EZ COMMUNICATIONS, INC.
10800 MAIN STREET, P.O. BOX 10103
FAIRFAX, VA 22030-8003 703/591-1000 FAX 703/934-1200
August 28, 1996
Mr. Geoffrey Armstrong
SFX Broadcasting, Inc.
600 Congress Avenue
Suite 1270
Austin, Texas 78701
Re: Asset Exchange of WSSS(FM), Charlotte, North Carolina for WTDR(FM),
Stateville, North Carolina and Asset Purchase of WNKS(FM), Charlotte,
North Carolina and WRFX(FM), Kannapolis, North Carolina
Dear Jeff:
This letter is intended to set forth the basic terms of a possible like-kind
exchange within the meaning of Section 1031 of the Internal Revenue Code and
the regulations thereunder and asset purchase (the "Subject Transaction")
between EZ Communications, Inc., a Virginia corporation ("EZ"), present or
future licensee and owner of substantially all of the assets that are used or
useful in the operation of radio stations WSSS(FM) and WNKS(FM), Charlotte,
North Carolina and WRFX(FM), Kannapolis, North Carolina (the "EZ Stations")
and SFX Broadcasting, Inc. ("SFX"), a Delaware corporation, licensee and owner
of substantially all of the assets that are used or useful in the operation of
radio station WTDR(FM), Charlotte, North Carolina (the "SFX Station," and,
with the EZ Stations the "Stations").
1. Nature of the Subject Transaction. The Subject Transaction shall
involve the transfer and delivery by EZ and SFX at Closing of all the tangible
and intangible assets, both real and personal, used or useful in the operation
of the EZ Stations and SFX Station, respectively, and related real property,
but excluding cash, cash equivalents, and accounts receivable. The transfer
and delivery of the assets comprising WNKS(FM) and WRFX(FM), Charlotte, North
Carolina shall be excluded from the like-kind exchange described above, but
shall be the subject of a separate asset purchase agreement pursuant to which
SFX shall convey to EZ at Closing for such assets Sixty-Four Million Eight
Hundred Thousand Dollars ($64,800,000) in immediately available funds (the
"Asset Purchase Agreement"). As of this date, EZ has not been granted licenses
by the Federal Communications Commission to operate radio stations WNKS(FM)
and WRFX(FM) (the "Future EZ Stations"). In addition, EZ has not closed the
transactions to purchase the Future EZ Stations.
Mr. Geoffrey Armstrong
August 28, 1996
Page 2
Therefore, EZ agrees to transfer all the tangible and intangible assets, both
real and personal, used or useful in the operation of the Future EZ Stations,
and related property, but excluding cash, cash equivalents, and accounts
receivable subject to an Asset Purchase Agreement and Asset Exchange Agreement
between EZ and Evergreen Media Corporation with respect to WNKS(FM) and
WRFX(FM) (collectively referred to as "Purchase & Exchange Agreements"). The
assets of the Stations to be exchanged will be transferred free and clear of
all liabilities, liens and encumbrances, including liabilities under financing
agreements, except those specifically provided for under the Purchase &
Exchange Agreements referred to above, if any.
2. Working Capital Adjustments. Within sixty (60) days following the
Closing Date, the parties shall establish a net working capital adjustment
based on customary accounting principles, including, without limitation, the
amount of the Stations' respective aggregate net trade balance at closing, if
and to the extent such balance is negative and exceeds mutually agreed levels
as to the EZ Stations and the SFX Station, respectively, and otherwise by the
amount of any prorations for rent, utility payments, employee benefits
(including vacation and sick leave), and other normal income and expense items
related to the operation of the Stations. Income and expense of the Stations
will be prorated as of 12:01 a.m., Eastern time, on the day of Closing.
3. Accounts Receivable. The parties will use their best efforts to
collect the accounts receivable of the Stations existing as of the Closing for
a period of 90 days after the Closing. Prior to the fifteenth day after the
end of the 90-day collection period, the parties will remit to the other all
amounts collected with respect to those account receivable, and all records,
or copies thereof, with respect to any accounts receivable.
