-----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, ME0A8lj1mG9vRm81yN4MH6IqtB4Xd7+4O0T0rfT1p5afHPLAN1NpWUfae1kUK2LN XAON1cgHRzGwjLXjpZdepg== 0000950144-96-006007.txt : 19960830 0000950144-96-006007.hdr.sgml : 19960830 ACCESSION NUMBER: 0000950144-96-006007 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 25 FILED AS OF DATE: 19960828 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COX RADIO INC CENTRAL INDEX KEY: 0001018522 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 581620022 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-08737 FILM NUMBER: 96622570 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/A 1 COX RADIO S-1, AMENDMENT 1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 1996 REGISTRATION NO. 333-08737 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO 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. ------------------------ 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 7,500,000 SHARES COX RADIO, INC. COX RADIO, INC. 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 7,500,000 shares of Class A Common Stock being offered, 6,000,000 shares are being offered initially in the United States and Canada (the "U.S. Offering") by the U.S. Underwriters and 1,500,000 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 and the issuance of 155,000 shares of restricted Class A Common Stock to management at the effective time of the Offerings (assuming that the Underwriters' over-allotment option is not exercised), Cox Enterprises, Inc. ("CEI") will own approximately 71.9% of the outstanding Common Stock and have 96.2% 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 $15.00 and $17.00 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. Application has been made for listing of the Class A Common Stock on the New York Stock Exchange ("NYSE") under the symbol "CXR." --------------------------- 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.
- ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO PUBLIC AND 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 1,125,000 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 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") either 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. 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 in the same market. 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 in the same market. 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. ------------------------ 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 THE NYSE 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 [LEFT FLAP OF FOLDOUT CONTAINS STATION LOGOS] ii 8 [RIGHT FLAP OF FOLDOUT CONTAINS MAP OF UNITED STATES SHOWING STATION LOCATIONS] iii 9 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"). Two of the Pending Transactions are also being reviewed by the Department of Justice ("DOJ") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"). There can be no assurance that such FCC approval will be obtained, that in connection with such HSR review, the DOJ will not require restructuring of such transactions or that such 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, 42 radio stations (27 FM and 15 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 revenues of $178.6 million and broadcast cash flow of $51.8 million during the twelve month period ending June 30, 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 25 of the Company's 42 stations will be clustered in five 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............................. 3 2 1 41.8% 33.0 1.27 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+. 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 1 10 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 portfolio 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 $166 million in cash and approximately $87 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, providing continuity and management depth to the combined organization. Cox Radio expects to consummate the NewCity Acquisition in the first half of 1997. 2 11 ORLANDO ACQUISITION In June 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 a 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 third 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 exercised its option to purchase an 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"). Cox Radio expects to consummate the Tampa Acquisition in the fourth quarter of 1996. TULSA ACQUISITION In August 1996, Cox Radio entered into negotiations to acquire an AM and an FM station in Tulsa for $5.5 million in cash. Cox Radio expects to consummate the Tulsa Acquisition in the first quarter of 1997. 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 seven 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"). Following the Cox Radio Consolidation, Cox Radio and its subsidiaries will be indebted to CEI in the amount of approximately $107.1 million (the "CEI Notes"). Cox Radio will apply $107.1 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 and the issuance of 155,000 shares of restricted Class A Common Stock to management, CEI will own approximately 71.9% of the outstanding Common Stock of Cox Radio and have 96.2% 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 12 THE OFFERINGS Class A Common Stock offered: U.S. Offering............................... 6,000,000 shares International Offering...................... 1,500,000 shares Total............................... 7,500,000 shares Common Stock to be outstanding after the Offerings: Class A Common Stock(1)..................... 7,655,000 shares Class B Common Stock........................ 19,577,672 shares Total............................... 27,232,672 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 NYSE Symbol.......................... "CXR"
- --------------- (1) If the Underwriters' over-allotment option were exercised in full, 8,780,000 shares of Class A Common Stock would be outstanding after the Offerings. See "Underwriting" and "Description of Capital Stock." Includes 155,000 shares of restricted stock to be issued to management at the effective time of the Offerings pursuant to Cox Radio's Long-Term Incentive Plan. Does not include 2,620,000 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 760,000 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 13 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 Acquisitions (as defined herein)) as if they had occurred as of June 30, 1996. The Transactions include (i) the acquisition of WRKA-FM and WRVI-FM in Louisville, which was completed by Cox Radio in January 1996 (the "Prior Louisville Acquisition"); (ii) the acquisition of WHEN-AM and WWHT-FM in Syracuse, which was completed by Cox Radio in June 1996 (the "Prior Syracuse Acquisition" and, together with the Prior Louisville Acquisition, the "Prior Acquisitions"); (iii) the Orlando Acquisition, the Louisville Acquisition, the Tulsa Acquisition and the Miami Disposition (collectively, the "Other Pending Transactions"); (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. Two of the Pending Transactions are also being reviewed by the DOJ pursuant to HSR. There can be no assurance that such FCC approval will be obtained, that in connection with such HSR review, the DOJ will not require restructuring of such transactions or that such other required conditions will be satisfied or waived.
PRO FORMA --------------------------------- YEAR ENDED SIX MONTHS DECEMBER 31, ENDED JUNE 30, ------------ ---------------- 1995 1995 1996 ------------ ----- ------ (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) STATEMENTS OF OPERATIONS DATA: Net revenues(1)............................................. $168.4 $80.5 $ 90.7 Station operating expenses.................................. 121.6 59.4 64.6 Corporate general and administrative expenses............... 4.4 2.3 2.7 Depreciation and amortization............................... 15.4 7.5 7.9 ------------ ----- ------ Operating income............................................ 27.0 11.3 15.5 Interest expense............................................ 20.6 10.1 10.5 Net income (loss)........................................... 1.2 (.9) 1.5 Net income (loss) per share................................. .04 (.03) .06 Number of shares outstanding................................ 27.2 27.2 27.2 OTHER OPERATING AND FINANCIAL DATA: Broadcast cash flow(2)...................................... $ 46.8 $21.1 $ 26.1 Broadcast cash flow margin(2)............................... 27.8% 26.2% 28.8% EBITDA(2)................................................... $ 42.4 $18.8 $ 23.4 After-tax cash flow(2)...................................... 16.6 6.6 9.4 Net debt to EBITDA(3)....................................... -- -- 4.9x BALANCE SHEET DATA (end of period): Cash and cash equivalents................................... $ -- $ -- $ 29.0(4) Intangible assets, net...................................... -- -- 379.8 Total assets................................................ -- -- 498.3 Total debt.................................................. -- -- 258.6 Shareholders' equity........................................ -- -- 207.5
5 14 - --------------- (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 June 30, 1996. In addition, for purposes of this calculation, net debt includes $26.7 million of restricted cash, representing the net proceeds from the Miami Disposition and the Orlando Acquisition, net of the cash to be used for the Tulsa Acquisition. The Company intends to use such cash for the acquisition of additional radio properties in transactions which qualify as deferred like kind exchanges. To qualify, such acquisitions must be consummated within 180 days of receipt of the proceeds from the Miami Disposition and the Orlando Acquisition, respectively. If qualifying acquisitions are not consummated within the required time, the $26.7 million in restricted cash will be subject to tax liability. In such event, assuming a tax rate of 38%, the net debt to EBITDA ratio would be 5.2x. (4) Includes cash of $26.7 million, representing the net proceeds from the Miami Disposition and the Orlando Acquisition, net of the cash to be used for the Tulsa Acquisition. The Company intends to use the proceeds from the Miami Disposition and the Orlando Acquisition for the acquisition of additional radio properties in transactions which will qualify as deferred like-kind exchanges. See "Unaudited Pro Forma Combined Financial Data." 6 15 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 six months ended June 30, 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 ------------------------------------------------- SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, ----------------------------- --------------- 1993 1994 1995 1995 1996 ----- ------- ------- ----- ----- (DOLLARS IN MILLIONS) STATEMENTS OF OPERATIONS DATA: Net revenues(1)................................ $95.0 $111.5 $123.6 $58.6 $66.3 Station operating expenses..................... 67.9 76.3 90.0 43.0 47.3 Corporate general and administrative expenses(2)................................. 2.5 2.7 5.9 1.9 2.3 Depreciation and amortization.................. 7.3 6.9 7.2 3.7 4.0 ----- ------ ------ ----- ----- Operating income............................... 17.3 25.6 20.5 10.0 12.7 Net income (loss)(3)........................... (1.1)(4) 11.2 8.2 3.8 5.2 OTHER OPERATING DATA: Broadcast cash flow(5)......................... $27.1 $ 35.2 $ 33.6 (6) $15.6 $19.0 Broadcast cash flow margin(5).................. 28.5% 31.6 % 27.2 % 26.6% 28.7% EBITDA(5)...................................... $24.6 $ 32.5 $ 27.7 (6) $13.7 $16.7 After-tax cash flow(5)......................... 13.8 18.1 15.4 7.5 9.2 Net cash provided by operating activities...... 11.4 14.1 14.0 6.3 9.1 Net cash used in investing activities.......... 6.1 12.3 17.3 2.1 15.2 Net cash provided by (used in) financing activities.................................. (4.8) (1.6 ) 3.1 (4.3) 6.1 Number of stations owned or operated or for which services are provided(7).............. 15 16 18 18 20
NEWCITY --------------------------------------------- SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, ------------------------- --------------- 1993 1994 1995 1995 1996 ----- ----- ----- ----- ----- (DOLLARS IN MILLIONS) STATEMENTS OF OPERATIONS DATA: Net revenues(1).................................. $53.3 $52.7(8) $55.6 $27.4 $28.9 Station operating expenses....................... 36.8 36.9 40.7 20.3 20.3 Corporate general and administrative expenses.... 1.9 1.8 1.7 1.0 0.9 Depreciation and amortization.................... 3.8 3.1 3.5 1.5 1.6 ----- ----- ----- ----- ----- Operating income................................. 10.8 10.9 9.7 4.6 6.1 Net income (loss)(3)............................. 11.0(9) 2.1 (0.4) (0.3) 0.7 OTHER OPERATING DATA: Broadcast cash flow(5)........................... $16.5 $15.8(8) $14.9(10) $ 7.1 $ 8.6 Broadcast cash flow margin(5).................... 31.0% 30.0% 26.8% 25.9% 29.8% EBITDA(5)........................................ $14.6 $14.0(8) $13.2(10) $ 6.1 $ 7.7 After-tax cash flow(5)........................... 16.9 5.3 3.1 1.2 2.3 Net cash provided by operating activities........ 6.9 4.2 2.4 -- 1.4 Net cash provided by (used in) investing activities.................................... 12.9 7.1 (13.3) (12.7) (1.2) Net cash provided by (used in) financing activities.................................... (20.1) (13.6) 11.0 12.6 0.3 Number of stations owned or operated or for which services are provided(7)...................... 14 17 17 17 19
7 16 - --------------- (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 $0.8 million and $1.2 million for the six months ended June 30, 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 -- Cox Enterprises, Inc. Unit Appreciation Plan" and " -- Long-Term Incentive Plan." In addition, year ended December 31, 1995 corporate general and administrative expenses include a nonrecurring corporate charge. (3) Historical earnings per share information for Cox Radio is not presented as it is not considered meaningful and may be misleading to potential investors given the Cox Radio Consolidation immediately prior to the Offerings and the recent significant acquisition and disposition activity of the Company. In addition, historical earnings per share information for NewCity is not presented because NewCity does not have publicly traded equity securities and is not registering stock to be sold in a public market. (4) 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. (5) "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. (6) 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." (7) For the years ended December 31, 1994 and 1995 and the six months ended June 30, 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. (8) 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." (9) 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." (10) Declines in broadcast cash flow and EBITDA from 1994 are due mainly to the losses incurred from the results of developing stations in KJSR-FM (Tulsa) and WZKD-AM (Orlando) 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 17 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 (except for the Tulsa Acquisition, for which Cox Radio expects to enter into a definitive agreement shortly), there can be no assurance that any of the Pending Transactions will be consummated. Consummation of each of the Pending Transactions is subject to certain closing conditions, including the receipt of FCC approval. The NewCity Acquisition and the Orlando Acquisition are also being reviewed by the DOJ pursuant to HSR. There can be no assurance that such FCC approval will be obtained, that in connection with such HSR review, the DOJ will not require restructuring of such transactions 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 rule 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 the cross-ownership rule 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 two daily newspapers 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. The Company has requested, and expects 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 an eighteen month period following the closing of the NewCity Acquisition or upon modification of the FCC's ownership rules such that Cox Radio would be permitted to own NewCity's Atlanta station on a permanent basis without a waiver. There can be no assurance that the FCC will grant such waivers. 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, or the FCC may on its own motion determine, to 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 of the Pending Transactions is received, the FCC would reconsider its approval or the consequences thereof. However, if FCC approval of 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. In connection with the Orlando Acquisition, the DOJ has issued a request for additional information (the "Orlando Second Request") seeking the production of documents and other information on the Chicago and Orlando radio markets. In connection with the NewCity Acquisition, the DOJ has issued a second request (the "NewCity Second Request") seeking the production of documents and other information on the Orlando radio market. There can be no assurance that the DOJ will not require restructuring of the acquisitions, potentially including the divestiture of certain stations, as part of the HSR process. Obtaining the FCC rule waivers, or complying with the Orlando Second Request and the NewCity Second Request, could delay or prevent consummation of the NewCity Acquisition and the Orlando 9 18 Acquisition. If any Pending Transaction is not consummated, there can be no assurance that Cox Radio will be able to enter into comparable transactions. 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 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 10 19 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. BENEFITS OF OFFERING TO AFFILIATED ENTITY After the consummation of the Offerings, Cox Radio will pay approximately $107.1 million or 98.3% of the net proceeds of the Offerings to fully discharge the CEI Notes. As a result, $1.9 million or 1.7% of the net proceeds of the Offerings will be available to the Company for other purposes. Immediately following the repayment of the CEI Notes, Cox Radio will not have any indebtedness. See "Capitalization", "Use of Proceeds" and "Certain Relationships and Related Transactions." 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, 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 through August 1, 2003. Although Cox Radio has applied or will 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 11 20 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 fines, 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; CERTAIN ANTI-TAKEOVER PROVISIONS 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 and the issuance of 155,000 shares of restricted Class A Common Stock to management, CEI, through wholly-owned subsidiaries, will own approximately 71.9% of the outstanding Common Stock and have 96.2% 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. Cox Radio's Amended and Restated Certificate of Incorporation (the "Cox Radio Certificate") and Amended and Restated Bylaws (the "Bylaws") also contain certain anti-takeover provisions. See "Description of Capital Stock -- Anti-takeover Provisions." This voting control or these anti-takeover provisions may have the effect of discouraging certain types of transactions involving an actual or potential 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 or require compliance with such anti-takeover provisions. POTENTIAL CONFLICTS OF INTEREST 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 certain 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. 12 21 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Offerings and the issuance of 155,000 shares of restricted Class A Common Stock to management, Cox Radio will have outstanding 7,655,000 shares of Class A Common Stock (assuming no exercise of the Underwriters' overallotment option) and 19,577,672 shares of Class B Common Stock. In addition, Cox Radio will have outstanding options to purchase 760,000 shares of Class A Common Stock. Of these shares, the 7,500,000 shares of Class A Common Stock offered hereby 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 subject to certain restrictions as to timing, manner and volume. The remaining 155,000 shares of Class A Common Stock outstanding are "restricted securities" within the meaning of Rule 144 under the Securities Act. Such shares and the 19,577,672 shares of Class B Common Stock held indirectly by CEI (an Affiliate) 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 directly or indirectly own 19,577,672 shares of Class B Common Stock, 155,000 shares of restricted Class A Common Stock and options to purchase 760,000 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 Common Stock or any securities convertible into or exercisable or exchangeable for 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 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 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 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 22 USE OF PROCEEDS The net proceeds from the sale of the 7,500,000 shares of Class A Common Stock offered hereby are estimated to be approximately $109 million (approximately $126 million if the Underwriters' over-allotment option is exercised in full), assuming an initial public offering price of $16 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 $107.1 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 $164 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 necessary funds will be loaned by CEI to Cox Radio at prevailing market rates. See "The NewCity Acquisition -- The Guaranty." 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 August 15, 1996) and are repayable in full on December 31, 1999. 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 23 DILUTION Dilution is the amount by which the initial public offering price paid by the purchasers of the shares of Class A Common Stock will exceed the net tangible book value per share of Common Stock after the Offerings. The net tangible book value per share of Common Stock is determined by subtracting the total liabilities of the Company from the total book value of the tangible assets of the Company and dividing the difference by the number of shares of Common Stock deemed to be outstanding on the date as of which such book value is determined. At June 30, 1996, on a pro forma basis to reflect the Transactions (exclusive of the Offerings), the Company had a net tangible book value (deficit) of approximately $(282,741,000) or $(14.33) per share. After giving effect to the sale by the Company of 7,500,000 shares of Class A Common Stock offered hereby at an assumed initial public offering price of $16.00 per share (the mid-point of the range set forth on the cover page of this Prospectus), and application of the estimated net proceeds therefrom, the pro forma net tangible book value (deficit) of the Company as of June 30, 1996 would have been approximately $(172,319,000), or $(6.33) per share. This represents an immediate increase in such net tangible book value of $8.00 per share to existing stockholders and an immediate dilution to new investors of $22.33 per share. The following table illustrates this per share dilution: Assumed initial public offering price per share............................. $16.00 Pro forma net tangible book value (deficit) per share before the Offerings.............................................................. $(14.33) Increase in net tangible book value (deficit) per share attributable to new investors.......................................................... 8.00 ------- Pro forma net tangible book value (deficit) per share after the Offerings... (6.33) ------ Dilution per share to new investors......................................... $22.33 ======
The following table summarizes the number of shares of Common Stock acquired from the Company and the aggregate consideration and the average price per share paid by existing stockholders and by purchasers of the shares of Class A Common Stock (before deducting underwriting discounts and commissions and offering expenses) in the Offerings:
SHARES PURCHASED TOTAL CONSIDERATION ---------------------- ------------------------ AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ---------- ------- ------------ ------- ------------- Existing stockholders(1).......... 19,732,672 72.5% $124,360,000 50.9% $ 6.30 New investors..................... 7,500,000 27.5 120,000,000 49.1 16.00 ---------- ----- ------------ ----- Total................... 27,232,672 100.0% $244,360,000 100.0% ========== ===== ============ =====
- --------------- (1) If the Underwriters' over-allotment option were exercised in full, 8,780,000 shares of Class A Common Stock would be outstanding after the Offerings. See "Underwriting" and "Description of Capital Stock." Includes 155,000 shares of restricted Class A Common Stock to be issued to management at the effective time of the Offerings pursuant to Cox Radio's Long-Term Incentive Plan. Does not include 2,620,000 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 760,000 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 24 CAPITALIZATION The following table sets forth the capitalization of Cox Radio at June 30, 1996 (i) on an historical basis (including the Prior Acquisitions); (ii) on a pro forma basis after giving effect to the Other Pending Transactions; (iii) on a pro forma basis after giving effect to the Other Pending Transactions and the Offerings; and (iv) on a pro forma basis after giving effect to the Transactions (other than the Prior Acquisitions). 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.
JUNE 30, 1996 ------------------------------------------------------------------- PRO FORMA FOR THE OTHER PRO FORMA FOR THE PENDING PRO FORMA HISTORICAL OTHER PENDING TRANSACTIONS AND FOR THE COX RADIO TRANSACTIONS THE OFFERINGS TRANSACTIONS ------------- ----------------- ---------------- ------------ (DOLLARS IN THOUSANDS) Cash and cash equivalents.................. $ 1,666 $ 28,366(1) $ 30,258(1) $ 29,004(1) ======== ======== ======== ======== Amounts due to CEI......................... $ 104,508 $ 107,108 $ -- $ -- Long-term debt (including current maturities).............................. -- -- -- 258,608 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, 7,655,000 shares issued and outstanding......................... -- -- 7,655 7,655 Class B Common Stock, $1.00 par value; 45,000,000 shares authorized, 19,577,672 shares issued and outstanding......................... -- -- 19,578 19,578 Additional paid-in capital............... 124,360 124,360 207,550 207,550 Deficit in retained earnings............. (43,029) (27,280) (27,280) (27,280) -------- -------- -------- -------- Total shareholders' equity....... 81,332 97,081 207,503 207,503 -------- -------- -------- -------- Total capitalization............. $ 185,840 $ 204,189 $207,503 $466,111 ======== ======== ======== ========
- --------------- (1) Includes cash of $26.7 million, representing the net proceeds from the Miami Disposition and the Orlando Acquisition, net of the cash to be used for the Tulsa Acquisition. The Company intends to use the proceeds from the Miami Disposition and the Orlando Acquisition for the acquisition of additional radio properties which will qualify as deferred like-kind exchanges. See "Unaudited Pro Forma Combined Financial Data." 16 25 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 Acquisitions; (ii) the Other Pending Transactions; (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 Acquisitions) as if they had occurred as of June 30, 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 the NewCity purchase price will be finalized after consummation of the NewCity Acquisition. The final purchase price allocation is not expected to differ materially from the pro forma estimate. 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 26 COX RADIO, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET JUNE 30, 1996
PRO FORMA FOR PRO FORMA THE OTHER ADJUSTMENTS FOR PRO FORMA FOR PRO FORMA PENDING THE OTHER THE OTHER ADJUSTMENTS TRANSACTIONS HISTORICAL PENDING PENDING FOR THE AND THE HISTORICAL COX RADIO TRANSACTIONS(1) TRANSACTIONS OFFERINGS(2) OFFERINGS NEWCITY ----------- --------------- ------------- ------------ ------------- ---------- (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents... $ 1,666 $ -- $ 1,666 $ 120,000 $ 3,558 $ 638 (11,000) (107,108) Restricted cash.......... -- 12,750(a) 26,700 -- 26,700 -- 19,750(b) (5,800)(c) Accounts and notes receivable, less allowance for doubtful accounts...... 31,285 358(d) 31,643 -- 31,643 11,783 Prepaid expenses and other current assets........ 4,804 -- 4,804 -- 4,804 2,805 ---------- ------- ----------- ---------- ----------- -------- Total current assets.... 37,755 27,058 64,813 1,892 66,705 15,226 ---------- ------- ----------- ---------- ----------- -------- Plant and equipment, net............. 29,614 (2,541)(d) 27,073 -- 27,073 9,458 Intangible assets, net..... 135,630 3,543(d) 139,173 -- 139,173 59,041 Other assets..... 1,767 -- 1,767 -- 1,767 164 ---------- ------- ----------- ---------- ----------- -------- Total Assets.... $ 204,766 $28,060 $ 232,826 $ 1,892 $ 234,718 $ 83,889 ========== ======= =========== ========== =========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt.......... $ -- $ -- $ -- $ -- $ -- $ 1,700 Accounts payable and accrued expenses...... 8,982 58(d) 9,040 -- 9,040 4,450 Unit appreciation plan liability..... 1,422 -- 1,422 (1,422) -- -- Income taxes payable....... 166 -- 166 -- 166 1,009 Other current liabilities... 888 -- 888 -- 888 2,388 ---------- ------- ----------- ---------- ----------- -------- Total current liabilities... 11,458 58 11,516 (1,422) 10,094 9,547 ---------- ------- ----------- ---------- ----------- -------- Long-term debt... -- -- -- 85,589 Amounts due to Cox Enterprises, Inc............. 104,508 2,600(e) 107,108 (107,108) -- -- Deferred income taxes........... 7,468 9,653(f) 17,121 -- 17,121 -- ---------- ------- ----------- ---------- ----------- -------- Total liabilities... 123,434 12,311 135,745 (108,530) 27,215 95,136 ---------- ------- ----------- ---------- ----------- -------- Redeemable preferred stock........... -- -- -- -- -- 11,848 SHAREHOLDERS' EQUITY: Preferred stock, $1.00 par value; 5,000,000 shares authorized...... -- -- -- -- -- -- Common Stock..... 1 -- 1 (1) -- 5 Class A Common Stock, $1.00 par value; 70,000,000 shares authorized; 7,655,000 shares outstanding..... -- -- -- 7,655 7,655 -- Class B Common Stock, $1.00 par value; 45,000,000 shares authorized; 19,577,672 shares outstanding..... -- -- -- 19,578 19,578 -- Additional paid-in capital......... 124,360 -- 124,360 83,190 207,550 -- -- Deficit in retained earnings........ (43,029 ) 15,749(f) (27,280) -- (27,280 ) (22,460) Note receivable from shareholders.... -- -- -- -- -- (640) ---------- ------- ----------- ---------- ----------- -------- Total shareholders' equity.... 81,332 15,749 97,081 110,422 207,503 (23,095) ---------- ------- ----------- ---------- ----------- -------- Total Liabilities and Shareholders' Equity.... $ 204,766 $28,060 $ 232,826 $ 1,892 $ 234,718 $ 83,889 ========== ======= =========== ========== =========== ======== PRO FORMA ADJUSTMENTS FOR PRO FORMA NEWCITY FOR THE ACQUISITION(3) TRANSACTIONS --------------- ------------ CURRENT ASSETS: Cash and cash equivalents... $ (1,892 )(a) $ 2,304 Restricted cash.......... -- 26,700 Accounts and notes receivable, less allowance for doubtful accounts...... -- 43,426 Prepaid expenses and other current assets........ -- 7,609 -------- -------- Total current assets.... (1,892 ) 80,039 -------- -------- Plant and equipment, net............. -- 36,531 Intangible assets, net..... 181,608 (b) 379,822 Other assets..... -- 1,931 -------- -------- Total Assets.... $ 179,716 $498,323 ======== ======== CURRENT LIABILITIES: Current portion of long-term debt.......... $ -- $ 1,700 Accounts payable and accrued expenses...... -- 13,490 Unit appreciation plan liability..... -- -- Income taxes payable....... -- 1,175 Other current liabilities... -- 3,276 -------- -------- Total current liabilities... -- 19,641 -------- -------- Long-term debt... 163,819 (c) 256,908 7,500 (b) Amounts due to Cox Enterprises, Inc............. -- -- Deferred income taxes........... (2,850 )(b) 14,271 -------- -------- Total liabilities... 168,469 290,820 -------- -------- Redeemable preferred stock........... (11,848 )(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; 7,655,000 shares outstanding..... -- 7,655 Class B Common Stock, $1.00 par value; 45,000,000 shares authorized; 19,577,672 shares outstanding..... -- 19,578 Additional paid-in capital......... -- 207,550 Deficit in retained earnings........ 22,460 (d) (27,280) Note receivable from shareholders.... 640 (d) -- -------- -------- Total shareholders' equity.... 23,095 207,503 -------- -------- Total Liabilities and Shareholders' Equity.... $ 179,716 $498,323 ======== ========
See Notes to Unaudited Pro Forma Combined Balance Sheet. 18 27 NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET (1) To reflect the pro forma effect of the Other Pending Transactions: (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). The sale is expected to close in the fourth quarter of 1996. See also (d) below. The Company intends to use the cash proceeds from the sale for the acquisition of additional radio properties in a transaction which will qualify as a deferred like-kind exchange. 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 June 1996 asset exchange agreement (the Orlando Acquisition). The transaction is expected to close in the first half of 1997. See also (d) below. The Company intends to use the cash proceeds from the sale for the acquisition of additional radio properties in a transaction which will qualify as a deferred like-kind exchange. (c) To reflect the pending acquisition of KRAV-FM and KGTO-AM (Tulsa Acquisition) for $5.5 million plus estimated acquisition costs (the Tulsa Acquisition). The acquisition is expected to close in the first quarter of 1997, and is expected to be purchased using a portion of the cash received from the Miami Disposition. See purchase price allocation at (d) below. (d) To reflect the net effect on net working capital, net plant and equipment and intangibles of the Miami Disposition, the Orlando Acquisition, the Tulsa Acquisition and the Louisville Acquisition:
NET WORKING NET PLANT CAPITAL AND EQUIPMENT INTANGIBLES TOTAL ----------- ------------- ----------- -------- (DOLLARS IN THOUSANDS) Stations acquired: Tulsa.................................... $ 300 $ 83 $ 5,417 $ 5,800 Louisville............................... -- -- 2,600 2,600 Orlando.................................. -- 3,551 16,699 20,250 Stations disposed of: Miami.................................... -- (4,714) (5,747) (10,461) Chicago.................................. -- (1,461) (15,426) (16,887) ---- ------- -------- -------- $ 300 $(2,541) $ 3,543 $ 1,302 ==== ======= ======== ========
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 accounted for as a sale and a purchase and recorded at fair value. (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 third quarter of 1996, and will be financed through borrowings from CEI under the CEI Notes. See purchase price allocation at (d) 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.................................................................... (6,175) Intangibles............................................................................ (21,173) -------- Pre-tax gain............................................................................. 25,402 Less related taxes....................................................................... (9,653) -------- Net after-tax gain............................................................... $ 15,749 ========
(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 $107.1 million owed to CEI under the CEI Notes. See "Certain Relationships and Related Transactions." Also, reflects the settlement of the $1.4 million compensation liability allocated to Cox Radio by CEI under the Unit Appreciation Plan. In connection with the Offerings, this liability is expected to be settled through the issuance of 155,000 shares of restricted Class A Common Stock of Cox Radio. 19 28 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 $1.9 million in net proceeds remaining from the Offerings. See also (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)............................ $164,711 Assumption of NewCity debt................................................................. 87,289 Acquisition and other related costs........................................................ 1,000 -------- Total................................................................................ 253,000 Estimated fair value of tangible assets acquired and liabilities assumed: Plant and equipment...................................................................... (9,458) Long-term debt premium................................................................... 7,500 Deferred tax asset....................................................................... (2,850) Other working capital accounts........................................................... (7,543) -------- (12,351) -------- Excess of purchase price over tangible assets acquired and liabilities assumed............. 240,649 -------- Less previously recorded intangibles....................................................... (59,041) -------- Pro forma adjustment to intangibles.................................................. $181,608 ========
Purchase accounting requires the fair valuation of the $75 million aggregate principal amount of NewCity's 11.375% Senior Subordinated Notes due 2003, which is estimated to be $82.5 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 $2.9 million at an effective tax rate of 38%. The allocation of the NewCity purchase price will be finalized after consummation of the NewCity Acquisition. The final purchase price allocation is not expected to differ materially from the pro forma estimate. (c) To reflect the financing of the NewCity Acquisition with $163.8 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 29 COX RADIO, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 ------------------------------------------------------------------------------------ PRO FORMA FOR THE PRO FORMA PRO FORMA PRIOR ADJUSTMENTS FOR PRO FORMA FOR ADJUSTMENTS FOR ACQUISITIONS AND HISTORICAL THE PRIOR THE PRIOR THE OTHER PENDING THE OTHER PENDING COX RADIO ACQUISITIONS(1. ACQUISITIONS TRANSACTIONS(2. TRANSACTIONS ---------- --------------- ------------- ----------------- ----------------- (DOLLARS IN THOUSANDS) Net revenues............................ $ 123,572 $ 2,706 $ 126,278 $ (18,175) $ 108,103 Costs and expenses: Operating............................. 41,831 489 42,320 (8,388) 33,932 Selling, general and administrative... 48,131 1,271 49,402 (8,783) 40,619 Corporate general and administrative...................... 5,853 -- 5,853 5,853 Depreciation and amortization......... 7,247 817 8,064 (562) 7,502 -------- ------ -------- -------- -------- Operating income........................ 20,510 129 20,639 (442) 20,197 Interest expense........................ (5,974) -- (5,974) 1,212 (11,032) (6,270)(3) Other, net.............................. (147) (6) (153) 87 (66) -------- ------ -------- -------- -------- Income (loss) before income taxes....... 14,389 123 14,512 (5,413) 9,099 Income taxes(10)........................ 6,226 47 6,273 (2,057) 4,216 -------- ------ -------- -------- -------- Net income (loss)....................... $ 8,163 $ 76 $ 8,239 $ (3,356) $ 4,883 ======== ====== ======== ======== ========
YEAR ENDED DECEMBER 31, 1995 --------------------------------------------------------------------------------------------------------- PRO FORMA FOR THE PRIOR ACQUISITIONS, PRO FORMA FOR THE THE OTHER PRIOR PRO FORMA PENDING PRO FORMA ACQUISITIONS AND ADJUSTMENTS TRANSACTIONS ADJUSTMENTS THE OTHER PENDING FOR THE AND THE HISTORICAL FOR NEWCITY PRO FORMA FOR THE TRANSACTIONS OFFERINGS OFFERINGS NEWCITY ACQUISITION(4. TRANSACTIONS ----------------- ----------- --------------- ---------- -------------- ----------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net revenues.......... $ 108,103 $ -- $ 108,103 $ 55,636 $ 4,622 $ 168,361 Costs and expenses: Operating........... 33,932 -- 33,932 20,059 2,316 56,307 Selling, general and administrative.... 40,619 -- 40,619 20,654 3,990 65,263 Corporate general and administrative.... 5,853 (3,646)(5) 2,207 1,745 418 4,370 Depreciation and amortization...... 7,502 -- 7,502 3,510 4,398(6) 15,410 -------- ------- -------- ------- -------- -------- Operating income...... 20,197 3,646 23,843 9,668 (6,500) 27,011 Interest expense...... (11,032) 11,032(7) -- (9,817) (11,467)(8)) (20,553) 731(9) Other, net............ (66) -- (66) -- (49) (115) -------- ------- -------- ------- -------- -------- Income (loss) before income taxes........ 9,099 14,678 23,777 (149) (17,285) 6,343 Income taxes(10)...... 4,216 5,578 9,794 249 (4,852) 5,191 -------- ------- -------- ------- -------- -------- Net income (loss)..... $ 4,883 $ 9,100 $ 13,983 $ (398) $(12,433) $ 1,152 ======== ======= ======== ======= ======== ======== Pro forma per share data: Earnings per share............. $ .04 ======== Average shares outstanding....... 27,233 ========
See Notes to Unaudited Pro Forma Combined Statements of Operations. 21 30 COX RADIO, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 ---------------------------------------------------------------------------------------- PRO FORMA FOR THE PRO FORMA PRO FORMA PRIOR ACQUISITIONS ADJUSTMENTS FOR PRO FORMA FOR ADJUSTMENTS FOR AND THE OTHER HISTORICAL THE PRIOR THE PRIOR THE OTHER PENDING PENDING COX RADIO ACQUISITIONS(1. ACQUISITIONS TRANSACTIONS(2. TRANSACTIONS ---------- ----------------- ------------- ------------------ ------------------ (DOLLARS IN THOUSANDS) Net revenues.......................... $ 66,308 $ 104 $66,412 $ (7,354) $ 59,058 Costs and expenses: Operating........................... 20,564 -- 20,564 (2,471) 18,093 Selling, general and administrative.................... 26,733 -- 26,733 (3,841) 22,892 Corporate general and administrative.................... 2,341 -- 2,341 -- 2,341 Depreciation and amortization....... 3,979 89 4,068 (85) 3,983 ------- ---- ------- ------- ------- Operating income...................... 12,691 15 12,706 (957) 11,749 Interest expense...................... (2,856) -- (2,856) 578 (5,222) (2,944)(3) Other, net............................ (275) -- (275) 62 (213) ------- ---- ------- ------- ------- Income (loss) before income taxes..... 9,560 15 9,575 (3,261) 6,314 Income taxes(10)...................... 4,347 6 4,353 (1,239) 3,114 ------- ---- ------- ------- ------- Net income (loss)..................... $ 5,213 $ 9 $ 5,222 $ (2,022) $ 3,200 ======= ==== ======= ======= =======
SIX MONTHS ENDED JUNE 30, 1996 ---------------------------------------------------------------------------------------------------------- PRO FORMA FOR THE PRO FORMA FOR THE PRIOR PRIOR PRO FORMA ACQUISITIONS, THE PRO FORMA ACQUISITIONS AND ADJUSTMENTS OTHER PENDING ADJUSTMENTS THE OTHER PENDING FOR THE TRANSACTIONS AND HISTORICAL FOR NEWCITY PRO FORMA FOR THE TRANSACTIONS OFFERINGS THE OFFERINGS NEWCITY ACQUISITION(4. TRANSACTIONS ----------------- ----------- ----------------- ---------- -------------- ------------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) Net revenues......... $59,058 $ -- $59,058 $ 28,865 $ 2,769 $ 90,692 Costs and expenses: Operating.......... 18,093 -- 18,093 9,723 1,216 29,032 Selling, general and administrative... 22,892 -- 22,892 10,548 2,121 35,561 Corporate general and administrative... 2,341 (1,164)(5) 1,177 888 672 2,737 Depreciation and amortization..... 3,983 -- 3,983 1,642 2,259(6) 7,884 ------- ------- ------- ------- ------- -------- Operating income..... 11,749 1,164 12,913 6,064 (3,499) 15,478 Interest expense..... (5,222) 5,222(7) -- (5,102) (5,734)(8) (10,470) 366(9) Other, net........... (213) -- (213) -- 1 (212) ------- ------- ------- ------- ------- -------- Income (loss) before income taxes....... 6,314 6,386 12,700 962 (8,866) 4,796 Income taxes(10)..... 3,114 2,427 5,541 250 (2,511) 3,280 ------- ------- ------- ------- ------- -------- Net income (loss).... $ 3,200 $ 3,959 $ 7,159 $ 712 $ (6,355) $ 1,516 ======= ======= ======= ======= ======= ======== Pro forma per share data: Earnings per share............ $ .06 ======== Average shares outstanding...... 27,233 ========
See Notes to Unaudited Pro Forma Combined Statements of Operations. 22 31 COX RADIO, INC. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 ---------------------------------------------------------------------------------- PRO FORMA PRO FORMA FOR THE PRO FORMA ADJUSTMENTS FOR PRIOR ADJUSTMENTS FOR PRO FORMA FOR THE OTHER ACQUISITIONS AND HISTORICAL THE PRIOR THE PRIOR PENDING THE OTHER PENDING COX RADIO ACQUISITIONS(1. ACQUISITIONS TRANSACTIONS(2. TRANSACTIONS ---------- --------------- ------------- --------------- ----------------- (DOLLARS IN THOUSANDS) Net revenues............................. $ 58,551 $ 1,208 $59,759 $(8,489) $51,270 Costs and expenses: Operating.............................. 18,252 255 18,507 (3,072) 15,435 Selling, general and administrative.... 24,757 648 25,405 (4,896) 20,509 Corporate general and administrative... 1,873 -- 1,873 -- 1,873 Depreciation and amortization.......... 3,715 560 4,275 (461) 3,814 ---------- ------- ------------- --------------- -------- Operating income......................... 9,954 (255) 9,699 (60) 9,639 Interest expense......................... (2,942) -- (2,942) 597 (5,355) (3,010)(3) Other, net............................... (268) -- (268) (6) (274) ---------- ------- ------------- --------------- -------- Income (loss) before income taxes........ 6,744 (255) 6,489 (2,479) 4,010 Income taxes(10)......................... 2,948 (97) 2,851 (942) 1,909 ---------- ------- ------------- --------------- -------- Net income (loss)........................ $ 3,796 $ (158) $ 3,638 $(1,537) $ 2,101 ======== ============ =========== ============ ================
SIX MONTHS ENDED JUNE 30, 1995 --------------------------------------------------------------------------------------------------------- PRO FORMA FOR THE PRO FORMA FOR THE PRIOR PRIOR PRO FORMA ACQUISITIONS, THE PRO FORMA ACQUISITIONS AND ADJUSTMENTS OTHER PENDING ADJUSTMENTS THE OTHER PENDING FOR THE TRANSACTIONS AND HISTORICAL FOR NEWCITY PRO FORMA FOR THE TRANSACTIONS OFFERINGS THE OFFERINGS NEWCITY ACQUISITION(4. TRANSACTIONS ----------------- ----------- ----------------- ---------- -------------- ----------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net revenues.......... $51,270 $ -- $51,270 $ 27,372 $ 1,890 $ 80,532 Costs and expenses: Operating........... 15,435 -- 15,435 9,558 1,113 26,106 Selling, general and administrative.... 20,509 -- 20,509 10,761 1,984 33,254 Corporate general and administrative.... 1,873 (823)(5) 1,050 964 252 2,266 Depreciation and amortization...... 3,814 -- 3,814 1,518 2,259(6) 7,591 -------- ----------- -------- ---------- -------------- ----------------- Operating income...... 9,639 823 10,462 4,571 (3,718) 11,315 Interest expense...... (5,355) 5,355(7) -- (4,760) (5,734)(8)) (10,128) 366(9) Other, net............ (274) -- (274) -- -- (274) -------- ----------- -------- ---------- -------------- ----------------- Income (loss) before income taxes........ 4,010 6,178 10,188 (189) (9,086) 913 Income taxes(10)...... 1,909 2,347 4,256 136 (2,594) 1,798 -------- ----------- -------- ---------- -------------- ----------------- Net income (loss)..... $ 2,101 $ 3,831 $ 5,932 $ (325) $ (6,492) $ (885) ============== ========== ============== ======== ============ ============== Pro forma per share data: Earnings per share............. $ (.03) ============== Average shares outstanding....... 27,233 ==============
See Notes to Unaudited Pro Forma Combined Statements of Operations. 23 32 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) (the Prior Louisville Acquisition), which were acquired in January 1996, and WHEN-AM and WWHT-FM (Syracuse) (the Prior Syracuse Acquisition), which were acquired in June 1996, as if such acquisitions were consummated as of January 1, 1995 (the Prior Acquisitions). Since the Prior Louisville Acquisition took place in early January 1996, no pro forma adjustments for historical operations were made for the six months ended June 30, 1996 due to immateriality. In addition, no pro forma adjustment was made for interest expense for the Prior Louisville Acquisition 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 of the Prior Louisville Acquisition and the $4.7 million purchase price of the Prior Syracuse Acquisition. In addition, adjustments have been made to reflect the estimated fee associated with the LMA with NewCity for the operation of the Syracuse stations. As a result of the LMA, the operations of the Syracuse stations are recorded by NewCity. See Note 4 below. The pro forma adjustments for the Prior Acquisitions are as follows:
PRIOR PRIOR TOTAL PRO LOUISVILLE SYRACUSE FORMA ACQUISITION ACQUISITION ADJUSTMENTS ----------- ----------- ----------- (DOLLARS IN THOUSANDS) Year ended December 31, 1995: Net revenues............................................................ $ 2,498 $ 208 $ 2,706 Costs and expenses: Operating............................................................. 489 -- 489 Selling, general and administrative................................... 1,271 -- 1,271 Depreciation and amortization......................................... 632 185 817 Other, net.............................................................. (6) -- (6) Six months ended June 30, 1996: Net revenues............................................................ $ -- $ 104 $ 104 Costs and expenses: Operating............................................................. -- -- -- Selling, general and administrative................................... -- -- -- Depreciation and amortization......................................... -- 89 89 Six months ended June 30, 1995: Net revenues............................................................ $ 1,104 $ 104 $ 1,208 Costs and expenses: Operating............................................................. 255 -- 255 Selling, general and administrative................................... 648 -- 648 Depreciation and amortization......................................... 469 91 560
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 33 NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED) (2) To reflect the pro forma effect of the Other Pending Transactions. Pro forma adjustments have been made for depreciation and amortization resulting from purchase price allocations for the acquisition of KRAV-FM and KGTO-AM (Tulsa) (the Tulsa Acquisition) and the acquisition of WHOO-AM, WHTQ-FM, and WMMO-FM (the Orlando Acquisition). In addition, adjustments have been made to reflect the estimated fee associated with the LMA with NewCity for the operation of the Orlando stations. As a result of the LMA, the operations of the Orlando stations are recorded by NewCity for pro forma purposes. See Note 4 below. The pro forma adjustments for the Other Pending Transactions are set forth as follows:
DISPOSITIONS ACQUISITIONS TOTAL -------------------- ------------------ PRO FORMA MIAMI CHICAGO ORLANDO TULSA ADJUSTMENTS ------- -------- ------- ------ ----------- (DOLLARS IN THOUSANDS) Year ended December 31, 1995: Net Revenues........................................ $(7,723) $(13,227) $1,500 $1,275 $ (18,175) Costs and expenses: Operating......................................... (5,630) (3,337) -- 579 (8,388) Selling, general and administrative............... (3,142) (6,638) -- 997 (8,783) Depreciation and amortization..................... (496) (1,128) 895 167 (562) Interest expense.................................... 285 927 -- -- 1,212 Other, net.......................................... 31 54 -- 2 87 Six months ended June 30, 1996: Net Revenues........................................ $(3,386) $ (5,372) $ 750 $ 654 $ (7,354) Costs and expenses: Operating......................................... (1,420) (1,298) -- 247 (2,471) Selling, general and administrative............... (1,400) (2,893) -- 452 (3,841) Depreciation and amortization..................... (246) (399) 474 86 (85) Interest expense.................................... 135 443 -- -- 578 Other, net.......................................... -- 63 -- (1) 62 Six months ended June 30, 1995: Net Revenues........................................ $(2,797) $ (6,987) $ 750 $ 545 $ (8,489) Costs and expenses: Operating......................................... (1,952) (1,791) -- 671 (3,072) Selling, general and administrative............... (1,518) (3,570) -- 192 (4,896) Depreciation and amortization..................... (247) (732) 436 82 (461) Interest expense.................................... 140 457 -- -- 597 Other, net.......................................... -- -- -- (6) (6)
The pro forma results do not include the estimated nonrecurring after-tax gains of $15.7 million from the Miami Disposition and the Orlando Acquisition described in Note 1 to the Unaudited Pro Forma Combined Balance Sheet. (3) To reflect interest expense on the $107.1 million owed by Cox Radio to CEI as of June 30, 1996, (the CEI Notes). 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, $2.9 million and $3.0 million for the year ended December 31, 1995, and the six months ended June 30, 1996 and 1995, respectively. The assumed interest rates were 10.3%, 9.8% and 10.0% for the year ended December 31, 1995, and the six months ended June 30, 1996 and 1995, respectively. See "Certain Relationships and Related Transactions." 25 34 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 $(1,708) $ 4,622 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) Six months ended June 30, 1996: Net revenues................................................ $3,370 $253 $ (854) $ 2,769 Costs and expenses: Operating................................................. 926 290 -- 1,216 Selling, general and administrative....................... 1,884 237 -- 2,121 Corporate general and administrative...................... 672 -- -- 672 Six months ended June 30, 1995: Net revenues................................................ $2,384 $360 $ (854) $ 1,890 Costs and expenses: Operating................................................. 678 435 -- 1,113 Selling, general and administrative....................... 1,608 376 -- 1,984 Corporate general and administrative...................... 252 -- -- 252
(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 will provide 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 $240.6 million in intangibles arising from the NewCity Acquisition, net of the amount of amortization previously recorded in the historical financial statements of NewCity. Intangible assets are being amortized over 40 years. No pro forma adjustments have been made for depreciation expense as the fair value of property and equipment is estimated to approximate book value at the date of acquisition. (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 $163.8 million under a bank credit facility to be entered into to finance 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 $0.2 million for the year and six 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 35 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 statements of operations data and other operating 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 statements of operations data and other operating data for the years ended December 31, 1991 and 1992 and the six months ended June 30, 1995 and 1996 and the balance sheet data as of December 31, 1991, 1992 and 1993 and as of June 30, 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 six months ended June 30, 1996 are not necessarily indicative of the results that may be expected for the entire year ended December 31, 1996.
SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, -------------------------------------------------- ----------------- 1991 1992 1993 1994 1995 1995 1996 ------ ------ ------ ------ ------ ------ ------ (DOLLARS IN MILLIONS) STATEMENTS OF OPERATIONS DATA: Net revenues(1).................... $ 98.1 $ 97.7 $ 95.0 $111.5 $123.6 $ 58.6 $ 66.3 Station operating expenses......... 73.9 70.9 67.9 76.3 90.0 43.0 47.3 Corporate general and administrative expenses(2)....... 2.0 2.2 2.5 2.7 5.9 1.9 2.3 Depreciation and amortization...... 8.3 7.5 7.3 6.9 7.2 3.7 4.0 ------ ------ ------ ------ ------ ------ ------ Operating income................... 13.9 17.1 17.3 25.6 20.5 10.0 12.7 Interest expense................... 10.0 7.7 5.6 5.2 6.0 2.9 2.9 Net income (loss)(3)............... 1.1 4.2 (1.1)(4) 11.2 8.2 3.8 5.2 OTHER OPERATING DATA: Broadcast cash flow(5)............. $ 24.2 $ 26.8 $ 27.1 $ 35.2 $ 33.6(6) $ 15.6 $ 19.0 Broadcast cash flow margin(5)...... 24.7% 27.4% 28.5% 31.6% 27.2% 26.6% 28.7% EBITDA(5).......................... $ 22.2 $ 24.6 $ 24.6 $ 32.5 $ 27.7(6) $ 13.7 $ 16.7 After-tax cash flow(5)............. 9.4 11.7 13.8 18.1 15.4 7.5 9.2 Net cash provided by operating activities....................... 7.8 9.9 11.4 14.1 14.0 6.3 9.1 Net cash used in investing activities....................... 5.1 0.1 6.1 12.3 17.3 2.1 15.2 Net cash provided by (used in) financing activities............. (2.8) (9.3) (4.8) (1.6) 3.1 (4.3) 6.1 BALANCE SHEET DATA (END OF PERIOD): Cash and cash equivalents.......... $ 0.6 $ 1.1 $ 1.7 $ 1.9 $ 1.7 $ 1.8 $ 1.7 Intangible assets, net............. 119.2 113.9 114.2 120.1 126.8 117.5 135.6 Total assets....................... 172.8 165.2 168.3 180.0 191.8 179.8 204.8 Total debt (including amounts due to CEI).......................... 66.9 86.2 89.7 120.3 125.1 117.4 104.5 Shareholder's equity............... 95.4 70.3 64.2 40.4 47.2 44.2 81.3
- --------------- (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 $0.8 million and $1.2 million for the six months ended June 30, 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 -- Cox Enterprises, Inc. Unit Appreciation Plan" and "-- Long-Term Incentive Plan." In addition, year ended December 31, 1995 corporate general and administrative expenses include a nonrecurring corporate charge. 27 36 (3) Historical earnings per share information for Cox Radio is not presented as it is not considered meaningful and may be misleading to potential investors given the Cox Radio Consolidation immediately prior to the Offerings and the recent significant acquisition and disposition activity of the Company. (4) 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. (5) "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. (6) 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 37 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.
SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, -------------------------------------------------- ----------------- 1991 1992 1993 1994 1995 1995 1996 ------ ------ ------ ------ ------ ------ ------ (DOLLARS IN MILLIONS) STATEMENTS OF OPERATIONS DATA: Net revenues(1)...................... $ 46.0 $ 49.4 $ 53.3 $ 52.7(2) $ 55.6 $ 27.4 $ 28.9 Station operating expenses........... 32.9 34.7 36.8 36.9 40.7 20.3 20.3 Corporate general and administrative expenses........................... 1.9 1.8 1.9 1.8 1.7 1.0 0.9 Depreciation and amortization........ 4.0 3.9 3.8 3.1 3.5 1.5 1.6 ------ ------ ------ ------ ------ ------ ------ Operating income..................... 7.2 9.0 10.8 10.9 9.7 4.6 6.1 Interest expense..................... 11.9 11.8 11.6 10.1 9.8 4.8 5.1 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) (0.3) 0.7 Extraordinary item................... -- -- (2.0)(5) (0.2)(6) -- -- -- Net income (loss)(7)................. (4.7) (2.9) 11.0 2.1 (0.4) (0.3) 0.7 OTHER OPERATING DATA: Broadcast cash flow(8)............... $ 13.1 $ 14.7 $ 16.5 $ 15.8(2) $ 14.9(9) $ 7.1 $ 8.6 Broadcast cash flow margin(8)........ 28.5% 29.8% 31.0% 30.0% 26.8% 25.9% 29.8% EBITDA(8)............................ $ 11.2 $ 12.9 $ 14.6 $ 14.0(2) $ 13.2(9)) $ 6.1 $ 7.7 After-tax cash flow(8)............... (0.7) 1.0 16.9 5.3 3.1 1.2 2.3 Net cash provided by operating activities......................... 0.8 3.5 6.9 4.2 2.4 -- 1.4 Net cash provided by (used in) investing activities............... (0.3) (1.8) 12.9 7.1 (13.3) (12.7) (1.2) Net cash provided by (used in) financing activities............... (0.2) (1.2) (20.1) (13.6) 11.0 12.6 0.3 BALANCE SHEET DATA (END OF PERIOD): Cash and cash equivalents............ $ 2.3 $ 2.8 $ 2.4 $ 0.2 $ 0.2 $ 0.1 $ .6 Intangible assets, net............... 58.4 46.8 53.8 51.8 60.1 61.0 59.0 Total assets......................... 81.0 80.4 84.3 72.4 81.9 84.9 83.9 Total debt........................... 90.3 91.4 87.6 76.0 87.0 88.6 87.3 Redeemable preferred stock........... 12.2 14.1 10.4 10.3 11.3 10.8 11.8 ------ ------ ------ ------ ------ ------ ------ Total debt and redeemable preferred stock.............................. 102.5 105.5 98.0 86.3 98.3 99.4 99.1 Stockholders' deficiency(10)......... (27.0) (31.8) (22.8) (21.9) (23.3) (22.7) (23.1)
- --------------- (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. 29 38 (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. (7) Historical earnings per share information for NewCity is not presented as NewCity does not have publicly traded equity securities and is not registering stock to be sold in a public market. (8) "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. (9) Declines in broadcast cash flow and EBITDA from 1994 are due mainly to the losses incurred from the results of developing stations in KJSR-FM (Tulsa) and WZKD-AM (Orlando) that began operating in January 1995. See further discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity." (10) No cash dividends were declared or paid on NewCity's common stock during any of these periods. 30 39 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 six months ended June 30, 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 ------------------- SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, ------------------- 1995 1995 1996 ------------ ------- ------- (DOLLARS IN THOUSANDS) STATEMENTS OF OPERATIONS DATA: Net revenues............................................... $168,361 $80,532 $90,692 Station operating expenses................................. 121,570 59,360 64,593 Corporate general and administrative expenses.............. 4,370 2,266 2,737 Depreciation and amortization.............................. 15,410 7,591 7,884 ------------ ------- ------- Operating income........................................... 27,011 11,315 15,478 Interest expense........................................... 20,553 10,128 10,470 Net income (loss).......................................... 1,152 (885) 1,516 OTHER OPERATING DATA: Broadcast cash flow(1)..................................... $ 46,791 $21,172 $26,099 Broadcast cash flow margin(1).............................. 27.8% 26.3% 28.8% EBITDA(1).................................................. $ 42,421 $18,906 $23,362 After-tax cash flow(1)..................................... 16,562 6,706 9,400
- --------------- (1)See Note 5 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, 42 radio stations (27 FM and 15 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 six months ended June 30, 1995 and 1996 as presented in "Unaudited Pro Forma Combined Financial Data." SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995 Net Revenues. Net revenues for the six months ended June 30, 1996 increased $10.2 million to $90.7 million, a 13% increase over the comparable period in 1995. The increase was due generally to growth in market share and advertising rate increases in certain of the Company's markets and included $3.5 million at WSB-AM (Atlanta) due primarily to increased sports programming, $2.1 million at the Company's Los Angeles stations reflecting higher advertising rates and successful implementation of new marketing strategies, $1.4 million at the Company's Miami stations due to higher ratings and a change in sales approach and $1.5 million at the Company's Orlando stations reflecting a strong local economy. Station Operating Expenses. Station operating expenses increased $5.2 million to $64.6 million, an increase of 9% over the comparable period in 1995. The increase included $2.3 million at WSB-AM due primarily to higher sports programming costs, $0.8 million at the Company's Los Angeles stations due to compensation programs tied to station ratings, $0.9 million at the Company's Orlando stations reflecting 31 40 increases in certain station operating expenses as a result of increases in revenues and an overall increase in selling expenses relating to increases in revenues throughout the Company. Broadcast Cash Flow. Broadcast cash flow increased $5.0 million to $26.1 million, a 24% increase over the comparable period in 1995. In addition, the broadcast cash flow margin increased to 28.7% for the six months ended June 30, 1996 from 26.3% for the comparable period in 1995. Such increases resulted primarily from improvements in net revenues over station operating expenses at WSB-AM and the Company's Los Angeles and Miami stations. Corporate, General and Administrative expenses. Corporate general and administrative expenses increased $0.5 million to $2.7 million, an increase of 23% over the comparable period in 1995 primarily due to an increase in Cox Radio's allocated portion of CEI's Unit Appreciation Plan ("UAP") expense. ACQUISITIONS During 1996, in response to the removal of certain station ownership restrictions in the 1996 Act, the Company has acquired, contracted to acquire or is negotiating to acquire 29 radio stations for approximately $296 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, five in Tulsa 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 41 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 a substantial portion of the taxable gain on these transactions upon the reinvestment of the $32.5 million in net proceeds in additional radio properties in transactions which will qualify as deferred like-kind exchanges. It is not expected that any of the Pending Transactions, with the possible exception of the Tulsa Acquisition, will qualify for reinvestment. The Company is presently pursuing additional qualifying reinvestment properties. 33 42 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 will transfer direct or indirect ownership of its 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 call letters of WYNF-FM with its existing Tampa station, WWRM-FM, and then subsequently changed the new 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 (the Tampa Acquisition). This transaction is expected to close in fourth quarter of 1996. 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 34 43 to close during the last quarter of 1996. In June 1996, the Company acquired WHEN-AM and WWHT-FM (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). The Louisville Acquisition is expected to close in the third quarter of 1996. In June 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. The Orlando Acquisition and the Miami Disposition will be accounted for as like-kind exchanges for tax purposes. Tax rules will allow the Company to defer a substantial portion of the taxable gain on these transactions upon the reinvestment of the $32.5 million in net proceeds in qualifying future acquisitions. It is not expected that any of the Pending Transactions, with the possible exception of the Tulsa Acquisition, will qualify for reinvestment. The Company is presently pursuing additional qualifying reinvestment properties. 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 $166 million in cash and approximately $87 million in the assumption of NewCity debt (the NewCity Acquisition). The NewCity Acquisition is expected to close in the first half of 1997. In July 1996, the Company entered into negotiations to acquire KRAV-FM and KGTO-AM (Tulsa) for $5.5 million (the Tulsa Acquisition). The Tulsa Acquisition is expected to close in the first quarter 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 U.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:
SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, ------------------------------- ----------------- 1993 1994 1995 1995 1996 ------- -------- -------- ------- ------- (DOLLARS IN THOUSANDS) STATEMENTS OF OPERATIONS DATA: Net revenues.............................. $94,950 $111,535 $123,572 $58,551 $66,308 Station operating expenses................ 67,948 76,314 89,962 43,009 47,297 Corporate general and administrative expenses(1)............................ 2,522 2,667 5,853 1,873 2,341 Depreciation and amortization............. 7,224 6,995 7,247 3,715 3,979 ------- -------- -------- ------- ------- Operating income.......................... 17,256 25,559 20,510 9,954 12,691 Interest expense.......................... 5,590 5,229 5,974 2,942 2,856 Net income (loss)......................... (1,101)(2) 11,207 8,163 3,796 5,213 OTHER OPERATING DATA: Broadcast cash flow(3).................... $27,002 $ 35,221 $ 33,610(4) $15,542 $19,011 Broadcast cash flow margin(3)............. 28.4% 31.6% 27.2% 26.5% 28.7% EBITDA(3)................................. $24,480 $ 32,554 $ 27,757(4) $13,669 $16,670 After-tax cash flow(3).................... 13,715 18,202 15,410 7,511 9,192
- --------------- (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 $0.8 million and $1.2 million for the six months ended June 30, 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 35 44 expect to incur this expense in future periods. See "Management -- Cox Enterprises, Inc. Unit Appreciation Plan" and "-- 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 5 in "Selected Historical Consolidated Financial Data -- Cox Radio" for definitions. (4) 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. SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995 Net Revenues. Net revenues for the six months ended June 30, 1996 increased $7.8 million to $66.3 million, a 13% increase over the comparable period in 1995. The increase was primarily due to higher ratings at certain of the Company's stations which were owned, operated or to which services were provided during both of these six month periods as well as an increase in the number of such stations. The increase for individual stations and markets included $3.5 million at WSB-AM (Atlanta) primarily due to increased sports programming revenues, $2.1 million at the Company's Los Angeles stations reflecting higher advertising rates and successful implementation of new marketing strategies and $2.0 million at the Company's Miami stations due to higher ratings and a change in sales approach. Net revenues also increased $2.3 million due to the inclusion of the operations of WCNN-AM (Atlanta) and WFNS-AM (Tampa), which were initially included in the Company's operations in April and June 1995, respectively, and WRKA-FM (Louisville), which was initially included in the operations of the Company in the first quarter of 1996. Such increases were partially offset by a decrease of $1.6 million at the Company's Chicago stations due to programming changes. On a "same station" basis (reflecting results from stations operated for the entire six month period ended June 30 in both 1996 and 1995), net revenues increased $5.4 million to $63.6 million, an increase of 9% over the six months ended June 30, 1995. Station Operating Expenses. Station operating expenses increased $4.3 million to $47.3 million, an increase of 10% over the comparable period in 1995. Approximately $2.8 million of the increase was attributable to the operations of WCNN-AM, WFNS-AM, and WRKA-FM, which were initially included in the Company's operations in April 1995, June 1995 and January 1996, respectively. The increase for existing stations included $2.3 million at WSB-AM due primarily to higher sports programming costs, $0.8 million at the Company's Los Angeles stations due primarily to compensation programs tied to station ratings and an overall increase in selling expenses relating to increases in revenues throughout the Company. These increases were partially offset by a decrease in station operating expenses of $1.8 million at WIOD-AM (Miami) and the Company's Chicago stations. On a "same station" basis, station operating expenses increased $1.5 million, to $43.7 million an increase of 4% over the six months ended June 30, 1995. Broadcast Cash Flow. Broadcast cash flow increased $3.5 million to $19.0 million, a 22% increase over the comparable period in 1995. On a "same station" basis, broadcast cash flow increased by $3.9 million to $19.9 million, an increase of 25% over the comparable period in 1995. In addition, the broadcast cash flow margin increased to 28.7% for the six months ended June 30, 1996 from 26.5% for the comparable period in 1995. Such increases resulted primarily from improvements in net revenues over station operating expenses at WSB-AM, the Company's Los Angeles stations, and the Company's Miami stations and the decrease in station operating expenses at WIOD-AM. Corporate General and Administrative Expenses. Corporate, general and administrative expenses increased $0.5 million to $2.3 million over the comparable period in 1995 primarily due to an increase in Cox Radio's allocated portion of CEI's UAP expense. Operating Income. Operating income increased $2.7 million to $12.7 million, an increase of 27% over the first six months of 1995 for the reasons noted above. In addition, the operating margin increased to 19.1% for the six months ended June 30, 1996 from 17.0% for the comparable period of 1995. Interest Expense. Interest expense for the six months ended June 30, 1996 remained substantially the same as the comparable period in 1995. 36 45 Net Income. Net income increased by $1.4 million to $5.2 million, an increase of 37% 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, a net revenue increase of $8.8 million was 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 included $6.3 million for the acquisition of broadcast rights for the Atlanta Braves and the Atlanta Hawks, $2.0 million of programming, 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 Cox Radio's allocated portion of CEI's 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 in 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 in 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. 37 46 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. Interest Expense. Interest expense decreased $0.4 million in 1994 to $5.2 million, a 7% 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. Certain of the indirect subsidiaries of CEI, through which the U.S. radio operations of CEI are conducted, 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 a revolving credit facility with CEI (the "New CEI Credit Facility"). All interest accrued under the New CEI Credit Facility prior to the consummation of the Offerings will be contributed by CEI to Cox Radio. 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%. Upon the consummation of the Offerings, Cox Radio will use $107.1 million of the net proceeds of the Offerings to completely discharge all amounts owed under the CEI Notes. CEI continues to perform day-to-day cash management services for Cox Radio. See "Certain Relationships and Related Transactions." Cox Radio will be required to borrow approximately $164 million to consummate the NewCity Acquisition. Although Cox expects to be able to obtain the required financing from a syndicate of banks, if such bank financing is not available, the required funds will be loaned by CEI to Cox Radio at prevailing market rates. Upon consummation of 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 $75 million 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, due to the "change of control", 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. Because the NewCity Notes, since the announcement of the acquisition of NewCity by Cox Radio, have consistently traded at prices in excess of 101% of the principal amount thereof, Cox Radio does not expect any holders of the NewCity Notes to accept the repurchase offer. If NewCity is required to repurchase any of the NewCity Notes, the Company expects to fund such repurchase through debt financing, including bank financing. 38 47 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 NewCity's 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 will only limit the actions of NewCity and its subsidiaries and not the other subsidiaries of the Company. 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:
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, --------------------------- ----------------- 1993 1994 1995 1995 1996 ------- ------- ------- ------- ------- (DOLLARS IN THOUSANDS) Net cash provided by operating activities............................. $11,429 $14,068 $13,987 $ 6,274 $ 9,070 Net cash used in investing activities (including acquisitions)............... 6,053 12,292 17,342 2,119 15,189 Net cash provided by (used in) financing activities............................. (4,776) (1,607) 3,149 (4,255) 6,094 Broadcast cash flow...................... 27,002 35,221 33,610 15,542 19,011 Interest expense......................... 5,590 5,229 5,974 2,942 2,856 Income taxes............................. 6,048 8,863 6,226 2,948 4,347 Capital expenditures..................... 1,065 2,705 4,073 1,308 1,153
Net cash provided by operating activities for the six months ended June 30, 1996 increased $2.8 million to $9.1 million over the comparable period in 1995. The increase was due principally to the aforementioned $1.4 million improvement in net income and a deferred tax charge of approximately $1.0 million recorded in the second quarter of 1996. Net cash from operating activities in 1995 remained substantially the same as in 1994. Net cash provided by operating activities in 1994 increased $2.6 million to $14.1 million over 1993. The increase was due to the previously noted $12.3 million increase in net income over 1993, including the impact of the noncash, nonrecurring cumulative effect of accounting changes of $7.6 million recorded in 1993, as well as the 1993 $1.1 million gain on disposition of a radio station and the net effect of changes in working capital accounts. Net cash used in investing activities for all periods presented principally reflects the Company's acquisition activity discussed above and capital expenditures. The increases in annual capital expenditures from 1993 to 1995 were due to the increasing number of stations owned or operated by Cox Radio. Net cash provided by (used in) financing activities represents the net change in amounts due to CEI, repayment of debt, dividends paid and net changes in book overdrafts. With the exception of the $3.0 million repayment of debt in 1993, cash flows from financing activities represent intercompany transactions with CEI and fluctuations for the periods presented generally reflect the differences between changes in both cash flows from operating activities and cash flows from investing activities. See "Certain Relationships and Related Transactions." 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, respectively, which are expected to be funded through operations. 39 48 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 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 $36,740 Corporate general and administrative expenses.......... 1,103 1,238 Depreciation and amortization.......................... 1,982 1,997 Operating income....................................... 4,700 7,991 Net income............................................. 1,812 3,401
- --------------- (1) Includes a nonrecurring corporate charge. 40 49 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 six months ended June 30, 1996, approximately 66.1%, 66.5%, 68.2%, and 67.6% 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 SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995 Net Revenues. Net revenues increased from $27.4 million during the six months ended June 30, 1995 to $28.9 million during the six months ended June 30, 1996, an increase of $1.5 million, or 5%. Such increase was due to increased local revenue of $0.9 million and increased national revenue of $0.6 million which were partially offset by a small decrease in other revenue of $45,000. The most significant increases in local and national revenues were in the Tulsa, Orlando, Syracuse, and San Antonio markets due to growth in market revenue share and advertising rate increases. Operating Costs. Total operating costs for the six months ended June 30, 1996 were $22.8 million, the same as for the six months ended June 30, 1995. Although total operating costs remained the same, broadcasting operations costs increased by $0.2 million and depreciation and amortization increased by $0.1 million. These increased costs were offset by decreases in selling, general and administrative expenses of $0.2 million and corporate general and administrative expenses of $76,000. The increase of $0.2 million in broadcasting operations costs is primarily the result of increases in programming expenses in the Syracuse and Orlando markets caused by increased research activity, certain increased salaries for key talent employees, increased royalty costs due to increased net revenue and increased sports programming costs due to increased sports activity. Selling, General and Administrative Expenses. The decrease of $0.2 million in selling, general and administrative expenses is primarily the result of reduced general and administrative expenses of approximately $0.4 million in the Orlando, Tulsa, San Antonio and Bridgeport markets due to various reasons that 41 50 was partially offset by increased selling expenses in the Tulsa and Orlando markets. The primary reasons for the decrease in general and administrative expenses include reduced lease payments related to local marketing agreements in the Orlando, Tulsa and San Antonio markets for radio stations that were not owned for the entire first six months during 1995, reduced employee health insurance costs in the Orlando and San Antonio markets and reduced salaries in the Bridgeport market due to the elimination of certain personnel in minor operating divisions. The increase in selling expenses was principally due to increased commissions paid in the Tulsa and Orlando markets due to increased net revenues. Depreciation and Amortization Expense. Depreciation and amortization expense increased from $1.5 million during the six months ended June 30, 1995 to $1.6 million during the six months ended June 30, 1996, an increase of $0.1 million, or 8%. Such increase was due to depreciation of certain equipment during 1996 that was not owned during the entire six months ended June 30, 1995. Operating Income. Operating income increased by $1.5 million, or 33%, from $4.6 million during the six months ended June 30, 1995 to $6.1 million during the six months ended June 30, 1996. Such increase was caused by the increase in net revenue of $1.5 million as discussed previously. EBITDA. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by $1.6 million, or 27%, from $6.1 million during the six months ended June 30, 1995 to $7.7 million during the six months ended June 30, 1996. The increase in EBITDA was substantially due to increased net revenue during 1996. Interest Expense. Interest expense increased by $0.3 million, or 7%, during the first six months of 1996 compared to the same period in 1995, from $4.8 million to $5.1 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. 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, 42 51 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 that was not part of NewCity's operations until April 1993, increased salaries and administrative expenses of 43 52 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, NewCity amended the WJZF-LMA (the "Amendment"). Among other items, the Amendment provided for the issuance by NewCity to Cox Radio 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. LIQUIDITY AND CAPITAL RESOURCES Generally, the primary sources of liquidity for NewCity are its cash generated from operating activities and any borrowings, as required, made through its Senior Credit Facility (as defined herein). The significant liquidity needs of NewCity include its debt service requirements, funding of working capital needs and capital expenditures. Cash generated by operating activities was $2.4 million for the year ended December 31, 1995. Such cash was used to fund purchases of plant and equipment of $1.5 million, acquisition related costs of $0.5 million and to partially contribute to payments on long-term borrowings. NewCity's loan agreement with Fleet National Bank (Fleet) provides for an aggregate senior credit facility of $15.0 million. One portion of the senior credit facility provides an $11.0 million reducing revolving 44 53 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 $2.0 million occurs. As of June 30, 1996, the Line of Credit availability was $9.8 million as the result of an open standby letter of credit of $1.2 million issued by Fleet in May 1995 in connection with NewCity's issuance of a 16.33% promissory note due May 16, 1997 to assist in financing the acquisition of KJSR-FM in Tulsa (the "KJSR Note"). 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 KJSR Note. The Fleet Agreement also provided for a separate revolving line of credit of $4.0 million 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 commenced on July 1, 1996 and continue on a quarterly basis until maturity in amounts ranging from $66,666 to $0.4 million. Collectively, the Line of Credit and the Term Loan represent NewCity's aggregate senior credit facility (the "Senior Credit Facility"). At December 31, 1995, NewCity had $4.0 million of borrowings outstanding under the Term Loan and $6.0 million outstanding under the Line of Credit. Such borrowings were substantially incurred to assist in funding the acquisitions of four radio stations during the year ended December 31, 1995, as described below. Interest on any borrowings under the Senior Credit Facility is payable at the prime interest rate maintained by Fleet plus 1.5% or, at NewCity's option, the London Interbank Offered Rate ("LIBOR") plus 2.75% (the "LIBOR Option"). At December 31, 1995, NewCity had exercised various LIBOR Options for the $10.0 million principal balance outstanding, thereby setting its interest rate on such borrowings at rates ranging from 8.4% to 8.7% through November 1996. NewCity and its subsidiaries have pledged all of their assets to Fleet. In addition, the terms of the Senior Credit Facility, among other conditions, restrict NewCity's future ability to pay dividends and incur additional indebtedness, require NewCity to maintain an annual minimum level of cash flow, as defined, and restrict annual capital expenditures. On March 3, 1995, March 17, 1995, May 17, 1995 and May 31, 1995, NewCity acquired substantially all the assets of radio stations WZKD-AM (formerly WOMX) in Orlando, KCJZ-FM (formerly KDIL) in San Antonio, KJSR-FM (formerly KTFX) in Tulsa and WCFB-FM in Orlando, respectively. The purchase prices for such radio stations were $0.5 million for WZKD, $3.2 million for KCJZ, $3.5 million for KJSR and $6.0 million for WCFB. The aggregate cost of $13.2 million to acquire these radio broadcasting properties was financed using cash in escrow of $1.2 million, the issuance of the KJSR Note, borrowings under the Senior Credit Facility of approximately $10.0 million, and cash on hand. The KJSR Note was issued on May 17, 1995 in connection with the acquisition of substantially all the assets of radio station KJSR-FM in Tulsa, Oklahoma. 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 $1.0 million, plus interest, on May 16, 1996 and 1997, respectively. (See Note 2 to the Consolidated Financial Statements of NewCity). NewCity believes that its cash generated from operations and borrowings under the Senior Credit Facility will be sufficient to meet its requirements for working capital, capital expenditures, interest and principal payments. 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 NewCity's financial statements. 45 54 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, 42 radio stations (27 FM and 15 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 $179 million and broadcast cash flow of $52 million during the twelve month period ending June 30, 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 average of 5.3%, which was calculated using revenue projections obtained from RAB, for 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 25 of the Company's 42 stations will be clustered in five 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. 46 55 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) 4.8 KACE-FM R&B Oldies African American 11.9 Adults 35-54 ATLANTA 10 12 WSB-AM News/Talk Adults 35-64 9.8 WSB-FM Adult Contemporary Women 25-54 8.3 WJZF-FM(5)(6) Jazz Men 25-54 4.1 WCNN-AM(6) Sports/Talk Men 25-54 2.1 MIAMI 12 11 WFLC-FM Hot Adult Contemporary Adults 25-54 4.7 WHQT-FM Urban Adult Contemporary Adults 25-54 6.0 TAMPA 21 21 WWRM-FM Soft Adult Contemporary Women 35-54(4) 8.6 WCOF-FM 70's Oldies Adults 25-44(4) 5.3 WSUN-AM Sports/Talk Men 25-54 3.2 WFNS-AM(8) Sports/Talk Men 25-54 1.2 ORLANDO 26 39 WDBO-AM(5) News/Talk Adults 35-64 7.2 WWKA-FM(5) Country Adults 25-54 8.5 WCFB-FM(5) Rhythmic Adult Contemporary Women 25-54 6.1 WZKD-AM(5) Kids Radio Children 3-11 -- WHOO-AM(9)(10) Standards Adults 55+ -- WHTQ-FM(9)(10) Classic Rock Men 25-54 7.5 WMMO-FM(9)(10) Rock Adult Contemporary Adults 25-54 5.8 SAN ANTONIO 29 34 KCYY-FM(5) Country Adults 25-54 7.4 KKYX-AM(5) Classic Country Adults 35-64 2.6 KCJZ-FM(5) Jazz Adults 25-54 4.8 LOUISVILLE 45 49 WRKA-FM Oldies Adults 35-54(4) 6.2 WRVI-FM Rock Adult Adults 25-49 2.1 (11) WXNU-FM(12) Contemporary Alternative Adults 18-34 3.8 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 3 ATLANTA 1 21.3 % WSB-AM 1 WSB-FM 4 WJZF-FM(5)(6) 10 WCNN-AM(6) 17 MIAMI 3 11.3 % WFLC-FM 4 WHQT-FM 2 (7) TAMPA 4 11.9 % WWRM-FM 3 WCOF-FM 10 (7) WSUN-AM 14 WFNS-AM(8) 17 ORLANDO 1 30.7 % WDBO-AM(5) 5 WWKA-FM(5) 2 WCFB-FM(5) 6 WZKD-AM(5) -- WHOO-AM(9)(10) -- WHTQ-FM(9)(10) 3 WMMO-FM(9)(10) 6 SAN ANTONIO 4 14.3 % KCYY-FM(5) 2 KKYX-AM(5) 16 KCJZ-FM(5) 10 LOUISVILLE 5 8.0 % WRKA-FM 4 WRVI-FM 14 (11) WXNU-FM(12) 11
47 56
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 (13) WZZK-AM(5) Country Adults 25-54 -- WODL-FM(5) Oldies Adults 25-54 8.3 DAYTON 55 52 WHIO-AM News/Talk Adults 35-64 6.1 WHKO-FM Country Adults 25-54 14.2 TULSA 56 60 KRMG-AM(5) News/Talk Adults 25-54 7.0 KWEN-FM(5) Country Adults 25-54 12.8 KJSR-FM(5) 70's Oldies Adults 25-54 8.7 Adult Contemporary Adults 25-54 4.9 KRAV-FM(14) Standards Adults 55+ -- KGTO-AM(14) BRIDGEPORT 58 111 WEZN-FM(5) Adult Contemporary Adults 25-54 12.2 (15) SYRACUSE 71 68 WSYR-AM(5) News/Talk Adults 35-64 11.1 WYYY-FM(5) Adult Contemporary Adults 25-54 12.1 WBBS-FM(5) Country Adults 25-54 9.9 Sports/Talk Men 25-54 3.7 WHEN-AM(10) Adult Hit Radio Women 18-34 3.4 WWHT-FM(10) 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 (13) WZZK-AM(5) -- WODL-FM(5) 5 DAYTON 2 25.5 % WHIO-AM 4 WHKO-FM 1 TULSA 1 41.8 % KRMG-AM(5) 5 KWEN-FM(5) 1 KJSR-FM(5) 3 8 KRAV-FM(14) -- KGTO-AM(14) BRIDGEPORT 3 21.6 % WEZN-FM(5) 1 (15) SYRACUSE 1 55.3 % WSYR-AM(5) 1 WYYY-FM(5) 1 WBBS-FM(5) 3 9 WHEN-AM(10) 7 (7) WWHT-FM(10)
- --------------- (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) Tied. (8) 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. (9) Station to be acquired pursuant to the Orlando Acquisition. (10) Station operated by NewCity pursuant to an LMA. (11) Broadcasting on WRVI-FM began in January 1996. Accordingly, audience share and audience rank are based only on the Winter 1996 and Spring 1996 Arbitron Market Reports. (12) Station to be acquired pursuant to the Louisville Acquisition. (13) Audience share and audience rank information for WZZK-AM and WZZK-FM are combined because the stations are simulcast. (14) Station to be acquired pursuant to the Tulsa Acquisition. (15) Audience share and rank data is based only on Arbitron Market Reports for Fall 1995 and Spring 1996 because Arbitron does not produce Summer and Winter Arbitron Market Reports for the Bridgeport/Fairfield County market. 48 57 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. Generally, the Company considers developing stations to include those which have been recently acquired by the Company, with respect to which the Company is planning or actively considering a format change and which are not performing well financially. Currently, the Company considers nine of its stations to be 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 1992 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 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 call letters and format with Cox Radio's existing Tampa station, WWRM-FM, and then subsequently changed the new WYNF-FM's call letters to WCOF-FM and installed its 70's Oldies format on that station, 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 49 58 6.3 audience share and number six rank in the Fall 1993 Arbitron Market Report. In the Spring 1996 Arbitron Market Report, WWRM-FM had an 8.1 audience share and was ranked third. 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 Spring 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 Spring 1996 Arbitron Market Report, WBBS-FM ranked third among Adults 25-54 with an audience share of 9.7. 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 Spring 1996 Arbitron Market Report, the station ranked third with an 8.4 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 eighth with a 5.3 audience share in the Spring 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 50 59 community and is designed to improve ratings and maximize the impact of advertising for the Company's customers. 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 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. These two management teams share a common operating philosophy, which management believes 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 51 60 communities and customers. The general managers of Cox Radio and NewCity have been with their 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, on an aggregate basis, greater radio advertising 52 61 revenue growth than the average of 5.3%, which was calculated using revenue projections obtained from RAB, for the U.S. radio industry as a whole. These markets include six Sunbelt markets and four 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((3) 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((4) - ---------------------------------- ------- ------- -------- ----- ------- ------- --- --- --------- 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 5 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 Average........................... -- -- 22.9 77.1 5.4 5.6 -- -- --
- --------------- (1) Source, Duncan's. (2) Ranks assigned by Arbitron based on 12+ population in the market. (3) Source, BIA. (4) 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. 53 62 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 SIX 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 4 KOST-FM Audience Share........................................... 5.6 4.7 4.2 3.7 Audience Rank............................................ 2 2 4 5 KACE-FM(1) Audience Share........................................... 0.6 0.6 1.2 1.4 Audience Rank............................................ 29 35 28 27 Combined Audience Share.................................... 10.0 9.5 9.0 8.9 Combined Revenue Share..................................... 10.8(2) 11.0 10.9 11.6 Combined Revenue Rank...................................... 2 3 4 N.A.
