Discontinued Operations

On April 29, 2011, we entered into a Stock Purchase Agreement with Clear Channel, pursuant to which we sold all of the outstanding capital stock of our subsidiaries that collectively comprised our Metro Traffic business (referred to herein as the “Metro Sale Transaction”). Pursuant to the Stock Purchase Agreement, Clear Channel purchased the Metro Traffic business for $25,000 in cash, $5,000 of which was paid into an escrow account to satisfy certain liabilities that is recorded in prepaid and other assets and $750 of which was paid for the settlement of the Triangle litigation (see below). After the consummation of the Metro Sale Transaction, Metro (then owned by Clear Channel) paid to us and our affiliates, and satisfied in full, certain outstanding, pre-closing, inter-company obligations in the amount of $95,000. Generally, for a period of up to six months (extended in certain circumstances to up to a year), the parties will provide to one another certain transition assistance, including with respect to personnel and office facilities. If Clear Channel's half of the liabilities for which the escrow account was created is less than $5,000, the difference between $5,000 and 50 percent of the expenses actually incurred by Clear Channel will be released from escrow. The Metro Traffic business represented approximately 46% of our revenue for the year ended December 31, 2010. Net proceeds for the Metro Sale Transaction were $115,000 and the gain on the sale was $19,726. In accordance with the terms of the Stock Purchase Agreement, net proceeds of the Metro Sale Transaction will be adjusted based upon the actual net working capital of the Metro Traffic business as of April 28, 2011 compared to the target net working capital amount of $20,000. We have recorded an estimated net working capital adjustment of $3,100 in current liabilities from discontinued operations as of September 30, 2011.

In connection with the Metro Sale Transaction, we entered into separate agreements with our lenders to amend the terms of the Securities Purchase Agreement and the Credit Agreement, which agreements were terminated on October 21, 2011 in connection with our merger with Verge. We amended the agreements to (1) provide for the consent of the lenders to the Metro Sale Transaction and the release of the liens on the assets sold pursuant to the Stock Purchase Agreement for the Metro Sale Transaction and (2) permit the Metro Sale Transaction thereunder. As part of the amendments, we paid off the $104,000 of Senior Notes held by non-Gores holders. As part of the amendments, our debt leverage covenant was eliminated and we obtained increased flexibility to make new investments, enter into mergers and dispose of assets and incur additional subordinated debt. On May 11, 2011, we entered into a sixth amendment to our Securities Purchase Agreement for the sole purpose of incorporating an inadvertent omission from the fifth amendment, and eliminated the minimum LTM EBITDA thresholds previously applicable to the second and third quarters of 2011 that were negotiated with the non-Gores noteholders prior to the paydown of 100% of their Senior Notes as part of the Metro Sale Transaction.

As part of the second amendment to the Securities Purchase Agreement, we agreed to pay on the maturity date (or any earlier date on which the Senior Notes become due and payable) to each holder of the Senior Notes a fee equal to 2% of the outstanding principal amount of the Senior Notes held by each noteholder on December 31, 2010 (all such fees collectively, the “Senior Leverage Amendment Fee”). As a result of the fifth amendment to the Securities Purchase Agreement entered into on April 29, 2011, the Senior Leverage Amendment Fee was due and payable on the earliest to occur of: (1) July 15, 2012, (2) the date on which the Senior Notes held by Gores were paid in full, surrendered or refinanced and (3) the date on which all of the collateral securing the Senior Notes was released. As described in Note 16 - Subsequent Events, the Senior Notes held by Gores were refinanced at the time of the Merger and accordingly, the Senior Leverage Amendment Fee of $2,433 was paid on October 21, 2011.

As part of the waiver and fourth amendment, the then holders of the Senior Notes and the Company agreed a 5% leverage fee would be imposed effective October 1, 2011 unless: (1) our debt leverage ratio for any LTM period beginning on June 30, 2011 complied with one of the following debt leverage ratios applicable to the five quarters beginning on June 30, 2011: 5.00, 5.00, 4.50, 3.50 and 3.50 and (2) more than 50% of the outstanding amount of Senior Notes held by the non-Gores holders had been repaid as of such quarterly measurement date. On September 30, 2011, our debt leverage ratio was above the 5.00 level and therefore, the 5% leverage fee became accruable on October 1, 2011. The fee was equal to 5% of the Senior Notes outstanding for the period beginning October 1, 2011 and accrued on a daily basis from such date until the fee amount was paid in full. When the Merger closed on October 21, 2011, the 5% leverage fee of $29 became due for the portion of the fourth quarter prior to closing of the Merger and was paid in full.

