<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 16, 1997.
REGISTRATION NO. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------
CAPSTAR BROADCASTING PARTNERS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 4832 75-2672663
(State of incorporation) (Primary Standard Industrial (I. R. S. Employer
Classification Code Number) Identification No.)
------------------
600 Congress Avenue, Suite 1400
Austin, Texas 78701
(512) 404-6840
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------
R. STEVEN HICKS
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
CAPSTAR BROADCASTING PARTNERS, INC.
600 CONGRESS AVENUE, SUITE 1400
AUSTIN, TEXAS 78701
(512) 404-6840
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------
Copies of Communications to:
<TABLE>
<S> <C> <C>
WILLIAM S. BANOWSKY, JR. JEFFREY A. CHAPMAN HELENE R. BANKS
CAPSTAR BROADCASTING PARTNERS, INC. VINSON & ELKINS L. L. P. CAHILL GORDON & REINDEL
600 CONGRESS AVENUE, SUITE 1400 3700 TRAMMELL CROW CENTER 80 PINE STREET
AUSTIN, TEXAS 78701 2001 ROSS AVENUE NEW YORK, NEW YORK 10005
(512) 404-6840 DALLAS, TEXAS 75201 (212) 701-3439
(214) 220-7700
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this registration statement becomes effective.
------------------
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. | |
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. | |
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. | |
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. | X |
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock, $.01 par value per share......................... $100,000,000 $30,303
=====================================================================================================================
</TABLE>
(1) In accordance with Rule 457(o) under the Securities Act of 1933, the
number of shares being registered and the proposed maximum offering
price per share are not included in this table.
(2) Estimated solely for the purpose of calculating the registration fee.
------------------
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
The Prospectus included herein assumes that the Benchmark Acquisition, the
Osborn Add-on Acquisitions and the Osborn Ft. Myers Disposition (all as defined
in such Prospectus) have been consummated. It is anticipated that such
acquisitions will be consummated prior to the time that this registration
statement becomes effective.
<PAGE> 3
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 APRIL 15, 1997
SHARES
CAPSTAR BROADCASTING PARTNERS, INC.
CLASS A COMMON STOCK
($.01 par value)
------------------
All of the shares of Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"), offered hereby (the "Offering") are being sold
by Capstar Broadcasting Partners, Inc. ("Capstar" and, together
with its subsidiaries, the "Company").
Prior to the Offering, there has been no public market for the Class A Common
Stock. It is anticipated that the initial public offering price
will be between $ and $ per share. For information relating to
the factors to be considered in determining the initial
offering price to the public, see "Underwriting."
The Company's authorized capital stock consists of Class A Common Stock, Class
B Common Stock, par value $.01 per share ("Class B Common Stock"), and Class
C Common Stock, par value $.01 per share ("Class C Common Stock" and,
together with the Class A Common Stock and the Class B Common Stock,
the "Common Stock"). The rights of each share of Common Stock are
identical other than with respect to voting rights. The Class A
Common Stock entitles the holders thereof to one vote per share,
the Class B Common Stock has no voting rights except as other-
wise required by law, and the Class C Common Stock entitles
the holders thereof to ten votes per share. Upon completion
of the Offering and after giving effect to the Recapital-
ization (as defined), (i) the holders of Class A Common
Stock offered hereby will have approximately % of
the total voting power of the outstanding Common Stock
and (ii) the holders of the Class C Common Stock will
have approximately % of the total voting power
of the outstanding Common Stock. R. Steven Hicks,
the Company's President and Chief Executive
Officer, and Capstar Broadcasting Partners,
L.P. ("Capstar L.P.") will hold all of the
outstanding Class C Common Stock. Subject
to the prior approval of the Federal
Communications Commission (the
"FCC"), the Class C Common
Stock is convertible in
whole at any time into
Class A Common Stock
on a share-for-share
basis. See "Descrip-
tion of Capital
Stock."
The Company has applied to list the Class A Common Stock on the under the
symbol " ."
------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE CLASS A COMMON STOCK, SEE "RISK FACTORS" BEGINNING
ON PAGE 12 HEREIN.
------------------
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.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
-------- --------------- ------------
<S> <C> <C> <C>
Per Share................................................ $ $ $
Total (3)................................................ $ $ $
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933. See "Underwriting."