- --------------- (1) KACE-FM was operated by Cox Radio pursuant to an LMA beginning in August 1994 and was acquired in August 1995. (2) Excludes revenue from KACE-FM. 54 63 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 Radio 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 SIX 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 6.8 Audience Rank.................................... 11 9 6 3 WSB-FM Audience Share................................... 7.6 7.8 6.6 6.6 Audience Rank.................................... 4 3 3 4 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 1.1 Audience Rank.................................... 16 17 17 18 Combined Audience Share............................ 13.2 17.2 16.9 18.4 Combined Revenue Share............................. 16.2(3) 16.8(4) 21.3 22.3 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. 55 64 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 for the latest four book average.
1996 LATEST FOUR BOOK AVERAGE/ LATEST SIX 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 6.0 Audience Rank.......................................... 5 3 3 2(1) WFLC-FM Audience Share......................................... 5.2 5.0 4.9 4.7 Audience Rank.......................................... 3 6 4 4 Combined Audience Share.................................. 10.0 10.6 10.6 10.7 Combined Revenue Share................................... 10.8 10.9 11.3 10.8 Combined Revenue Rank.................................... 4 3 3 N.A.
- --------------- (1) Tied. 56 65 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 SIX 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 5.6 Audience Rank.......................................... 4 8 4(1) 9 WCOF-FM(2) Audience Share......................................... N.A. 7.8 5.9 5.3 Audience Rank.......................................... N.A. 2 9 10(1) WSUN-AM Audience Share......................................... 1.8 3.2 3.5 2.1 Audience Rank.......................................... 12 12 12 14 WFNS-AM (Tampa Acquisition)(3) Audience Share......................................... 0.9 1.0 1.0 0.6 Audience Rank.......................................... 13 15 17 21 Combined Audience Share.................................. 9.6 17.8 17.0 13.6 Combined Revenue Share................................... 8.9(4) 13.2(5) 11.9 12.8 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. 57 66 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 June 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 SIX 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 4.3 Audience Rank................................................. 5 6 9 11 WWKA-FM (NewCity Acquisition) Audience Share................................................ 9.4 7.2 7.7 8.5 Audience Rank................................................. 1 3 3 2 WCFB-FM (NewCity Acquisition)(1) Audience Share................................................ 3.9 3.0 3.1 5.1 Audience Rank................................................. 12 14 14 9 WZKD-AM (NewCity Acquisition)(2) Audience Share................................................ N.A. N.A. N.A. N.A. Audience Rank................................................. N.A. N.A. N.A. N.A. WHOO-AM (Orlando Acquisition)(3) Audience Share................................................ 0.4 0.7 0.6 0.6 Audience Rank................................................. 19(4) 19(4) 20 19 WHTQ-FM (Orlando Acquisition)(3) Audience Share................................................ 4.0 4.6 4.3 4.9 Audience Rank................................................. 11 13 11 10 WMMO-FM (Orlando Acquisition)(3) Audience Share................................................ 7.5 5.8 7.5 5.8 Audience Rank................................................. 3 7 4 6 Combined Audience Share......................................... 31.9 27.3 28.5 29.2 Combined Revenue Share.......................................... 25.1(5) 22.0(5) 20.6(5) 21.4(5) Combined Revenue Rank........................................... 1 1 1 N.A.
- --------------- (1) WCFB-FM was operated pursuant to an LMA beginning in August 1992 and was acquired in May 1995. (2) 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 are not reported in industry guides. (3) NewCity began operating the station pursuant to an LMA in July 1996. (4) Tied. (5) Excludes revenue from WZKD-AM, WHOO-AM, WHTQ-FM and WMMO-FM. 58 67 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 SIX 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 7.4 Audience Rank........................................ 2 3 3 2 KKYX-AM (NewCity Acquisition) Audience Share....................................... 1.6 1.8 1.6 1.2 Audience Rank........................................ 18 18 19 17 KCJZ-FM (NewCity Acquisition)(1) Audience Share....................................... 2.4 2.9 3.9 4.8 Audience Rank........................................ 11 10 10 10 Combined Audience Share................................ 13.7 12.5 12.8 13.4 Combined Revenue Share................................. 16.4 15.7 14.3 13.8 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. 59 68 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 SIX 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 5.5 Audience Rank........................................ 4 3 3 7 WRVI-FM(1) Audience Share....................................... N.A. N.A. N.A. 1.9(2) Audience Rank........................................ N.A. N.A. N.A. 14(2) WXNU-FM (Louisville Acquisition)(3) Audience Share....................................... N.A. 0.8 1.7 1.4 Audience Rank........................................ N.A. 17(4) 14 15 Combined Audience Share................................ 8.6 7.9 8.3 8.8 Combined Revenue Share................................. N.A. N.A. 7.9(5) 7.6(5) 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 and Spring 1996 Arbitron Market Reports. (3) Reported under the call letters WQNF-FM through the Summer 1995 Arbitron Market Report. (4) Tied. (5) Excludes revenue from WXNU-FM. 60 69 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 SIX 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 14.1 Audience Rank.......................................... 1 1 1 1 WODL-FM (NewCity Acquisition) Audience Share......................................... 8.6 6.3 7.8 8.3 Audience Rank.......................................... 4 5 5 5 Combined Audience Share.................................. 27.2 25.4 21.9 22.4 Combined Revenue Share................................... 35.6 34.7 32.5 32.2 Combined Revenue Rank.................................... 1 1 1 N.A.
- --------------- (1) Audience share and audience rank information for WZZK-AM and WZZK-FM report are combined because the stations are simulcast. 61 70 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 SIX 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 3.7 Audience Rank.......................................... 8 8 9 9 WHKO-FM Audience Share......................................... 12.6 13.4 12.3 14.2 Audience Rank.......................................... 1 1 1 1 Combined Audience Share.................................. 17.3 17.7 16.7 17.9 Combined Revenue Share................................... 31.2 28.8 25.5 27.9 Combined Revenue Rank.................................... 2 2 2 N.A.
62 71 TULSA, OKLAHOMA Market Revenue Rank: 56 -- KRMG-AM (News/Talk), KWEN-FM (Country), KJSR-FM (70's Oldies), KRAV-FM (Adult Contemporary), KGTO-AM (Standards). 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 five 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. KRAV-FM and KGTO-AM, with respect to which the Company expects to enter into a definitive purchase agreement shortly, broadcast an Adult Contemporary and a Standards format, respectively.
1996 LATEST FOUR BOOK AVERAGE/ LATEST SIX 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 7.0 Audience Rank.......................................... 2 3 4 5 KWEN-FM (NewCity Acquisition) Audience Share......................................... 18.6 15.1 12.5 12.8 Audience Rank.......................................... 1 1 1 1 KJSR-FM (NewCity Acquisition)(1) Audience Share......................................... 3.1 2.7 6.5 8.7 Audience Rank.......................................... 6 6 4 3 KRAV-FM (Tulsa Acquisition) Audience Share......................................... 6.3 6.0 5.6 4.9 Audience Rank.......................................... 5 6 7 8 KGTO-AM (Tulsa Acquisition) Audience Share......................................... 0.9 0.8 0.4 0.4 Audience Rank.......................................... 17 16 21 20 Combined Audience Share.................................. 39.5 33.4 32.0 33.8 Combined Revenue Share................................... 37.1(2) 35.5(2) 35.5(3) 37.2(3) 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, KRAV-FM and KGTO-AM. (3) Excludes revenue from KRAV-FM and KGTO-AM. 63 72 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 SIX 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 12.2 Audience Rank..................................... 2 2 1 1 Combined Revenue Share.............................. 24.1 22.5 21.6 22.6 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. 64 73 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." NewCity acquired WBBS-FM in 1993 and converted the station 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 SIX 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 6.6 Audience Rank.......................................... 4 4 6 6 WYYY-FM (NewCity Acquisition) Audience Share......................................... 12.8 14.4 14.0 12.1 Audience Rank.......................................... 1 1 1 1 WBBS-FM (NewCity Acquisition)(1) Audience Share......................................... 7.2 7.7 9.4 9.9 Audience Rank.......................................... 5 6 3 3 WHEN-AM(2) Audience Share......................................... 2.1 2.5 2.6 2.2 Audience Rank.......................................... 10 10 10 11 WWHT-FM(2) Audience Share......................................... 3.0 3.8 4.2 3.3 Audience Rank.......................................... 9 7 8 8 Combined Audience Share.................................. 33.0 36.9 37.3 34.1 Combined Revenue Share................................... 45.6(3) 51.2(4) 51.7(4) 53.0(4) Combined Revenue Rank.................................... 1 1 1 N.A.
- --------------- (1) WBBS-FM was acquired by NewCity in August 1993. (2) WHEN-AM and WWHT-FM were acquired by Cox Radio in June 1996. NewCity operates these stations pursuant to an LMA. (3) Excludes revenue from WHEN-AM, WWHT-FM and WBBS-FM. (4) Excludes revenue from WHEN-AM and WWHT-FM. 65 74 ORGANIZATIONAL HISTORY Cox Radio is currently an indirect, wholly-owned subsidiary of CEI. Upon completion of the Offerings and the issuance of 155,000 shares of restricted Class A Common Stock to management, CEI will own approximately 71.9% of the Common Stock of Cox Radio and have 96.2% 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 U.S. 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. 66 75 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 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 67 76 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. 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. 68 77 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)(3) 104.1 MHz April 1, 2003 C1 371 m 60 kw WCNN-AM(3) 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(4) 910 kHz February 1, 2003 B N.A. 5 kw Orlando........................................... WDBO-AM(2) 580 kHz February 1, 2003 B N.A. 5 kw WWKA-FM(2) 92.3 MHz February 1, 2003 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- 990 kHz February 1, 2003 B N.A. 50 kw day AM(6)(7) 5 kw night WHTQ- 96.5 MHz February 1, 2003 C 487 m 100 kw FM(6)(7) WMMO- 98.9 MHz February 1, 2003 C2 134 m 38 kw FM(6)(7) 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(5) A 95 m 6 kw WRVI-FM 94.7 MHz August 1, 2003 A 100 m 3 kw WXNU-FM(8) 105.9 MHz August 1, 2003 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(5) B N.A. 5 kw WHKO-FM 99.1 MHz October 1, 1996(5) 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 KRAV-FM(9) 96.5 MHz June 1, 1997 C 405 m 100 kw KGTO-AM(9) 1050 kHz June 1, 1997 B N.A. 1 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(7) 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(7) 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) Cox Radio provides programming to this station pursuant to an LMA. (4) Cox Radio provides sales and related services to this station through a JSA; station to be acquired pursuant to the Tampa Acquisition. (5) Cox Radio has filed an application with the FCC to renew such licenses. Such applications are pending FCC approval as of August 28, 1996. (6) Station to be acquired by Cox Radio pursuant to the Orlando Acquisition. (7) Station operated by NewCity pursuant to an LMA. (8) Station to be acquired by Cox Radio pursuant to the Louisville Acquisition (9) Station to be acquired by Cox Radio pursuant to the Tulsa Acquisition. 69 78 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 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 holds certain radio station licenses directly and serves as a holding company for 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 15% 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, 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 70 79 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 the 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 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 a stockholder of Cox Radio who holds an attributable interest in 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; Oakland, California; and El Paso, Texas 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. 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, the service area of which station is not located in any market in which Cox Radio owns or, subsequent to the consummation of the Pending Transactions will own, any 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 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 71 80 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. 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 when or 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: (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). Cox Radio cannot predict when or whether any of these proposals will ultimately be adopted by the FCC. 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. 72 81 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 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 a licensee's license renewal application, 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). 73 82 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 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. 74 83 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 the loss of any 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 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 size 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 75 84 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 size 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 operations. 76 85 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 $166 million payable in cash and approximately $87 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 $164 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 and, therefore, consummation of the NewCity Acquisition is subject to the receipt of such FCC approval. The NewCity Acquisition is also being reviewed by the DOJ pursuant to HSR. In connection with the NewCity Acquisition, the DOJ has issued the NewCity Second Request seeking the production of documents and other information on the Orlando radio market. There can be no assurance that such FCC approval will be obtained or that in connection with such HSR review, the DOJ will not require restructuring of such transactions. 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. 77 86 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 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, Inc., a wholly owned subsidiary of CEI ("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 $164 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. 78 87 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 August 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............. 54 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 79 88 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 Journal/ 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. 80 89 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 other 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 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. 81 90 The appreciated value of units as of any time in the appreciation period is based on the value of a share of common stock of CEI, as determined by an independent appraisal firm or firms selected by CEI. Since 1969, CEI has commissioned annual appraisals of its common stock by two appraisal firms. The CEI common stock is appraised as of December 31, with the appraisals generally completed in the first quarter of the next year. The average of the two appraisals has historically been considered the fair market value of the common stock. 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 Cox Radio will adopt the Cox Radio, Inc. Long-Term Incentive Plan (the "LTIP") prior to the consummation of the Offerings. 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 2,400,000 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 Board of Directors or, if the Board of Directors shall determine, a committee of the Board of Directors. Subject to the provisions of the LTIP, the Board of Directors 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 Board of Directors when the options are granted, but shall be no less than 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 Board of Directors, 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 82 91 deliver 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 Board of Directors 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 Board of Directors 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 Board of Directors at the time the award is granted are not satisfied. Upon the effective date of the Offerings, UAP units awarded in 1994 that would have matured in 1998, will be converted into 155,000 restricted shares of Class A Common Stock issued pursuant to the LTIP. These restricted shares will remain unvested until the end of the original five-year UAP appreciation period. UAP units awarded in 1996 will be cancelled and converted to options to acquire Class A Common Stock pursuant to the LTIP. 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 Board of Directors 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 Board of Directors 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 Board of Directors, 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 Cox Radio will adopt the Cox Radio, Inc. Employee Stock Purchase Plan (the "Stock Purchase Plan") prior to the consummation of Offerings. The Cox Radio Board has authorized a maximum of 350,000 shares 83 92 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 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 June 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 350,000 shares, each participant's subscription will be reduced on a pro rata basis. The Stock Purchase Plan will be administered by the Board of Directors. 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. 84 93 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. Following the Offerings, Cox Radio may permit its employees to continue to participate in the Plan and/or the CESP or Cox Radio may cease such participation for some or all of its employees or may establish one or more separate plans for Cox Radio employees. 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. Cox Radio will adopt the Cox Radio, Inc. Restricted Stock Plan for Non-Employee Directors (the "Directors Restricted Stock Plan") prior to the consummation of the Offerings. 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 25,000. 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 the Audit Committee and the Executive Committee of the Cox Radio Board. CEI COMPENSATION COMMITTEE INTERLOCK 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. Of the 202,644,870 shares of CEI common stock outstanding, Barbara Cox Anthony, as trustee of the Anne Cox Chambers Atlanta Trust, exercises beneficial ownership over 58,316,422 shares (28.8%), Anne Cox Chambers, as the trustee of the Barbara Cox Anthony Atlanta Trust, exercises beneficial ownership over 58, 316,422 shares (28.8%) and 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%). Thus, Barbara Cox Anthony and Anne Cox Chambers, who are sisters, together exercise sole or shared beneficial 85 94 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 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. 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 U.S. radio operations of CEI are conducted (the "CEI Radio Subsidiaries") owed to CEI and one of its other subsidiaries $137.9 million. As of June 30, 1996, CEI, through subsidiaries, contributed $33.4 million to the capital of certain of the CEI Radio Subsidiaries. The remaining $104.5 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%. Prior to the consummation of the Offerings, CEI or one of its subsidiaries will loan to Cox Radio an additional $2.6 million to fund the Louisville Acquisition which will be evidenced by an additional CEI Note causing the total principal amount of the CEI Notes to be approximately $107.1 million. Immediately prior to the consummation 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 and its subsidiaries will be indebted to CEI under the CEI Notes. In connection with the Cox Radio Consolidation, the common stock in Cox Radio currently held by an indirect subsidiary of CEI will be converted into 19,577,672 shares of Class B Common Stock. Cox Radio will apply approximately $107.1 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. All interest accrued and principal owed under the New CEI Credit Facility immediately prior to the consummation of the Offerings will be contributed by CEI to Cox Radio. 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%. Immediately prior to the consummation of the Offerings, Cox Radio will declare a dividend in the amount of any account receivable from CEI or any of its affiliates. CEI performs, and after the Offerings will continue to perform, day-to-day cash management services for Cox Radio, whereby the bank sends daily notification of Cox Radio's checks presented for payment and CEI transfers funds from other sources to cover Cox Radio's checks presented for payment. Settlements of debit or credit balances between Cox Radio and CEI occur 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 rent, legal, corporate secretarial, tax, treasury, internal audit, risk management, benefits administration and other support services. Cox Radio was allocated expenses for the 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 studio and tower site properties in Atlanta and Dayton that are used for Cox Radio's radio operations and CEI's television 86 95 operations in those markets. It is anticipated that these leases will have three year terms and the annual rental cost in the aggregate will be less than $0.5 million. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS All information required to be disclosed under this caption is set forth above in "Management -- CEI Compensation Committee Interlock and Insider Participation." 87 96 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table provides information as of the date of this Prospectus as adjusted to reflect the effect of the Cox Radio Consolidation 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:
CLASS A COMMON STOCK CLASS B COMMON STOCK PERCENT OF VOTE --------------------------------------------- -------------------------------------------- OF ALL CLASSES OF PERCENT OF CLASS PERCENT OF CLASS COMMON STOCK NAME OF ----------------------- -------------------- ----------------------- BENEFICIAL BEFORE AFTER BEFORE AFTER BEFORE AFTER BEFORE AFTER BEFORE AFTER OWNER OFFERINGS OFFERINGS OFFERINGS OFFERINGS(4) OFFERINGS OFFERINGS OFFERINGS OFFERINGS OFFERINGS OFFERINGS(4) - ------------ --------- --------- --------- ------------ ---------- ---------- --------- --------- --------- ------------ Cox Enterprises, Inc.(1)(2)(3) -- -- --% --% 19,577,672 19,577,672 100% 100.0% 100.0% 96.2% Nicholas D. Trigony... -- -- -- -- -- -- -- -- -- -- Robert F. Neil...... -- 36,671 -- * -- -- -- -- -- * Marc W. Morgan.... -- 20,623 -- * -- -- -- -- -- * Robert B. Green..... -- 14,896 -- * -- -- -- -- -- * James C. Kennedy... -- -- -- -- -- -- -- -- -- -- David E. Easterly... -- -- -- -- -- -- -- -- -- -- All directors and officers as a group (six persons, including those named above).... -- 72,190 --% * -- -- 100% 100% -- *
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)................................ -- Nicholas D. Trigony........................................... 24,374 Robert F. Neil................................................ 3,068 Marc W. Morgan................................................ 4,350 Robert B. Green............................................... -- James C. Kennedy.............................................. -- David E. Easterly............................................. 111,049 ---------- All directors and officers as a group (six persons, including those named above).......................................... 142,841 ========================
- --------------- * Less than 1% (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. (4) Includes 155,000 shares of restricted Class A Common Stock to be issued to management at the effective time of the Offerings pursuant to Cox Radio's Long-Term Incentive Plan. 88 97 DESCRIPTION OF CAPITAL STOCK The following summary description of the capital stock of Cox Radio is qualified by reference to 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"). RESTRICTIONS ON PURPOSE OF THE COMPANY The Cox Radio Certificate restricts the purpose of the Company to (i) engaging in the business of radio broadcasting within the United States, (ii) purchasing or otherwise acquiring (for cash, property, notes, stock or bonds of the Company) assets used or useful in the radio broadcasting business, (iii) selling, assigning, transferring or purchasing the assets or stock of radio stations, businesses or properties within the United States, and (iv) undertaking any other activity in connection with (i) through (iii) above. 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 or conveyance 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 CEI. 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 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. 89 98 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 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 First Chicago Trust Company of New York. PREFERRED STOCK Shares of preferred stock may be issued by Cox Radio from time to time in one or more series. Except as may be provided by the Cox Radio Board in a certificate of designation or by law, shares of any series of Preferred Stock that have been redeemed (whether through the operation of a sinking fund or otherwise) or purchased by Cox Radio or which, if convertible or exchangeable, have been converted into or exchanged for shares of stock of any other class or classes shall be retired and shall not be reissued. 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 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. However, if stockholder action is taken by written consent, the Company, in accordance with the rules and regulations of the SEC, will be required to send each stockholder entitled to vote on the matter acted on, but whose consent was not solicited, a written information statement at least 20 calendar days prior to the earliest date on which the corporate action may be taken. Such information statement will contain information substantially similar to that which would have been contained in a proxy statement complying with Schedule 14A of the Securities Exchange Act of 1934. 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 90 99 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 voting stock representing a majority of the voting power of all voting stock of the Company. LIMITATION OF DIRECTOR LIABILITY The Cox Radio Certificate limits the liability of directors of the Company to the Company and its stockholders to the fullest extent permitted by Delaware law. Specifically, a director of the Company will not be personally liable for monetary damages for breach of the director's fiduciary duty as a director, except for liability (i) for a breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions by a director not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for liability arising under Section 174 of the DGCL (relating to the declaration of dividends and purchase of redemption of shares in violation of the DGCL), or (iv) for any transaction from which the director derived an improper personal benefit. The Company believes that these provisions will assist the Company in attracting and retaining qualified individuals to serve as directors. In addition, these provisions do not limit the rights of the Company or its stockholders, in appropriate circumstances, to seek equitable remedies such as injunctive or other forms of non-monetary relief. Such remedies may not be effective in all cases. Insofar as indemnification for liabilities arising under the Securities Act, may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. 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 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. Corporations, pursuant to a provision in their certificate of incorporation, may choose not to be governed by Section 203 of the DGCL. The Company has elected, pursuant to a provision in the Cox Radio Certificate, not to be governed by Section 203 of the DGCL. FOREIGN OWNERSHIP The Cox Radio Certificate restricts the ownership, voting and transfer of the Company's capital stock, including the Class A Common Stock and the Class B Common stock, in accordance with the Communications Act and the rules of the FCC, to prohibit ownership of more than 25% of the Company's outstanding capital stock (or more than 25% of the voting rights it represents) by or for the account of aliens or corporations otherwise subject to domination or control by aliens. The Cox Radio Certificate also prohibits any transfer of the Company's capital stock that would cause the Company to violate this prohibition. In addition, the Cox Radio Certificate authorizes the Cox Radio Board to adopt such provisions as it deems necessary to enforce these prohibitions, including the inclusion of a legend regarding restrictions on foreign ownership of the capital stock of the Company on the certificates representing such capital stock. The Company's Class A 91 100 Common Stock certificates contain a certification that must be executed by the transferee of any such certificate before transfers of the shares represented thereby may be made on the books of the Company. Such certification addresses whether such transferee, or any person or entity for whose account such shares will be held, is an alien. In addition, the Cox Radio Certificate provides that the Company reserves the right to refuse to honor any transfer of the capital stock of the Company which, in the judgment of the Company or its transfer agent, would or might constitute a violation of the Communications Act or the FCC rules and regulations. 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 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. All interest accrued and principal owed under the New CEI Credit Facility immediately prior to the consummation of the Offerings will be contributed by CEI to Cox Radio. 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 $107.1 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. Because the NewCity Notes since the announcement of the acquisition of NewCity by Cox Radio have consistently traded at prices in excess of 101% of the principal amount thereof, Cox Radio does not expect any holders of NewCity Notes to accept the repurchase offer. 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 Cox Radio or the other subsidiaries of the Company. 92 101 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Offerings and the issuance of 155,000 shares of restricted Class A Common Stock to management, Cox Radio will have outstanding 7,655,000 shares of Class A Common Stock (assuming no exercise of the Underwriters' overallotment option) and 19,577,672 shares of Class B Common Stock. In addition, Cox Radio will have outstanding options to purchase 760,000 shares of Class A Common Stock. Of these shares, the 7,500,000 shares of Class A Common Stock offered hereby 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 subject to certain restrictions as to timing, manner and volume. The remaining 155,000 shares of Class A Common Stock outstanding are "restricted securities" within the meaning of Rule 144 under the Securities Act. Such shares and the 19,577,672 shares of Class B Common Stock held indirectly by CEI (an Affiliate) 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 directly or indirectly own 19,577,672 shares of Class B Common Stock, 155,000 shares of restricted Class A Common Stock and options to purchase 760,000 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 Common Stock or any securities convertible into or exercisable or exchangeable for shares of 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, 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 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 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 on or 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 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 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." 93 102 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 underwriters (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 (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:
INTERNATIONAL 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 94 103 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 900,000 shares and 225,000 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 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. 95 104 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 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. 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 will reserve up to 250,000 shares of Class A Common Stock (approximately 3.3% 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. Application has been made for listing of the Class A Common Stock on the NYSE. In order to meet one of the requirements for listing of the Class A Common Stock on the NYSE, the Underwriters have agreed to sell lots of 100 or more shares to a minimum of 2,000 beneficial holders. 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 96 105 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 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 it 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. 97 106 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 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 98 107 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 New York Stock Exchange, 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 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. 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, or such person is an individual subject to provisions of United States federal gift tax law applicable to certain United States expatriates. 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 99 108 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 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. 100 109 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 have been so included in reliance upon the report of such firm 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 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 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. 101 110 INDEX TO FINANCIAL STATEMENTS
PAGE ---- COX RADIO, INC. Independent Auditors' Report.......................................................... F-2 Consolidated Balance Sheets, December 31, 1994 and 1995 and (Unaudited) June 30, 1996................................................................................ F-3 Consolidated Statements of Operations, Years Ended December 31, 1993, 1994 and 1995 and (Unaudited) Six Months Ended June 30, 1995 and 1996............................. F-4 Consolidated Statements of Shareholder's Equity, Years Ended December 31, 1993, 1994 and 1995 and (Unaudited) Six Months Ended June 30, 1996............................. F-5 Consolidated Statements of Cash Flows, Years Ended December 31, 1993, 1994 and 1995 and (Unaudited) Six Months Ended June 30, 1995 and 1996............................. F-6 Notes to Consolidated Financial Statements............................................ F-7 NEWCITY COMMUNICATIONS, INC. Report of Independent Auditors........................................................ F-18 Consolidated Balance Sheets, December 31, 1994 and 1995............................... F-19 Consolidated Statements of Operations, Years Ended December 31, 1993, 1994 and 1995... F-20 Consolidated Statements of Stockholders' Deficiency, Years Ended December 31, 1993, 1994 and 1995....................................................................... F-21 Consolidated Statements of Cash Flows, Years Ended December 31, 1993, 1994 and 1995... F-22 Notes to Consolidated Financial Statements............................................ F-23 Consolidated Balance Sheets (Unaudited) June 30, 1996 and December 31, 1995........... F-34 Consolidated Statements of Operations, (Unaudited) Six Months Ended June 30, 1996 and 1995................................................................................ F-35 Consolidated Statements of Cash Flows, (Unaudited) Six Months Ended June 30, 1996 and 1995............................................................................ F-36 Notes to Consolidated Interim Financial Statements (Unaudited)........................ F-37 INFINITY HOLDINGS CORP. OF ORLANDO Independent Auditors' Report.......................................................... F-38 Consolidated Balance Sheets, December 31, 1995 and (Unaudited) June 30, 1996.......... F-39 Consolidated Statements of Operations, Year Ended December 31, 1995 and (Unaudited) Six Months Ended June 30, 1995 and 1996............................................. F-40 Consolidated Statements of Cash Flows, Year Ended December 31, 1995 and (Unaudited) Six Months Ended June 30, 1995 and 1996............................................. F-41 Notes to Consolidated Financial Statements............................................ F-42
F-1 111 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-2 112 COX RADIO, INC. CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ------------------- JUNE 30, 1994 1995 1996 -------- -------- ----------- (UNAUDITED) (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents................................... $ 1,897 $ 1,691 $ 1,666 Accounts and notes receivable, less allowance for doubtful accounts of $760, $774 and $893.......................... 28,446 30,667 31,285 Prepaid expenses and other current assets................... 3,152 3,289 4,804 -------- -------- ----------- Total current assets................................ 33,495 35,647 37,755 Plant and equipment, net...................................... 26,255 28,020 29,614 Intangible assets, net........................................ 120,053 126,798 135,630 Other assets.................................................. 220 1,302 1,767 -------- -------- ----------- Total assets........................................ $180,023 $191,767 $ 204,766 ======== ======== ========= LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses....................... $ 11,455 $ 10,924 $ 8,982 Unit appreciation plan liability............................ 187 963 1,422 Income taxes payable........................................ 315 278 166 Other current liabilities................................... 518 873 888 -------- -------- ----------- Total current liabilities........................... 12,475 13,038 11,458 Amounts due to Cox Enterprises, Inc........................... 120,308 125,089 104,508 Deferred income taxes......................................... 6,833 6,470 7,468 -------- -------- ----------- Total liabilities................................... 139,616 144,597 123,434 -------- -------- ----------- 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 90,947 124,360 Deficit in retained earnings................................ (50,541) (43,778) (43,029) -------- -------- ----------- Total shareholder's equity.......................... 40,407 47,170 81,332 -------- -------- ----------- Total liabilities and shareholder's equity.......... $180,023 $191,767 $ 204,766 ======== ======== =========
See notes to consolidated financial statements. F-3 113 COX RADIO, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, --------------------------- ----------------- 1993 1994 1995 1995 1996 ------- ------- ------- ------- ------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) Net revenues: Local.......................................... $68,018 $80,484 $93,465 $43,202 $50,414 National....................................... 26,202 30,193 29,385 15,024 15,479 Other.......................................... 730 858 722 325 415 ------- ------- ------- ------- ------- Total net revenues..................... 94,950 111,535 123,572 58,551 66,308 Costs and expenses: Operating...................................... 29,903 32,218 41,831 18,252 20,564 Selling, general and administrative............ 38,045 44,096 48,131 24,757 26,733 Corporate general and administrative........... 2,522 2,667 5,853 1,873 2,341 Depreciation and amortization.................. 7,224 6,995 7,247 3,715 3,979 ------- ------- ------- ------- ------- Operating income................................. 17,256 25,559 20,510 9,954 12,691 Other income (expense): Interest expense............................... (5,590) (5,229) (5,974) (2,942) (2,856) Gain on disposition of radio station........... 1,060 -- -- -- -- Other -- net................................... (187) (260) (147) (268) (275) ------- ------- ------- ------- ------- Income before income taxes and cumulative effect of accounting changes.......................... 12,539 20,070 14,389 6,744 9,560 Income taxes..................................... 6,048 8,863 6,226 2,948 4,347 ------- ------- ------- ------- ------- Income before cumulative effect of accounting changes........................................ 6,491 11,207 8,163 3,796 5,213 Cumulative effect of accounting changes.......... (7,592) -- -- -- -- ------- ------- ------- ------- ------- Net income (loss)................................ $(1,101) $11,207 $ 8,163 $ 3,796 $ 5,213 ======= ======= ======= ======= ======= Pro forma net income (loss) per share (unaudited) (Note 2): For Cox Radio Consolidation.................... $ .42 $ .19 $ .27 ======= ======= ======= For Cox Radio Consolidation and the Transactions................................ $ .04 $ (.03) $ .06 ======= ======= ======= Pro forma common shares outstanding (unaudited) (Note 2): For Cox Radio Consolidation.................... 19,578 19,578 19,578 ======= ======= ======= For Cox Radio Consolidation and the Transactions................................ 27,233 27,233 27,233 ======= ======= =======
See notes to consolidated financial statements. F-4 114 COX RADIO, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
COMMON STOCK ADDITIONAL --------------- PAID-IN DEFICIT IN SHARES AMOUNT CAPITAL RETAINED EARNINGS TOTAL ------ ------ ---------- ----------------- -------- (IN THOUSANDS) 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).................... -- -- -- 5,213 5,213 Dividends to CEI (unaudited).............. -- -- -- (4,464) (4,464) Capital contribution by CEI (unaudited)... -- -- 33,413 -- 33,413 -- ------ ---------- ----------------- -------- BALANCE AT JUNE 30, 1996 (UNAUDITED)........ 1 $ 1 $ 124,360 $ (43,029) $ 81,332 ===== ====== ======== ============= ========
See notes to consolidated financial statements. F-5 115 COX RADIO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE 30, ----------------------------- ----------------- 1993 1994 1995 1995 1996 ------- -------- -------- ------- ------- (UNAUDITED) (DOLLARS IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)............................ $(1,101) $ 11,207 $ 8,163 $ 3,796 $ 5,213 Items not requiring cash: Cumulative effect of accounting changes... 7,592 -- -- -- -- Depreciation.............................. 2,273 2,216 2,382 1,210 1,287 Amortization.............................. 4,951 4,779 4,865 2,505 2,692 Gain on disposition of radio station...... (1,060) -- -- -- -- Deferred income taxes..................... (28) 34 (441) (403) 984 (Increase) decrease in accounts receivable... (2,385) (6,109) (2,221) 433 (618) Increase in prepaid expenses and other current assets............................ (347) (296) (57) (2,159) (1,501) Increase (decrease) in accounts payable and accrued expenses.......................... 808 1,902 (299) 9 332 Increase in unit appreciation plan liability................................. -- 187 776 388 459 Increase (decrease) in taxes payable......... 672 (257) (37) 289 (112) Other, net................................... 54 405 856 206 334 ------- -------- -------- ------- ------- Net cash provided by operating activities......................... 11,429 14,068 13,987 6,274 9,070 ------- -------- -------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures......................... (1,065) (2,705) (4,073) (1,308) (1,153) Acquisitions................................. (9,390) (9,954) (11,697) -- (13,188) (Increase) decrease in other long-term assets.................................... (301) 337 (1,580) (811) (842) Proceeds from disposition of radio station... 4,688 -- -- -- -- Other, net................................... 15 30 8 -- (6) ------- -------- -------- ------- ------- Net cash used in investing activities......................... (6,053) (12,292) (17,342) (2,119) (15,189) ------- -------- -------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in amounts due to CEI.... 3,762 30,658 4,781 (2,898) 12,832 Repayment of debt............................ (3,000) -- -- -- -- Dividends paid............................... (5,000) (34,980) (1,400) -- (4,464) Increase (decrease) in book overdrafts....... (538) 2,715 (232) (1,357) (2,274) ------- -------- -------- ------- ------- Net cash provided by (used in) financing activities............... (4,776) (1,607) 3,149 (4,255) 6,094 ------- -------- -------- ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................... 600 169 (206) (100) (25) 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 $ 1,797 $ 1,666 ======= ======== ======== ======= =======
See notes to consolidated financial statements. F-6 116 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. Immediately prior to the closing of the Offerings, CEI will transfer direct or indirect ownership of its U.S. radio broadcast properties to Cox Radio (the "Cox Radio Consolidation"). In connection with the Cox Radio Consolidation, the Company's capital stock will consist of 70,000,000 authorized shares of Class A Common Stock, 45,000,000 authorized shares of Class B Common Stock and 5,000,000 authorized shares of Preferred Stock, all at $1.00 par value per share. CEI will receive 19,577,672 shares of the Company's Class B Common Stock for its ownership interests. 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 F-7 117 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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. Pro Forma Per Share Information (Unaudited) Historical net income (loss) per common share is not presented in light of the proposed Cox Radio Consolidation as discussed in Note 1. Pro forma net income per share amounts are calculated for the Cox Radio Consolidation based upon the historical net income divided by the pro forma number of common shares outstanding assuming the proposed Cox Radio Consolidation was completed as of January 1, 1995. Pro forma net income (loss) per share amounts are calculated for the Cox Radio Consolidation and the Transactions based on the pro forma net income (loss) divided by the pro forma number of common shares outstanding assuming the proposed Cox Radio Consolidation and Transactions were completed as of January 1, 1995. F-8 118 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 represented 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. 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 June 30, 1996 and for the six months ended June 30, 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 six months ended June 30, 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. F-9 119 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 call letters and format of WYNF-FM with its existing Tampa station, WWRM-FM, and then subsequently changed the new 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 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 provided or 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 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 ======== ========
F-10 120 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 ======== ========
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 ====== ====== ======
F-11 121 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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) ======= =======
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. F-12 122 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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%
Any qualified pension plan or 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 expenses associated with these plans. 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 F-13 123 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 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 1992 plan were $1,070,000 and $1,875,000 as of December 31, 1994 and 1995, respectively, and are included in Amounts due to CEI in the accompanying Consolidated Balance Sheets. Amounts accrued under the 1994 plan were $187,000 and $963,000 as of December 31, 1994 and 1995, respectively, and are reported as a separate line in current liabilities. In connection with the Offerings, the 1994 plan is expected to be settled through the issuance of 155,000 shares of restricted Class A Common Stock of Cox Radio. 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. F-14 124 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 61,390 66,171 ------- -------- -------- Total......................................... $89,650 $120,308 $125,089 ======= ======== ========
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. 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................... 86,805 --------- Intercompany due to CEI, December 31, 1994............................... 61,390 Dividends to CEI....................................................... 1,400 Cash transferred to CEI................................................ (110,617) Acquisitions........................................................... 11,697 Net operating expense allocations and reimbursements................... 102,301 --------- Intercompany due to CEI, December 31, 1995............................... $ 66,171 =========
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. F-15 125 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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 a substantial portion of the related tax gains on these transactions upon the reinvestment of the $32.5 million in net proceeds in qualifying future acquisitions. It is not expected that any of the Pending Transactions, with the possible exception of the Tulsa Acquisition, will qualify for reinvestment. The Company is presently pursuing additional qualifying reinvestment properties. 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 $137.9 million. In June 1996, CEI contributed to the capital of the Company and its subsidiaries $33.4 million. The remaining $104.5 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%. F-16 126 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 $166 million is to be paid in cash and $87 million in assumption of debt (the "NewCity Acquisition"). The NewCity Acquisition is expected to be financed primarily 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. In August 1996, the Company entered into negotiations to acquire KRAV-FM and KGTO-AM (Tulsa) for $5.5 million. F-17 127 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-18 128 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-19 129 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) before preferred stock dividends.... 11,038 2,064 (398) Preferred stock dividends....................................... (2,026) (1,176) (1,000) -------- -------- ------- Net income (loss) available to common shareholders.... $ 9,012 $ 888 $(1,398) ======== ======== =======