The results of the Metro Traffic operations that include an allocation of interest expense related to the debt repaid with proceeds from the Metro Sale Transaction are included in discontinued operations for all periods presented as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2011 (1)			2010			2011 (1)			2010
Revenue	$	—		$	43,728		$	50,811		$	124,403
Operating costs	—			40,296			50,744			116,724
Depreciation and amortization	—			3,039			3,843			9,378
Corporate general and administrative expenses	—			513			946			1,170
Restructuring charges	(96		)	477			717			2,179
Special charges	60			146			321			417
Total expenses	(36		)	44,471			56,571			129,868
Operating loss	36			(743		)	(5,760		)	(5,465		)
Interest expense	—			3,727			5,000			11,848
Loss from discontinued operations before income tax	36			(4,470		)	(10,760		)	(17,313		)
Income tax benefit from discontinued operations	(1,642		)	(1,699		)	(5,881		)	(6,569		)
Net loss from discontinued operations	$	1,678		$	(2,771	)	$	(4,879	)	$	(10,744	)


(1)	The three and nine month periods ended September 30, 2011 include the results of the Metro Traffic business up through April 29, 2011, the date of the Metro Sale Transaction, and restructuring and special charges related to the Metro Traffic business through September 30, 2011.

The Metro Sale Transaction resulted in an accounting gain of $19,726 and a capital loss for income tax purposes due to a difference between book and tax basis in part due to book goodwill impairment charges. We have concluded that it is more likely than not that we will not realize a benefit in the second quarter from this capital loss. Accordingly, a full valuation allowance was recorded. Therefore, no net tax expense was provided for the Metro Sale Transaction in the nine months ended September 30, 2011. In the third quarter we updated our analysis of our ability to utilize these losses in connection with the sale of the 24/7 formats. We do not expect to utilize any of the remaining losses as of September 30, 2011.

The Metro Traffic assets and liabilities presented in discontinued operations in the consolidated balance sheet were as follows:



	September 30, 2011		December 31, 2010
ASSETS
Current assets:
Accounts receivable, net of allowance for doubtful accounts	$	—	$	46,885
Prepaid and other assets	590		1,838
Total current assets discontinued operations (1)	590		48,723
Property and equipment, net	—		13,546
Intangible assets, net	—		66,224
Goodwill	—		13,149
Other assets	—		237
Total non-current assets discontinued operations	—		$	93,156
Total assets discontinued operations	$	590	$	141,879
LIABILITIES
Current liabilities:
Accounts payable	$	—	$	11,950
Deferred revenue	—		3,398
Accrued and other current liabilities	11,244		17,009
Total current liabilities discontinued operations (2)	11,244		32,357
Deferred tax liability	—		11,986
Other liabilities	5,938		8,191
Total non-current liabilities discontinued operations (3)	5,938		20,177
Total liabilities discontinued operations	$	17,182	$	52,534


(1)	As of September 30, 2011, total current assets discontinued operations consisted of deferred tax assets which were not assumed by Clear Channel.


(2)	As of September 30, 2011, total current liabilities discontinued operations consisted of estimated net working capital adjustment (as noted above), accrued transaction costs related to the Metro Sale Transaction and accrued liabilities related to closed facilities and certain other current liabilities related to the Metro Traffic segment, which were not assumed by Clear Channel.


(3)	As of September 30, 2011, total non-current liabilities discontinued operations consisted of unrecognized tax benefits and accrued non-current liabilities related to closed facilities related to the Metro Traffic segment, which were not assumed by Clear Channel.

Settlement of Triangle Lawsuit

On April 29, 2011, as part of the Metro Sale Transaction, we entered into a settlement agreement with Triangle Software, LLC (d/b/a Beat the Traffic) (“Triangle”) pursuant to which all claims relating to any patents owned by Triangle as they related to the Sigalert business were settled. As part of the settlement agreement, we and Triangle released the other from all claims related to the lawsuit. The Sigalert business was part of the Metro Sale Transaction described above and in connection with the closing, the settlement agreement was assigned by us to Clear Channel when the Metro Sale Transaction closed on April 29, 2011. In early May 2011, the claims of Triangle and our counterclaims were dismissed with prejudice by the court in which the lawsuit was filed at the request of both Triangle and the Company in connection with the terms of the settlement agreement.