(2) Before deduction of expenses payable by the Company estimated at $ .
(3) The Company has granted the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase a maximum of
additional shares to cover over-allotments of shares. If the option is
exercised in full, the total Price to Public will be $ , Underwriting
Discounts and Commissions will be $ , and Proceeds to Company will be
$ .
------------------
The shares of Class A Common Stock are offered by the several
Underwriters when, as and if delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or part and subject to certain
other conditions. It is expected that the shares of Class A Common Stock
offered hereby will be available for delivery on or about , 1997 against
payment in immediately available funds.
CREDIT SUISSE FIRST BOSTON
ALEX. BROWN & SONS
INCORPORATED
BT SECURITIES CORPORATION
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
The date of this Prospectus is , 1997.
<PAGE> 4
[Insert Graphics]
------------------
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and quarterly reports for each of the
first three quarters of each fiscal year containing interim unaudited financial
information.
------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS,
SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and the financial statements, including the notes thereto,
appearing in this Prospectus. Unless otherwise specified, this Prospectus
assumes the consummation of the Pending Acquisitions (as defined). As used in
this Prospectus, unless otherwise specified, the "Company" and "Capstar" each
means Capstar Broadcasting Partners, Inc. and its subsidiaries after giving
effect to the consummation of the Pending Acquisitions. Commodore Media, Inc.
("Commodore") is a subsidiary of Capstar and conducts its business through its
subsidiaries, Atlantic Star Communications, Inc. (formerly named Commodore
Holdings, Inc.), Southern Star Communications, Inc. (formerly named Osborn
Communications Corporation ("Osborn")) and Pacific Star Communications, Inc.
("Pacific Star"). Unless otherwise indicated, the information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option.
Certain capitalized terms used in this Prospectus are defined herein under the
caption "Glossary of Certain Terms and Market and Industry Data."
THE COMPANY
The Company is the largest radio broadcaster in the United States
operating exclusively in mid-sized markets. The Company currently owns and
operates or provides services to 99 radio broadcasting stations in 28 mid-sized
markets located primarily in the northeastern, southeastern and western United
States. The Company has entered into seven agreements to acquire 32 additional
stations in seven new markets (including ten stations in four new markets for
which the Company currently provides services pursuant to an LMA (as defined))
and three existing markets, which acquisitions are expected to occur subsequent
to the Offering (the "Pending Acquisitions"). Upon completion of the Pending
Acquisitions, the Company will own and operate or provide services to 121 radio
broadcasting stations in 31 mid-sized markets located throughout the country.
These stations comprise the leading radio group, in terms of revenue share
and/or audience share, in 20 of these markets.
In February 1996, as a result of the passage of the Telecommunications
Act of 1996 (the "Telecom Act"), radio broadcasting companies were permitted to
increase their ownership of stations within a single market from a maximum of
four to a maximum of between five and eight stations, depending on market size.
More importantly, the Telecom Act also eliminated the national ownership
restriction that generally had limited companies to the ownership of no more
than 40 stations (20 AM and 20 FM) throughout the United States. In order to
capitalize on the opportunities created by the Telecom Act, R. Steven Hicks, an
executive with over 30 years of experience in the radio broadcasting industry,
and Hicks Muse formed Capstar to acquire and operate radio station clusters in
mid-sized markets. The Company generally defines mid-sized markets as those
Metropolitan Statistical Areas ("MSAs") ranked between 50 and 200, each of
which has approximately $10.0 million to $35.0 million in radio advertising
revenue.
The Company believes that mid-sized markets represent attractive
operating environments because, as compared to the 50 largest markets in the
United States, they are generally characterized by (i) lower radio station
purchase prices as a multiple of broadcast cash flow, (ii) less sophisticated
and undercapitalized competitors, including both radio and competing
advertising media such as newspaper and television, and (iii) less direct
format competition resulting from fewer stations in any given market. The
Company believes that the attractive operating characteristics of mid-sized
markets coupled with the opportunity provided by the Telecom Act to create
in-market radio station cluster groups will enable the Company to achieve
substantial revenue growth and cost efficiencies. As a result, management
believes that the Company can generate broadcast cash flow margins that are
comparable to the higher margins that heretofore were generally achievable only
in the top 50 markets.