See accompanying notes. F-20 130 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-21 131 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-22 132 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. Revenue Recognition Revenue is recognized as advertising time is broadcast. 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 buildings and equipment is computed by the straight-line method over the estimated useful lives of the assets (ranging from three to 20 years). 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-23 133 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. Earnings per Share Earnings per share information has not been presented as NewCity does not have publicly traded equity securities and is not registering stock to be sold in a public market. 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 F-24 134 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $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 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. F-25 135 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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 F-26 136 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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. F-27 137 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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)
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. F-28 138 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 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 F-29 139 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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. F-30 140 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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-31 141 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-32 142 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-33 143 NEWCITY COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, 1996 1995 ----------- ------------ (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA) ASSETS Current assets: Cash and cash equivalents................................................... $ 638 $ 206 Accounts receivable, less allowances of $667 and $678....................... 11,783 10,709 Prepaid expenses and other current assets................................... 1,208 608 Deferred barter expenses.................................................... 1,597 1,104 ----------- ------------ Total current assets................................................. 15,226 12,627 Property and equipment: Land........................................................................ 2,154 2,237 Buildings................................................................... 3,044 2,269 Equipment................................................................... 17,265 16,800 Leasehold improvements...................................................... 563 559 ----------- ------------ 23,026 21,865 Less accumulated depreciation and amortization................................ 13,568 12,828 ----------- ------------ 9,458 9,037 Other assets: Intangibles, primarily cost in excess of net assets of businesses acquired, less accumulated amortization of $14,268 and $13,195...................... 59,041 60,064 Other....................................................................... 164 212 ----------- ------------ 59,205 60,276 ----------- ------------ Total assets......................................................... $ 83,889 $ 81,940 =========== ============ LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current liabilities: Accounts payable............................................................ $ 1,090 $ 933 Accrued expenses............................................................ 957 927 Salaries, wages and commissions payable..................................... 746 733 Accrued interest payable.................................................... 1,657 1,671 State income taxes payable.................................................. 1,009 898 Deferred barter revenue..................................................... 2,388 1,736 Current portion of long-term debt........................................... 1,700 1,200 ----------- ------------ Total current liabilities............................................ 9,547 8,098 Long-term debt, less current portion.......................................... 85,589 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.......................... 11,848 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......................................................... (22,460) (22,671) 8% Notes receivable from certain officers and shareholders for Class A Common Stock.............................................................. (640) (640) ----------- ------------ (23,095) (23,306) ----------- ------------ Total liabilities and stockholders' deficiency....................... $ 83,889 $ 81,940 =========== ============
See accompanying notes. F-34 144 NEWCITY COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, --------------------- 1996 1995 ------- ------- (DOLLARS IN THOUSANDS) Broadcasting revenues: Local................................................................ $21,986 $20,877 National and regional................................................ 9,315 8,611 Other................................................................ 1,229 1,274 ------- ------- 32,530 30,762 Less advertising agency commissions.................................... (3,665) (3,390) ------- ------- Net revenues................................................. 28,865 27,372 Station operating costs and expenses: Broadcasting operations.............................................. 9,723 9,558 Selling, general and administrative.................................. 10,548 10,761 Depreciation and amortization........................................ 1,642 1,518 Corporate general and administrative expenses.......................... 888 964 ------- ------- Total operating costs........................................ 22,801 22,801 ------- ------- Operating income....................................................... 6,064 4,571 Interest expense....................................................... 5,102 4,760 ------- ------- Income (loss) before income taxes...................................... 962 (189) Income tax expense..................................................... 250 136 ------- ------- Net income (loss) before preferred stock dividends........... 712 (325) Preferred stock dividends.............................................. (500) (618) ------- ------- Net income (loss) available to common shareholders........... $ 212 $ (943) ======= =======
See accompanying notes. F-35 145 NEWCITY COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, --------------------- 1996 1995 ------- ------- (DOLLARS IN THOUSANDS) Operating activities: Net income (loss)............................................ $ 712 $ (325) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization............................. 1,837 1,709 Provision for losses on accounts receivable............... 258 292 Changes in operating assets and liabilities: Increase in accounts receivable........................... (1,332) (565) Increase in prepaid expenses and other current assets..... (600) (637) Increase in deferred barter expenses...................... (493) (597) Increase in accounts payable.............................. 157 647 Increase (decrease) in accrued expenses................... 30 (961) Increase (decrease) in salaries, wages and commissions payable................................................. 13 (98) Increase (decrease) in state income taxes payable......... 111 (82) Increase (decrease) in accrued interest payable........... (14) 48 Increase in deferred barter revenue....................... 652 650 (Increase) decrease in other assets....................... 48 (80) ------- ------- Net cash provided by operating activities............ 1,379 1 Investing activities: Purchase of property, plant and equipment.................... (1,483) (1,066) Purchases of radio station assets: Intangibles............................................... -- (9,844) Property and equipment.................................... -- (2,608) Increase in intangibles...................................... (53) (355) Decrease in cash in escrow................................... -- 1,175 Proceeds from sale of land and equipment..................... 300 -- ------- ------- Net cash used by investing activities................ (1,236) (12,698) Financing activities: Principal payments on long-term borrowings................... (5,311) (1,600) Proceeds from long-term borrowings........................... 5,600 14,200 ------- ------- Net cash provided (used) by financing activities..... 289 12,600 ------- ------- Increase (decrease) in cash and cash equivalents............... 432 (97) Cash and cash equivalents at beginning of period............... 206 168 ------- ------- Cash and cash equivalents at end of period..................... $ 638 $ 71 ======= =======
See accompanying notes. F-36 146 NEWCITY COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 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 six month period ended June 30, 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. INCOME TAXES The Company's effective tax rate differs from the Federal statutory tax rate because of the use of Federal net operating loss carryforwards. 3. SUBSEQUENT EVENT On July 3, 1996, the Company executed a definitive agreement to sell all of its outstanding shares of capital stock to Cox Radio, Inc. (Cox Radio), a wholly-owned subsidiary of Cox Broadcasting, Inc. in exchange for aggregate consideration, as defined, of approximately $250,000,000. Payment of such consideration will be made by a combination of cash and the assumption of certain indebtedness on the closing date. The definitive agreement payment obligations of Cox Radio have been unconditionally guaranteed by Cox Broadcasting, Inc. Consummation of the transaction will require necessary federal regulatory approvals as well as the approvals of the Company's Stockholders and Investors. F-37 147 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-38 148 INFINITY HOLDINGS CORP. OF ORLANDO CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30, 1995 1996 ------------ ----------- (UNAUDITED) (DOLLARS IN THOUSANDS) PREDECESSOR SUCCESSOR ------------ ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents........................................... $ 164 $ 348 Accounts receivable, less allowance for doubtful accounts of $47 and $74.............................................................. 1,756 1,595 Prepaid expenses and other current assets........................... 39 98 ------------ ----------- Total current assets........................................ 1,959 2,041 Plant and equipment, net.............................................. 3,635 3,438 Intangible assets, net................................................ 11,948 35,266 Other assets.......................................................... 20 20 ------------ ----------- Total assets................................................ $ 17,562 $40,765 ========== ========= LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses............................... $ 514 $ 534 Other current liabilities........................................... 145 30 ------------ ----------- Total current liabilities................................... 659 564 Amounts due to Affiliate.............................................. 11,802 40,000 Other long-term liability............................................. 300 200 ------------ ----------- Total liabilities........................................... 12,761 40,764 ------------ ----------- 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 -- Deficit in retained earnings........................................ (4,658) -- ------------ ----------- Total shareholder's equity.................................. 4,801 1 ------------ ----------- Total liabilities and shareholder's equity.................. $ 17,562 $40,765 ========== =========
See notes to consolidated financial statements. F-39 149 INFINITY HOLDINGS CORP. OF ORLANDO CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, --------------------------- 1995 1995 1996 ------------ ------------ ------------ (UNAUDITED) (DOLLARS IN THOUSANDS) Net revenues: Local and regional..................................... $ 3,602 $ 1,453 $ 2,530 National............................................... 1,863 855 816 Other.................................................. 167 76 24 ------------ ------------ ------------ Total net revenues............................. 5,632 2,384 3,370 Costs and expenses: Operating.............................................. 1,488 678 926 Selling, general and administrative.................... 3,281 1,608 1,884 Corporate general and administrative................... 418 252 672 Depreciation and amortization.......................... 1,216 570 682 ------------ ------------ ------------ Operating loss........................................... (771) (724) (794) Other expense: Interest expense....................................... (902) (348) (480) Other -- net........................................... (39) -- (340) ------------ ------------ ------------ Loss before extraordinary item........................... (1,712) (1,072) (1,614) Extraordinary item....................................... (36) (36) (346) ------------ ------------ ------------ Net loss................................................. $ (1,748) $ (1,108) $ (1,960) ========== ========== ==========
See notes to consolidated financial statements. F-40 150 INFINITY HOLDINGS CORP. OF ORLANDO CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDING YEAR ENDED JUNE 30, DECEMBER 31, ------------------------- 1995 1995 1996 ------------ ----------- ----------- (UNAUDITED) (DOLLARS IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss................................................... $ (1,748) $(1,108) $(1,960) Items not requiring cash: Depreciation and amortization............................ 1,216 570 682 Extraordinary item....................................... 36 36 346 (Increase) decrease in accounts receivable................. (1,055) (539) 134 Increase (decrease) in accounts payable and accrued expenses................................................. 341 467 (95) Other, net................................................. (290) (243) (74) -------- ------- ------- Net cash used in operating activities............ (1,500) (817) (967) -------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures....................................... (588) (503) (76) -------- ------- ------- Net cash used in investing activities............ (588) (503) (76) -------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in amounts due to Affiliate....................... 1,684 1,259 1,227 -------- ------- ------- Net cash provided by financing activities........ 1,684 1,259 1,227 -------- ------- ------- Net increase (decrease) in cash and cash equivalents....... (404) (61) 184 Cash and cash equivalents at beginning of period........... 568 568 164 -------- ------- ------- Cash and cash equivalents at end of period................. $ 164 $ 507 $ 348 ======== ======= ======= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest..................................... $ 764 $ 179 $ 630 ======== ======= =======
See notes to consolidated financial statements. F-41 151 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 acquired the Company in connection with its purchase of the operating subsidiaries of Granum Holdings, L.P. ("Granum") on June 26, 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 acquisition of the Company by Infinity was recorded, effective June 30, 1996, using the purchase method of accounting, whereby the allocable share of the Granum purchase price was pushed down to the assets acquired and liabilities assumed based on their fair values at the date of acquisition as follows (in thousands): Net working capital............................................. 1,596 Plant and equipment............................................. 3,438 Goodwill/FCC broadcast licenses................................. 35,266 ------- $40,300 =======
For balance sheet purposes, the Company is referred to as "Predecessor" at December 31, 1995 and as "Successor" at June 30, 1996. 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 consolidation. 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 F-42 152 INFINITY HOLDINGS CORP. OF ORLANDO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 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 June 30, 1996 and for the six months ended June 30, 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 six months ended June 30, 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 F-43 153 INFINITY HOLDINGS CORP. OF ORLANDO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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 =======
F-44 154 INFINITY HOLDINGS CORP. OF ORLANDO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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).......................................... $ -- =====
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 During 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 at December 31, 1995 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. Prior to the sale of the Company to Infinity on June 26, 1996, all intercompany debt was forgiven by Granum in the form of a capital contribution. At June 30, 1996, the balance of Amounts due to Affiliate represents an intercompany allocation of Infinity's long-term debt. F-45 155 INFINITY HOLDINGS CORP. OF ORLANDO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 of the Company for the year ended December 31, 1995 and the six months ended June 30, 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 Forgiveness of intercompany debt (unaudited)..................... 12,251 12,251 Net loss (unaudited).............. -- -- -- (1,960) (1,960) Elimination of Predecessor equity accounts (unaudited)............ -- -- (21,709) 6,618 (15,091) ----------- ------ --------------- ----------------- ------------- Balance June 30, 1996, Successor (unaudited)..................... 9,800 $ 1 $ -- $ -- $ 1 ========= ====== =========== ============= ==========
In accordance with purchase accounting, the historical equity accounts of the Predecessor have been eliminated so as to properly reflect the equity accounts of the Successor as of June 30, 1996. 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. In connection with Infinity's purchase of Granum during June 1996 and the repayment by Granum of its then outstanding borrowings, Granum wrote off unamortized deferred financing costs resulting in an extraordinary loss on the extinguishment of debt. The Company's allocable portion of that extraordinary loss was $346,120. F-46 156 - ------------------------------------------------------ - ------------------------------------------------------ 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..................................... ii Prospectus Summary......................... 1 Risk Factors............................... 9 Use of Proceeds............................ 14 Dividend Policy............................ 14 Dilution................................... 15 Capitalization............................. 16 Unaudited Pro Forma Combined Financial Data..................................... 17 Unaudited Pro Forma Combined Balance Sheet.................................... 18 Unaudited Pro Forma Combined Statements of Operations............................... 21 Selected Historical Consolidated Financial Data..................................... 27 Management's Discussion and Analysis of the Pro Forma Combined Results of Operations............................... 31 Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio.................. 34 Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity.................... 41 Business................................... 46 The NewCity Acquisition.................... 77 Management................................. 79 Certain Relationships and Related Transactions............................. 87 Security Ownership of Certain Beneficial Owners................................... 88 Description of Capital Stock............... 89 Description of Indebtedness................ 92 Shares Eligible for Future Sale............ 93 Underwriting............................... 94 Certain United States Federal Tax Consequences to Non-United States Holders of Class A Common Stock.................. 97 Legal Matters.............................. 100 Experts.................................... 100 Available Information...................... 101 Index to Financial Statements.............. F-1
--------------------------- 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. - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ 7,500,000 SHARES [LOGO COX RADIO, INC.] COX RADIO, INC. CLASS A COMMON STOCK --------------------------- PROSPECTUS , 1996 --------------------------- LEHMAN BROTHERS ALLEN & COMPANY INCORPORATED CS FIRST BOSTON MORGAN STANLEY & CO. INCORPORATED ------------------------------------------------------ ------------------------------------------------------ 157 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 7,500,000 SHARES COX RADIO, INC. COX RADIO, INC. 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 7,500,000 shares of Class A Common Stock being offered, 6,000,000 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 and the issuance of 155,000 shares of restricted Class A Common Stock to management at the effective time of the Offerings (assuming that the Underwriters' over-allotment option is not exercised), Cox Enterprises, Inc. ("CEI") will own approximately 71.9% of the outstanding Common Stock and have 96.2% 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 $15.00 and $17.00 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. Application has been made for listing of the Class A Common Stock on the New York Stock Exchange ("NYSE") under the symbol "CXR." --------------------------- 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. - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------- PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO PUBLIC AND 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 1,125,000 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 158 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..................................... ii Prospectus Summary......................... 1 Risk Factors............................... 9 Use of Proceeds............................ 14 Dividend Policy............................ 14 Dilution................................... 15 Capitalization............................. 16 Unaudited Pro Forma Combined Financial Data..................................... 17 Unaudited Pro Forma Combined Balance Sheet.................................... 18 Unaudited Pro Forma Combined Statements of Operations............................... 21 Selected Historical Consolidated Financial Data..................................... 27 Management's Discussion and Analysis of the Pro Forma Combined Results of Operations............................... 31 Management's Discussion and Analysis of Financial Condition and Results of Operations of Cox Radio.................. 34 Management's Discussion and Analysis of Financial Condition and Results of Operations of NewCity.................... 41 Business................................... 46 The NewCity Acquisition.................... 77 Management................................. 79 Certain Relationships and Related Transactions............................. 87 Security Ownership of Certain Beneficial Owners................................... 88 Description of Capital Stock............... 89 Description of Indebtedness................ 92 Shares Eligible for Future Sale............ 93 Underwriting............................... 94 Certain United States Federal Tax Consequences to Non-United States Holders of Class A Common Stock.................. 97 Legal Matters.............................. 100 Experts.................................... 100 Available Information...................... 101 Index to Financial Statements.............. F-1
--------------------------- 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. - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ 7,500,000 SHARES [LOGO] COX RADIO, INC. COX RADIO, INC. CLASS A COMMON STOCK --------------------------- PROSPECTUS , 1996 --------------------------- LEHMAN BROTHERS ALLEN & COMPANY INCORPORATED CS FIRST BOSTON MORGAN STANLEY & CO. INTERNATIONAL ------------------------------------------------------ ------------------------------------------------------ 159 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-1 160 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 -- Amended and Restated Bylaws of Cox Radio, Inc. *4.1 -- Indenture between NewCity Communications, Inc. and Shawmut Bank Connecticut, National Association, as Trustee, dated as of November 2, 1993, relating to the 11 3/8% Notes due 2003 of NewCity Communications, Inc. 4.2 -- First Supplemental Indenture between NewCity Communications, Inc. and Shawmut Bank Connecticut, National Association, as Trustee, dated as of September 16, 1994, relating to the 11 3/8% Notes due 2003 of NewCity Communications, Inc. 4.3 -- Specimen of Class A Common Stock Certificate. 5.1 -- Opinion of Dow, Lohnes & Albertson, PLLC (including consent). 10.1 -- Promissory Note for Cox Radio, Inc. 10.2 -- Promissory Note for WSB, Inc. 10.3 -- Promissory Note for Cox Kentucky, Inc. 10.4 -- Promissory Note for WHIO, Inc. 10.5 -- Promissory Note for Cox Syracuse, Inc. 10.6 -- Promissory Note for WWRM, Inc. 10.7 -- Promissory Note for WCKG, Inc. 10.8 -- Form of New CEI Credit Facility. 10.9 -- Cox Radio, Inc. Long-Term Incentive Plan. 10.10 -- Cox Radio, Inc. Employee Stock Purchase Plan. 10.11 -- Cox Radio, Inc. Restricted Stock Plan for Non-Employee Directors. 11 -- Cox Radio, Inc. Statement Regarding: Computation of Earnings per Share. 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). 23.5 -- Consent of Richard A. Ferguson to Become a Director. *24.1 -- Power of Attorney (included on page II-4). 27.1 -- Financial Data Schedule (for SEC use only).
- --------------- * Previously filed. ** To be filed by amendment. II-2 161 (b) Financial Statement Schedule 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 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 be 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-3 162 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1, to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia, on August , 1996. COX RADIO, INC. By: * ------------------------------------ Robert F. Neil President and Chief Executive Officer POWER OF ATTORNEY Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to the Registration Statement has been signed below by the following person on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------------------------------------------- ---------------------------- ---------------- * Chairman of the Board of August , 1996 - --------------------------------------------- Directors Nicholas D. Trigony * President and Chief August , 1996 - --------------------------------------------- Executive Officer, Director Robert F. Neil /s/ MARITZA C. PICHON Chief Financial Officer August , 1996 - --------------------------------------------- (Principal Financial Officer Maritza C. Pichon and Principal Accounting Officer) * Director August , 1996 - --------------------------------------------- James C. Kennedy * Director August , 1996 - --------------------------------------------- David E. Easterly
- --------------- * Maritza C. Pichon, by signing her name hereto, does sign this document in behalf of each of the persons indicated above for whom she is attorney-in-fact pursuant to a power of attorney duly executed by such person and filed with the Securities and Exchange Commission. By: /s/ MARITZA C. PICHON ------------------------------------ Maritza C. Pichon Attorney-in-Fact II-4 163 COX RADIO, INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNT
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ------------------ ------------ --------------------------- ----------- ------------- ADDITIONS --------------------------- CHARGED TO 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 $554 $ -- $ 540 $ 774 ========= =========== ======== ========== ==========
- --------------- (1) Represents the net of accounts written off and accounts recovered. S-1 164 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 -- Amended and Restated Bylaws of Cox Radio, Inc. *4.1 -- Indenture between NewCity Communications, Inc. and Shawmut Bank Connecticut, National Association, as Trustee, dated as of November 2, 1993, relating to the 11 3/8% Notes due 2003 of NewCity Communications, Inc. 4.2 -- First Supplemental Indenture between NewCity Communications, Inc. and Shawmut Bank Connecticut, National Association, as Trustee, dated as of September 16, 1994, relating to the 11 3/8% Notes due 2003 of NewCity Communications, Inc. 4.3 -- Specimen of Class A Common Stock Certificate. 5.1 -- Opinion of Dow, Lohnes & Albertson, PLLC (including consent). 10.1 -- Promissory Note for Cox Radio, Inc. 10.2 -- Promissory Note for WSB, Inc. 10.3 -- Promissory Note for Cox Kentucky, Inc. 10.4 -- Promissory Note for WHIO, Inc. 10.5 -- Promissory Note for Cox Syracuse, Inc. 10.6 -- Promissory Note for WWRM, Inc. 10.7 -- Promissory Note for WCKG, Inc. 10.8 -- Form of New CEI Credit Facility. 10.9 -- Cox Radio, Inc. Long-Term Incentive Plan. 10.10 -- Cox Radio, Inc. Employee Stock Purchase Plan. 10.11 -- Cox Radio, Inc. Restricted Stock Plan for Non-Employee Directors. 11 -- Cox Radio, Inc. Statement Regarding: Computation of Earnings per Share. 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). 23.5 -- Consent of Richard A. Ferguson to Become a Director. *24.1 -- Power of Attorney (included on page II-4). 27.1 -- Financial Data Schedule (for SEC use only).
- --------------- * Previously filed. ** To be filed by amendment. EX-1.1 2 UNDERWRITING AGREEMENT 1 EXHIBIT 1.1 Shares COX RADIO, INC. Class A Common Stock U.S. UNDERWRITING AGREEMENT _____ __, 1996 LEHMAN BROTHERS INC. ALLEN & COMPANY INCORPORATED CS FIRST BOSTON CORPORATION MORGAN STANLEY & CO. INCORPORATED As Representatives of the several U.S. Underwriters named in Schedule 1, c/o Lehman Brothers Inc. Three World Financial Center New York, New York 10285 Dear Sirs: Cox Radio, Inc., a Delaware corporation (the "Company") and a wholly-owned subsidiary of Cox Broadcasting Inc. ("Cox Broadcasting"), which is in turn an indirect wholly-owned subsidiary of Cox Enterprises, Inc. ("CEI" or the "Principal Stockholder"), proposes to sell _________ shares (the "Firm Stock") of the Company's Class A Common Stock, par value $1.00 per share (the "Common Stock"). In addition, the Company proposes to grant to the U.S. Underwriters named in Schedule 1 hereto (the "U.S. Underwriters") an option to purchase up to an additional _______ shares of the Common Stock on the terms and for the purposes set forth in Section 2 (the "Option Stock"). The Firm Stock and the Option Stock, if purchased, are hereinafter collectively called the "Stock". This is to confirm the agreement concerning the purchase of the Stock from the Company by the U.S. Underwriters named in Schedule 1 hereto (the "U.S. Underwriters"). It is understood by all parties that the Company is concurrently entering into an agreement dated the date hereof (the "International Underwriting Agreement") providing for the sale by the Company of __________ shares of Common Stock (including the over-allotment option thereunder) (the "International Stock") through 2 2 arrangements with certain underwriters outside the United States (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 U.S. Underwriters and the International Managers simultaneously are entering into an agreement between the U.S. and international underwriting syndicates (the "Agreement Between U.S. Underwriters and International Managers") which provides for, among other things, the transfer of shares of Common Stock between the two syndicates. It is also understood that prior to the offering and sale of shares of Common Stock (the "Offering") contemplated by the foregoing, subsidiaries of CEI will transfer the capital stock or assets of all of their U.S. radio broadcasting operations to the Company (the "Consolidation"). Two forms of prospectus are to be used in connection with the Offering, one relating to the Stock and the other relating to the International Stock. The latter form of prospectus will be identical to the former except for certain substitute pages as included in the registration statement and amendments thereto referred to below. Except as used in Sections 2, 3, 4, 9, and 10 herein, and except as the context may otherwise require, references herein to the Stock shall include all the shares which may be sold pursuant to either this Agreement or the International Underwriting Agreement, and references herein to any prospectus whether in preliminary or final form, and whether as amended or supplemented, shall include both the U.S. and the international versions thereof. As used in this Agreement, the term "Underwriter" includes U.S. Underwriters and International Managers. 1. As used in this Section 1, the "Company" and "its subsidiaries" refers to the Company and its subsidiaries following the consummation of the Consolidation. (A) Representations, Warranties and Agreements of the Company. The Company represents, warrants and agrees that: (a) A registration statement on Form S-1 (File No. 333-08737) with respect to the Stock has (i) been prepared by the Company in conformity with the requirements of the United States Securities Act of 1933 (the "Securities Act") and the rules and regulations (the "Rule and Regulations") of the United States Securities and Exchange Commission (the "Commission") thereunder, (ii) been filed with the Commission under the Securities Act and (iii) become effective under the Securities Act. Copies of such registration statement (and any amendments thereto) have been delivered by the Company to you as the 3 3 representatives (the "Representatives") of the U.S. Underwriters. As used in this Agreement, "Effective Time" means the date and the time as of which such registration statement, or the most recent post-effective amendment thereto, if any, was declared effective by the Commission; "Effective Date" means the date of the Effective Time; "Preliminary Prospectus" means each prospectus included in such registration statement, or amendments thereof, before it became effective under the Securities Act and any prospectus filed with the Commission by the Company with the consent of the Representatives pursuant to Rule 424(a) of the Rules and Regulations; "Registration Statement" means such registration statement, as amended at the Effective Time, including all information contained in the final prospectus filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations in accordance with Section 5(a) hereof and deemed to be a part of the registration statement as of the Effective Time pursuant to paragraph (b) of Rule 430A of the Rules and Regulations; and "Prospectus" means such final prospectus, as first filed with the Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules and Regulations. The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus. (b) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will, when they become effective or are filed with the Commission, as the case may be, conform in all material respects to the requirements of the Securities Act and the Rules and Regulations and do not and will not, as of the applicable Effective Date (as to the Registration Statement and any amendment thereto) and as of the applicable filing date (as to the Prospectus and any amendment or supplement thereto), contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Registration Statement or the Prospectus in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein. (c) The Company and each of its subsidiaries (as defined in Section 15) have been duly incorporated or formed and are validly existing in good standing under the laws of their respective jurisdictions of incorporation or formation, are duly qualified to do business and are in good standing in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties 4 4 and to conduct the businesses in which they are engaged, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole; and none of the subsidiaries of the Company is a "significant subsidiary", as such term is defined in Rule 405 of the Rules and Regulations. (d) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and conform to the description thereof contained in the Prospectus; and all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued and are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims. (e) The shares of the Stock to be issued and sold by the Company to the U.S. Underwriters hereunder and under the International Underwriting Agreement have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein and in the International Underwriting Agreement, will be duly and validly issued, fully paid and non-assessable; and the Stock conforms to the description thereof contained in the Prospectus. (f) This Agreement has been duly authorized, executed and delivered by the Company. (g) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement and the International Underwriting Agreement and the consummation of the transactions contemplated hereby and thereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets; and, except for the registration of the Stock under the 5 5 Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the United States Securities Exchange Act of 1934 ("Exchange Act") and applicable state or foreign securities laws in connection with the purchase and distribution of the Stock by the U.S. Underwriters and the International Managers, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement, or the International Underwriting Agreement, by the Company and the consummation of the transactions contemplated hereby and thereby. (h) The execution, delivery and performance of the Agreement and Plan of Merger dated July 1, 1996 (the "Merger Agreement") by and among the Company, NewCity Communications, Inc. ("NewCity") and certain stockholders of NewCity by the Company did not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any existing indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, except as would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; and, except as set forth in the Prospectus, the performance by the Company of its obligations under the Merger Agreement will not result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets, except as would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (i) The Merger Agreement has been duly authorized and executed by the Company and, assuming due authorization and execution by each of the other parties thereto, is a valid, binding agreement of the Company enforceable against the Company in accordance to its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) or an implied covenant of good faith and fair dealing. (j) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the 6 6 Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Securities Act. (k) Neither the Company nor any of its subsidiaries has sustained, since the date of the latest audited financial statements included in the Prospectus, any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree; and, since such date, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries. (l) The financial statements filed as part of the Registration Statement or included in the Prospectus present fairly the financial condition and results of operations of the entities purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. (m) The Company and each of its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and all real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases, with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries. (n) The Company and each of its subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective 7 7 properties and as is customary for companies engaged in similar businesses in similar industries. (o) The Company and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights and licenses necessary for the conduct of their respective businesses and have no reason to believe that the conduct of their respective businesses will conflict with, and have not received any notice of any claim of conflict with, any such rights of others. (p) There are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would have a material adverse effect on the consolidated financial position, stockholders' equity, results of operations, business or prospects of the Company and its subsidiaries, taken as a whole; and to the best of the Company's knowledge, other than as set forth in the Prospectus, no such proceedings are threatened or contemplated by governmental authorities or threatened in writing by others. (q) There are no contracts or other documents which are required to be described in the Prospectus or filed as exhibits to the Registration Statement by the Securities Act or by the Rules and Regulations which have not been described in the Prospectus or filed as exhibits to the Registration Statement or incorporated therein by reference as permitted by the Rules and Regulations. (r) The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. 8 8 (s) Neither the Company nor any of its subsidiaries (i) is in violation of its charter or by-laws, (ii) is in default in any respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject or (iii) is in violation in any respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject except in each case above as would have a material adverse effect on the Company and its subsidiaries, taken as a whole. (t) Each of the radio stations owned or operated, or to which sales and marketing services are provided, by the Company and its subsidiaries is validly licensed by the Federal Communications Commission (the "FCC") and, except as set forth on Schedule 1(t) hereto, no administrative or judicial proceedings are pending or, to the knowledge of the Company or its subsidiaries, threatened by or pending before the FCC with respect to such licenses; the Company and its subsidiaries possess adequate certificates, authorizations or permits which are in full force and effect issued by other appropriate governmental agencies or bodies necessary to the ownership of their respective properties and the conduct of the businesses now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the Company and its subsidiaries taken as a whole; and the Company and its subsidiaries are in compliance in all material respects with the Communications Act of 1934, as amended, and the rules, regulations and policies of the FCC. (u) There has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, medical wastes, hazardous wastes or hazardous substances by the Company or any of its subsidiaries (or, to the knowledge of the Company, any of their predecessors in interest) at, upon or from any of the property now or previously owned or leased by the Company or its subsidiaries in violation of any applicable law, ordinance, rule, regulation, order, judgment, decree or permit or which would require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not have, or could not be reasonably likely to have, singularly or in the aggregate with all such violations and 9 9 remedial actions, a material adverse effect on the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries; there has been no material spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances due to or caused by the Company or any of its subsidiaries or with respect to which the Company or any of its subsidiaries have knowledge, except for any such spill, discharge, leak, emission, injection, escape, dumping or release which would not have or would not be reasonably likely to have, singularly or in the aggregate with all such spills, discharges, leaks, emissions, injections, escapes, dumpings and releases, a material adverse effect on the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, taken as a whole; and the terms "hazardous wastes", "toxic wastes", "hazardous substances" and "medical wastes" shall have the meanings specified in any applicable local, state, federal and foreign laws or regulations with respect to environmental protection. (v) Neither the Company nor any subsidiary is an "investment company" within the meaning of such term under the United States Investment Company Act of 1940 and the rules and regulations of the Commission thereunder. (B) Representation and Warranty of the Principal Stockholder. The Principal Stockholder represents, warrants and agrees that: (a) To the best knowledge of the Principal Stockholder, the Registration Statement and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus do not and will not, as of the applicable Effective Date (as to the Registration Statement and any amendment thereto) and as of the applicable filing date (as to the Prospectus and any amendment or supplement thereto), contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Registration Statement or the Prospectus in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein. 10 10 2. Purchase of the Stock by the U.S. Underwriters. On the basis of the representations and warranties contained in, and subject to the terms and conditions of, this Agreement, the Company agrees to sell _______ shares of the Firm Stock to the several U.S. Underwriters and each of the U.S. Underwriters, severally and not jointly, agrees to purchase the number of shares of Firm Stock set forth opposite that U.S. Underwriter's name in Schedule 1 hereto. The respective purchase obligations of the U.S. Underwriters with respect to the Firm Stock shall be rounded among the U.S. Underwriters to avoid fractional shares, as the Representatives may determine. In addition, the Company grants to the U.S. Underwriters an option to purchase up to _______ shares of Option Stock. Such option is granted solely for the purpose of covering over-allotments in the sale of Firm Stock and is exercisable as provided in Section 4 hereof. Shares of Option Stock shall be purchased severally for the account of the U.S. Underwriters in proportion to the number of shares of Firm Stock set forth opposite the name of such U.S. Underwriters in Schedule 1 hereto. The respective purchase obligations of each U.S. Underwriter with respect to the Option Stock shall be adjusted by the Representatives so that no U.S. Underwriter shall be obligated to purchase Option Stock other than in 100 share amounts. The price of both the Firm Stock and any Option Stock shall be $_____ per share. The Company shall not be obligated to deliver any of the Stock to be delivered on the First Delivery Date or the Second Delivery Date (as hereinafter defined), as the case may be, except upon payment for all the Stock to be purchased on such Delivery Date as provided herein and in the International Underwriting Agreement. 3. Offering of Stock by the U.S. Underwriters. Upon authorization by the Representatives of the release of the Firm Stock, the several U.S. Underwriters propose to offer the Firm Stock for sale upon the terms and conditions set forth in the Prospectus. It is understood that _______ shares of the Firm Stock will initially be reserved by the several U.S. Underwriters for offer and sale upon the terms and conditions set forth in the Prospectus and in accordance with the rules and regulations of the National Association of Securities Dealers, Inc. to employees and persons having business relationships with the Company and its subsidiaries who have heretofore delivered to the Representatives offers or indications of interest to purchase shares of Firm Stock in form satisfactory to the Representatives, and that any allocation of such Firm Stock among such persons will be made in accordance with 11 11 timely directions received by the Representatives from the Company; provided, that under no circumstances will the Representatives or any U.S. Underwriter be liable to the Company or to any such person for any action taken or omitted in good faith in connection with such offering to employees and persons having business relationships with the Company and its subsidiaries. It is further understood that any shares of such Firm Stock which are not purchased by such persons will be offered by the Underwriters to the public upon the terms and conditions set forth in the Prospectus. Each U.S. Underwriter agrees that, except to the extent permitted by the Agreement Between U.S. Underwriters and International Managers, it will not offer or sell any of the Stock outside of the United States and Canada. 4. Delivery of and Payment for the Stock. Delivery of and payment for the Firm Stock shall be made at the office of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York, 10019, at 10:00 A.M., New York City time, on the fourth full business day following the date of this Agreement or at such other date or place as shall be determined by agreement between the Representatives and the Company. This date and time are sometimes referred to as the "First Delivery Date". On the First Delivery Date, the Company shall deliver or cause to be delivered certificates representing the Firm Stock to the Representatives for the account of each U.S. Underwriter against payment to the Company of the purchase price in Federal or other funds immediately available in New York City. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each U.S. Underwriter hereunder. Upon delivery, the Firm Stock shall be registered in such names and in such denominations as the Representatives shall request in writing not less than two full business days prior to the First Delivery Date. For the purpose of expediting the checking and packaging of the certificates for the Firm Stock, the Company shall make the certificates representing the Firm Stock available for inspection by the Representatives in New York, New York, not later than 2:00 P.M., New York City time, on the business day prior to the First Delivery Date. At any time on or before the thirtieth day after the date of this Agreement, the option granted in Section 2 may be exercised by written notice being given to the Company by the Representatives. Such notice shall set forth the aggregate number of shares of Option Stock as to which the option is being exercised, the names in which the shares of Option Stock are to be registered, the denominations in which the shares of Option Stock are to be issued and the date and time, as determined by the Representatives, when the shares of Option Stock are to be delivered; provided, that this date and time shall not be earlier than the First Delivery Date nor earlier than the second business day after the date on which the option shall 12 12 have been exercised nor later than the fifth business day after the date on which the option shall have been exercised. The date and time the shares of Option Stock are delivered are sometimes referred to as the "Second Delivery Date" and the First Delivery Date and the Second Delivery Date are sometimes each referred to as a "Delivery Date". Delivery of and payment for the Option Stock shall be made at the place specified in the first sentence of the first paragraph of this Section 4 (or at such other place as shall be determined by agreement between the Representatives and the Company) at 10:00 A.M., New York City time, on the Second Delivery Date. On the Second Delivery Date, the Company shall deliver or cause to be delivered the certificates representing the Option Stock being purchased by the U.S. Underwriters to the Representatives for the account of each U.S. Underwriter against payment to the Company of the purchase price in Federal or other funds immediately available in New York City. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each U.S. Underwriter hereunder. Upon delivery, the Option Stock shall be registered in such names and in such denominations as the Representatives shall request in the aforesaid written notice. For the purpose of expediting the checking and packaging of the certificates for the Option Stock, the Company shall make the certificates representing the Option Stock available for inspection by the Representatives in New York, New York, not later than 2:00 P.M., New York City time, on the business day prior to the Second Delivery Date. 5. Further Agreements of the Company. The Company agrees: (a) To prepare the Prospectus in a form approved by the Representatives and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Securities Act; to make no further amendment or any supplement to the Registration Statement or to the Prospectus except as permitted herein; to advise the Representatives, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish the Representatives with copies thereof; to advise the Representatives, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, of the suspension of the qualification of the Stock for offering or 13 13 sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus or suspending any such qualification, to use promptly its best efforts to obtain its withdrawal; (b) To furnish promptly to each of the Representatives and to counsel for the Underwriters a signed copy of the Registration Statement as originally filed with the Commission, and each amendment thereto filed with the Commission, including all consents and exhibits filed therewith; (c) To deliver promptly to the Representatives such number of the following documents as the Representatives shall reasonably request: (i) conformed copies of the Registration Statement as originally filed with the Commission and each amendment thereto (in each case excluding exhibits other than this Agreement and the computation of per share earnings) and (ii) each Preliminary Prospectus, the Prospectus and any amended or supplemented Prospectus; and, if the delivery of a prospectus is required at any time after the Effective Time in connection with the offering or sale of the Stock or any other securities relating thereto and if at such time any events shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary to amend or supplement the Prospectus in order to comply with the Securities Act, to notify the Representatives and, upon their request, to prepare and furnish without charge to each U.S. Underwriter and to any dealer in securities as many copies as the Representatives may from time to time reasonably request of an amended or supplemented Prospectus which will correct such statement or omission or effect such compliance; (d) To file promptly with the Commission any amendment to the Registration Statement or the Prospectus or any supplement to the Prospectus that may, in the judgment of the Company or the Representatives, be required by the Securities Act or requested by the Commission; (e) Prior to filing with the Commission any amendment to the Registration Statement or supplement to the Prospectus or any Prospectus 14 14 pursuant to Rule 424 of the Rules and Regulations, to furnish a copy thereof to the Representatives and counsel for the Underwriters and obtain the consent of the Representatives to the filing; (f) As soon as practicable after the Effective Date, to make generally available to the Company's security holders and to deliver to the Representatives an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158); (g) For a period of five years following the Effective Date, to furnish to the Representatives copies of all materials furnished by the Company to its shareholders and all public reports and all reports and financial statements furnished by the Company to the principal national securities exchange upon which the Common Stock may be listed pursuant to requirements of or agreements with such exchange or to the Commission pursuant to the Exchange Act or any rule or regulation of the Commission thereunder; (h) Promptly from time to time, to take such action as the Representatives may reasonably request to qualify the Stock for offering and sale under the securities laws of such jurisdictions as the Representatives may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Stock; provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (i) For a period of 180 days from the date of the Prospectus, not to, directly or indirectly, offer for sale, sell or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock (other than the Stock and shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date hereof or disclosed in the Prospectus, or pursuant to currently outstanding options, warrants or rights), or sell or grant options, rights or warrants with respect to any shares of Common Stock (other than the grant of options pursuant to option plans existing on the date hereof or disclosed in the Prospectus), without the prior written consent of Lehman Brothers Inc.; and to cause the Principal Stockholder, certain officers and each director of the Company to furnish to the Representatives, prior to the First 15 15 Delivery Date, a letter or letters, in form and substance satisfactory to counsel for the Underwriters, pursuant to which each such person shall agree not to, directly or indirectly, offer for sale, sell or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock for a period of 180 days from the date of the Prospectus, without the prior written consent of Lehman Brothers Inc. The Company and the Principal Stockholder shall not take, directly or indirectly, any action designed to cause or result in, or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Stock; (j) Prior to the Effective Date, to apply for the listing of the Stock on the New York Stock Exchange and to use its best efforts to complete that listing, subject only to official notice of issuance and evidence of satisfactory distribution, prior to the First Delivery Date; (k) Prior to filing with the Commission any reports on Form SR pursuant to Rule 463 of the Rules and Regulations, to furnish a copy thereof to the counsel for the Underwriters and receive and consider its comments thereon, and to deliver promptly to the Representatives a signed copy of each report on Form SR filed by it with the Commission; (l) To apply the net proceeds from the sale of the Stock being sold by the Company as set forth in the Prospectus; and (m) To take such steps as shall be necessary to ensure that neither the Company nor any subsidiary shall become an "investment company" within the meaning of such term under the United States Investment Company Act of 1940 and the rules and regulations of the Commission thereunder. 6. Expenses. The Company agrees to pay (a) the costs incident to the authorization, issuance, sale and delivery of the Stock and any taxes payable in that connection; (b) the costs incident to the preparation, printing and filing under the Securities Act of the Registration Statement and any amendments and exhibits thereto; (c) the costs of distributing the Registration Statement as originally filed and each amendment thereto and any post-effective amendments thereof (including, in each case, exhibits), any Preliminary Prospectus, the Prospectus and any amendment or supplement to the Prospectus, all as provided in this Agreement; (d) the costs of producing and distributing this Agreement, the Agreement Between U.S. Underwriters and International Managers, any Supplemental Agreement Among U.S. 16 16 Underwriters and any other related documents in connection with the offering, purchase, sale and delivery of the stock; (e) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, securing any required review by the National Association of Securities Dealers, Inc. of the terms of sale of the Stock; (f) any applicable listing or other fees; (g) the fees and expenses of qualifying the Stock under the securities laws of the several jurisdictions as provided in Section 5(h) and of preparing, printing and distributing a Blue Sky Memorandum (including reasonable related fees and expenses of counsel to the Underwriters); and (h) all other costs and expenses incident to the performance of the obligations of the Company under this Agreement; provided that, except as provided in this Section 6 and in Section 11, the U.S. Underwriters shall pay their own costs and expenses, including the costs and expenses of their counsel, any transfer taxes on the Stock which they may sell and the expenses of advertising any offering of the Stock made by the U.S. Underwriters. 7. Conditions of U.S. Underwriters' Obligations. The respective obligations of the U.S. Underwriters hereunder are subject to the accuracy, when made and on each Delivery Date, of the representations and warranties of the Company and the Principal Stockholder contained herein, to the performance by the Company of its obligations hereunder, and to each of the following additional terms and conditions: (a) The Prospectus shall have been timely filed with the Commission in accordance with Section 5(a); no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and any request of the Commission for inclusion of additional information in the Registration Statement or the Prospectus or otherwise shall have been complied with. (b) No U.S. Underwriter or International Manager shall have discovered and disclosed to the Company on or prior to such Delivery Date that the Registration Statement or the Prospectus or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of Cravath, Swaine & Moore, counsel for the Underwriters, is material or omits to state a fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the International 17 17 Underwriting Agreement, the Stock, the Registration Statement and the Prospectus, and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters. (d) The Consolidation shall have been duly consummated and the Company shall have furnished to Cravath, Swaine & Moore, counsel for the Underwriters, all documents and information in connection therewith that such counsel may reasonably request. (e) Dow, Lohnes & Albertson shall have furnished to the Representatives its written opinion, as counsel to the Company, addressed to the U.S. Underwriters and dated such Delivery Date, in form and substance reasonably satisfactory to the Representatives, to the effect that: (i) The Company and each of its subsidiaries have been duly incorporated or formed and are validly existing in good standing under the laws of their respective jurisdictions of incorporation or formation, are duly qualified to do business and are in good standing in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification and have all power and authority necessary to own or hold their respective properties and conduct the businesses in which they are engaged, other than jurisdictions in which the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company (including the shares of Stock being delivered on such Delivery Date) have been duly and validly authorized and issued, are fully paid and non-assessable and conform to the description thereof contained in the Prospectus; and all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued and are fully paid, non-assessable and (except for directors' qualifying shares) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims; 18 18 (iii) There are no preemptive or other rights to subscribe for or to purchase, nor any restriction upon the voting or transfer of, any shares of the Stock pursuant to the Company's charter or by-laws or any agreement or other instrument known to such counsel; (iv) To the best of such counsel's knowledge and other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, might have a material adverse effect on the consolidated financial position, stockholders' equity, results of operations, business or prospects of the Company and its subsidiaries; and, to the best of such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (v) The Registration Statement was declared effective under the Securities Act as of the date and time specified in such opinion, the Prospectus was filed with the Commission pursuant to the subparagraph of Rule 424(b) of the Rules and Regulations specified in such opinion on the date specified therein and no stop order suspending the effectiveness of the Registration Statement has been issued and, to the knowledge of such counsel, no proceeding for that purpose is pending or threatened by the Commission; (vi) The Registration Statement and the Prospectus and any further amendments or supplements thereto made by the Company prior to such Delivery Date (other than the financial statements and related schedules therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations; (vii) The statements contained (1) in the Prospectus under the captions "Business - Federal Regulation of Radio Broadcasting," "The NewCity Acquisition," "Management - Cox Enterprises, Inc. Unit Appreciation Plan," "Management - Long Term Incentive Plan," "Management - Employee Stock Purchase Plan," "Management - Retirement Plans," "Management - Compensation of Directors," "Certain Relationships and Related Transactions," Description of Capital Stock," "Description of Indebtedness," "Shares Eligible for 19 19 Future Sale," "Underwriting," and "Certain United States Tax Consequences to Non-United States Holders of Class A Common Stock" and (2) in the Registration Statement in Items 14 and 15, in each case, insofar as they describe legal matters, documents or proceedings, constitute fair summaries thereof; (viii) To the best of such counsel's knowledge, there are no material contracts or other documents which are required to be described in the Prospectus or filed as exhibits to the Registration Statement by the Securities Act or by the Rules and Regulations which have not been described or filed as exhibits to the Registration Statement or incorporated therein by reference as permitted by the Rules and Regulations; (ix) Each of this Agreement and the International Underwriting Agreement has been duly authorized, executed and delivered by the Company and the Principal Stockholder; (x) The Merger Agreement has been duly authorized and executed by the Company and, assuming due authorization and execution by each of the other parties thereto, is a valid, binding agreement of the Company enforceable against the Company in accordance to its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) or an implied covenant of good faith and fair dealing; (xi) The issue and sale of the shares of Stock being delivered on such Delivery Date by the Company and the compliance by the Company with all of the provisions of this Agreement and the International Underwriting Agreement will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, known to such counsel to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any statute or any 20 20 order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets; and, except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the Exchange Act and applicable state or foreign securities laws in connection with the purchase and distribution of the Stock by the U.S. Underwriters and the International Managers, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement or the International Underwriting Agreement by the Company; (xii) The execution, delivery and performance of the Merger Agreement by the Company and the consummation of the transactions contemplated thereby did not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any existing indenture, mortgage, deed of trust, loan agreement or other agreement or instrument that is material to the Company and its subsidiaries, taken as a whole, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject; and, except as set forth in the Prospectus, the performance by the Company of its obligations under the Merger Agreement will not result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any statute or, to such counsel's knowledge, any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets; (xiii) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or the right to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Securities Act; and 21 21 (xiv) Each of the radio stations owned, operated, programmed or marketed by the Company and its subsidiaries is validly licensed by the FCC and, except as set forth on Schedule 1(t) hereto, no administrative or judicial proceedings are pending or, to the knowledge of such counsel, threatened by or pending before the FCC with respect to such licenses; the Company and its subsidiaries possess adequate certificates, authorizations or permits which are in full force and effect issued by other appropriate governmental agencies or bodies necessary to the ownership of their respective properties and the conduct of the businesses now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the Company and its subsidiaries taken as a whole. In rendering such opinion, such counsel may state that its opinion is limited to matters governed by the Federal laws of the United States of America, the laws of the District of Columbia and the General Corporation Law of the State of Delaware. Such counsel shall also have furnished to the Representatives a written statement, addressed to the U.S. Underwriters and dated such Delivery Date, in form and substance satisfactory to the Representatives, to the effect that (x) such counsel has acted as counsel to the Company on a regular basis (although the Company is also represented by its General Counsel) and has acted as counsel to the Company in connection with the preparation of the Registration Statement, and (y) based on the foregoing, no facts have come to the attention of such counsel which lead it to believe that the Registration Statement, as of the Effective Date, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or that the Prospectus contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The foregoing opinion and statement may be qualified by a statement to the effect that such counsel does not assume any responsibility for the accuracy, completeness or fairness of the statements made in the Prospectus, the Registration Statement, or the financial statements and schedules thereto, except for the statements made in the Prospectus or the Registration Statement in the Items or under the captions referred to in paragraph (vii) of this Section 7(e) insofar as such statements describe legal matters, documents or proceedings. 22 22 (f) The Representatives shall have received from Cravath, Swaine & Moore, counsel for the Underwriters, such opinion or opinions, dated such Delivery Date, with respect to the incorporation of the Company, the issuance and sale of the Stock, the Registration Statement, the Prospectus and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters. (g) The Representatives shall have received from each of Deloitte & Touche LLP and Ernst & Young LLP: (i) At the time of execution of this Agreement, a letter, in form and substance satisfactory to the Representatives, addressed to the U.S. Underwriters and dated the date hereof (i) confirming that it is an independent public accountant within the meaning of the Securities Act and is in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission and (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants' "comfort letters" to underwriters in connection with registered public offerings; and (ii) With respect to the letters of Deloitte & Touche LLP and Ernst & Young LLP referred to in the preceding paragraph and delivered to the Representatives concurrently with the execution of this Agreement (each an "initial letter"), the Company shall have furnished to the Representatives a letter ("bring-down letter") of each such accountant, addressed to the U.S. Underwriters and dated such Delivery Date (i) confirming that it is an independent public accountant within the meaning of the Securities Act and is in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date of the bring-down letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five days prior to the date of the bring-down letter), the conclusions and findings of such firm with respect to the financial 23 23 information and other matters covered by the initial letter and (iii) confirming in all material respects the conclusions and findings set forth in its respective initial letter. (h) The Company shall have furnished to the Representatives a certificate, dated such Delivery Date, of its President and a Vice President or its chief financial officer stating that: (i) The representations, warranties and agreements of the Company in Section 1(A) are true and correct in all material respects as of such Delivery Date; the Company has complied in all material respects with all its agreements contained herein; and the conditions set forth in Sections 7(a) and 7(i) have been fulfilled; and (ii) They have carefully examined the Registration Statement and the Prospectus and, in their opinion (A) as of the Effective Date, the Registration Statement and Prospectus did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (B) since the Effective Date no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement or the Prospectus. (i) (i) Neither the Company, CEI or NewCity nor any of their respective subsidiaries shall have sustained since the date of the latest audited financial statements included in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company, CEI or NewCity or any of their respective subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company, CEI or NewCity and their respective subsidiaries, otherwise than as set forth or contemplated in the Prospectus, or (iii) since the date of the Prospectus, with respect to the pending acquisition of NewCity by the Company pursuant to the Merger Agreement, there shall not have been any adverse development the effect of which, in any such case described in clause (i), (ii) or (iii), is, in the judgment of the Representatives, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Stock 24 24 being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus. (j) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by Federal or state authorities, (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the judgment of a majority in interest of the several U.S. Underwriters, impracticable or inadvisable to proceed with the public offering or delivery of the Stock being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus. (k) The New York Stock Exchange shall have approved the Stock for listing, subject only to official notice of issuance and evidence of satisfactory distribution. (l) The closing under the International Underwriting Agreement shall have occurred concurrently with the closing hereunder on the First Delivery Date. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters. 8. Indemnification and Contribution. (a) The Company shall indemnify and hold harmless each U.S. Underwriter, its officers and employees and each person, if any, who controls any U.S. Underwriter within the meaning of the Securities Act, from and against any loss, 25 25 claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Stock), to which that U.S. Underwriter, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Preliminary Prospectus, the Registration Statement or the Prospectus or in any amendment or supplement thereto or (B) in any blue sky application or other document prepared or executed by the Company (or based upon any written information furnished by the Company) specifically for the purpose of qualifying any or all of the Stock under the securities laws of any state or other jurisdiction (any such application, document or information being hereinafter called a "Blue Sky Application"), (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement or the Prospectus, or in any amendment or supplement thereto, or in any Blue Sky Application any material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any act or failure to act or any alleged act or failure to act by any U.S. Underwriter in connection with, or relating in any manner to, the Stock or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above (provided that the Company shall not be liable under this clause (iii) to the extent that it is determined in a final judgment by a court of competent jurisdiction that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such U.S. Underwriter through its gross negligence or willful misconduct), and shall reimburse each U.S. Underwriter and each such officer, employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by that U.S. Underwriter, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus, or in any such amendment or supplement, or in any Blue Sky Application, in reliance upon and in conformity with written information concerning such U.S. Underwriter furnished to the Company through the Representatives by or on behalf of any U.S. Underwriter specifically for inclusion therein; and, provided further, that as to any Preliminary Prospectus this indemnity agreement shall not inure to the benefit of any U.S. Underwriter on account of any loss, claim, damage, liability or action arising from the sale of Stock to any person by that U.S. Underwriter if that U.S. Underwriter failed to send or give a copy of the 26 26 Prospectus, as the same may be amended or supplemented, to that person within the time required by the Securities Act, and the untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact in such Preliminary Prospectus was corrected in the Prospectus, unless such failure resulted from non-compliance by the Company with Section 5(b) herein. The foregoing indemnity agreement is in addition to any liability which the Company may otherwise have to any U.S. Underwriter or to any officer, employee or controlling person of that U.S. Underwriter. (b) To the extent that any U.S. Underwriter or any person who controls any U.S. Underwriter within the meaning of Section 15 of the Securities Act is unable to obtain from the Company the indemnification provided in subsection (a) of this Section 8 within 30 business days after written demand upon the Company, the Principal Stockholder agrees to indemnify and hold harmless each U.S. Underwriter and each such control person against any loss, claim, damage, liability, action or expense described in the indemnity contained in subsection (a) of this Section to the same extent as if the Principal Stockholder were the Company; provided, however, that the Principal Stockholder's obligations under this subsection (b) shall not exceed [$107.3 million] less the amount of indemnity actually provided by the Principal Stockholder to the International Managers under Section 8(b) of the International Underwriting Agreement. (c) Each U.S. Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, its officers and employees, each of its directors and each person, if any, who controls the Company within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company, the Principal Stockholder, or any such director, officer or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Preliminary Prospectus, the Registration Statement or the Prospectus or in any amendment or supplement thereto, or (B) in any Blue Sky Application or (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement or the Prospectus, or in any amendment or supplement thereto, or in any Blue Sky Application any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such U.S. Underwriter furnished to the Company through the Representatives by or on behalf of that U.S. Underwriter specifically for inclusion therein, and shall reimburse the Company and any such director, officer or 27 27 controlling person for any legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which any U.S. Underwriter may otherwise have to the Company or any such director, officer, employee or controlling person. (d) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent it has been materially prejudiced by such failure and, provided further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the Representatives shall have the right to employ counsel to represent jointly the Representatives and those other U.S. Underwriters and their respective officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the U.S. Underwriters against the Company or the Principal Stockholder under this Section 8 if, in the reasonable judgment of the Representatives, it is advisable for the Representatives and those U.S. Underwriters, officers, employees and controlling persons to be jointly represented by separate counsel, and in that event the fees and expenses of such single separate counsel shall be paid by the Company or the Principal Stockholder, as the case may be. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of 28 28 each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (e) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a), 8(b) or 8(c) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Principal Stockholder, on the one hand, and the U.S. Underwriters, on the other hand, from the offering of the Stock or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company or the Principal Stockholder, on the one hand, and the U.S. Underwriters, on the other hand, with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Principal Stockholder on the one hand and the U.S. Underwriters on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Stock purchased under this Agreement (before deducting expenses) received by the Company on the one hand, and the total underwriting discounts and commissions received by the U.S. Underwriters with respect to the shares of the Stock purchased under this Agreement, on the other hand, bear to the total gross proceeds from the offering of the shares of the Stock under this Agreement, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Principal Stockholder, on the one hand or the U.S. Underwriters, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Principal Stockholder and the U.S. Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 8(e) were to be determined by pro rata allocation (even if the U.S. Underwriters were treated as one entity for such purpose) or by any other 29 29 method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 8(e) shall be deemed to include, for purposes of this Section 8(e), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(e), no U.S. Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Stock underwritten by it and distributed to the public was offered to the public exceeds the amount of any damages which such U.S. Underwriter has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The U.S. Underwriters' obligations to contribute as provided in this Section 8(e) are several in proportion to their respective underwriting obligations and not joint. Each party entitled to contribution agrees that, upon the service of a summons or other initial legal process upon it in any action instituted against it in respect of which contribution may be sought, it shall promptly give written notice of such service to the party or parties from whom contribution may be sought but the omission so to notify such party or parties of any such service shall not relieve the party from whom contribution may be sought for any obligation it may have hereunder or otherwise. (f) The U.S. Underwriters severally confirm and the Company acknowledges that the statements with respect to the public offering of the Stock by the U.S. Underwriters set forth on the cover page of, the legend concerning over-allotments on the inside front cover page of and the concession and reallowance figures appearing under the caption "Underwriting" in the Prospectus are correct and constitute the only information concerning such U.S. Underwriters furnished in writing to the Company by or on behalf of the U.S. Underwriters specifically for inclusion in the Registration Statement and the Prospectus. 9. Defaulting U.S. Underwriters. If, on either Delivery Date, any U.S. Underwriter defaults in the performance of its obligations under this Agreement, the remaining non-defaulting U.S. Underwriters shall be obligated to purchase the Stock which the defaulting U.S. Underwriter agreed but failed to purchase on such Delivery Date in the respective proportions which the number of shares of the Firm Stock set opposite the name of each remaining non-defaulting U.S. Underwriter in Schedule 1 hereto bears to the total number of shares of the Firm Stock set forth opposite the names of all the 30 30 remaining non-defaulting U.S. Underwriters in Schedule 1 hereto; provided, however, that the remaining non-defaulting U.S. Underwriters shall not be obligated to purchase any of the Stock on such Delivery Date if the total number of shares of the Stock which the defaulting U.S. Underwriter or U.S. Underwriters agreed but failed to purchase on such date exceeds 9.09% of the total number of shares of the Stock to be purchased on such Delivery Date, and any remaining non-defaulting U.S. Underwriter shall not be obligated to purchase more than 110% of the number of shares of the Stock which it agreed to purchase on such Delivery Date pursuant to the terms of Section 2. If the foregoing maximums are exceeded, the remaining non-defaulting U.S. Underwriters, or those other underwriters satisfactory to the Representatives who so agree, shall have the right, but shall not be obligated, to purchase, in such proportion as may be agreed upon among them, all the Stock to be purchased on such Delivery Date. If the remaining U.S. Underwriters or other underwriters satisfactory to the Representatives do not elect to purchase the shares which the defaulting U.S. Underwriter or U.S. Underwriters agreed but failed to purchase on such Delivery Date, this Agreement (or, with respect to the Second Delivery Date, the obligation of the U.S. Underwriters to purchase, and of the Company to sell, the Option Stock) shall terminate without liability on the part of any non-defaulting U.S. Underwriter or the Company, except that the Company will continue to be liable for the payment of expenses to the extent set forth in Sections 6 and 11. As used in this Agreement, the term "Underwriter" includes, for all purposes of this Agreement unless the context requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to this Section 9, purchases Firm Stock which a defaulting U.S. Underwriter agreed but failed to purchase. Nothing contained herein shall relieve a defaulting U. S. Underwriter of any liability it may have to the Company for damages caused by its default. If other Underwriters are obligated or agree to purchase the Stock of a defaulting or withdrawing U.S. Underwriter, either the Representatives or the Company may postpone the Delivery Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Underwriters may be necessary in the Registration Statement, the Prospectus or in any other document or arrangement. 10. Termination. The obligations of the U.S. Underwriters hereunder may be terminated by the Representatives by notice given to and received by the Company prior to delivery of and payment for the Firm Stock if, prior to that time, any of the events described in Sections 7(i) or 7(j) shall have occurred or if the U.S. Underwriters shall decline to purchase the Stock for any reason permitted under this Agreement. 31 31 11. Reimbursement of U.S. Underwriters' Expenses. If (a) the Company shall fail to tender the Stock for delivery to the U.S. Underwriters by reason of any failure, refusal or inability on the part of the Company to perform any agreement on its part to be performed, or because any other condition of the U.S. Underwriters' obligations hereunder required to be fulfilled by the Company is not fulfilled, the Company will reimburse the U.S. Underwriters for all reasonable out-of-pocket expenses (including fees and disbursements of counsel) incurred by the U.S. Underwriters in connection with this Agreement and the proposed purchase of the Stock, and upon demand the Company shall pay the full amount thereof to the Representative(s). If this Agreement is terminated pursuant to Section 9 by reason of the default of one or more U.S. Underwriters, the Company shall not be obligated to reimburse any defaulting U.S. Underwriter on account of those expenses. 12. Notices, etc. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the U.S. Underwriters, shall be delivered or sent by mail, telex or facsimile transmission to Lehman Brothers Inc., Three World Financial Center, New York, New York 10285, Attention: Syndicate Department (Fax: 212-526-6588), with a copy, in the case of any notice pursuant to Section 8(c), to the Director of Litigation, Office of the General Counsel, Lehman Brothers Inc., 3 World Financial Center, 10th Floor, New York, NY 10285; (b) if to the Company or the Principal Stockholder, shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Maritza C. Pichon (Fax: 404-843-5780 ); provided, however, that any notice to an U.S. Underwriter pursuant to Section 8(d) shall be delivered or sent by mail, telex or facsimile transmission to such U.S. Underwriter at its address set forth in its acceptance telex to the Representatives, which address will be supplied to any other party hereto by the Representatives upon request. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the U.S. Underwriters by Lehman Brothers Inc. on behalf of the Representatives. 13. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the U.S. Underwriters, the Company, the Principal Stockholder and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that 32 32 (A) the representations, warranties, indemnities and agreements of the Company and the Principal Stockholder contained in this Agreement shall also be deemed to be for the benefit of the officers and employees of each Underwriter and the person or persons, if any, who control any U.S. Underwriter within the meaning of Section 15 of the Securities Act and for the benefit of each International Manager (and officers, employees and controlling persons thereof) who offers or sells any shares of Common Stock in accordance with the terms of the Agreement Between U.S. Underwriters and International Managers and (B) the indemnity agreement of the U.S. Underwriters contained in Section 8(b) of this Agreement shall be deemed to be for the benefit of directors of the Company, officers of the Company who have signed the Registration Statement and any person controlling the Company within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 13, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 14. Survival. The respective indemnities, representations, warranties and agreements of the Company, the Principal Stockholder and the U.S. Underwriters contained in this Agreement or made by or on behalf on them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Stock and shall remain in full force and effect, regardless of any investigation made by or on behalf of any of them or any person controlling any of them. 15. Definition of the Terms "Business Day" and "Subsidiary". For purposes of this Agreement, (a) "business day" means any day on which the New York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules and Regulations. 16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK. Each party irrevocably agrees that any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby ("Related Proceedings") may be instituted in the federal courts of the United States of America located in the City of New York or the courts of the State of New York in each case located in the Borough of Manhattan in the City of New York (collectively, the "Specified Courts"), and irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a "Related Judgment"), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. The parties further agree that service of any process, summons, notice or document by mail to such party's address set forth 33 33 above shall be effective service of process for any lawsuit, action or other proceeding brought in any such court. The parties hereby irrevocably and unconditionally waive any objection to the laying of venue of any lawsuit, action or other proceeding in the Specified Courts, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such lawsuit, action or other proceeding brought in any such court has been brought in an inconvenient forum. 17. Counterparts. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument. 18. Headings. The 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 Agreement. If the foregoing correctly sets forth the agreement between the Company and the U.S. Underwriters, please indicate your acceptance in the space provided for that purpose below. Very truly yours, COX RADIO, INC. By --------------------------------- Name: Title: COX ENTERPRISES, INC. By -------------------------------- Name: Title: 34 34 Accepted: LEHMAN BROTHERS INC. ALLEN & COMPANY INCORPORATED CS FIRST BOSTON CORPORATION MORGAN STANLEY & CO. INC. For themselves and as Representatives of the several U.S. Underwriters named in Schedule 1 hereto By LEHMAN BROTHERS INC. By ---------------------------- Authorized Representative 35 SCHEDULE 1
U.S. Underwriters Number of Shares ----------------- ---------------- Lehman Brothers Inc . . . . . . . . . . . . . . . Allen & Company Incorporated. . . . . . . . . . . CS First Boston Corporation . . . . . . . . . . Morgan Stanley & Co. Incorporated. . . . . . . . [more to come] ----------------- Total . . . . . . . . . . . =================
36 SCHEDULE 1(t) Pending or Threatened FCC Proceedings 1. In March 1996, a complaint was filed with the FCC against WCKG(FM) alleging a violation of the FCC's rules on indecent programming relating to a broadcast of the Howard Stern show. This complaint remains pending before the FCC's Mass Media Bureau. 2. Two programming related objections have been filed by individuals with respect to the grant of the WIOD(AM) license renewal application, granted by the FCC in June 1996. 3. On June 14, 1996, the United States Court of Appeals for the D.C. Circuit (the "Court") denied the appeal filed by WSB, Inc., an affiliate of Cox Radio, Inc., for reversal of an FCC decision dismissing WSB, Inc.'s application to acquire WJZF(FM) and reversing an FCC staff decision granting the application of NewCity Communications of Massachusetts, Inc. to make a minor change to WJZF's facilities. WSB, Inc. has petitioned for rehearing of the Court's decision. 4. In January 1994, a complaint was filed with the FCC against WSB(AM) alleging a violation of the FCC's rules on indecent programming relating to a broadcast of the Neal Boortz show. This complaint remains pending before the FCC's Mass Media Bureau. EX-3.1 3 RESTATED CERTIFICATE OF INC. 1 EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF COX RADIO, INC. Article I: Name. The name of this corporation (the "Corporation") is: Cox Radio, Inc. Article II: Registered Office. The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801. The registered agent in charge thereof is The Corporation Trust Company. Article III: Business. The purposes of the Corporation are as follows: A. To engage in the business within the United States of America of transmitting, receiving, relaying and/or distributing radio broadcasts, sounds, signals, and messages of all kinds by means of waves, radiation, wire, cable, radio, light or other means of communications of any type, kind or nature; B. To purchase or otherwise acquire (for cash, property, notes, stock or bonds of this Corporation or otherwise) assets used or useful in the aforesaid business, and to undertake or assume the whole or any part of any obligations and or liabilities attendant thereto; C. To sell, assign, transfer or purchase the assets or stock of radio stations, businesses or properties within the United States; and D. In general, to carry on any other activity, to perform any function and to undertake any activity in connection with the purposes set forth in the foregoing paragraphs A, B and C of this Article III. Article IV: Authorized Capital Stock. A. Authorized Shares. The total number of shares of all classes of capital stock that the Corporation shall have authority to issue is one hundred twenty million (120,000,000) shares, 2 -2- of which (i) one hundred fifteen million (115,000,000) shares, of a par value of $1.00 per share, shall be Common Stock (the "Common Stock"), and (ii) five million (5,000,000) shares of a par value of $1.00 per share, shall be Preferred Stock (hereinafter called "Preferred Stock"). The Common Stock shall be divided into classes as follows: seventy million (70,000,000) shares of Class A Common Stock ("Class A Stock") and forty-five million (45,000,000) shares of Class B Common Stock ("Class B Stock"). B. Class A Stock and Class B Stock. 1. Powers, Preferences and Rights. Except as otherwise provided in paragraph B of this Article IV, each share of Common Stock shall be identical. 2. Voting Rights. a. Each share of Class A Stock shall entitle the holder thereof to one (1) vote and each share of Class B Stock shall entitle the holder thereof to ten (10) votes. Except as set forth herein or as may otherwise be required by the laws of the State of Delaware, all actions submitted to a vote of stockholders of the Corporation (including, without limitation, any proposed amendment to this Amended and Restated Certificate of Incorporation ("Certificate") that would increase the number of authorized shares of Class A Stock, of Class B Stock or of any class or series of voting Preferred Stock, if any, or decrease the number of authorized shares of any such class or series of stock (but not below the number of shares thereof then outstanding)) shall be voted on by the holders of Class A Stock and Class B Stock (as well as the holders of any Preferred Stock, if any, entitled to vote thereon) voting together as a single class, and no separate vote or consent of the holders of shares of Class A Stock, the holders of the shares of Class B Stock or the holders of such shares of Preferred Stock shall be required for the approval of any such matter. b. The holders of Class A Stock and Class B Stock shall each be entitled to vote separately as a class with respect to (i) amendments to this Certificate that alter or change the powers, preferences or special rights of their respective class of stock so as to affect them adversely and (ii) such other matters as require class votes under the General Corporation Law of the State of Delaware. c. Except as otherwise provided by law or pursuant to this Article IV or by resolution or resolutions of 3 -3- the Board of Directors of the Corporation (the "Board") providing for the issuance of any series of Preferred Stock, the holders of the Class A Stock and the Class B Stock shall have sole voting power for all purposes, each holder of Class A Stock and each holder of Class B Stock being entitled to vote as provided in subparagraph 2.a or 2.b as applicable of this paragraph B of this Article IV. 3. Dividends. a. If and when dividends on the Class A Stock and Class B Stock are declared payable from time to time by the Board as provided in subparagraph 3.a of paragraph B of this Article IV, whether payable in cash, in property or in shares of stock of the Corporation, the holders of Class A Stock and the holders of Class B Stock shall be entitled to share equally, on a per share basis, in such dividends, subject to the limitations described below. If dividends are declared that are payable in shares of Class A Stock or Class B Stock, such dividends shall be payable at the same rate on all classes of Common Stock and the dividends payable in shares of Class A Stock shall be payable only to holders of Class A Stock and the dividends payable in shares of Class B Stock shall be payable only to holders of Class B Stock. If the Corporation shall in any manner subdivide or combine the outstanding shares of Class A Stock or Class B Stock, the outstanding shares of the other class of Common Stock shall be proportionally subdivided or combined in the same manner and on the same basis as the outstanding shares of Class A Stock or Class B Stock, as the case may be, that have been subdivided or combined. b. Subject to provisions of law and the preferences of the Preferred Stock and of any other stock ranking prior to the Class A Stock or the Class B Stock as to dividends, the holders of the Class A Stock and the Class B Stock shall be entitled to receive dividends at such time and in such amounts as may be determined by the Board and declared out of any funds lawfully available therefor, and shares of Preferred Stock of any class shall not be entitled to share therein except as otherwise expressly provided in the resolution or resolutions of the Board providing for the issue of such series. Dividends on the Class A Stock and the Class B Stock shall be payable only as and when declared by the Board. 4. Conversion of Class B Stock by Holder. a. The holder of each share of Class B Stock shall have the right at any time, or from time to time, at such holder's option, to convert such share into one fully paid and 4 -4- nonassessable share of Class A Stock on and subject to the terms and conditions hereinafter set forth. b. In order to exercise his conversion privilege, the holder of any shares of Class B Stock to be converted shall present and surrender the certificate or certificates representing such shares, duly endorsed, during usual business hours at any office or agency of the Corporation maintained for the transfer of Class B Stock and shall deliver a written notice of the election of the holder to convert the shares represented by such certificate or any portion thereof specified in such notice. Such notice shall also state the name or names (with address) in which the certificate or certificates for shares of Class A Stock issuable on such conversion shall be registered. If required by the Corporation, any certificate for shares surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the Corporation, duly executed by the holder of such shares or his duly authorized representative. Each conversion of shares of Class B Stock shall be deemed to have been effected at the close of business on the date (the "conversion date") on which the certificate or certificates representing such shares shall have been surrendered and such notice and any required instruments of transfer shall have been received as aforesaid, provided, however, that the conversion may, at the option of any holder of any shares of Class B Stock to be converted, be conditioned upon notice by such holder to the Corporation of the occurrence of any specified event (including, without limitation, the closing of any sale, exchange or other disposition of such shares of Class B Stock), and the person or persons in whose name or names any certificate or certificates for shares of Class A Stock shall be issuable on such conversion shall be, for the purpose of receiving dividends and for all other corporate purposes whatsoever, deemed to have become the holder or holders of record of the shares of Class A Stock represented thereby on the conversion date. c. As promptly as practicable after the presentation and surrender for conversion, as herein provided, of any certificate for shares of Class B Stock (but only after the notice of the occurrence of any event specified, if any, by the holder of such shares of Class B Stock), the Corporation shall issue and deliver at such office or agency, to or upon the written order of the holder thereof, certificates for the number of shares of Class A Stock issuable upon such conversion. In case any certificate for shares of Class B Stock shall be surrendered for conversion of a part only of the shares represented thereby, the Corporation shall deliver at such office or agency, to or upon the written order of the holder thereof, a certificate or certificates for the number of shares of Class B Stock repre- 5 -5- sented by such surrendered certificate that are not being converted. The issuance of certificates for shares of Class A Stock issuable upon the conversion of shares of Class B Stock by the registered holder thereof shall be made without charge to the converting holder for any tax imposed on the Corporation in respect of the issue thereof. The Corporation shall not, however, be required to pay any tax that may be payable with respect to any transfer involved in the issue and delivery of any certificate in a name other than that of the registered holder of the shares being converted, and the Corporation shall not be required to issue or deliver any such certificate unless and until the person requesting the issue thereof shall have paid to the Corporation the amount of such tax or has established to the satisfaction of the Corporation that such tax has been paid. d. Upon any conversion of shares of Class B Stock into shares of Class A Stock pursuant hereto, no adjustment with respect to dividends shall be made; only those dividends shall be payable on the shares so converted as have been declared and are payable to holders of record of shares of Class B Stock on a date prior to the conversion date with respect to the shares so converted; and only those dividends shall be payable on shares of Class A Stock issued upon such conversion as have been declared and are payable to holders of record of shares of Class A Stock on or after such conversion date. e. In case of any sale or conveyance of all or substantially all of the property or business of the Corporation as an entirety, a holder of a share of Class B Stock shall have the right thereafter to convert such share into the kind and amount of cash, shares of stock and other securities and properties receivable upon such sale or conveyance by a holder of one share of Class A Stock and shall have no other conversion rights with regard to such share. The provisions of subparagraph 4.e of paragraph B of this Article IV shall similarly apply to successive sales or conveyances. f. Shares of Class B Stock converted into Class A Stock shall be retired and shall resume the status of authorized but unissued shares of Class B Stock. g. Such number of shares of Class A Stock as may from time to time be required for such purpose shall be reserved for issuance upon conversion of outstanding shares of Class B Stock. 