4. Definitive Agreements. The parties will undertake to negotiate a
definitive Asset Exchange Agreement and Asset Purchase Agreement (together,
the "Agreements"), setting forth the terms and conditions of the exchange,
which will supersede all prior agreements, if any, between EZ and SFX. The
parties may assign their rights and obligations under this letter of intent
and the definitive Agreements to a wholly owned subsidiary, or to American
Radio Systems Corporation in the case of EZ, provided however that each party
shall remain liable to the other party for the satisfactory performance of
such assignee's obligations under this letter of intent or the Agreements, as
the case may be.
a. Terms of the Agreements. The Agreements will contain provisions
appropriate for a radio station asset exchange and purchase transaction,
including appropriate representations, warranties, covenants (which, as to
stations WNKS(FM) and WRFX(FM), shall be no greater than those granted by EZ's
predecessor), and indemnification agreement, such as the following:
Mr. Geoffrey Armstrong
August 28, 1996
Page 3
i. FCC Approval. The exchange and sale of the Stations will be
conditioned on the prior consent of the FCC as to EZ's acquisition of the SFX
Station and SFX's acquisition of the EZ Stations, with the consent having
become a Final Order (as that term is commonly understood) and the parties
having complied with any statutory or regulatory requirements imposed or
administered by the FCC, provided, however, that the Closing shall not occur
prior to the close of the Purchase & Exchange Agreements between EZ and
Evergreen Media Corporation.
ii. Governmental Approvals. The exchange and sale of the
Stations will also be conditioned on the prior consent and approval of any
other Federal, state or local governmental agencies, the compliance by the
parties with any statutory or regulatory requirements imposed or administered
by any of those agencies and authorities, and the expiration of any applicable
waiting periods. The Agreements shall provide that it shall be the primary
responsibility of EZ, in the case of the EZ Stations, and SFX, in the case of
the SFX Station, to obtain necessary regulatory consents, including, without
limitation, making arrangements with third parties to insure regulatory
compliance of the Subject Transaction within the respective markets.
iii. Other Approvals. The exchange of the Stations will also
be conditioned on the receipt of all material third-party consents without the
imposition of any conditions that would be adverse to EZ or SFX. SFX and EZ
will warrant in the Agreements that it will use its best efforts to obtain all
material consents required under this paragraph prior to the Closing.
iv. Assumption of Liabilities. At Closing EZ in the case of
the SFX Station and SFX in the case of the EZ Stations will assume the
obligations of ongoing agreements of the Stations to the extent that the
obligations relate to the period after the Closing, and to the extent such
obligations are disclosed in the Agreements or are entered into thereafter in
the ordinary course of business. However, the parties will not assume any
obligations arising under financing arrangements or under agreements entered
into other than in the ordinary course of business.
v. Conditional Nature of the WNKS/WRFX Agreement. The Asset
Purchase Agreement shall provide that the closing under the Asset Exchange
Agreement is a condition precedent to closing the Asset Purchase Agreement,
but the closing of the Asset Purchase Agreement shall not be a condition to
closing the Asset Exchange Agreement; provided, however, SFX shall have the
option to terminate both the Asset Purchase Agreement and Asset Exchange
Agreement if EZ is unable to close under either agreement.
vi. Specific Performance. Agreements shall provide that either
party shall be entitled to obtain specific performance of the other's
obligation in the event such other party
Mr. Geoffrey Armstrong
August 28, 1996
Page 4
wrongfully breaches its obligations to close the transaction pursuant to the
terms of the Agreements.
vii. Upset Date. The Asset Exchange Agreement will provide
that either party, if not then in default, could terminate the agreement at
any time after December 31, 1997.
b. Delivery of Draft Agreements; Due Diligence. EZ is prepared to
deliver a first draft of the Agreements to SFX within ten (10) days of the
date that this letter is countersigned on behalf of SFX. The parties shall
immediately have the opportunity to begin a thorough investigation and review
of (i) the conditions of the technical facilities of the Stations, and (ii)
the cash flow, assets and liabilities of the Stations as reflected in its
books, financial records and material contracts. The satisfactory completion
of such investigation and review and the approval of the Board of EZ
Communications, Inc. and SFX shall be condition precedents to the execution
and delivery of the Agreements.
c. Execution of Asset Exchange Agreement; Filing of FCC
Application. Unless otherwise mutually agreed, the parties shall use their
best efforts to execute and deliver the Agreements within thirty days after
the full execution and delivery of this letter, and to prepare and file an FCC
Assignment Application with respect to the Stations' licenses within ten (10)
days following such execution and delivery of the Agreements.