To effectively and efficiently manage its stations, the Company has
developed a flexible management structure designed to manage a large and
growing portfolio of radio stations throughout the United States. Initially,
the station portfolio has been organized into three regions, the Northeast, the
Southeast and the West, each of which is managed by regional executives in
conjunction with general managers in each of the Company's markets.
3
<PAGE> 6
STATION PORTFOLIO
In October 1996, the Company consummated its first acquisition when it
purchased Commodore (the "Commodore Acquisition"). Since such time, the Company
has consummated the purchase of (i) Osborn in February 1997 (the "Osborn
Acquisition"), (ii) substantially all of the assets of EZY Com, Inc. ("EZY"),
City Broadcasting Co., Inc. ("City") and Roper Broadcasting, Inc. ("Roper" and,
collectively, with EZY and City, "Space Coast") in April 1997 (collectively,
the "Space Coast Acquisitions") and (iii) Benchmark Communications Radio
Limited Partnership, L.P. and certain of its subsidiary partnerships
(collectively, "Benchmark") in June 1997 (the "Benchmark Acquisition"). On a
pro forma basis after giving effect to such acquisitions as if they had
occurred on January 1, 1996, the Company would have had net revenue and
broadcast cash flow of $ million and $ million, respectively, for the year
ended December 31, 1996.
The Company has agreed, subject to various conditions, to acquire 32
additional radio stations ( 22 FM and 10 AM) in seven separate transactions.
Upon completion of the Pending Acquisitions, the Company's portfolio will
include a total of 121 stations located in 31 mid-sized markets in the United
States. On a pro forma basis after giving effect to the Pending Acquisitions as
if they had occurred on January 1, 1996, the Company would have had net revenue
and broadcast cash flow of $ million and $ million, respectively, for the year
ended December 31, 1996.
<TABLE>
<CAPTION>
COMPANY COMPANY COMPANY
STATIONS REVENUE AUDIENCE
MSA -------- SHARE SHARE
MARKET(1) RANK FM AM RANK RANK SOURCE COMPANY
--------- ---- -- -- ------- --------- --------------
<S> <C> <C> <C> <C> <C>
NORTHEAST REGION
Allentown-Bethlehem, PA ................... 64 2 2 1 1 Commodore
Melbourne-Titusville-Cocoa, FL ............ 96 3 2 1 1 Space Coast
Fairfield County, CT ...................... 112 3 3 2 2 Commodore
Ft. Pierce-Stuart-Vero Beach, FL .......... 121 5 1 1 1 Commodore
Huntington, WV-Ashland, KY ................ 153 2 -- 3 4 Benchmark
Dover, DE ................................. NA 2 1 1 1 Benchmark
Wilmington, DE ............................ NA 1 1 2 2 Commodore
Westchester-Putnam Counties, NY ........... NA 3 2 NA 1 Commodore
--- --
SUBTOTAL ........................... 26 17
SOUTHEAST REGION
Greenville, SC ........................... 59 3 1 2 2 Benchmark
Columbia, SC ............................. 88 4 2 1 1 Benchmark/Emerald City
Huntsville, AL ........................... 114 1 2 1 1 Osborn
Jackson, MS .............................. 118 2 2 2 2 Benchmark
Shreveport, LA ........................... 126 1 1 2 3 Benchmark
Montgomery, AL ........................... 142 3 -- 2 2 Benchmark
Asheville, NC ............................ 179 1 1 1 1 Osborn
Tuscaloosa, AL ........................... 212 2 1 1 1 Osborn
Wheeling, WV ............................. 213 5 2 1 1 Osborn
Winchester, VA ........................... 219 2 1 2 1 Benchmark
Jackson, TN .............................. 257 2 1 1 1 Osborn
Roanoke, VA .............................. NA 4 1 2 1 Benchmark/Cavalier/WRIS
Lynchburg, VA ............................ NA 3 1 1 1 Benchmark/Cavalier
Statesville, NC .......................... NA 1 1 NA NA Benchmark
Gadsden, AL .............................. NA 1 1 NA 1 Osborn
--- --
SUBTOTAL........................... 35 18
WEST REGION
Stockton, CA ............................. 85 1 1 3 3 Community Pacific
Des Moines, IA ........................... 89 2 1 4 4 Community Pacific
Madison, WI .............................. 120 4 2 1 1 Madison
Modesto, CA .............................. 121 1 1 2 2 Community Pacific
Anchorage, AK ............................ 165 4 2 2 1 Community Pacific/COMCO
Fairbanks, AK ............................ NA 2 1 NA 1 COMCO
Yuma, AZ ................................. NA 2 1 NA 1 Commonwealth
--- ---
SUBTOTAL........................... 16 9
--- ---
TOTAL.............................. 77 44
=== ===
</TABLE>
- ---------------
NA Information not available.