5. Priority of Preferred Stock. 6 -6- The Class A Stock and the Class B Stock are subject to all the powers, rights, privileges, preferences and priorities of any series of Preferred Stock as may be stated herein and as shall be stated and expressed in any resolution or resolutions adopted by the Board, pursuant to authority expressly granted to and vested in it by the provisions of this Article IV. 6. Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntarily or involuntarily (sometimes referred to as liquidation), after payment or provision for payment of the debts and other yliabilities of the Corporation and the preferential amounts to which the holders of any stock ranking prior to the Class A Stock and the Class B Stock in the distribution of the Corporation's assets shall be entitled upon such liquidation, dissolution or winding up, the holders of the Class A Stock and the Class B Stock shall be entitled to share equally, on a per share basis, in the distribution of the remaining assets of the Corporation. Neither the consolidation or merger of the Corporation with or into any other corporation or corporations nor the sale, transfer or lease of all or substantially all of the assets of the Corporation shall itself be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this subparagraph 6 of paragraph B of this Article IV. C. Preferred Stock. Shares of Preferred Stock may be issued from time to time in one or more series. Except as may be provided by the Board in a certificate of designation or by law, shares of any series of Preferred Stock that have been redeemed (whether through the operation of a sinking fund or otherwise) or purchased by the Corporation or which, if convertible or exchangeable, have been converted into or exchanged for shares of stock of any other class or classes shall be retired and shall not be reissued. The Board is hereby 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 7 -7- subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding. Article V: Number of Directors and Limitation of Liability of Directors. A. Number of Directors. The number of directors that shall constitute the whole Board of the Corporation shall be as specified in the Bylaws of the Corporation, as the same may be amended from time to time. B. Limitation of Liability of Directors. The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, or any successor provision thereto, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section and, as provided in said section shall advance expenses, including reasonable attorneys' fees, of any and all such persons, and the indemnification and advancement of expenses provided for herein shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors, and administrators of such persons. To the fullest extent permitted by Section 102 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, or any successor provision thereto, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. C. Future Amendments. In addition to the provisions of paragraph B of this Article V hereof, if the General Corporation Law of the State of Delaware is amended hereafter to authorize or permit corporate action further limiting or eliminating the personal liability of a director to the Corporation or its stockholders, then the liability of each director of the Corporation shall be further limited or eliminated to the fullest extent permitted by any such future amendment of the law of the State of Delaware. D. Repeal or Modification. Any repeal or modification of this Article V or any provision hereof shall not increase the personal liability of any director of the Corporation for any act 8 -8- or occurrence taking place prior to such repeal or modification, or otherwise adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. Article VI: Meetings. Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept (subject to any provision of Delaware law) outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws of the Corporation. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide. Article VII: Election of Directors. A. Stockholders' Meeting. The directors who are directors on the date that this Certificate of the Corporation is filed with the Secretary of State of Delaware shall serve until the first annual meeting of stockholders at which directors are elected following that date. The Directors shall be elected at the annual meeting of stockholders, and each director elected shall hold office until such director's successor has been elected and qualified. Directors need not be stockholders of the Corporation. B. Directors Elected by Preferred Stock. During any period when the holders of Preferred Stock or any one or more series thereof, voting as a class, shall be entitled to elect a specified number of directors by reason of dividend arrearages or other contingencies giving them the right to do so, then and during such times as such right continues the then otherwise authorized number of directors shall be increased by such specified number of directors, and the holders of the Preferred Stock or such series thereof, voting as a class, shall be entitled to elect the additional directors so provided for, pursuant to the provisions of such Preferred Stock or series; and each such additional director shall serve until the annual meeting at which his term of office shall expire and until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of such Preferred Stock or series, whichever occurs earlier. Whenever the holders of such Preferred Stock or series thereof are divested of such rights to elect a specified number of directors, voting as a class, pursuant to the provisions of such Preferred Stock or series, the terms of office of all directors elected by the holders of such Preferred Stock or series, voting as a class pursuant to such 9 -9- provisions, or elected to fill any vacancies resulting from the death, resignation or removal of directors so elected by the holders of such Preferred Stock or series, shall forthwith terminate and the authorized number of directors shall be reduced accordingly. C. Removal. Subject to the rights of any series of Preferred Stock then outstanding, any director, or the entire Board, may be removed from office at any time by the affirmative vote of the holders of shares that entitle the holders to cast a majority of the votes entitled to be cast by the holders of all shares of capital stock of the Corporation that are entitled to vote generally in the election of directors of the Corporation. D. Notice of Stockholder Nominees. Nominations of persons for election to the Board (other than persons nominated to fill vacancies and newly created directorships, who shall in each case be nominated and elected as provided in the Bylaws of the Corporation) shall be made only at a meeting of stockholders and only (1) by or at the direction of the Board or (2) by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in paragraph D of this Article VII. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than thirty (30) days nor more than sixty (60) days prior to the meeting; provided, however, that if less than forty (40) days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. For purposes of paragraph D of this Article VII, any adjournment(s) or postponement(s) of the original meeting whereby the meeting will reconvene within thirty (30) days from the original date shall be deemed for purposes of this notice to be a continuation of the original meeting and no nominations by a stockholder of persons to be elected directors of the Corporation may be made at any such reconvened meeting and no nominations by a stockholder of persons to be elected directors of the Corporation may be made at any such reconvened meeting unless pursuant to a notice that was timely for the meeting on the date originally scheduled. Such stockholder's notice shall set forth: (i) as to each person whom the stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election 10 -10- of directors, or is otherwise required, in each case pursuant to the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) as to the stockholder giving the notice (a) the name and address, as they appear on the Corporation's books, of such stockholder, and (B) the class and number of shares of the Corporation that are beneficially owned by such stockholder. Notwithstanding the foregoing, nothing in paragraph D of this Article VII shall be interpreted or construed to require the inclusion of information about any such nominee in any proxy statement distributed by, at the direction of, or on behalf of the Board. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by paragraph D of this Article VII, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Article VIII: Indemnification. The Corporation shall indemnify, in the manner and to the full extent permitted by law, any person (or the estate of any person) who was or is a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the Corporation, and whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that such person is or was a director, officer or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise. The Corporation may, to the full extent permitted by law, purchase and maintain insurance on behalf of any such person against any liability that may be asserted against him. To the full extent permitted by law, the indemnification provided herein shall include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, and, in the manner provided by law, any such expenses may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding. The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person for any such expenses to the full extent permitted by law, nor shall it be deemed exclusive of any other rights to which any person seeking indemnification from the Corporation may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Article IX: Stockholder Vote. 11 -11- Unless otherwise provided by statute, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Such consent shall be filed with the Secretary of the Corporation. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Article X: Stockholder Proposals at Annual Meetings. Business may be properly brought before an annual meeting by a stockholder only upon the stockholder's timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than thirty (30) days nor more than sixty (60) days prior to the meeting as originally scheduled; provided, however, that if less than forty (40) days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. For purposes of this Article X, any adjournment(s) or postponement(s) of the original meeting whereby the meeting will reconvene within thirty (30) days from the original date shall be deemed for purposes of notice to be a continuation of the original meeting and no business may be brought before any reconvened meeting unless such timely notice of such business was given to the Secretary of the Corporation for the meeting as originally scheduled. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting, (ii) the name and record address of the stockholder proposing such business, and (iii) the class and number of shares of the Corporation that are beneficially owned by the stockholder proposing such business. Notwithstanding the foregoing, nothing in this Article X shall be interpreted or construed to require the inclusion of information about any such proposal in any proxy statement distributed by, at the direction of, or on behalf of the Board. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Article X, and if he 12 -12- should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Article XI: Call of Special Meetings. Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time by a majority of the members of the Board. Such special meetings may not be called by any other person or persons or in any other manner. Article XII: Amendment of Bylaws In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board, by action taken in accordance with the provisions of the Bylaws of the Corporation is hereby expressly authorized and empowered to adopt, amend or repeal any provision of the Bylaws of the Corporation. Article XIII: Section 203 The Corporation shall not be governed by Section 203 of the General Corporation Law of the State of Delaware. Article XIV: Participation of Non-Citizens The following provisions are included herein for the purpose of ensuring that control and management of the Corporation complies with the Communications Act of 1934 and the rules, regulations and policies of the Federal Communications Commission ("FCC"), as the same may be amended from time to time (collectively, the "Communications Act"): (a) The Corporation shall not issue to or for the account of (A) a person who is a citizen of a country other than the United States; (B) an entity organized under the laws of a government other than the government of the United States or any state, territory, or possession of the United States; (C) a government other than the government of the United States or of any state, territory, or possession of the United States; or (D) a representative of, or an individual or entity controlled by, any of the foregoing (each person or entity described in any of the foregoing clauses (A) through (D), individually, an "Alien" or collectively "Aliens") any share of capital stock of the Corporation if such issuance would cause the total capital stock of the Corporation held or voted by Aliens to exceed, in violation of the Communications Act, 25% of (1) the total capital 13 -13- stock of the Corporation outstanding at any time or (2) the total voting power of all shares of such capital stock outstanding and entitled to vote at any time, and (ii) shall not permit the transfer on the books of the Corporation of any capital stock to any Alien that would result in the total capital stock of the Corporation held or voted by Aliens to exceed such 25% limit in violation of the Communications Act. (b) No Alien or Aliens, individually or collectively, shall be entitled to vote or direct or control the vote of more than 25% of (i) the total capital stock of the Corporation outstanding at any time or (ii) the total voting power of all shares of capital stock of the Corporation outstanding and entitled to vote at any time and from time to time, if to do so would violate the Communications Act. (c) No Alien shall be qualified to act as an officer of the Corporation, and no more than one-fourth of the total number of directors of the Corporation at any time and from time to time may be Aliens, in either case if such would violate the Communications Act. (d) The Board of Directors of the Corporation shall have all powers necessary to implement the provisions of this Article XIV and to ensure compliance with the alien ownership restrictions of the Communications Act, including, without limitation, the power to prohibit the transfer of any shares of capital stock of the Corporation to any Alien, the inclusion of a legend regarding restrictions on foreign ownership of the capital stock on any certificates representing such stock, and to take or cause to be taken such action as it deems appropriate to implement such prohibition. Without limiting the generality of the foregoing and notwithstanding any other provision of these Amended and Restated Articles of Incorporation, the Corporation also reserves the right to refuse to honor any transfer of the capital stock of the Corporation which, in the judgment of the Corporation or its transfer agent, would or might constitute a violation of the Communications Act or the FCC rules and regulations. EX-3.2 4 RESTATED BYLAWS 1 EXHIBIT 3.2 AMENDED AND RESTATED BYLAWS OF COX RADIO, INC. ARTICLE I OFFICES Section 1. The registered office of the corporation in the State of Delaware shall be at the principal office of The Corporation Trust Company in the City of Wilmington, County of New Castle, State of Delaware, and the registered agent in charge thereof shall be The Corporation Trust Company. Section 2. The corporation may also have offices at such other places both within and without the State of Delaware and the United States as the Board of Directors may from time to time determine or as the business of the corporation may from time to time require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. The annual meeting of stockholders of the corporation for the election of directors of the corporation, and for the transaction of such other business as may properly come before such meeting, shall be held in Atlanta, Georgia, at such place and time as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware or the United States as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of the notice thereof; provided, however, that no annual meeting of stockholders need be held if all actions, including the election of directors, required by the General Corporation Law of the State of Delaware to be taken at such annual meeting are taken by written consent in lieu of a meeting pursuant to Section 11 hereof. Meetings of the stockholders for any other purpose may be held at such time and place, within or without the State of Delaware or the United States, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Written notice of the annual meeting stating the place, date and time of the meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each holder of record of shares of the corporation's Voting Stock. As used in these Bylaws, "Voting Stock" means, with respect to any annual or special meeting of the stockholders 2 -2- of the corporation, or with respect to any action to be taken by the stockholders of the corporation, all issued and outstanding shares of capital stock of the corporation entitled to vote at such meeting or with respect to such action, and each reference to a percentage or portion of the "Voting Power" of shares of Voting Stock shall refer to such percentage or portion of the votes entitled to be cast by such shares of Voting Stock. Section 3. Special meetings of the stockholders for any purpose or purposes, unless otherwise provided by statute, the Certificate of Incorporation or these Bylaws, shall be called by the President and Chief Executive Officer or Secretary at the request in writing of a majority of the Board of Directors, to be held at such place, date and time as shall be designated in the notice or waiver of notice thereof. Such requests shall state the purpose or purposes of the proposed meeting. Section 4. Written notice of a special meeting shall state the place, date and time of the meeting and the purpose or purposes for which the meeting is called and shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each holder of record of shares of the corporation's Voting Stock. Section 5. Business transacted at any special meeting of the stockholders shall be limited to the purpose or purposes stated in the notice, unless stockholders owning Voting Stock representing a majority of the Voting Power of all Voting Stock of the corporation consent thereto either at the special meeting or in writing executed subsequent to the meeting. Section 6. If, prior to the time of mailing, the Secretary of the corporation shall have received from any stockholder a written request that notices intended for such stockholder are to be mailed to some address other than the address that appears on the records of the corporation, notices intended for such stockholder shall be mailed to the address designated in such request. Notice of any annual or special meeting of stockholders need not be given to any stockholder who files a written waiver of notice with the Secretary, signed by the person entitled to notice, whether before or after such meeting. Neither the business to be transacted at, nor the purpose of, any meeting of stockholders need be specified in any written waiver of notice thereof. Attendance of a stockholder at a meeting, in person or by proxy, shall constitute a waiver of notice of such meeting, except when such stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the notice of such meeting was inadequate or improperly given. 3 -3- Section 7. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every annual or special meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to examination by any stockholder for any purpose germane to the meeting during ordinary business hours, and for a period of at least ten (10) days prior to the meeting either at a place within the city where the meeting is to be held (which place shall be specified in the notice of the meeting) or (if not so specified) at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present at the meeting. Section 8. Unless otherwise provided by statute, the Certificate of Incorporation or these Bylaws, the holders of record of one-third of the Voting Stock of the corporation which represent a majority of the Voting Power of all Voting Stock of the corporation, whether present in person or by proxy at such meeting, shall constitute a quorum at all annual and special meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the holders of record of a majority of the Voting Power of the Voting Stock of the corporation that are present at the meeting in person or by proxy shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted that might have been transacted at the meeting as originally described in the notice to the stockholders. If the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each holder of record of Voting Stock. Section 9. When a quorum is present at any annual or special meeting, the vote of the holders of record of Voting Stock representing a majority of the Voting Power of all Voting Stock of the corporation present in person or by proxy at such meeting shall decide any question brought before such meeting, unless the question is one upon which by express provision of statute, the Certificate of Incorporation or these Bylaws a different vote is required, in which case such express provision shall govern and control the decision of such question. 4 -4- Section 10. No proxy shall be voted or acted upon after a period of three years from its date, unless the proxy provides for a longer period. Section 11. Unless otherwise provided by statute, the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock of the corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Such consent shall be filed with the Secretary of the Corporation. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS Section 1. The number of directors that constitutes the Board of Directors shall be at least one (1) and not more than nine (9). The first Board of Directors shall initially consist of the number of directors as shall be specified at the organizational meeting of the corporation. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the Board of Directors or by the stockholders at the annual or special meeting. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article. Each director shall hold office until his successor is elected and qualified. Directors need not be stockholders. The Board of Directors may elect one of their members to be Chairman of the Board of Directors. He shall perform such duties as may, from time to time be assigned to him or her by the Board of Directors. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. The directors so chosen shall hold office until the next annual election and until their successors are duly elected and qualified, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If at any time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole Board of 5 -5- Directors (as constituted immediately prior to any such increase), the Court of Chancery of the State of Delaware, upon application of any stockholder or stockholders holding at least ten percent of the total number of shares at the time outstanding having the right to vote for such directors, may summarily order an election to be held to fill any such vacancies or newly created directorships or to replace the directors chosen by the directors then in office. Section 3. The business of the corporation shall be managed by its Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute, the Certificate of Incorporation or these Bylaws directed or required to be exercised or done by the stockholders. ARTICLE IV MEETINGS OF THE BOARD OF DIRECTORS Section 1. The Board of Directors of the corporation may hold meetings, both regular and special, within or without the State of Delaware or the United States. Section 2. As soon as practicable after each annual election of directors by the stockholders, the Board of Directors shall meet for the purpose of organization and the transaction of other business, unless it shall have transacted all such business by written consent pursuant to Section 6 of this Article. Section 3. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board of Directors. Section 4. Special meetings of the Board of Directors may be called by the Chairman and shall be called by the President and Chief Executive Officer upon the written request to such effect of a majority of the members of the Board of Directors then in office on three (3) days' notice to each director, which notice shall comply with the requirements of Article VIII hereof. Such meetings shall be called by the Chairman, President and Chief Executive Officer or Secretary in like manner and on like notice on the written request of a majority of the directors. Section 5. At all regular and special meetings of the Board of Directors, a simple majority of the directors shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, unless otherwise specifically provided by statute, the Certificate of 6 -6- Incorporation or these Bylaws. If a quorum is not present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum shall be present. Section 6. Unless otherwise provided by statute, the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or the committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board of Directors or such committee. Section 7. Any one or more members of the Board of Directors, or of any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. ARTICLE V COMMITTEES OF DIRECTORS Section 1. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more committees, each consisting of two or more directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Section 2. Except as provided below, any committee, to the extent provided in the resolutions of the Board of Directors and in these Bylaws, shall have and may exercise all of the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it. No committee, however, shall have the power or authority to amend the Certificate of Incorporation; to adopt an agreement of merger or consolidation; to recommend to the 7 -7- stockholders the sale, lease, exchange or other disposition of all or substantially all of the corporation's property and assets; to recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution; or to amend these Bylaws; further, unless a resolution of the Board of Directors, these Bylaws or the Certificate of Incorporation expressly so provides, no committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger. Section 3. A committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 4. Each committee shall keep regular minutes of its meetings and shall file them with the minutes of the proceedings of the Board of Directors when required. ARTICLE VI COMPENSATION OF DIRECTORS Section 1. Unless otherwise provided by statute, the Certificate of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of the directors. Section 2. The directors may be paid their expenses, if any, of attending meetings of the Board of Directors. Such payments may take the form of a fixed sum for attendance at each meeting and/or a stated salary as a director. Members of committees may be allowed like compensation for attending committee meetings. Section 3. No payment permitted under this Article VI shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. ARTICLE VII OFFICERS Section 1. The officers of the corporation shall be designated by the Board of Directors, by election, and shall include a President and Chief Executive Officer, a Secretary and a Treasurer. The Board of Directors may also elect such other officers and agents as it deems necessary, including a Chief Financial Officer, Chief Operating Officer, Vice Presidents and one or more Assistant Secretaries and Assistant Treasurers. Any 8 -8- number of offices may be held by the same person, unless otherwise provided by statute, the Certificate of Incorporation or these Bylaws. Section 2. The officers of the corporation shall be elected by the Board of Directors at the Board's first meeting after each annual meeting of stockholders. Section 3. The officers of the corporation shall hold office until their successors are chosen and qualified. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors. Section 4. The Board of Directors may fix the officers' salaries, if any, or it may authorize the President and Chief Executive Officer to fix the salary of any other officer. Section 5. The President and Chief Executive Officer shall preside at all meetings of the stockholders, and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President and Chief Executive Officer shall execute under the seal of the corporation bonds, mortgages and other contracts requiring a seal, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof is delegated by the Board of Directors to some other officer or agent of the corporation. Section 6. In the absence of the President and Chief Executive Officer or in the event of his inability or refusal to act, the Vice President (or in the event there are more than one, then the Vice Presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the President and Chief Executive Officer and, when so acting, shall have all the powers of and be subject to all the restrictions upon the President and Chief Executive Officer. The Vice President shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 7. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all of the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for any committees when required. The Secretary shall give, or cause to be given, notice 9 -9- of all meetings of the stockholders and special meetings of the Board of Directors and shall perform such other duties as may be prescribed by the Board of Directors or the President and Chief Executive Officer, under whose supervision he or she shall be. The Secretary shall have custody of the corporate seal of the corporation, and he or she, or an Assistant Secretary, shall have the authority to affix the same to any instrument requiring it, and (when so affixed) it may be attested by his or her signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 8. The Assistant Secretary, or if there are more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there is no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 9. The Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. Section 10. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and Chief Executive Officer, and the Board of Directors at the Board's regular meetings or when the Board so requires, an account of all of his or her transactions as Treasurer and of the financial condition of the corporation. Section 11. If required by the Board of Directors, the Treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the corporation. 10 -10- Section 12. The Assistant Treasurer, or if there are more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there is no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VIII NOTICES Section 1. Whenever any notice is required by law, the Certificate of Incorporation or these Bylaws to be given to any stockholder, director or officer, such notice, except as otherwise provided by law, may be given personally, or by mail, or, in the case of directors or officers, by telegram, cable or facsimile transmission, addressed to such address as appears on the books of the Corporation. Any notice given by telegram, cable or facsimile transmission shall be deemed to have been given when it shall have been transmitted and any notice given by mail shall be deemed to have been given three business days after it shall have been deposited in the United States mail with postage thereon prepaid. Section 2. Whenever any notice is required to be given by law, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the meeting or the time stated therein, shall be deemed equivalent in all respects to such notice to the full extent permitted by law. ARTICLE IX CERTIFICATES OF STOCK Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by the President and Chief Executive Officer or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by the stockholder in the corporation. Section 2. Any or all of the signatures on the certificate may be a facsimile if the certificate is manually signed on behalf of a transfer agent or a registrar (other than the corporation itself or an employee of the corporation). In case any officer, transfer agent or registrar who has signed or whose 11 -11- facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, the certificate may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. Section 3. The Board of Directors may direct that a new certificate or certificates be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates or his or her legal representative to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by the proper evidence of succession, assignment or authority to transfer, the corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date that shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new date for the new adjourned meeting. Section 6. The corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends and to vote as such owner. 12 -12- The corporation shall be entitled to hold liable for calls and assessments a person registered on its books as the owner of shares. The corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, regardless of whether the corporation shall have express or other notice thereof, unless otherwise provided by statute, the Certificate of Incorporation or these Bylaws. ARTICLE X GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the corporation, unless otherwise provided by statute, the Certificate of Incorporation or these Bylaws, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, property, or in shares of stock, unless otherwise provided by statute, the Certificate of Incorporation or these Bylaws. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, may think proper as a reserve or reserves for contingencies, equalizing dividends, repairing or maintaining any property of the corporation, or for such other purpose or purposes as the Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. Section 2. Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 3. Fiscal Year. The fiscal year of the corporation shall end on the thirty-first day of December of each year unless changed by resolution by the Board of Directors. Section 4. Indemnification. The corporation shall have the power to indemnify its officers, directors, employees and agents of the corporation, and such other persons as designated by the Board of Directors, to the full extent as permitted under the laws of the State of Delaware. Section 5. Seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization, and the name of the State of Delaware. The seal may 13 -13- be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced. Section 6. Amendments. These Bylaws may be altered, amended or repealed or new Bylaws adopted either by the stockholders or the Board of Directors at any annual meeting of the stockholders or regular meeting of the Board of Directors, or at any special meeting of the stockholders or the Board of Directors (if notice of such alteration, amendment, repeal or adoption of new Bylaws is contained in the notice of such special meeting), by a vote of the holders of record owning Voting Stock representing a majority of the Voting Power of all Voting Stock of the corporation present in person or by proxy at such meeting at which there is a quorum, or by a vote of a majority of the directors present at such meeting at which there is a quorum (whichever is applicable). EX-4.2 5 FIRST SUPPLEMENTAL INDENTURE 1 EXHIBIT 4.2 FIRST SUPPLEMENTAL INDENTURE between NEWCITY COMMUNICATIONS, INC. and SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, As Trustee Dated as of September 16, 1994 2 FIRST SUPPLEMENTAL INDENTURE THIS FIRST SUPPLEMENTAL INDENTURE, dated as of September 16, 1994 by and between NEWCITY COMMUNICATIONS, INC., a Connecticut corporation with principal offices in Bridgeport, Connecticut (the "Company"), and SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, a national banking association with its principal office in Hartford, Connecticut, as trustee under the Indenture referred to below (the "Trustee"), WITNESSETH THAT: WHEREAS, NewCity Communications, Inc. duly executed and delivered an Indenture, dated as of November 2, 1993 (the "Indenture"), to Shawmut Bank Connecticut, National Association, as trustee, for the purpose of securing its Senior Subordinated Notes (the "Notes"); and WHEREAS, the Company has obtained the consent of the holders of at least a majority of the face amount of the outstanding amount of the Notes and has satisfied all of the requirements of Sections 9.02 and 9.04 of the Indenture in order to amend Section 4.04 of the Indenture as hereinafter provided (the "Amendment"); and WHEREAS, all things prescribed by law and by the terms of the Indenture necessary to make the Amendment, when duly executed and delivered by the Company and the Trustee a valid and binding instrument, enforceable in accordance with its terms, and otherwise to effectuate the amendment of the Indenture, have been done and performed, and the execution and delivery of this First Supplemental Indenture have been in all respects duly authorized; 3 NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH: THAT the Indenture is amended as hereinafter provided; otherwise to remain in full force and effect in accordance with the provisions thereof. ARTICLE ONE Amendment of the Indenture Section 1.01. The Company and the Trustee, for and on behalf of the Noteholders hereby covenant and agree that Section 4.04 of the Indenture is hereby amended to read as follows: "Section 4.04 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 than 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 - 2 - 4 Expense 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. The foregoing notwithstanding, nothing herein contained shall prevent the Investment by the Company or any Subsidiary in an amount up to $500,000 in any Person, other than a wholly owned Subsidiary, whose primary business is the ownership and operation of radio stations, provided that, so long as any of the Notes are outstanding, the aggregate amount of such outstanding Investments shall not exceed $500,000 at any one time nor shall any such Investment be considered to be a Restricted Payment for any purpose. "Prior to making any Restricted Payment under this Section 4.04, the Company shall deliver to the Trustee an Officer's 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 computation and shall be fully protected in relying on such Officers' Certificate." - 3 - 5 Section 1.02. The Company hereby expressly ratifies, adopts, renews, confirms and continues in full force and effect, without limitation, except as hereby amended, each and every covenant, agreement, condition and provision contained in the Indenture. Section 1.03. The Company covenants that the recitals of fact and statements contained in this First Supplemental Indenture are true and that, upon the execution and delivery of this First Supplemental Indenture, the Company is not in default in any respect under any of the provisions of the Indenture or of the Notes thereby secured or intended so to be. ARTICLE TWO Additional Provisions Section 2.01. Except as amended by Article One of this First Supplemental Indenture, the Indenture remains in full force and effect in accordance with its terms. Section 2.02. The cover of this First Supplemental Indenture and all article and description headings are inserted for convenience of reference only and are not to be taken to be any part of this First Supplemental Indenture or to control or affect the meaning, construction or effect of the same. Section 2.03. This First Supplemental Indenture shall be simultaneously executed in several counterparts, and all such counterparts executed and delivered each as an original shall constitute but one and the same instrument. - 4 - 6 IN WITNESS WHEREOF, NewCity Communications, Inc. has caused its corporate name to be hereunto affixed and this instrument to be signed and sealed by its President or its Vice President and its corporate seal to be attested by its Secretary, for and in its behalf, and caused this instrument to be delivered; and Shawmut Bank Connecticut, National Association, in token of its acceptance of the trust hereby created, has caused its corporate name to be hereunto affixed and this instrument to be signed and sealed by one of its Vice Presidents and its corporate seal to be attested by one of its Trust Officers, for and in its behalf, and caused this instrument to be delivered all as of the day and year first above written. - 5 - 7 NewCity Communications, Inc. (CORPORATE SEAL) By: /s/ Richard A. Ferguson ------------------------------ President Attest: /s/ James T. Morley - ------------------------------- Secretary Signed, sealed and delivered by NewCity Communications, Inc. in the presence of: Sheila Daniel - ------------------------------- Lila Grimes - ------------------------------- - 6 - 8 SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION (CORPORATE SEAL) By: /s/ Michael M. Hopkins ------------------------------ Vice President Attest: /s/ Jacqueline Levesque - ------------------------------- Its Corporate Trust Officer Signed, sealed and delivered by SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION in the presence of: /s/ Susan T. Keller - ------------------------------- Susan T. Keller /s/ Karen R. Felt - ------------------------------- Karen R. Felt - 7 - 9 STATE OF CONNECTICUT) ) ss.: Bridgeport; September 19, 1994 COUNTY OF FAIRFIELD ) Personally appeared Richard A. Ferguson and James T. Morley of NewCity Communications, Inc., signer and sealer, respectively, of the foregoing instrument, to me personally known, who being by me duly sworn did say that they are the [Vice] President and Secretary, respectively, of NewCity Communications, Inc., one of the corporations described herein, and that they executed said instrument and severally acknowledged the same to be their free act and deed as such Vice President and Secretary, respectively, and the free act and deed of NewCity Communications, Inc. and on oath stated that they were duly authorized to sign and seal, respectively, said instrument and that the seal affixed thereto is the corporate seal of NewCity Communications, Inc., before me. /s/ Lila Grimes --------------------------------------------------- Notary Public LILA GRIMES NOTARY PUBLIC MY COMMISSION EXPIRES JULY 31, 1998 (NOTARY SEAL) - 8 - 10 STATE OF CONNECTICUT) ) ss.: Hartford; September __, 1994 COUNTY OF HARTFORD ) Personally appeared Michael M. Hopkins and Jacqueline Levesque of SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, signer and sealer, respectively, of the foregoing instrument, to me personally known, who being by me duly sworn did say that they are a Vice President and Corporate Trust Officer, respectively, of Shawmut Bank Connecticut, National Association, one of the corporations described herein, and that they executed said instrument and severally acknowledged the same to be their free act and deed as such Vice President and Corporate Trust Officer, respectively, and the free act and deed of Shawmut Bank Connecticut, National Association, and on oath stated that they were duly authorized to sign and seal, respectively, said instrument and that the seal affixed thereto is the corporate seal of Shawmut Bank Connecticut, National Association, before me. /s/ Michelle K. Blezard ----------------------------------------------------- Notary Public Michelle K. Blezard Notary Public My Commission Expires August 31, 1998 (NOTARY SEAL) - 9 - EX-4.3 6 STOCK CERTIFICATE 1 EXHIBIT 4.3 [CRI] [group of people standing around world globe] CLASS A COMMON STOCK CLASS A COMMON STOCK PAR VALUE $1.00 CUSIP 244051 10 2 SEE REVERSE FOR CERTAIN DEFINITIONS Cox Radio, Inc. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE This is to Certify that is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF THE CLASS A COMMON STOCK, PAR VALUE $1.00 PER SHARE. OF Cox Radio, Inc., issued under and subject to the Amended Certificate of Incorporation of the Corporation (a copy of which is on file at the office of the Transfer Agent of the Corporation), to all the terms and conditions of which the said owner by accepting this Certificate expressly assents and agrees to be bound. The shares represented by this Certificate are transferable, to the extent permitted by the Amended Certificate of Incorporation of the Corporation, on the books of the Corporation in person or by attorney duly authorized in writing upon surrender of this Certificate duly endorsed. This Certificate shall not be valid until countersigned by the Transfer Agent and registered by the Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: Attest: [ Corporate seal of Cox Radio, Inc. ] /s/ Andrew A. Merdek /s/ Robert F. Neil Secretary President and Chief Executive Officer countersigned and registered: FIRST CHICAGO TRUST COMPANY OF NEW YORK by /s/ Joseph Spadaford TRANSFER AGENT AND REGISTRAR AUTHORIZED OFFICER 2 COX RADIO, INC. The Corporation will furnish to any stockholder upon request and without charge, a full statement of the designation, relative rights, preferences and limitations of the shares of each class of stock authorized to be issued and of each series of preferred stock so far as the same have been fixed, and the authority of the Board to designate and fix the relative rights, preferences and limitations of other series of preferred stock. The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT WROS -- as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT -- ______________ Custodian _____________ (Cust) (Minor) under Uniform Gifts to Minors Act ______________ (State)