5. Time Brokerage Agreement. EZ and SFX agree to mutually negotiate in
good faith and enter into a Time Brokerage Agreement, which shall become
effective as of September 15, 1996, pursuant to which EZ (or its assignee), in
the case of the SFX Stations, and SFX, in the case of the EZ Stations, shall
be entitled to program, promote and sell advertising time on such respective
Stations to the fullest extent allowable by law. The parties agree that their
respective fees provided for under the Time Brokerage Agreements, shall be
equal and offsetting, subject to adjustment to reflect the projected 1996
monthly cash flow of the EZ Stations and SFX Station, respectively.
6. Broker, Expenses of Transaction. EZ and SFX will share equally any
transfer taxes, sales taxes, document stamps, or other charges levied by any
governmental entity including FCC, FTC and other filing fees on account of the
exchange and sale of the Stations. SFX and EZ hereby represent and warrant to
the other that neither has retained any broker or agent in connection with the
purchase or sale or exchange of the Stations other than Ed Dougan &
Associates, whose fee shall be borne equally between SFX and EZ, provided that
EZ's share of such fees shall not exceed Three Hundred Twenty Four Thousand
Dollars ($324,000).
7. Exclusive Negotiations. During the period of negotiation of the
Agreements, the parties hereby agree, in consideration of expenses to be
incurred in pursuing exchange of the Stations, that they will not discuss or
negotiate with any other possible party, or entertain or consider
Mr. Geoffrey Armstrong
August 28, 1996
Page 5
any inquiries or proposals relating to, the possible disposition of the Stations
or of any material portion thereof.
8. Operations in Ordinary Course. Except to the extent provided for
otherwise in the respective Time Brokerage Agreement, the parties hereby agree
that they will operate their respective Stations only in the ordinary course
of business, including, without limitation, using its reasonable best efforts
to maintain all existing individual employment agreements and arrangements,
and to maintain levels of marketing and promotion efforts and expenditures in
the period prior to Closing at levels no less than those currently budgeted in
1996 business plans.
9. Confidentiality. During the course of negotiation of the Agreements,
the parties will continue to discuss and obtain information regarding the
Stations. The parties and their affiliates and agents agree to maintain in
confidence all such information and any other information obtained from the
other, whether written or oral. Subject to the requirements of law, EZ and SFX
shall keep confidential their negotiations regarding, and any definitive
agreement reached for, the exchange of the Stations. Upon request, the parties
will return all written information obtained from the other, any written
record of all oral information obtained from the other and all copies thereof,
including any corporate data files with respect thereto. Subject to applicable
FCC and other legal requirements, no public announcement regarding this letter
of intent or the underlying transaction shall be made without the express
written approval of both EZ and SFX, which shall not be unreasonably withheld
and with the understanding that the parties desire to issue public
announcements of the contemplated transactions on Thursday, August 29, 1996.
If the foregoing is acceptable, please countersign below to confirm your
intent to proceed with negotiations consistent with the terms of this letter
no later than three (3) business days following its receipt. By so doing, the
parties (i) agree to be bound by the terms set forth herein, which represent
the essential terms of the Subject Transaction, and agree to negotiate in good
faith such supplemental terms as are customary in similar transactions, and
(ii) represent and warrant to each
Mr. Geoffrey Armstrong
August 28, 1996
Page 6
other that said negotiation, execution, delivery and performance of the
Agreements substantially as described above would not violate, conflict with,
or result in the breach of terms of any agreement, written or oral, or by
which the parties or any of their property is bound.
Very truly yours,
EZ COMMUNICATIONS, INC.
By: /s/ Alan Box
---------------------------
Alan Box, President
ACCEPTED:
SFX BROADCASTING, INC.
By: /s/ D. Geoffrey Armstrong
---------------------------------------------
Its: Executive Vice President, CFO and COO
--------------------------------------
Date: August 28, 1996
-------------------------------------
In acknowledgment that EZ and American Radio Systems Corporation ("ARS")
have entered into an Agreement and Plan of Merger dated August 5, 1996, ARS
hereby acknowledges receipt of notice of the Subject Transaction and consents
to the terms herein.
AMERICAN RADIO SYSTEMS
CORPORATION
By: /s/ Steve Dodge
--------------------------------