(1) See explanatory notes to this table on page 46 of this Prospectus.
4
<PAGE> 7
ACQUISITION STRATEGY
The Company is the leading consolidator of radio stations in mid-sized
markets throughout the United States. Management has achieved this position
through the application of an acquisition strategy that it believes allows the
Company to develop radio station clusters at attractive prices. First, the
Company enters attractive new mid-sized markets by acquiring a leading station
(or a group that owns a leading station) in such market. The Company then
utilizes the initial acquisition as a platform to acquire additional stations
which further enhance the Company's position in a given market. Management
believes that once it has established operations in a market with an initial
acquisition, it can acquire additional stations at reasonable prices and, by
leveraging its existing infrastructure, knowledge of and relationships with
advertisers and substantial management experience, improve the operating
performance and financial results of those stations.
OPERATING STRATEGY
The Company's objective is to maximize the broadcast cash flow of each
of its radio station clusters through the application of the following
strategies:
Enhance Revenue Growth through Multiple Station Ownership. Management
believes that the ownership of multiple stations in a market allows the Company
to coordinate its programming to appeal to a broad spectrum of listeners. Once
the station cluster has been created, the Company can provide one-stop shopping
to advertisers attempting to reach a wide range of demographic groups.
Simplifying the buying of advertising time for customers encourages increased
advertiser usage thereby enhancing the Company's revenue generating potential.
Broad demographic coverage also allows the Company to compete more effectively
against alternative media, such as newspaper and television, thus potentially
increasing radio's share of the total advertising dollars spent in a given
market.
Create Low Cost Operating Structure. Management believes that it is
less expensive to operate radio stations in mid-sized markets than in large
markets for several reasons. First, because stations in mid-sized markets
typically have less direct format competition, the Company is less reliant on
expensive on-air talent and costly advertising and promotional campaigns to
capture listeners. Second, the ownership of multiple stations within a market
allows the Company to achieve substantial cost savings through the
consolidation of facilities, management, sales and administrative personnel,
operating resources (such as on-air talent, programming and music research) and
through the reduction of redundant corporate expenses. Furthermore, management
expects that the Company, as a result of the large size of its portfolio,
combined with the consolidated purchasing power of the Hicks Muse portfolio
companies, will be able to realize substantial economies of scale in such areas
as national representation commissions, employee benefits, casualty insurance
premiums, long distance telephone rates and other operating expenses. Finally,
the incorporation of digital automation in certain markets allows the Company
to operate radio stations at off-peak hours with minimal human involvement
while improving the quality of programming.
Utilize Sophisticated Operating Techniques. Following the acquisition
of a station or station group, the Company seeks to capitalize on management's
extensive large market operating experience by implementing sophisticated
techniques such as advertising inventory management systems, sales training
programs and in-depth music research studies which improve both the efficiency
and profitability of its stations. Prior to the passage of the Telecom Act,
management believes that many operators in mid-sized markets did not generate
sufficient revenue to justify the incurrence of expenditures to develop these
techniques.
Provide Superior Customer Service. The Company believes that
advertising customers in mid-sized markets typically do not have extensive
resources to create and implement advertising campaigns. The Company provides
many of its advertising customers with extensive advertising support which may
include (i) assistance in structuring advertising and promotional campaigns,
(ii) creating and producing customer advertisements and (iii) analyzing the
effectiveness of the customer's media programs. Management believes that this
type of superior customer service attracts new customers to the Company and
increases the loyalty of the Company's existing customers, thereby providing
stability to the Company's revenue, often despite fluctuations in station
ratings.
5
<PAGE> 8
Develop Decentralized Management Structure. The Company has developed
experienced and highly motivated regional and local management teams, derived
primarily from station groups acquired by the Company, and has decentralized
decision-making so that these regional and local managers have the flexibility
to develop operating cultures that capitalize on the unique qualities of each
region and market. The Company also relies on local managers to source
additional acquisition opportunities. In addition, in order to motivate
regional management, the Company intends to link compensation to regional
operating performance as well as the combined results of the Company.