Additional abbreviations may also be used though not in the above list. For value received, ____________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ___________________________________________________________________________ ___________________________________________________________________________ (Please print or typewrite name and address including postal zip code of assignee) ___________________________________________________________________________ ____________________________________________________________ Shares of the Class A Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint _________________________ Attorney, to transfer the said Stock on the books of the within-named Corporation with full power of substitution in the premises. Dated, _______________ _____________________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the Certificate, in every particular, without alteration or enlargement, or any change whatever. Signature Guaranteed: NOTICE: The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockholders, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to SEC Rule 17 Ad-15. 3 STATUTORY RESTRICTIONS -- FEDERAL COMMUNICATIONS ACT. The Corporation and its subsidiaries and affiliates operate communications properties subject to the jurisdiction of the Federal Communications Commission under the Communications Act of 1934, as amended. Said Act and the rules and regulations of said Commission contain express restrictions on the transfer of stock of corperations subject thereto, particularly with respect to alien persons. The right is reserved to refuse in honor any transfer of the stock of the Corporation which, in the judgment of the Corporation or its Transfer Agent, would or might constitute a violation of said Act or rules and regulations. As used in this context, the word "alien" shall be construed to include the following: a person who is a citizen of a country other than the United States, any entity organized under the laws of a government other than the government of the United States or any state, territory or possession of the United States, a government other than the government of the United States or of any state, territory or possession of the United States, or a representative of, or an individual or entity controlled by, any of the foregoing. APPLICATION FOR TRANSFER OF SHARES The undersigned (the "Applicant") hereby makes application for the transfer to the name of the Applicant of the number of shares of stock represented by this Certificate and hereby certifies to the Corporation that: The Applicant is___ is not___ an alien. The Applicant will___ will not___ hold the shares applied for or any of them for or on behalf of an alien. The Applicant hereby agrees that on request of the Corporation, he will furnish proof in support of this certification. Date:___________________ __________________________________ Signature of Applicant EX-5.1 7 OPINION OF DOW LOHNES 1 EXHIBIT 5.1 [LETTERHEAD OF DOW, LOHNES & ALBERTSON, PLLC] August 28, 1996 Cox Radio, Inc. 1400 Lake Hearn Drive Atlanta, Georgia 30319 Re: Registration Statement on Form S-1 (Registration No. 33-08737) Ladies and Gentlemen: We have acted as special counsel for Cox Radio, Inc., a Delaware corporation ("Cox"), in connection with the preparation of the subject registration statement, as amended (the "Registration Statement"), filed with the Securities and Exchange Commission (the "Commission") pursuant to the Securities Act of 1933, as amended (the "Act"), to register the public offering by Cox of 7,500,000 shares (assuming exercise of the underwriters' overallotment option) of the Class A Common Stock, $1.00 par value per share, of Cox (the "Class A Common Stock"). In preparing this opinion we have examined and reviewed such documents and made such investigations of law as we have considered necessary or appropriate to render the opinions expressed below. We have reviewed (a) the Registration Statement; (b) Cox's Certificate of Incorporation and Bylaws; (c) the proposed forms of Underwriting Agreement to be entered into by Cox, Lehman Brothers Inc., Allen & Company Incorporated, CS First Boston and Morgan Stanley & Co. Incorporated (the "Underwriting Agreement"); and (d) such other documents, corporate records, certificates of public officials, certificates of officers of the Company and other instruments relating to the authorization and issuance of the Class A Common Stock as we deemed relevant or necessary for opinions herein expressed. 2 Cox Radio, Inc. August 28, 1996 Page 2 As to matters of fact relevant to our opinion, we have relied upon certificates of officers of Cox without further investigation. With respect to the foregoing documents, we have assumed (i) the authenticity of all documents submitted to us as originals, the conformity with authentic original documents of all documents submitted to us as copies or forms, the genuineness of all signatures and the legal capacity of natural persons, and (ii) that the foregoing documents, in the forms thereof submitted for our review, have not been altered, amended or repealed in any respect material to our opinion as stated herein. We have not reviewed any documents other than the documents listed above for purposes of rendering our opinion as expressed herein, and we assume that there exists no provision of any such other document that bears upon or is inconsistent with our opinion as expressed herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we assume to be true, complete and accurate in all material respects. Our opinion is limited to matters of law of the District of Columbia, the General Corporation Law of the State of Delaware, and the United States of America, insofar as such laws apply, and we express no opinion as to conflicts of law rules, or the laws of any states or jurisdictions, including federal laws regulating securities or other federal laws, or the rules and regulations of stock exchanges or any other regulatory body, other than as specified above. Based upon and subject to the foregoing and any other qualifications stated herein, we are of the opinion that the 7,500,000 shares of Class A Common Stock to be offered by Cox as described in the Registration Statement, when and to the extent issued in accordance with the provisions of the Underwriting Agreement, will be legally issued, fully paid and non-assessable. We hereby consent to the use of this opinion as Exhibit 5.1 to the Registration Statement and to all references to our firm in the Registration Statement, provided, however, that in giving such consent we do not admit that we come within the category of 3 Cox Radio, Inc. August 28, 1996 Page 3 persons whose consent is required under Section 7 of the Act or the Rules and Regulations of the Commission thereunder. Except as provided for hereinabove, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other person or entity for any purpose. DOW, LOHNES & ALBERTSON, PLLC By: /s/ Stuart A. Sheldon ---------------------------- Stuart A. Sheldon Member EX-10.1 8 PROMISSORY NOTE FOR COX RADIO 1 EXHIBIT 10.1 PROMISSORY NOTE FOR COX RADIO, INC. FOR VALUE RECEIVED, Cox Radio, Inc., a Delaware corporation ("Maker"), promises to pay to Cox Enterprises, Inc., a Delaware corporation ("CEI"), or its successors and assigns (CEI and its successors and assigns being referred to herein as "Payee"), at its offices at 1400 Lake Hearn Drive, N.E., Atlanta, Georgia 30319, or at such other place as Payee may from time to time designate in writing, the principal sum of Thirty Million Seven Hundred Seventy One Thousand and Six Hundred Five Dollars ($30,771,605), plus all interest accruing from the date hereof on the principal balance from time to time outstanding, at a variable rate equal to the sum of the Texas Commerce Bank Prime Rate plus 1.50% on the basis of a 365-day year for the actual number of days elapsed. 1. The entire principal balance of this Note then outstanding, plus all accrued and unpaid interest thereon, shall be due and payable on December 31, 1999, or such later date as may be agreed to in writing by Maker and Payee, in lawful money of the United States in immediately available funds. 2. This Note may be prepaid in whole or in part, without penalty or premium, at any time upon ten (10) days' prior written notice to Payee. 3. The occurrence of any of the following events shall be an "Event of Default" hereunder: (a) Maker shall fail to pay any principal or interest hereunder when the same is due and payable, and such failure shall continue for a period of five (5) days from the due date of such sum; (b) This Note shall at any time and for any reason cease to be in full force and effect or shall be declared to be null and void, or the validity or enforceability hereof shall be contested in writing by Maker, or Maker shall deny in writing that it has any further liability or obligation hereunder; or (c) An order of relief shall have been entered against Maker in any bankruptcy or insolvency proceeding, or Maker shall admit in writing its inability to pay its debts as they mature, or Maker shall make a general assignment for the benefit of its creditors; or Maker shall apply for or consent to the appointment of any receiver, trustee, or similar officer for all or any substantial part of its property, or such receiver, trustee or similar officer shall be appointed without the application or consent of Maker and such appointment shall continue undischarged for a period of ninety (90) days; or Maker shall institute (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding shall be instituted (by petition, application or otherwise) against Maker and shall remain undismissed for a period of ninety (90) days; or any judgment, writ, warrant of attachment or execution or similar process shall be issued or levied against a substantial part of the property of Maker and such judgment, writ, or similar process shall not be released, vacated or fully bonded within ninety (90) days after its issue or levy. 2 4. Upon the occurrence of an Event of Default, at the option of Payee the entire principal balance hereof and all accrued and unpaid interest thereon shall at once become due and payable and may be collected forthwith regardless of the stipulated date of maturity. TIME IS OF THE ESSENCE WITH RESPECT TO THIS NOTE. Failure to exercise the foregoing option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default, and no exercise by Payee of any option provided herein shall exhaust Payee's right to exercise the same on any number of subsequent occasions. 5. Past due principal, pursuant to acceleration or otherwise, and, to the extent permitted by applicable law, past due interest and (after the occurrence of an Event of Default) past due fees, pursuant to acceleration or otherwise, shall bear interest from their respective due dates, until paid, at the Default Rate. The Default Rate is defined as the underlying borrowing rate (as it changes) plus 2.00%. 6. Maker agrees to pay all costs and expenses of collection, including reasonable attorneys' fees, arising in connection with any enforcement action by Payee in which it shall prevail, of any of its rights under this Note whether by or through an attorney-at-law or in an action in bankruptcy, insolvency or other judicial proceedings. 7. PRESENTMENT FOR PAYMENT, DEMAND, PROTEST, AND NOTICE OF DEMAND, NOTICE OF DISHONOR, NOTICE OF NON-PAYMENT, AND ALL OTHER NOTICES ARE HEREBY WAIVED BY MAKER EXCEPT AS EXPRESSLY REQUIRED BY THE TERMS HEREOF. 8. This Note may not be changed orally, but only by an agreement in writing signed by the party or parties against whom enforcement of any waiver, change, modification. or discharge is sought. 9. This Note shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Maker shall not assign any of its rights or obligations hereunder except with the prior written consent of Payee. IN WITNESS WHEREOF, Maker has caused this Note to be executed effective June 30, 1996. COX RADIO, INC. By: /s/ Andrew A. Merdek -------------------------- Name: Andrew A. Merdek Title: Secretary COX ENTERPRISES, INC. By: /s/ Richard J. Jacobson ------------------------- Name: Richard J. Jacobson Title: Treasurer EX-10.2 9 PROMISSORY NOTE FOR WSB, INC. 1 EXHIBIT 10.2 PROMISSORY NOTE FOR WSB, INC. FOR VALUE RECEIVED, WSB, Inc., a Delaware corporation ("Maker"), promises to pay to Georgia Television Company, a Delaware corporation ("GATV"), or its successors and assigns (GATV) and its successors and assigns being referred to herein as "Payee"), at its offices at 1400 Lake Hearn Drive, N.E., Atlanta, Georgia 30319, or at such other place as Payee may from time to time designate in writing, up to the principal sum of Twelve Million Six Hundred Forty Four Thousand Dollars ($12,644,000) or such lesser amount as shall be advanced hereunder, plus all interest accruing from the date hereof on the principal balance from time to time outstanding, at a variable rate equal to the sum of the Texas Commerce Bank Prime Rate plus 1.50% on the basis of a 365-day year for the actual number of days elapsed. 1. The entire principal balance of this Note then outstanding, plus all accrued and unpaid interest thereon, shall be due and payable on December 31, 1999, or such later date as may be agreed to in writing by Maker and Payee, in lawful money of the United States in immediately available funds. 2. This Note may be prepaid in whole or in part, without penalty or premium, at any time upon ten (10) days' prior written notice to Payee. 3. The occurrence of any of the following events shall be an "Event of Default" hereunder: (a) Maker shall fail to pay any principal or interest hereunder when the same is due and payable, and such failure shall continue for a period of five (5) days from the due date of such sum; (b) This Note shall at any time and for any reason cease to be in full force and effect or shall be declared to be null and void, or the validity or enforceability hereof shall be contested in writing by Maker, or Maker shall deny in writing that it has any further liability or obligation hereunder; or (c) An order of relief shall have been entered against Maker in any bankruptcy or insolvency proceeding, or Maker shall admit in writing its inability to pay its debts as they mature, or Maker shall make a general assignment for the benefit of its creditors; or Maker shall apply for or consent to the appointment of any receiver, trustee, or similar officer for all or any substantial part of its property, or such receiver, trustee or similar officer shall be appointed without the application or consent of Maker and such appointment shall continue undischarged for a period of ninety (90) days; or Maker shall institute (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding shall be instituted (by petition, application or otherwise) against Maker and shall remain undismissed for a period of ninety (90) days; or any judgment, writ, warrant of attachment or execution or similar process shall be issued or levied against a substantial part of the property of Maker and such judgment, writ, or similar process shall not be released, vacated or fully bonded within ninety (90) days after its issue or levy. 2 4. Upon the occurrence of an Event of Default, at the option of Payee the entire principal balance hereof and all accrued and unpaid interest thereon shall at once become due and payable and may be collected forthwith regardless of the stipulated date of maturity. TIME IS OF THE ESSENCE WITH RESPECT TO THIS NOTE. Failure to exercise the foregoing option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default, and no exercise by Payee of any option provided herein shall exhaust Payee's right to exercise the same on any number of subsequent occasions. 5. Past due principal, pursuant to acceleration or otherwise, and, to the extent permitted by applicable law, past due interest and (after the occurrence of an Event of Default) past due fees, pursuant to acceleration or otherwise, shall bear interest from their respective due dates, until paid, at the Default Rate. The Default Rate is defined as the underlying borrowing rate (as it changes) plus 2.00%. 6. Maker agrees to pay all costs and expenses of collection, including reasonable attorneys' fees, arising in connection with any enforcement action by Payee in which it shall prevail, of any of its rights under this Note whether by or through an attorney-at-law or in an action in bankruptcy, insolvency or other judicial proceedings. 7. PRESENTMENT FOR PAYMENT, DEMAND, PROTEST, AND NOTICE OF DEMAND, NOTICE OF DISHONOR, NOTICE OF NON-PAYMENT, AND ALL OTHER NOTICES ARE HEREBY WAIVED BY MAKER EXCEPT AS EXPRESSLY REQUIRED BY THE TERMS HEREOF. 8. This Note may not be changed orally, but only by an agreement in writing signed by the party or parties against whom enforcement of any waiver, change, modification. or discharge is sought. 9. This Note shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Maker shall not assign any of its rights or obligations hereunder except with the prior written consent of Payee. IN WITNESS WHEREOF, Maker has caused this Note to be executed effective June 30, 1996. WSB, INC. By: /s/ Andrew A. Merdek -------------------------- Name: Andrew A. Merdek Title: Secretary COX ENTERPRISES, INC. By: /s/ Richard J. Jacobson ------------------------- Name: Richard J. Jacobson Title: Treasurer EX-10.3 10 PROMISSORY NOTE FOR COX KENTUCKY 1 EXHIBIT 10.3 PROMISSORY NOTE FOR COX KENTUCKY, INC. FOR VALUE RECEIVED, Cox Kentucky, Inc., a Delaware corporation ("Maker"), promises to pay to Cox Enterprises, Inc., a Delaware corporation ("CEI"), or its successors and assigns (CEI and its successors and assigns being referred to herein as "Payee"), at its offices at 1400 Lake Hearn Drive, N.E., Atlanta, Georgia 30319, or at such other place as Payee may from time to time designate in writing, the principal sum of Seven Million Nine Hundred Eighty Eight Thousand and Two Hundred Ten Dollars ($7,988,210) plus all interest accruing from the date hereof on the principal balance from time to time outstanding, at a variable rate equal to the sum of the Texas Commerce Bank Prime Rate plus 1.50% on the basis of a 365-day year for the actual number of days elapsed. 1. The entire principal balance of this Note then outstanding, plus all accrued and unpaid interest thereon, shall be due and payable on December 31, 1999, or such later date as may be agreed to in writing by Maker and Payee, in lawful money of the United States in immediately available funds. 2. This Note may be prepaid in whole or in part, without penalty or premium, at any time upon ten (10) days' prior written notice to Payee. 3. The occurrence of any of the following events shall be an "Event of Default" hereunder: (a) Maker shall fail to pay any principal or interest hereunder when the same is due and payable, and such failure shall continue for a period of five (5) days from the due date of such sum; (b) This Note shall at any time and for any reason cease to be in full force and effect or shall be declared to be null and void, or the validity or enforceability hereof shall be contested in writing by Maker, or Maker shall deny in writing that it has any further liability or obligation hereunder; or (c) An order of relief shall have been entered against Maker in any bankruptcy or insolvency proceeding, or Maker shall admit in writing its inability to pay its debts as they mature, or Maker shall make a general assignment for the benefit of its creditors; or Maker shall apply for or consent to the appointment of any receiver, trustee, or similar officer for all or any substantial part of its property, or such receiver, trustee or similar officer shall be appointed without the application or consent of Maker and such appointment shall continue undischarged for a period of ninety (90) days; or Maker shall institute (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding shall be instituted (by petition, application or otherwise) against Maker and shall remain undismissed for a period of ninety (90) days; or any judgment, writ, warrant of attachment or execution or similar process shall be issued or levied against a substantial part of the property of Maker and such judgment, writ, or similar process shall not be released, vacated or fully bonded within ninety (90) days after its issue or levy. 2 4. Upon the occurrence of an Event of Default, at the option of Payee the entire principal balance hereof and all accrued and unpaid interest thereon shall at once become due and payable and may be collected forthwith regardless of the stipulated date of maturity. TIME IS OF THE ESSENCE WITH RESPECT TO THIS NOTE. Failure to exercise the foregoing option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default, and no exercise by Payee of any option provided herein shall exhaust Payee's right to exercise the same on any number of subsequent occasions. 5. Past due principal, pursuant to acceleration or otherwise, and, to the extent permitted by applicable law, past due interest and (after the occurrence of an Event of Default) past due fees, pursuant to acceleration or otherwise, shall bear interest from their respective due dates, until paid, at the Default Rate. The Default Rate is defined as the underlying borrowing rate (as it changes) plus 2.00%. 6. Maker agrees to pay all costs and expenses of collection, including reasonable attorneys' fees, arising in connection with any enforcement action by Payee in which it shall prevail, of any of its rights under this Note whether by or through an attorney-at-law or in an action in bankruptcy, insolvency or other judicial proceedings. 7. PRESENTMENT FOR PAYMENT, DEMAND, PROTEST, AND NOTICE OF DEMAND, NOTICE OF DISHONOR, NOTICE OF NON-PAYMENT, AND ALL OTHER NOTICES ARE HEREBY WAIVED BY MAKER EXCEPT AS EXPRESSLY REQUIRED BY THE TERMS HEREOF. 8. This Note may not be changed orally, but only by an agreement in writing signed by the party or parties against whom enforcement of any waiver, change, modification. or discharge is sought. 9. This Note shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Maker shall not assign any of its rights or obligations hereunder except with the prior written consent of Payee. IN WITNESS WHEREOF, Maker has caused this Note to be executed effective June 30, 1996. COX KENTUCY, INC. By: /s/ Andrew A. Merdek ----------------------- Name: Andrew A. Merdek Title: Secretary COX ENTERPRISES, INC. By: /s/ Richard J. Jacobson ---------------------------- Name: Richard J. Jacobson Title: Treasurer EX-10.4 11 PROMISSORY NOTE FOR WHIO, INC. 1 EXHIBIT 10.4 PROMISSORY NOTE FOR WHIO, INC. FOR VALUE RECEIVED, WHIO, Inc., a Delaware corporation ("Maker"), promises to pay to Cox Enterprises, Inc., a Delaware corporation ("CEI"), or its successors and assigns (CEI and its successors and assigns being referred to herein as "Payee"), at its offices at 1400 Lake Hearn Drive, N.E., Atlanta, Georgia 30319, or at such other place as Payee may from time to time designate in writing, the principal sum of Twenty One Million Three Hundred Seventy Three Thousand ($21,373,000), plus all interest accruing from the date hereof on the principal balance from time to time outstanding, at a variable rate equal to the sum of the Texas Commerce Bank Prime Rate plus 1.50% on the basis of a 365-day year for the actual number of days elapsed. 1. The entire principal balance of this Note then outstanding, plus all accrued and unpaid interest thereon, shall be due and payable on December 31, 1999, or such later date as may be agreed to in writing by Maker and Payee, in lawful money of the United States in immediately available funds. 2. This Note may be prepaid in whole or in part, without penalty or premium, at any time upon ten (10) days' prior written notice to Payee. 3. The occurrence of any of the following events shall be an "Event of Default" hereunder: (a) Maker shall fail to pay any principal or interest hereunder when the same is due and payable, and such failure shall continue for a period of five (5) days from the due date of such sum; (b) This Note shall at any time and for any reason cease to be in full force and effect or shall be declared to be null and void, or the validity or enforceability hereof shall be contested in writing by Maker, or Maker shall deny in writing that it has any further liability or obligation hereunder; or (c) An order of relief shall have been entered against Maker in any bankruptcy or insolvency proceeding, or Maker shall admit in writing its inability to pay its debts as they mature, or Maker shall make a general assignment for the benefit of its creditors; or Maker shall apply for or consent to the appointment of any receiver, trustee, or similar officer for all or any substantial part of its property, or such receiver, trustee or similar officer shall be appointed without the application or consent of Maker and such appointment shall continue undischarged for a period of ninety (90) days; or Maker shall institute (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding shall be instituted (by petition, application or otherwise) against Maker and shall remain undismissed for a period of ninety (90) days; or any judgment, writ, warrant of attachment or execution or similar process shall be issued or levied against a substantial part of the property of Maker and such judgment, writ, or similar process shall not be released, vacated or fully bonded within ninety (90) days after its issue or levy. 2 4. Upon the occurrence of an Event of Default, at the option of Payee the entire principal balance hereof and all accrued and unpaid interest thereon shall at once become due and payable and may be collected forthwith regardless of the stipulated date of maturity. TIME IS OF THE ESSENCE WITH RESPECT TO THIS NOTE. Failure to exercise the foregoing option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default, and no exercise by Payee of any option provided herein shall exhaust Payee's right to exercise the same on any number of subsequent occasions. 5. Past due principal, pursuant to acceleration or otherwise, and, to the extent permitted by applicable law, past due interest and (after the occurrence of an Event of Default) past due fees, pursuant to acceleration or otherwise, shall bear interest from their respective due dates, until paid, at the Default Rate. The Default Rate is defined as the underlying borrowing rate (as it changes) plus 2.00%. 6. Maker agrees to pay all costs and expenses of collection, including reasonable attorneys' fees, arising in connection with any enforcement action by Payee in which it shall prevail, of any of its rights under this Note whether by or through an attorney-at-law or in an action in bankruptcy, insolvency or other judicial proceedings. 7. PRESENTMENT FOR PAYMENT, DEMAND, PROTEST, AND NOTICE OF DEMAND, NOTICE OF DISHONOR, NOTICE OF NON-PAYMENT, AND ALL OTHER NOTICES ARE HEREBY WAIVED BY MAKER EXCEPT AS EXPRESSLY REQUIRED BY THE TERMS HEREOF. 8. This Note may not be changed orally, but only by an agreement in writing signed by the party or parties against whom enforcement of any waiver, change, modification. or discharge is sought. 9. This Note shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Maker shall not assign any of its rights or obligations hereunder except with the prior written consent of Payee. IN WITNESS WHEREOF, Maker has caused this Note to be executed effective June 30, 1996. WHIO, INC. By: /s/ Andrew A. Merdek ------------------------ Name: Andrew A. Merdek Title: Secretary COX ENTERPRISES, INC. By: /s/ Richard J. Jacobson ------------------------ Name: Richard J. Jacobson Title: Treasurer EX-10.5 12 PROMISSORY NOTE FOR COX SYRACUSE 1 EXHIBIT 10.5 PROMISSORY NOTE FOR COX SYRACUSE, INC. FOR VALUE RECEIVED, Cox Syracuse, Inc., a Delaware corporation ("Maker"), promises to pay to Cox Enterprises, Inc., a Delaware corporation ("CEI"), or its successors and assigns (CEI and its successors and assigns being referred to herein as "Payee"), at its offices at 1400 Lake Hearn Drive, N.E., Atlanta, Georgia 30319, or at such other place as Payee may from time to time designate in writing, the principal sum of Four Million Five Hundred Eight Thousand Dollars ($4,508,000), plus all interest accruing from the date hereof on the principal balance from time to time outstanding, at a variable rate equal to the sum of the Texas Commerce Bank Prime Rate plus 1.50% on the basis of a 365-day year for the actual number of days elapsed. 1. The entire principal balance of this Note then outstanding, plus all accrued and unpaid interest thereon, shall be due and payable on December 31, 1999, or such later date as may be agreed to in writing by Maker and Payee, in lawful money of the United States in immediately available funds. 2. This Note may be prepaid in whole or in part, without penalty or premium, at any time upon ten (10) days' prior written notice to Payee. 3. The occurrence of any of the following events shall be an "Event of Default" hereunder: (a) Maker shall fail to pay any principal or interest hereunder when the same is due and payable, and such failure shall continue for a period of five (5) days from the due date of such sum; (b) This Note shall at any time and for any reason cease to be in full force and effect or shall be declared to be null and void, or the validity or enforceability hereof shall be contested in writing by Maker, or Maker shall deny in writing that it has any further liability or obligation hereunder; or (c) An order of relief shall have been entered against Maker in any bankruptcy or insolvency proceeding, or Maker shall admit in writing its inability to pay its debts as they mature, or Maker shall make a general assignment for the benefit of its creditors; or Maker shall apply for or consent to the appointment of any receiver, trustee, or similar officer for all or any substantial part of its property, or such receiver, trustee or similar officer shall be appointed without the application or consent of Maker and such appointment shall continue undischarged for a period of ninety (90) days; or Maker shall institute (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding shall be instituted (by petition, application or otherwise) against Maker and shall remain undismissed for a period of ninety (90) days; or any judgment, writ, warrant of attachment or execution or similar process shall be issued or levied against a substantial part of the property of Maker and such judgment, writ, or similar process shall not be released, vacated or fully bonded within ninety (90) days after its issue or levy. 2 4. Upon the occurrence of an Event of Default, at the option of Payee the entire principal balance hereof and all accrued and unpaid interest thereon shall at once become due and payable and may be collected forthwith regardless of the stipulated date of maturity. TIME IS OF THE ESSENCE WITH RESPECT TO THIS NOTE. Failure to exercise the foregoing option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default, and no exercise by Payee of any option provided herein shall exhaust Payee's right to exercise the same on any number of subsequent occasions. 5. Past due principal, pursuant to acceleration or otherwise, and, to the extent permitted by applicable law, past due interest and (after the occurrence of an Event of Default) past due fees, pursuant to acceleration or otherwise, shall bear interest from their respective due dates, until paid, at the Default Rate. The Default Rate is defined as the underlying borrowing rate (as it changes) plus 2.00%. 6. Maker agrees to pay all costs and expenses of collection, including reasonable attorneys' fees, arising in connection with any enforcement action by Payee in which it shall prevail, of any of its rights under this Note whether by or through an attorney-at-law or in an action in bankruptcy, insolvency or other judicial proceedings. 7. PRESENTMENT FOR PAYMENT, DEMAND, PROTEST, AND NOTICE OF DEMAND, NOTICE OF DISHONOR, NOTICE OF NON-PAYMENT, AND ALL OTHER NOTICES ARE HEREBY WAIVED BY MAKER EXCEPT AS EXPRESSLY REQUIRED BY THE TERMS HEREOF. 8. This Note may not be changed orally, but only by an agreement in writing signed by the party or parties against whom enforcement of any waiver, change, modification. or discharge is sought. 9. This Note shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Maker shall not assign any of its rights or obligations hereunder except with the prior written consent of Payee. IN WITNESS WHEREOF, Maker has caused this Note to be executed effective June 30, 1996. COX SYRACUSE, INC. By: /s/ Andrew A. Merdek -------------------------- Name: Andrew A. Merdek Title: Secretary COX ENTERPRISES, INC. By: /s/ Richard J. Jacobson ------------------------- Name: Richard J. Jacobson Title: Treasurer EX-10.6 13 PROMISSORY NOTE FOR WWRM, INC. 1 EXHIBIT 10.6 PROMISSORY NOTE FOR WWRM, INC. FOR VALUE RECEIVED, WWRM, Inc., a Delaware corporation ("Maker"), promises to pay to Cox Enterprises, Inc., a Delaware corporation ("CEI"), or its successors and assigns (CEI and its successors and assigns being referred to herein as "Payee"), at its offices at 1400 Lake Hearn Drive, N.E., Atlanta, Georgia 30319, or at such other place as Payee may from time to time designate in writing, the principal sum of Eighteen Million Two Hundred Twenty Three Thousand and One Hundred Eighty Five Dollars ($18,223,185), plus all interest accruing from the date hereof on the principal balance from time to time outstanding, at a variable rate equal to the sum of the Texas Commerce Bank Prime Rate plus 1.50% on the basis of a 365-day year for the actual number of days elapsed. 1. The entire principal balance of this Note then outstanding, plus all accrued and unpaid interest thereon, shall be due and payable on December 31, 1999, or such later date as may be agreed to in writing by Maker and Payee, in lawful money of the United States in immediately available funds. 2. This Note may be prepaid in whole or in part, without penalty or premium, at any time upon ten (10) days' prior written notice to Payee. 3. The occurrence of any of the following events shall be an "Event of Default" hereunder: (a) Maker shall fail to pay any principal or interest hereunder when the same is due and payable, and such failure shall continue for a period of five (5) days from the due date of such sum; (b) This Note shall at any time and for any reason cease to be in full force and effect or shall be declared to be null and void, or the validity or enforceability hereof shall be contested in writing by Maker, or Maker shall deny in writing that it has any further liability or obligation hereunder; or (c) An order of relief shall have been entered against Maker in any bankruptcy or insolvency proceeding, or Maker shall admit in writing its inability to pay its debts as they mature, or Maker shall make a general assignment for the benefit of its creditors; or Maker shall apply for or consent to the appointment of any receiver, trustee, or similar officer for all or any substantial part of its property, or such receiver, trustee or similar officer shall be appointed without the application or consent of Maker and such appointment shall continue undischarged for a period of ninety (90) days; or Maker shall institute (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding shall be instituted (by petition, application or otherwise) against Maker and shall remain undismissed for a period of ninety (90) days; or any judgment, writ, warrant of attachment or execution or similar process shall be issued or levied against a substantial part of the property of Maker and such judgment, writ, or similar process shall not be released, vacated or fully bonded within ninety (90) days after its issue or levy. 2 4. Upon the occurrence of an Event of Default, at the option of Payee the entire principal balance hereof and all accrued and unpaid interest thereon shall at once become due and payable and may be collected forthwith regardless of the stipulated date of maturity. TIME IS OF THE ESSENCE WITH RESPECT TO THIS NOTE. Failure to exercise the foregoing option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default, and no exercise by Payee of any option provided herein shall exhaust Payee's right to exercise the same on any number of subsequent occasions. 5. Past due principal, pursuant to acceleration or otherwise, and, to the extent permitted by applicable law, past due interest and (after the occurrence of an Event of Default) past due fees, pursuant to acceleration or otherwise, shall bear interest from their respective due dates, until paid, at the Default Rate. The Default Rate is defined as the underlying borrowing rate (as it changes) plus 2.00%. 6. Maker agrees to pay all costs and expenses of collection, including reasonable attorneys' fees, arising in connection with any enforcement action by Payee in which it shall prevail, of any of its rights under this Note whether by or through an attorney-at-law or in an action in bankruptcy, insolvency or other judicial proceedings. 7. PRESENTMENT FOR PAYMENT, DEMAND, PROTEST, AND NOTICE OF DEMAND, NOTICE OF DISHONOR, NOTICE OF NON-PAYMENT, AND ALL OTHER NOTICES ARE HEREBY WAIVED BY MAKER EXCEPT AS EXPRESSLY REQUIRED BY THE TERMS HEREOF. 8. This Note may not be changed orally, but only by an agreement in writing signed by the party or parties against whom enforcement of any waiver, change, modification. or discharge is sought. 9. This Note shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Maker shall not assign any of its rights or obligations hereunder except with the prior written consent of Payee. IN WITNESS WHEREOF, Maker has caused this Note to be executed effective June 30, 1996. WWRM, INC. By: /s/ Andrew A. Merdek --------------------------- Name: Andrew A. Merdek Title: Secretary COX ENTERPRISES, INC. By: /s/ Richard J. Jacobson ------------------------ Name: Richard J. Jacobson Title: Treasurer EX-10.7 14 PROMISSORY NOTE FOR WCKG, INC. 1 EXHIBIT 10.7 PROMISSORY NOTE FOR WCKG, INC. FOR VALUE RECEIVED, WCKG, Inc., a Delaware corporation ("Maker"), promises to pay to the order of Cox Enterprises, Inc., a Delaware corporation ("CEI"), or its successors and assigns (CEI and its successors and assigns being referred to herein as "Payee"), at its offices at 1400 Lake Hearn Drive, N.E., Atlanta, Georgia 30319, or at such other place as Payee may from time to time designate in writing, the principal sum of Nine Million Dollars ($9,000,000), plus interest accruing from the date hereof on the principal balance from time to time outstanding, at a variable rate equal to the sum of the Texas Commerce Bank Prime Rate plus 1.50% on the basis of a 365-day year for the actual number of days elapsed. 1. The entire principal balance of this Note then outstanding, plus all accrued and unpaid interest thereon, shall be due and payable on December 31, 2002, or such later date as may be agreed to in writing by Maker and Payee, in lawful money of the United States in immediately available funds. 2. This Note may be prepaid in whole or in part, without penalty or premium, at any time upon ten (10) days' prior written notice to Payee. 3. The occurrence of any of the following events shall be an "Event of Default" hereunder: (a) Maker shall fail to pay any principal or interest hereunder when the same is due and payable, and such failure shall continue for a period of five (5) days from the due date of such sum; (b) This Note shall at any time and for any reason cease to be in full force and effect or shall be declared to be null and void, or the validity or enforceability hereof shall be contested in writing by Maker, or Maker shall deny in writing that it has any further liability or obligation hereunder; or (c) An order of relief shall have been entered against Maker in any bankruptcy or insolvency proceeding, or Maker shall admit in writing its inability to pay its debts as they mature, or Maker shall make a general assignment for the benefit of its creditors; or Maker shall apply for or consent to the appointment of any receiver, trustee, or similar officer for all or any substantial part of its property, or such receiver, trustee or similar officer shall be appointed without the application or consent of Maker and such appointment shall continue undischarged for a period of ninety (90) days; or Maker shall institute (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or any such proceeding shall be instituted (by petition, application or otherwise) against Maker and shall remain undismissed for a period of ninety (90) days; or any judgment, writ, warrant of attachment or execution or similar process shall be issued or levied against a substantial part of the property of Maker and such judgment, writ, or similar process shall not be released, vacated or fully bonded within ninety (90) days after its issue or levy. 2 4. Upon the occurrence of an Event of Default, at the option of Payee the entire principal balance hereof and all accrued and unpaid interest thereon shall at once become due and payable and may be collected forthwith regardless of the stipulated date of maturity. TIME IS OF THE ESSENCE WITH RESPECT TO THIS NOTE. Failure to exercise the foregoing option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default, and no exercise by Payee of any option provided herein shall exhaust Payee's right to exercise the same on any number of subsequent occasions. 5. Past due principal, pursuant to acceleration or otherwise, and, to the extent permitted by applicable law, past due interest and (after the occurrence of an Event of Default) past due fees, pursuant to acceleration or otherwise, shall bear interest from their respective due dates, until paid, at the Default Rate. The Default Rate is defined as the underlying borrowing rate (as it changes) plus 2.00%. 6. Maker agrees to pay all costs and expenses of collection, including reasonable attorneys' fees, arising in connection with any enforcement action by Payee in which it shall prevail, of any of its rights under this Note whether by or through an attorney-at-law or in an action in bankruptcy, insolvency or other judicial proceedings. 7. PRESENTMENT FOR PAYMENT, DEMAND, PROTEST, AND NOTICE OF DEMAND, NOTICE OF DISHONOR, NOTICE OF NON-PAYMENT, AND ALL OTHER NOTICES ARE HEREBY WAIVED BY MAKER EXCEPT AS EXPRESSLY REQUIRED BY THE TERMS HEREOF. 8. This Note may not be changed orally, but only by an agreement in writing signed by the party or parties against whom enforcement of any waiver, change, modification. or discharge is sought. 9. This Note shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Maker shall not assign any of its rights or obligations hereunder except with the prior written consent of Payee. IN WITNESS WHEREOF, Maker has caused this Note to be executed on December 31, 1994. WCKG, INC. By: /s/ Andrew A. Merdek ------------------------- Name: Andrew A. Merdek Title: Secretary COX ENTERPRISES, INC. By: /s/ Richard J. Jacobson ------------------------ Name: Richard J. Jacobson Title: Assistant Treasurer EX-10.8 15 FORM OF NEW CEI CREDIT FACILITY 1 EXHIBIT 10.8 Revolving Promissory Note ___________ ____, 1996 1. FOR VALUE RECEIVED, COX RADIO, INC., a Delaware corporation ("Maker"), promises to pay ON DEMAND to the order of COX ENTERPRISES, INC., a Delaware corporation ("Payee"), that certain principal sum borrowed by Maker from Payee from time to time which shall be outstanding and set forth on the grid attached hereto and made a part hereof (the "Grid"). Interest shall accrue on the principal hereof which shall be outstanding from time to time at the rate per annum equivalent to the Prime Rate as defined herein, plus 1.5%, calculated daily and compounded monthly (the applicable interest rate per annum at any given time being hereinafter referred to as the "Interest Rate"). 2. Interest on this Revolving Promissory Note shall begin to accrue only upon the consummation of the initial public offering of the Class A Common Stock of the Maker. Any payment of principal or interest on this Revolving Promissory Note which is not paid within five days of when due shall bear interest at a rate per annum equal to 3.0% in excess of the Interest Rate until paid, but only to the extent that payment of such interest on overdue principal or interest is enforceable under applicable law. Payments of principal and interest shall be made to Payee at 1400 Lake Hearn Drive, N.E., Atlanta, Georgia 30319, or at such other place as Payee may from time to time designate in writing. 3. Payee shall enter all amounts of principal borrowed, paid or prepaid at any time on the Grid or on any separate record thereof maintained by Payee; provided, however, that the failure by Payee to so record amounts borrowed and repaid under this Revolving Promissory Note shall in no way affect the obligation of Maker to repay all amounts borrowed by Maker from Payee. 4. As used herein, the term "Prime Rate" shall mean the rate announced by Chase Manhattan Bank, N.A. from time to time at its principal office in the City of New York as its prime rate or base rate. For purposes of calculating interest hereunder, the Prime Rate in effect at the close of business on each business day of Payee shall be the Prime Rate for that day and any immediately succeeding nonbusiness day or days. In the event the Prime Rate is discontinued as a standard, the holder hereof shall designate a comparable reference rate as a substitute therefor. 2 5. Maker shall pay all amounts due hereunder, in cash, by cashier's check or wire transfer of immediately available funds. 6. Maker shall have the right at any time to prepay the principal hereof in full together with accrued interest thereon, in cash, by cashier's check or wire transfer of immediately available funds, without prepayment penalty. 7. In the event that this Revolving Promissory Note is collected by or through an attorney-at-law, all reasonable costs of collection, including reasonable attorneys' fees, shall be paid by Maker. 8. In no event shall the amount of interest due and payable under this Revolving Promissory Note exceed the maximum rate of interest allowed by applicable law (including, without limitation, Official Code of Georgia Annotated Section 7-4-18) and, in the event any such payment is inadvertently made by Maker or inadvertently received by Payee, such excess sum shall be credited as a payment of principal. It is the express intent hereof that Maker not pay and Payee not receive, directly or indirectly or in any manner, interest in excess of that which may be lawfully paid under applicable law. 9. Demand, presentment, notice, notice of demand, notice for payment, protest and notice of dishonor are hereby waived by each and every maker, guarantor, surety and other person or entity primarily or secondarily liable on this Revolving Promissory Note, except as may be otherwise expressly provided in the guaranty agreement of any guarantor. 10. Payee shall not be deemed to waive any of its rights hereunder unless such waiver be in writing and signed by Payee. No delay or omission by Payee in exercising any of its rights hereunder shall operate as a waiver of such rights and a waiver in writing on one occasion shall not be construed as a consent to or a waiver of any right or remedy on any further occasion. 11. This Revolving Promissory Note shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, executors, administrators and permitted successors and assigns. 12. Time is of the essence with respect to this Revolving Promissory Note. 13. This Revolving Promissory Note shall be governed by and construed in accordance with the laws of the State of Georgia. 2 3 IN WITNESS WHEREOF, Maker has caused this Revolving Promissory Note to be executed by its duly authorized officer on the day and year first above written. COX RADIO, INC., a Delaware corporation By: --------------------------------------- Title: ------------------------------------ 3 4
- -------------------------------------------------------------------------------- Revolving Credit Loan Grid - -------------------------------------------------------------------------------- Date Amount Amount Unpaid Officer's Borrowed Paid Balance Initials - -------------------------------------------------------------------------------- (current amount of intercompany indebtedness of Maker to Payee) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
4 5 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5 EX-10.9 16 COX LONG TERM INCENTIVE PLAN 1 EXHIBIT 10.9 COX RADIO, INC. LONG-TERM INCENTIVE PLAN SECTION 1. PURPOSE. The purpose of this Long-Term Incentive Plan (the "Plan") of Cox Radio, Inc. (the "Corporation") is (a) to promote the identity of interests between shareholders and employees of the Corporation by encouraging and creating significant ownership of Common Stock of the Corporation by officers and other employees of the Corporation and its subsidiaries; (b) to enable the Corporation to attract and retain qualified officers and employees who contribute to the Corporation's success by their ability, ingenuity and industry; and (c) to provide meaningful long-term incentive opportunities for officers and other employees who are responsible for the success of the Corporation and who are in a position to make significant contributions toward its objectives. SECTION 2. DEFINITIONS. In addition to the terms defined elsewhere in the Plan, the following shall be defined terms under the Plan: 2.01. "Award" means any Performance Award, Option, Stock Appreciation Right, Restricted Stock, Deferred Stock, Dividend Equivalent, or Other Stock-Based Award, or any other right or interest relating to Shares or cash, granted to a Participant under the Plan. 2.02. "Award Agreement" means any written agreement, contract or other instrument or document evidencing an Award. 2.03. "Board" means the Board of Directors of the Corporation. 2.04. "Code" means the Internal Revenue Code of 1986, as amended from time to time. References to any provision of the Code shall be deemed to include successor provisions thereto and regulations thereunder. 2.05. "Committee" means the Compensation Committee of the Board, or such other Board committee as may be designated by the Board to administer the Plan, or any subcommittee of either. 2.06. "Corporation" is defined as Cox Radio, Inc. or any successor to it in ownership of substantially all of its assets, whether by merger, consolidation or otherwise. 2.07. "Covered Employee" has the same meaning as set forth in section 162(m) of the Code, and successor provisions. 2.08. "Deferred Stock" means a right, granted to a Participant under Section 6.05, to receive Shares at the end of a specified deferral period. 2.09. "Dividend Equivalent" means a right, granted to a Participant under Section 6.03, to receive cash, Shares, other Awards, or other property equal in value to dividends paid with respect to a specified number of Shares. 2.10. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. References to any provision of the Exchange Act shall be deemed to include successor provisions thereto and regulations thereunder. 2.11. "Fair Market Value" means, with respect to Shares, Awards or other property, the fair market value of such Shares, Awards or other property determined by such methods or procedures as shall be established from time to time by the Committee. Unless otherwise determined by the Committee, the Fair 1 2 Market Value of Shares as of any date shall be the closing sales price on that date of a Share as reported in the New York Stock Exchange Composite Transaction Report; provided, that if there were no sales on the valuation date but there were sales on dates within a reasonable period both before and after the valuation date, the Fair Market Value is the weighted average of the closing prices on the nearest date before and the nearest date after the valuation date. The average is to be weighted inversely by the respective numbers of trading days between the selling dates and the valuation date. 2.12. "Incentive Stock Option" means an Option that is intended to meet the requirements of Section 422 of the Code. 2.13. "Non-Qualified Stock Option" means an Option that is not intended to be an Incentive Stock Option. 2.14. "Option" means a right, granted to a Participant under Section 6.06, to purchase Shares, other Awards, or other property at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option. 2.15. "Other Stock-Based Award" means a right, granted to a Participant under Section 6.08, that relates to or is valued by reference to Shares. 2.16. "Participant" means a person who, as an officer or employee of the Corporation or any Subsidiary, has been granted an Award under the Plan. 2.17. "Performance Award" means a right, granted to a Participant under Section 6.02, to receive cash, Shares, other Awards, or other property the payment of which is contingent upon achievement of performance goals specified by the Committee. 2.18. "Performance-Based Restricted Stock" means Restricted Stock that is subject to a risk of forfeiture if specified performance criteria are not met within the restriction period. 2.19. "Plan" is the Cox Radio, Inc. Long-Term Incentive Plan. 2.20. "Restricted Stock" means Shares granted to a Participant under Section 6.04, that are subject to certain restrictions and to a risk of forfeiture. 2.21. "Rule 16b-3" means Rule 16b-3, as from time to time amended and applicable to Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act. 2.22. "Shares" means the Class A Common Stock of the Corporation and such other securities of the Corporation as may be substituted for Shares or such other securities pursuant to Section 10. 2.23. "Stock Appreciation Right" means a right, granted to a Participant under Section 6.07, to be paid an amount measured by the appreciation in the Fair Market Value of Shares from the date of grant to the date of exercise of the right, with payment to be made in cash, Shares, other Awards, or other property as specified in the Award or determined by the Committee. 2.24. "Subsidiary" means any corporation (other than the Corporation) with respect to which the Corporation owns, directly or indirectly, 50% or more of the total combined voting power of all classes of stock. 2.25. "Year" means a calendar year. 2 3 SECTION 3. ADMINISTRATION. 3.01. Authority of the Committee. The Plan shall be administered by the Committee. The Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan: (i) to select and designate Participants; (ii) to determine the type or types of Awards to be granted to each Participant; (iii) to determine the number of Awards to be granted, the number of Shares to which an Award will relate, the terms and conditions of any Award granted under the Plan (including, but not limited to, any exercise price, grant price, or purchase price, any restriction or condition, any schedule for lapse of restrictions or conditions relating to transferability or forfeiture, exercisability, or settlement of an Award, and waivers or accelerations thereof, and waiver of performance conditions relating to an Award, based in each case on such considerations as the Committee shall determine), and all other matters to be determined in connection with an Award; (iv) to determine whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Shares, other Awards, or other property, or an Award may be cancelled, forfeited or surrendered; (v) to determine whether, to what extent, and under what circumstances cash, Shares, other Awards, or other property payable with respect to an Award will be deferred either automatically, at the election of the Committee or at the election of the Participant; (vi) to prescribe the form of each Award Agreement, which need not be identical for each Participant; (vii) to adopt, amend, suspend, waive and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Plan; (viii) to correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Award, rules and regulations, Award Agreement or other instrument hereunder; and (ix) to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan. 3.02. Manner of Exercise of Committee Authority. Except to the extent specifically reserved to another entity under the terms of the Plan or applicable law, the Committee shall have sole discretion in exercising such authority under the Plan. Any action of the Committee with respect to the Plan shall be final, conclusive and binding on all persons, including the Corporation, Subsidiaries, Participants, any person claiming any rights under the Plan from or through any Participant and shareholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. A memorandum signed by all members of the Committee shall constitute the act of the Committee without the necessity, in such event, to hold a meeting. The Committee may delegate to officers or managers of the Corporation or any Subsidiary the authority to perform administrative functions under the Plan, subject to such terms as the Committee shall determine. Notwithstanding any provisions of the Plan to the contrary, the Committee may delegate any or all of its authority to select Participants, determine the type, amount and terms of Awards and to exercise all other powers described in Section 3.01 to any person or persons the Committee shall from time to time designate, but such delegation of authority may be made only with respect to the selection under the Plan for participation by and issuance of Awards to individuals who are not officers or directors who could be exempt from Section 16 of the Exchange Act under the provisions of Rule 16b-3. 3 4 3.03. Limitation of Liability. Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer or other employee of the Corporation or any Subsidiary, the Corporation's independent certified public accountants, or any executive compensation consultant or other professional retained by the Corporation to assist in the administration of the Plan. No member of the Committee, nor any officer or employee of the Corporation acting on behalf of the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any officer or employee of the Corporation acting on their behalf, shall, to the extent permitted by law, be fully indemnified and protected by the Corporation with respect to any such action, determination, or interpretation. SECTION 4. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in Section 10, the total number of Shares reserved and available for Awards under the Plan shall be 2,400,000. For purposes of this Section 4, the number of and time at which Shares shall be deemed to be subject to Awards and therefore counted against the number of Shares reserved and available under the Plan shall be the earliest date at which the Committee can reasonably estimate the number of Shares to be distributed in settlement of an Award or with respect to which payments will be made; provided, that, subject to the requirements of Rule 16b-3, the Committee may adopt procedures for the counting of Shares relating to any Award for which the number of Shares to be distributed or with respect to which payment will be made cannot be fixed at the date of grant to ensure appropriate counting, avoid double counting (in the case of tandem or substitute awards), and provide for adjustments in any case in which the number of Shares actually distributed or with respect to which payments are actually made differs from the number of Shares previously counted in connection with such Award. If any Shares to which an Award relates are forfeited or the Award is settled or terminates without a distribution of Shares (whether or not cash, other Awards, or other property is distributed with respect to such Award), any Shares counted against the number of Shares reserved and available under the Plan with respect to such Award shall, to the extent of any such forfeiture, settlement or termination, again be available for Awards under the Plan; provided, that such Shares shall be available for issuance only to the extent the issuance of such shares would be exempted under Rule 16b-3. SECTION 5. ELIGIBILITY. Awards may be granted only to individuals who are officers or other employees (including employees who are also directors) of the Corporation or a Subsidiary. SECTION 6. SPECIFIC TERMS OF AWARDS. 6.01. General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 11.02), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including without limitation the acceleration of vesting of any Awards or terms requiring forfeiture of Awards in the event of termination of employment by the Participant. Except as provided in Sections 7.03 or 7.04, only services may be required as consideration for the grant of any Award. 6.02. Performance Awards. Subject to the provisions of Sections 7.01 and 7.02, the Committee is authorized to grant Performance Awards to Participants on the following terms and conditions: (i) Awards and Conditions. A Performance Award shall confer upon the Participant rights, valued as determined by the Committee, and payable to, or exercisable by, the Participant to whom the Performance Award is granted, in whole or in part, as determined by the Committee, conditioned upon the achievement of performance criteria determined by the Committee. (ii) Other Terms. A Performance Award shall be denominated in Shares and may be payable in cash, Shares, other Awards, or other property, and have such other terms as shall be determined by the Committee. 4 5 6.03. Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to Participants. The Committee may provide that 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. 6.04. Restricted Stock. The Committee is authorized to grant Restricted Stock to Participants on the following terms and conditions: (i) Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends thereon), which restrictions may lapse separately or in combination at such times, under such circumstances, in such installments or otherwise as the Committee shall determine. (ii) Forfeiture. Performance-Based Restricted Stock shall be forfeited unless preestablished performance criteria specified by the Committee are met during the applicable restriction period. Except as otherwise determined by the Committee, upon termination of employment (as determined under criteria established by the Committee) during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Corporation; provided, that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes. (iii) Certificates of Shares. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, such certificates shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, the Corporation shall retain physical possession of the certificates, and the Participant shall deliver a stock power to the Corporation, endorsed in blank, relating to the Restricted Stock. (iv) Dividends. Unless otherwise determined by the Committee, cash dividends paid on Performance-Based Restricted Stock shall be automatically reinvested in additional shares of Performance-Based Restricted Stock and cash dividends paid on other Restricted Stock shall be paid to the Participant. Dividends reinvested in Performance-Based Restricted Stock and Shares distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such stock or other property has been distributed. 6.05. Deferred Stock. The Committee is authorized to grant Deferred Stock to Participants, on the following terms and conditions: (i) Award and Restrictions. Delivery of Shares will occur upon expiration of the deferral period specified for Deferred Stock by the Committee (or, if permitted by the Committee, as elected by the Participant). In addition, Deferred Stock shall be subject to such restrictions as the Committee may impose, which restrictions may lapse at the expiration of the deferral period or at earlier specified times, separately or in combination, in installments, or otherwise, as the Committee shall determine. (ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment (as determined under criteria established by the Committee) during the applicable deferral period or portion thereof (as provided in the Award Agreement evidencing the Deferred Stock), all Deferred Stock that is at that time subject to deferral (other than a deferral at the election of the Participant) shall be forfeited; provided, that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Deferred Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Deferred Stock. 5 6 6.06 Options. The Committee is authorized to grant Options to Participants on the following terms and conditions: (i) Exercise Price. The exercise price per Share purchasable under an Option shall be determined by the Committee; provided, that, except as provided in Section 7.03, such exercise price shall be not less than the Fair Market Value of a Share on the date of grant of such Option. (ii) Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, the methods by which such exercise price may be paid or deemed to be paid, the form of such payment, including, without limitation, cash, Shares, other Awards or awards issued under other Corporation plans, or other property (including notes or other contractual obligations of Participants to make payment on a deferred basis, such as through "cashless exercise" arrangements), and the methods by which Shares will be delivered or deemed to be delivered to Participants. Options shall expire not later than ten years after the date of grant. (iii) Incentive Stock Options. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, including but not limited to the requirement that no Incentive Stock Option shall be granted more than ten years after the effective date of the Plan. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options shall be interpreted, amended, or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any Incentive Stock Option under Section 422 of the Code. In the event a Participant voluntarily disqualifies an Option as an Incentive Stock Option, the Committee may, but shall not be obligated to, make such additional Awards or pay bonuses as the Committee shall deem appropriate to reflect the tax savings to the Corporation which result from such disqualification. 6.07. Stock Appreciation Rights. The Committee is authorized to grant Stock Appreciation Rights to Participants on the following terms and conditions: (i) Right to Payment. A Stock Appreciation Right shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine in the case of any such right, other than one related to an Incentive Stock Option, the Fair Market Value of one Share at any time during a specified period before or after the date of exercise or the Change of Control Price as defined in Section 9.03) over (B) the grant price of the Stock Appreciation Right as determined by the Committee as of the date of grant of the Stock Appreciation Right, which, except as provided in Section 7.03, shall be not less than the Fair Market Value of one Share on the date of grant. (ii) Other Terms. The Committee shall determine the time or times at which a Stock Appreciation Right may be exercised in whole or in part, the method of exercise, method of settlement, form of consideration payable in settlement, method by which Shares will be delivered or deemed to be delivered to Participants, and any other terms and conditions of any Stock Appreciation Right. Limited Stock Appreciation Rights that may be exercised only upon the occurrence of a Change of Control (as such term is defined in Section 9.02) or as otherwise defined by the Committee) may be granted under this Section 6.07. Stock Appreciation Rights shall expire not later than ten years after the date of grant. 6.08 Other Stock-Based Awards. The Committee is authorized to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan, including without limitation, Shares awarded purely as a "bonus" and not subject to any restrictions or conditions, convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, purchase rights, and Awards valued by reference to book value of Shares or the value of securities of or the performance of specified Subsidiaries. The Committee shall determine the terms and conditions of such Awards, which may include performance criteria. Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 6.08 shall be purchased for such consideration, paid for at such 6 7 times, by such methods, and in such forms, including, without limitation, cash, Shares, other Awards, or other property, as the Committee shall determine. SECTION 7. CERTAIN PROVISIONS APPLICABLE TO AWARDS. 7.01. Performance-Based Awards. Performance Awards, Performance-Based Restricted Stock, and certain Other Stock-Based Awards subject to performance criteria are intended to be "qualified performance-based compensation" within the meaning of section 162(m) of the Code and shall be paid solely on account of the attainment of one or more preestablished, objective performance goals within the meaning of section 162(m) and the regulations thereunder. As selected by the Committee, the performance goal shall be the attainment of one or more of the preestablished amounts of annual net income, operating income, cash flow, return on assets, return on equity, return on capital or total shareholder return of the Corporation. The payout of any such Award to a Covered Employee may be reduced, but not increased, based on the degree of attainment of other performance criteria or otherwise at the direction of the Committee. 7.02. Maximum Individual Awards. No individual may be granted more than 100,000 shares subject to any combination of Performance Awards, Restricted Stock, or other Stock-Based Awards subject to performance criteria in any given year. The maximum payout for any individual for a Performance Award paid in cash is 100 percent of the participant's January 1 base salary for the year of the Performance Award payment. No individual may receive more than 300,000 options in any given year. The Share amounts in this Section 7.02 are subject to adjustment under Section 10 and are subject to the Plan maximum under Section 4. 7.03. Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for any other Award granted under the Plan or any award granted under any other plan of the Corporation, any Subsidiary, or any business entity to be acquired by the Corporation or a Subsidiary, or any other right of a Participant to receive payment from the Corporation or any Subsidiary. If an Award is granted in substitution for another Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new Award. Awards granted in addition to or in tandem with other Awards or awards may be granted either as of the same time as or a different time from the grant of such other Awards or awards. The per Share exercise price of any Option, grant price of any Stock Appreciation Right, or purchase price of any other Award conferring a right to purchase Shares: (i) Granted in substitution for an outstanding Award or award shall be not less than the lesser of the Fair Market Value of a Share at the date such substitute award is granted or such Fair Market Value at that date reduced to reflect the Fair Market Value at that date of the Award or award required to be surrendered by the Participant as a condition to receipt of the substitute Award; or (ii) Retroactively granted in tandem with an outstanding Award or award shall be not less than the lesser of the Fair Market Value of a Share at the date of grant of the later Award or at the date of grant of the earlier Award or award. 7.04. Exchange Provisions. The Committee may at any time offer to exchange or buy out any previously granted Award for a payment in cash, Shares, other Awards (subject to Section 7.03), or other property based on such terms and conditions as the Committee shall determine and communicate to the Participant at the time that such offer is made. 7.05. Term of Awards. The term of each Award shall be for such period as may be determined by the Committee; provided, that in no event shall the term of any Option or a Stock Appreciation Right granted in tandem therewith exceed a period of ten years from the date of its grant (or such shorter period as may be applicable under Section 422 of the Code). 7 8 7.06. Form of Payment Under Awards. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Corporation or a Subsidiary upon the grant or exercise of an Award may be made in such forms as the Committee shall determine, including without limitation, cash, Shares, other Awards, or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. Such payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents in respect of installment or deferred payments denominated in Shares. SECTION 8. GENERAL RESTRICTIONS APPLICABLE TO AWARDS. 8.01. Restrictions Under Rule 16b-3. 8.01.1. Six-Month Holding Period. Unless a Participant could otherwise transfer an equity security, derivative security, or Shares issued upon exercise of a derivative security granted under the Plan without incurring liability under Section 16(b) of the Exchange Act, (i) an equity security issued under the Plan, other than an equity security issued upon exercise or conversion of a derivative security granted under the Plan, shall be held for at least six months from the date of acquisition; (ii) with respect to a derivative security issued under the Plan, at least six months shall elapse from the date of acquisition of the derivative security to the date of disposition of the derivative security (other than upon exercise or conversion) or its underlying equity security; and (iii) any Award in the nature of a Stock Appreciation Right must be held for six months from the date of grant to the date of cash settlement. 8.01.2. Nontransferability. Awards which constitute derivative securities (including any option, stock appreciation right, or similar right) shall not be transferable by a Participant except by will or the laws of descent and distribution (except pursuant to a beneficiary designation authorized under Section 8.02) or, if then permitted under Rule 16b-3, pursuant to a qualified domestic relations order as defined under the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder, and, in the case of an Incentive Stock Option or, if then required by Rule 16b-3, any other derivative security granted under the Plan, shall be exercisable during the lifetime of a Participant only by such Participant or his guardian or legal representative. 8.01.3. Compliance with Rule 16b-3. It is the intent of the Corporation that this Plan comply in all respects with Rule 16b-3 in connection with any Award granted to a person who is subject to Section 16 of the Exchange Act. Accordingly, if any provision of this Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 as then applicable to any such person, such provision shall be construed to the extent practicable to conform to such requirements with respect to such person. 8.02. Limits on Transfer of Awards; Beneficiaries. No right or interest of a Participant in any Award shall be pledged, encumbered, or hypothecated to or in favor of any party (other than the Corporation or a Subsidiary), or shall be subject to any lien, obligation, or liability of such Participant to any party (other than the Corporation or a Subsidiary). Unless otherwise determined by the Committee (subject to the requirements of Section 8.01.2), no Award subject to any restriction shall be assignable or transferable by a Participant otherwise than by will or the laws of descent and distribution (except to the Corporation under the terms of the Plan); provided, that a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant, and to receive any distribution, with respect to any Award, upon the death of the Participant. A beneficiary, guardian, legal representative, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant or agreement applicable to such, except to the extent the Plan and such Award Agreement or agreement otherwise provide with respect to such persons, and to any additional restrictions deemed necessary or appropriate by the Committee. 8.03. Registration and Listing Compliance. The Corporation shall not be obligated to deliver any Award or distribute any Shares with respect to any Award in a transaction subject to regulatory approval, registration, or any other applicable requirement of federal or state law, or subject to a listing requirement 8 9 under any listing or similar agreement between the Corporation and any national securities exchange, until such laws, regulations, and contractual obligations of the Corporation have been complied with in full, although the Corporation shall be obligated to use its best efforts to obtain any such approval and comply with such requirements as promptly as practicable. 8.04. Share Certificates. All certificates for Shares delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop-transfer order and other restrictions as the Committee may deem advisable under applicable federal or state laws, rules and regulations thereunder, and the rules of any national securities exchange on which Shares are listed. The Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions or any other restrictions that may be applicable to Shares, including under the terms of the Plan or any Award Agreement. In addition, during any period in which Awards or Shares are subject to restrictions under the terms of the Plan or any Award Agreement, or during any period during which delivery or receipt of an Award or Shares has been deferred by the Committee or a Participant, the Committee may require the Participant to enter into an agreement providing that certificates representing Shares issuable or issued pursuant to an Award shall remain in the physical custody of the Corporation or such other person as the Committee may designate. SECTION 9. CHANGE OF CONTROL PROVISIONS. Notwithstanding any other provision of the Plan, the following acceleration provisions shall apply in the event of a "Change in Control" as defined in this Section 9. 9.01. Acceleration and Cash-Out Rights. In the event of a "Change in Control" and a "Qualified Termination" as defined in Sections 9.02 and 9.03, respectively, automatically in the case of Participants subject to Section 16 of the Exchange Act, and unless otherwise determined by the Board in writing at or after grant but prior to the occurrence of the Change of Control in the case of Participants not subject to Section 16 of the Exchange Act: (i) the performance criteria of all Performance Awards, Performance-Based Restricted Stock, and Other Stock-Based Awards shall be deemed fully achieved and all such Awards shall be fully earned and vested, subject only to the restrictions on dispositions of equity securities set forth in Section 8.01.1 and legal restrictions on the issuance of Shares set forth in Section 8.04; (ii) any Option, Stock Appreciation Right, and other Award in the nature of a right that may be exercised which was not previously exercisable and vested shall become fully exercisable and vested, subject only to the restrictions on disposition of equity securities set forth in Section 8.01.1 and legal restrictions on the issuance of Shares set forth in Section 8.04; and (iii) the restrictions, deferral limitations, and forfeiture conditions applicable to any other Award granted under the Plan shall lapse and such Awards shall be deemed fully vested, subject only to the restrictions on dispositions of equity securities set forth in Section 8.01.1 and legal restrictions on the issuance of Shares set forth in Section 8.04. 9.02. Change of Control. For purposes of Section 9.01, a "Change of Control" shall mean any transaction that results in the voting control of the Corporation held by Cox Enterprises, Inc., its successor or any subsidiary of either falling below 50.1 percent. 9.03. Qualified Termination. For the purposes of Section 9.01, a "Qualified Termination" shall mean any termination of employment for reasons other than (i) Cause; (ii) death, Disability or Retirement, or (iii) by the Participant without Good Reason within one (1) year following a Change in Control. (a) "Cause" shall mean (i) the willful and continued failure by the Participant to substantially perform the Participant's duties with the Corporation or (ii) the willful engaging by the Participant in conduct which is demonstrably and materially injurious to the Corporation or its subsidiaries, monetarily or otherwise. 9 10 (b) "Disability" shall be deemed the reason for the termination by the Corporation of the Participant's employment, if, as a result of the Participant's incapacity due to physical or mental illness, the Participant shall have been absent from the full-time performance of the Participant's duties with the Corporation for a period of six (6) consecutive months. (c) "Good Reason" for termination by the Participant of the Participant's employment shall mean the occurrence (without the Participant's express written consent) after any Change in Control of any one of the following acts by the Corporation. (i) a reduction by the Corporation in the Participant's annual base salary; (ii) the relocation of the Corporation's principal executive offices to a location more than fifty (50) miles from the location of such offices immediately prior to the Change in Control, but only in the event the Participant was employed at the Corporation's principal executive offices immediately prior to such reallocation. (d) "Retirement" shall be deemed the reason for the termination by the Corporation or the Participant of the Participant's employment if such employment is terminated in accordance with the Corporation's retirement policy, not including early retirement, generally applicable to its employees, as in effect immediately prior to the Change in Control, or in accordance with any retirement arrangement established with the Participant's consent with respect to the Participant. SECTION 10. ADJUSTMENT PROVISIONS. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of Shares which may thereafter be issued in connection with Awards (ii) the number and kind of Shares issued or issuable in respect of outstanding Awards, and (iii) the exercise price, grant price, or purchase price relating to any Award or, if deemed appropriate, make provision for a cash payment with respect to any outstanding Award; provided, however, in each case, that, with respect to Incentive Stock Options, no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding sentence) affecting the Corporation or any Subsidiary or the financial statements of the Corporation or any Subsidiary, or in response to changes in applicable laws, regulations, or accounting principles. SECTION 11. CHANGES TO THE PLAN AND AWARDS. 11.01. Changes to the Plan. The Board may amend, alter, suspend, discontinue or terminate the Plan without the consent of shareholders or Participants, except that any such amendment, alteration, suspension, discontinuation, or termination shall be subject to the approval of the Corporation's shareholders within one year after such Board action if such shareholder approval is required by any federal or state law or regulation or the rules of any stock exchange on which the Shares may be listed, or if the Board in its discretion determines that obtaining such shareholder approval is for any reason advisable; provided, however, that, without the consent of an affected Participant, no amendment, alteration, suspension, discontinuation, or termination of the Plan may impair the rights of such Participant under any Award theretofore granted to him. 11.02. Changes to Awards. The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue, or terminate, any Award theretofore granted and any Award Agreement relating thereto; provided, however, that, without the consent of an affected Participant, no such amendment, alteration, suspension, discontinuation, or termination of any Award may impair the rights of such Participant under such Award. 10 11 SECTION 12. GENERAL PROVISIONS. 12.01. No Rights to Awards. No Participant or employee shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants and employees. 12.02. No Shareholder Rights. No Award shall confer on any Participant any of the rights of a shareholder of the Corporation unless and until Shares are duly issued or transferred to the Participant in accordance with the terms of the Award. 12.03. Tax Withholding. The Corporation or any Subsidiary is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Shares, or any payroll or other payment to a Participant, amounts or withholding and other taxes due with respect thereto, its exercise, or any payment thereunder, and to take such other action as the Committee may deem necessary or advisable to enable the Corporation and Participants to satisfy obligations for the payment of withholding taxes and other tax liabilities relating to any Award. This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of Participant's tax obligations. 12.04. No Right to Employment. Nothing contained in the Plan or any Award Agreement shall confer, and no grant of an Award shall be construed as conferring, upon any employee any right to continue in the employ of the Corporation or any Subsidiary or to interfere in any way with the right of the Corporation or any Subsidiary to terminate his employment at any time or increase or decrease his compensation from the rate in existence at the time of granting of an Award. 12.05. Unfunded Status of Awards. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Corporation; provided, however, that the Committee may authorize the creation of trusts or make other arrangements to meet the Corporation's obligations under the Plan to deliver cash, Shares, other Awards, or other property pursuant to any award, which trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Committee otherwise determines with the consent of each affected Participant. 12.06. Other Compensatory Arrangements. The Corporation or any Subsidiary shall be permitted to adopt other or additional compensation arrangements (which may include arrangements which relate to Awards), and such arrangements may be either generally applicable or applicable only in specific cases. 12.07. Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated. 12.08. Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan, and any Award Agreement shall be determined in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of laws, and applicable Federal law. SECTION 13. EFFECTIVE DATE. The Plan shall become effective on the date of the effective day of the initial public offering of common stock of the Corporation. 11 EX-10.10 17 COX EMPLOYEE STOCK PURCHASE PLAN 1 EXHIBIT 10.10 COX RADIO, INC. EMPLOYEE STOCK PURCHASE PLAN 1. PURPOSE OF THE PLAN The purpose of the Cox Radio, Inc. Employee Stock Purchase Plan (the"Plan") is to provide a method by which eligible employees of Cox Radio, Inc. and its subsidiary corporations (the "Company") may purchase shares of Class A Common Stock of the Company ("Shares") by payroll deductions and at favorable prices. By this means, eligible employees will be given an opportunity to acquire an additional interest in the economic progress of the Company and a further incentive to promote the best interest of the Company. The Plan is intended to meet the requirements for an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended, (the "Code") and is to be interpreted and applied consistent with those requirements. 2. ELIGIBILITY TO PARTICIPATE Any regular employee of the Company employed by the Company as of December 1, 1996 is eligible to participate in the Plan. For this purpose, employment service with NewCity Communications, Inc. and its subsidiary corporations is counted under the Plan as employment with the Company. A "regular employee" means any employee regularly scheduled to work at least 30 hours per week, including any such person on an authorized leave of absence. Notwithstanding the foregoing, any employee who, after purchasing Shares under the Plan, would own 5 percent or more of the total combined voting power or value of all classes of stock of the Company or any parent corporation or subsidiary corporation thereof is not eligible to participate. Ownership of stock is determined in accordance with the provisions of Section 424(d) of the Code. For all Plan purposes, the terms "parent corporation" and "subsidiary corporation" have the meanings set forth in Sections 424(e) and (f) of the Code, respectively. 3. NUMBER OF SHARES TO BE OFFERED An aggregate 350,000 Shares will be offered for subscription under the Plan. 4. PURCHASE PRICE The purchase price per Share offered under this Plan will be 85 percent of the Fair Market Value of a Share determined as of April 1, 1997 (the "Grant Date"). "Fair Market Value" means the average of the high and low prices per Share as reflected by composite transactions on 1 2 the various national securities exchanges on which the Shares are listed and as reported by the National Association of Securities Dealers on the date the Fair Market Value is being determined, or if there are no transactions on that date, then the closing price for the preceding date upon which transactions occurred. 5. OFFERING OF SHARES FOR SUBSCRIPTION Shares will be offered to eligible employees for subscription during the period beginning with the Grant Date and ending with May 15, 1997. To subscribe, an eligible employee must complete, sign and deliver a subscription agreement to the Company no later than the last day of this subscription period. In the subscription agreement, the employee shall indicate the dollar amount of Shares for which the employee is subscribing to purchase (the "Subscription Amount"). 6. METHOD OF PAYMENT Payment of an employee's Subscription Amount will be made through payroll deductions, and an employee's participation in the Plan is contingent on the employee's providing the Company with written authorization to withhold payroll deductions. The Subscription Amount shall be withheld from the employee's pay in substantially equal installments each pay day during the 25 month period beginning June 1, 1997. Notwithstanding the foregoing, an employee may arrange to pay any installment due for any payroll period directly to the Company in the event the employee is on an authorized unpaid leave of absence during such payroll period. 7. LIMIT ON AMOUNT OF SHARES SUBSCRIBED Notwithstanding an employee's subscription agreement, the maximum amount that may be withheld from an employee's pay or otherwise paid to the Company for the purchase of Shares during the 25 month period referenced in Section 6 of the Plan shall not exceed $12,500. In the event of an oversubscription of Shares, each employee's subscription shall be reduced on a pro rata basis so that the total number of Shares subject to subscription does not exceed the maximum number of Shares authorized under Section 3 of the Plan. 8. PURCHASE OF SHARES Unless an employee previously has withdrawn from the Plan as provided in Section 9 or otherwise has had his or her participation terminated as provided in Section 12, a participating employee will be deemed to have exercised his or her right to purchase Shares as of July 1, 1999 (the "Purchase Date"). The number of Shares purchased by the employee shall be equal to the whole number of Shares that may be purchased with the total amount of withheld 2 3 payments made by the employee under the Plan that have not been refunded to the employee. Any amount remaining after the purchase of full Shares will be refunded to the employee. 9. CHANGE IN PARTICIPATION AND WITHDRAWAL FROM PLAN A participating employee may reduce his or her Subscription Amount at any time, but on a prospective basis only, by giving written notice to that effect to the Company. Such a reduction shall take effect as soon as is administratively feasible following the date as of which the Company is so notified. An employee may withdraw from the Plan and cancel his or her subscription at any time prior to the Purchase Date by giving written notice of cancellation to the Company. In such event, the employee may elect to have the entire amount he or she has paid to date applied to the purchase of whole Shares, with any remaining amount refunded in cash to the employee, or to have the entire amount paid to date refunded to the employee in cash with interest as provided in Section 10. Should any installment be due and unpaid for thirty days (as in the case of an unpaid leave of absence) without satisfactory arrangement for the payment being made within such period, the subscription shall be automatically canceled, the amount previously paid plus interest, as provided in Section 10, shall be refunded to the employee in cash and the employee shall have no right to purchase Shares under the Plan. 10. INTEREST ON REFUNDED PAYMENTS At any time that the entire amount paid by an employee under the Plan is refunded to the employee (or his or her estate) under any provision of the Plan in cash, as opposed to in Shares, the amount refunded shall be paid to the employee with interest calculated at a rate of 6% per annum in the manner determined by the Committee, as defined in Section 15, which shall be applied on a uniform and nondiscriminatory basis. 11. RIGHTS NOT TRANSFERABLE In the case of termination of employment, including retirement or death, the participating employee or his or her beneficiary may elect within thirty days after the happening of such event to (i) receive in cash the full amount paid by the employee, or (ii) have the amount paid applied to the purchase of full Shares with any remaining funds refunded in cash to the employee or to his or her beneficiary. A failure to make such election within such thirty-day period will be treated as notice of cancellation and the full amount paid will be refunded in cash. Each employee shall be permitted to designate his or her beneficiary under this Section 11, which designation shall be made in writing on a form prepared by or satisfactory to the Company and shall be delivered to the Company. In the event an employee does not so designate a beneficiary, any election rights under this Section 11 otherwise subject to delegation to a beneficiary will be deemed delegated to the employee's estate. 3 4 12. TERMINATION OF RIGHTS (a) Upon termination of employment for any reason other than retirement or death, the participating employee will be refunded the amount paid by him or her under the Plan with interest as provided under Section 10. (b) In the case of retirement or death, the participating employee or his or her estate may elect within thirty days after the happening of such event to (i) receive in cash the amount paid by the employee with interest as provided under Section 10 or (ii) have the amount paid applied to the purchase of full Shares with any remaining funds refunded in cash to the employee or to his or her estate. A failure to make such election within the such thirty-day period will be treated as notice of cancellation and the amount paid will be refunded with interest as provided in Section 10. (c) For the purpose of this Plan,"retirement" shall mean an employee's termination of employment with the Company after attainment of age 55. 13. ISSUANCE OF SHARES As soon as is administratively feasible after the purchase of any Shares under the Plan, the employee will be issued a stock certificate for the number of Shares purchased. The Shares will be issued only in the name of the participating employee, or if directed by the employee, in the employee's name and in the name of one other person as tenants by the entireties or joint tenants with right of survivorship. 14. APPLICATION OF FUNDS All funds held or received by the Company under this Plan may be used for any corporate purpose until applied to the purchase of Shares or refunded to employees and shall not be segregated from the general assets of the Company. 15. ADMINISTRATION The Plan shall be administered by the Board of Directors or by a committee designated by the Board (the "Committee") of the Company . The Committee shall prescribe such rules as it deems necessary to administer the Plan and shall have the sole and discretionary authority to resolve any questions regarding the interpretation or application of the terms of the Plan. 4 5 16. AMENDMENT OR DISCONTINUANCE OF PLAN The Board of Directors of the Company shall have the right to amend, modify or terminate the Plan at any time without notice, provided that no employee's then existing rights are adversely affected without his or her consent, and provided further that any amendment of the Plan shall, except as is provided in Section 17, shall be subject to shareholder approval to the extent required by any Federal or state law or the rules of any stock exchange on which the Shares may be listed. 17. ADJUSTMENT OF SUBSCRIPTIONS In the event of reorganization, recapitalization, stock split, stock dividend, merger, consolidation or any other change in the structure of Shares of the Common Stock of the Company, the Board of Directors of the Company may make such adjustment as it may deem appropriate in the number, kind and subscription price of Shares available for purchase under the Plan. 5 EX-10.11 18 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS 1 EXHIBIT 10.11 COX RADIO, INC. RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS SECTION 1. PURPOSE. The purpose of the Restricted Stock Plan for Non-Employee Directors of Cox Radio, Inc. (the "Corporation") is to attract and retain qualified persons who are not employees of the Corporation or any of its subsidiaries or affiliates for service as members of the Board of Directors by granting such directors shares of the Corporation's Common Stock, which are restricted in accordance with the terms and conditions set forth below, and thereby encouraging ownership in the Corporation by non-employee directors. SECTION 2. DEFINITIONS. Whenever used herein, unless the context otherwise indicates, the following terms shall have the respective meaning set forth below: Act: The Securities Exchange Act of 1934, as amended. Annual Board Retainer: The fee paid by the Corporation to each nonemployee Director of the Corporation, which fee may be modified from year to year. Board: The Board of Directors of the Corporation. Board Membership: The period of time during which a person served on the Board regardless of whether occurring before or after the Effective Date. Committee: The Board or a committee appointed by the Board that administers the Plan in accordance with Section 7 hereof. Common Stock: Class A Common Stock of Cox Radio, Inc. Corporation: Cox Radio, Inc. or any successor to it in ownership of substantially all of its assets, whether by merger, consolidation or otherwise. Director: Any member of the Board. Disability: A medically determinable physical or mental impairment which renders a participant substantially unable to function as a Director. Effective Date: The date specified in Section 10 hereof. Eligible Director: Any Director who is not an employee of the Corporation or any of its subsidiaries or affiliates. Participant: Each Director to whom Restricted Stock is granted under the Plan. Plan: The Cox Radio, Inc. Restricted Stock Plan for Non-Employee Directors. Restricted Period: With respect to each grant of Restricted Stock, the period of time from the date of grant of such Restricted Stock until the earliest to occur of the events described in Section 4(b) hereof. 1 2 Restricted Stock: Common Stock granted under the Plan which is subject to restrictions in accordance with Section 4 hereof. SECTION 3. ELIGIBILITY AND GRANTS. (a) Grants. Each Eligible Director shall receive fifty percent of the Annual Board Retainer in the form of Restricted Stock. The number of shares of Restricted Stock granted at any time shall be based on the closing price of a share of Common Stock on the New York Stock Exchange as of the date the Annual Board Retainer is payable. If required by the Committee, each grant of Restricted Stock shall be evidenced by a written agreement duly executed by or on behalf of the Corporation and the Participant. (b) Number of Shares. Notwithstanding any provisions of Section 3(a) to the contrary, the total number of shares of Restricted Stock which may be granted under the Plan shall not exceed 25,000. The shares may be authorized and unissued or issued and reacquired shares, as the Board of Directors from time to time may determine. Shares of Restricted Stock that are forfeited before the restrictions lapse shall be available for subsequent grants of Restricted Stock under the Plan to the extent that the Participant by whom such shares were forfeited did not, prior to the date of forfeitures, receive any benefits of ownership with respect to the shares of Restricted Stock. SECTION 4. TERMS AND CONDITIONS OF RESTRICTED STOCK. The restrictions set forth in this section shall apply to each grant of Restricted Stock for the duration of the Restriction Period. (a) Restrictions. A stock certificate representing the number of shares of Restricted Stock granted shall be registered in the Participant's name but shall be held in custody by the Corporation for the Participant's account. The Participant shall have all rights and privileges of a stockholder as to such Restricted Stock, including the rights to vote and to receive dividends, except that, subject to the provisions of Sections 3(a) and 4(b), the following restrictions shall apply: (i) the Participant shall not be entitled to delivery of the certificate until the expiration of the Restricted Period; (ii) none of the shares of Restricted Stock may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period; (iii) the Participant shall, if requested by the Corporation, execute and deliver to the Corporation, a stock power endorsed in blank. Upon the forfeiture (in whole or in part) of shares of Restricted Stock, in accordance with the provisions of Section 4(b), such forfeited shares shall become treasury shares of the Corporation without further action by the Participant. The Participant shall have the same rights and privileges, and be subject to the same restrictions, with respect to any shares received pursuant to Section 6. (b) Events. The Restricted Period shall begin on the date of grant of such Restricted Stock and shall end upon the first to occur of the following events: (i) Five Years of Service. With respect to each grant of Restricted Stock, the date on which the Participant completes five (5) years of service as a Director measured from the date of the grant to the Participant under the Plan. Except to the extent provided in subsections (ii) or (iii) below, a Participant who ceases to be a Director before completing five (5) years of service after the date of any grant of Restricted Stock shall forfeit such Restricted Stock. (ii) Disability. The date on which the Participant ceases to be a Director by reason of Disability. (iii) Death. The date on which the Participant ceases to be a Director by reason of death. (c) Delivery of Restricted Shares: At the end of the Restricted Period as herein provided, a stock certificate for the number of shares of Restricted Stock with respect to which the restrictions have lapsed shall be delivered, free of all such restrictions, to the Participant or the Participant's beneficiary or estate, as the case may be, subject to the withholding requirements of Section 9 hereof. The Corporation shall not be required to deliver any fractional share of Common Stock but will pay, in lieu thereof, the fair market value 2 3 (measured as of the date the restrictions lapse) of such fractional share to the Participant or the Participant's beneficiary or estate, as the case may be. SECTION 5. REGULATORY COMPLIANCE AND LISTING. The issuance or delivery of any shares of Restricted Stock may be postponed by the Corporation for such period as may be required to comply with any applicable requirements under the Federal securities laws, any applicable listing requirements of any national securities exchange or any requirements under any other law or regulation applicable to the issuance or delivery of such shares and the Corporation shall not be obligated to issue or deliver any such shares if the issuance or delivery thereof shall constitute a violation of any provision of any law or any regulation of any governmental authority or any national securities exchange. SECTION 6. ADJUSTMENTS. In the event of a recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation, rights offering, separation, reorganization or liquidation, or any other change in the corporate structure or shares of the Corporation, the Committee, in the exercise of its sole discretion, may make such equitable adjustments, to prevent dilution or enlargement of rights, as it may deem appropriate in the number and class of shares authorized to be granted hereunder. SECTION 7. ADMINISTRATION. The Plan shall be administered by the Committee. All determinations of the Committee shall be conclusive. The Committee may obtain such advice or assistance as it deems appropriate from persons not serving on the Committee. SECTION 8. TERMINATION OR AMENDMENT. The Board may at any time terminate the Plan and may from time to time alter or amend the Plan or any part thereof (including any amendment deemed necessary to ensure that the Corporation may comply with any regulatory requirement referred to in Section 5), provided, that, unless otherwise required by law, the rights of a Participant with respect to shares of Restricted Stock granted prior to such termination, alteration or amendment may not be impaired without the consent of such Participant and, provided further, to the extent required by any Federal or state law or regulation or the rules of any stock exchange on which the Common Stock may be listed, without the approval of the Corporation's shareholders, no alteration or amendment may be made which would (i) materially increase the aggregate number of shares of Restricted Stock that may be granted under the Plan (except by operation of Section 6), or (ii) change the category of Directors eligible to receive shares of Restricted Stock under the Plan. Notwithstanding the foregoing, the Plan shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act or the rules thereunder. The Corporation intends that the Plan and the grants of Restricted Stock hereunder shall comply with the conditions of Rule 16b-3 of the Act and qualify for the exemption from Section 16(b) of the Act as a "formula plan." SECTION 9. MISCELLANEOUS. (a) Right to Re-election. Nothing in the Plan shall be deemed to create any obligation on the part of the Board to nominate any Director for re-election by the Corporation's stockholders, nor confer upon any Director the right to remain a member of the Board. (b) Withholding of Taxes. Any taxes required to be paid by law with respect to the issuance or delivery of such shares shall be satisfied by reducing the number of shares of Common Stock otherwise deliverable to a Director. (c) Governing Law. This Plan shall be governed by the law of the State of Delaware and in accordance with such Federal laws as may be applicable. (d) Construction. Wherever any words are used herein in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would apply. SECTION 10. EFFECTIVE DATE. The Plan shall become effective on the date of the effective day of the initial public offering of common stock of the Corporation. 3 EX-11 19 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 COX RADIO, INC. STATEMENT REGARDING: COMPUTATION OF EARNINGS PER SHARE
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, ------------------- 1995 1995 1996 ------------ ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Pro forma information for the Cox Radio Consolidation: Historical net income.................................... $ 8,163 $ 3,796 $ 5,213 ======= ======= ======= Pro forma common shares outstanding...................... 19,578 19,578 19,578 ======= ======= ======= Pro forma net income per share........................... $ .42 $ .19 $ .27 ======= ======= ======= Pro forma information for the Cox Radio Consolidation and the Transactions: Historical net income.................................... $ 8,163 $ 3,796 $ 5,213 Pro forma adjustments.................................... (7,011) (4,681) (3,697) ------- ------- ------- Pro forma net income (loss).............................. $ 1,152 $ (885) $ 1,516 ======= ======= ======= Pro forma common shares outstanding for the Cox Radio Consolidation.......................................... 19,578 19,578 19,578 Issuance of Class A Common Stock in connection with the Transactions.................................. 7,655 7,655 7,655 ------- ------- ------- Pro forma common shares outstanding for the Cox Radio Consolidation and the Transactions..................... 27,233 27,233 27,233 ======= ======= ======= Pro forma net income (loss) per share.................... $ .04 $ (.03) $ .06 ======= ======= =======
EX-21 20 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 Subsidiaries of Cox Radio, Inc.(1) Cox Kentucky, Inc. WHIO, Inc. WSB, Inc. Cox Louisville, LLC ______________________ (1)Assumes completion of Cox Radio Consolidation. EX-23.1 21 CONSENT & REPORT DELOITTE & TOUCHE 1 EXHIBIT 23.1 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 Amendment No. 1 to Registration Statement No. 333-08737 of Cox Radio, Inc. 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 on 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 August 27, 1996 EX-23.2 22 CONSENT OF ERNST & YOUNG 1 EXHIBIT 23.2 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 of NewCity Communications, Inc. included in Amendment No. 1 to the Registration Statement (Form S-1 No. 333-08737) and related Prospectus of Cox Radio, Inc. for the registration of shares of its common stock. ERNST & YOUNG LLP Stamford, Connecticut August 27, 1996 EX-23.3 23 CONSENT OF DELOITTE & TOUCHE 1 EXHIBIT 23.3 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Amendment No. 1 to Registration Statement No. 333-08737 of Cox Radio, Inc. 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 August 27, 1996 EX-23.5 24 CONSENT OF RICHARD FERGUSON 1 EXHIBIT 23.5 CONSENT OF PERSON TO BECOME DIRECTOR Cox Radio, Inc.: I hereby consent to being named in the Registation Statement on Form S-1 of Cox Radio, Inc. as a person who will become a director of Cox Radio, Inc. upon the consummation of the merger of New Cox Radio II, Inc. with and into NewCity Communications, Inc., with NewCity Communications, Inc. as the surviving corporation as a wholly-owned subsidiary of Cox Radio, Inc. /s/ Richard A. Ferguson ------------------------ Richard A. Ferguson Bridgeport, Connecticut August 27, 1996 EX-27.1 25 FINANCIAL DATA SCHEDULE
5 1,000 6-mos DEC-31-1996 JAN-01-1996 JUN-30-1996 1,666 0 32,178 893 0 37,755 52,554 (22,940) 204,766 11,458 0 0 0 1 81,331 204,766 66,308 66,308 0 47,297 6,320 0 2,856 9,560 4,347 5,253 0 0 0 5,253 0 0
-----END PRIVACY-ENHANCED MESSAGE-----