OWNERSHIP AND MANAGEMENT
In April 1996, Hicks Muse combined its financial expertise with the
operating experience of R. Steven Hicks to form the Company. Mr. Hicks is a
30-year veteran of the radio broadcasting industry (including 18 years as a
station owner) who has owned and operated or managed in excess of 150 radio
stations in large and mid-sized markets throughout the United States. In
addition, in 1993, Mr. Hicks co-founded SFX Broadcasting, Inc., a publicly
traded company ("SFX"), for which he served as Chief Executive Officer for
three years until his resignation in 1996.
Hicks Muse is a private investment firm based in Dallas, New York, St.
Louis and Mexico City that specializes in acquisitions, recapitalizations and
other principal investing activities. Since the firm's inception in 1989,
affiliates of Hicks Muse have completed more than 70 transactions having a
combined transaction value exceeding $19.0 billion. In 1994, an affiliate of
Hicks Muse made its first major investment in the radio broadcasting industry
when Hicks, Muse, Tate & Furst Equity Fund II, L.P. founded Chancellor
Broadcasting Company ("Chancellor"), a company which owns and operates radio
stations exclusively within the 40 largest MSAs in the United States and which,
in the three years since its inception, has become one of the largest radio
broadcasting companies in the United States.
The Company has designed an organizational structure to effectively
manage its existing station portfolio as well as to accommodate future
in-market or group acquisitions. Each of the Company's existing and future
operating regions is, or will be, headquartered within the region and staffed
with a team of regional executives which manage, or will manage, the operations
of that region's station portfolio. A chief executive officer and/or a chief
operating officer of each region oversees the regional and general managers of
the stations within a particular region. In addition, a controller in each
region directly oversees the business managers of the stations within a region.
Each regional operating executive reports directly to R. Steven Hicks, while
each regional controller reports to the Company's chief financial officer. In
assembling each of the existing regional management teams, the Company has
sought to retain the senior management of some of the station groups that it
has acquired so as to (i) retain and capitalize on the local market experience
and knowledge of these experienced executives and (ii) foster a culture that is
consistent with the unique attributes of each of the local markets acquired.
Furthermore, the Company believes that each of its regional executives
possesses considerable knowledge of its region's competitors and is therefore
well situated to identify strategic acquisition candidates.
R. Steven Hicks, the President and Chief Executive Officer of the
Company, has invested $3.1 million in Class C Common Stock. Certain other
members of the Company's management, including certain of the Company's
regional executives, have invested an additional $6.1 million in Class A Common
Stock. The Company's regional executive management teams will be compensated
based upon the financial performance of their respective regions and the
Company as a whole with such compensation to be awarded in the form of cash
bonuses and stock options. Management believes that the ownership interests of
management and this compensation structure foster teamwork and the sharing of
the best practices across regions to maximize the overall financial performance
of the Company.
Each of the Company's regional executives has extensive experience
operating radio stations in mid-sized markets, as described below.
Northeast Region. The chief executive officer of the Northeast Region
is James T. Shea, Jr., the President (and former Chief Operating Officer) of
Commodore. Mr. Shea has more than 20 years of experience in the radio
broadcasting industry. Mr. Shea's operating knowledge and strong advertiser
relationships helped Commodore become a leading radio group in each of its
markets. Pro forma for the Pending Acquisitions, Mr. Shea will manage 43
stations in nine markets in the Northeast Region.
6
<PAGE> 9
Southeast Region. Frank D. Osborn, President and Chief Executive
Officer of Osborn since its inception in 1984, is the chief executive officer
of the Southeast Region. Mr. Osborn brings more than 19 years of radio industry
experience to the Company, including prior positions as Senior Vice President
of Price Communications, Vice President of Finance and Administration at NBC
Radio and General Manager of WYNY-FM in New York City. Mr. Osborn has been
successful in developing leading station clusters in each of Osborn's markets.
The Company intends to hire a chief operating officer for the Southeast Region,
who will assist Mr. Osborn in overseeing the operations of the radio stations
in the region. Pro forma for the Pending Acquisitions, the Southeast Region
will include 53 stations in 15 markets.
West Region. The West Region will be managed by two radio executives,
David J. Benjamin III and Claude C. Turner (also known as Dex Allen), with an
aggregate of 52 years of experience in the radio broadcasting industry. Mr.
Benjamin, the current President and Chief Executive Officer of Community
Pacific Broadcasting Company L.P. ("Community Pacific"), will serve as the
chief executive officer of the West Region upon consummation of the Community
Pacific Acquisition. Mr. Allen has served as the managing member of
Commonwealth Broadcasting of Arizona, L.L.C. ("Commonwealth") since 1984 and is
expected to continue to serve in such position until the consummation of the
Commonwealth Acquisition (as defined). Mr. Allen became the president and chief
operating officer of the West Region effective January 1, 1997. Pro forma for
the Pending Acquisitions, the West Region will include 25 stations in seven
markets.
THE PENDING ACQUISITIONS
The Company has agreed, subject to various conditions, to acquire (i)
in the Southeast Region, substantially all of the assets of Emerald City Radio
Partners, L.P. ("Emerald City"), WRIS, Inc. ("WRIS"), and Cavalier
Communications, L.P. ("Cavalier"), and (ii) in the West Region, substantially
all of the assets of COMCO Broadcasting, Inc. ("COMCO"), Commonwealth, The
Madison Radio Group ("Madison") and Community Pacific. After consummation of
the Pending Acquisitions, the Company will own and operate or provide services
to a total of 121 radio stations.
<TABLE>
<CAPTION>
COMPANY
STATIONS
-------- EXPECTED
COMPANY FM AM REGION CLOSING DATE
- ------- -- -- ------------ -------------
<S> <C> <C> <C> <C>
Emerald City ............ 1 -- Southeast July 1997
WRIS .................... 1 -- Southeast August 1997
Cavalier ................ 4 1 Southeast October 1997
COMCO ................... 4 2 West October 1997
Commonwealth ............ 2 1 West October 1997
Madison ................. 4 2 West October 1997
Community Pacific ....... 6 4 West November 1997
--- ---
Total ............... 22 10
=== ===
</TABLE>
Consummation of each of the Pending Acquisitions is subject to
numerous conditions, including approval of the FCC and, where applicable,
satisfaction of any requirements and any applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). Accordingly, the actual date of consummation of each of the Pending
Acquisitions may vary from the anticipated closing dates. The consummation of
the Offering is not conditioned on the consummation of any of the Pending
Acquisitions. For further information concerning the Pending Acquisitions, see
"Risk Factors -- Risks of Acquisition Strategy," "Business" and "The Pending
Acquisitions."
7
<PAGE> 10
THE OFFERING
Class A Common Stock offered hereby....... shares (1)
Common Stock to be outstanding after the
Offering (2)
Class A Common Stock ................... shares (3)
Class B Common Stock ................... 1,818,181 shares
Class C Common Stock ................... 15,248,452 shares
Total ........................... shares
Use of Proceeds........................... The net proceeds of the Offering
will be used by the Company to repay
a portion of the indebtedness
incurred in connection with the
Benchmark Acquisition under the New
Credit (as defined). See "Use of
Proceeds."
Voting Rights............................. The Class A Common Stock entitles
the holders thereof to one vote per
share; the Class B Common Stock has
no voting rights except as
otherwise required by law; and the
Class C Common Stock entitles the
holder thereof to ten votes per
share. The Class A Common Stock and
the Class C Common Stock vote
together as a single class on all
matters submitted to a vote of
stockholders, except as otherwise
required by law and except that the
holders of Class A Common Stock ,
voting as a separate class, are
entitled to elect two members of
the Board of Directors of Capstar.
Notwithstanding the foregoing, upon
the earlier to occur of (i) the
date on which Hicks Muse and its
affiliates ceases to own
beneficially more than 50% of the
number of shares of Class C Common
Stock owned by them upon completion
of the Offering and (ii) the third
anniversary date of the completion
of the Offering, the holders of
Class A Common Stock and Class C
Common Stock shall vote together as
a single class upon the election of
all directors. Upon completion of
the Offering and after giving
effect to the Recapitalization, (i)
the holders of the Class A Common
Stock offered hereby will have
approximately % of the total voting
power of the outstanding Common
Stock and (ii) the holders of the
Class C Common Stock will have
approximately % of the total voting
power of the outstanding Common
Stock. R. Steven Hicks, Capstar's
President and Chief Executive
Officer, and Capstar L.P. will hold
all of the outstanding Class C
Common Stock. See "Risk Factors --
Control of the Company" and
"Description of Capital Stock."
Also see "Security Ownership of
Certain Beneficial Owners" and
"Certain Transactions" as to the
voting and other interests of
certain beneficial owners of the
capital stock of Capstar.
Other Rights............................... Each class of Common Stock has the
same rights to dividends and upon
liquidation. Upon the sale or
transfer of shares of Class B Common
Stock or Class C Common Stock to any
person or entity other than Hicks
Muse or its affiliates, such shares
shall automatically convert into
shares of Class A Common Stock on a
8
<PAGE> 11
share-for-share basis, subject, in
the case of Class B Common Stock, to
certain conditions. See "Description
of Stock."
Dividend Policy........................... Capstar intends to retain future
earnings for use in the Company's
business and does not anticipate
declaring or paying any cash or
stock dividends on shares of its
Common Stock in the foreseeable
future.
Symbol................................... " "
- ----------------
(1) Does not include shares of Class A Common Stock
issuable pursuant to the Underwriters' over-allotment option.
(2) Prior to the Offering, Capstar will effect the Recapitalization in
which Class C Common Stock will be issued. See "-- The
Recapitalization."
(3) Excludes (a) 744,000 shares currently issuable upon exercise of the
Warrant (as defined) at an exercise price of $10.00 per share as
increased by an annual rate of interest equal to 8.0% per year
commencing as of October 16, 1996 and (b) 204,255 shares currently
issuable upon exercise of the New Warrant (as defined) at an exercise
price of $11.00 per share as increased by an annual rate of interest
equal to 8.0% per year commencing as of February 20, 1997. See
"Certain Transactions-- Warrants." Also excludes shares issuable upon
exercise of outstanding options, none of which are currently
exercisable, to purchase an aggregate of 706,895 shares of Class A
Common Stock at a weighted average exercise price of $10.58 per
share. See "Management-- Benefit Plans-- Stock Option Plan."
THE RECAPITALIZATION
The information provided in this Prospectus gives effect to a 1 for 10
reverse stock split of Capstar's Class A Common Stock and Class B Common Stock
and the exchange by R. Steven Hicks and Capstar L.P. of their respective
shares of Class A Common Stock for an equal number of shares of Class C Common
Stock (collectively, the "Recapitalization"), all of which will occur prior to
the Offering.
RISK FACTORS
Prospective purchasers of the Class A Common Stock should consider
carefully all of the information set forth in this Prospectus and, in
particular, should evaluate the specific factors set forth under the caption
"Risk Factors" beginning on page 12, which provides a discussion of the risks
involved in an investment in the Class A Common Stock.
9
<PAGE> 12
SUMMARY HISTORICAL FINANCIAL DATA
The following table presents summary historical financial data of the
Company and its predecessor, Commodore, for financial reporting purposes, for
the periods indicated. The following financial information should be read in
conjunction with the Financial Statements of the Company and Commodore and the
related notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
COMMODORE THE COMPANY
-------------------------------------------------------------------- --------------------
YEARS ENDED DECEMBER 31, ||
----------------------------------------------- JANUARY 1, 1996 - || OCTOBER 17, 1996 -
1992 1993 1994 1995 OCTOBER 16, 1996(1) || DECEMBER 31, 1996(2)
-------- -------- -------- -------- ------------------- || --------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) ||
<S> <C> <C> <C> <C> <C> || <C>
OPERATING DATA: ||
Net revenue ......................... $ 17,961 $ 19,798 $ 26,225 $ 30,795 $ 31,957 || $ 10,303
Station operating expenses .......... 12,713 13,509 16,483 19,033 21,291 || 6,283
Depreciation and amortization ....... 1,676 1,129 2,145 1,926 2,158 || 1,331
Corporate expenses .................. 1,602 2,531 2,110 2,051 1,757 || 601
Other operating expenses(3) ......... -- 1,496 2,180 2,007 13,834 || 744
Operating income (loss) ............. 1,970 1,133 3,307 5,778 (7,083) || 1,344
Interest expense .................... 4,614 4,366 3,152 7,806 8,861 || 5,035
Net loss ............................ (2,580) (3,782) (527) (2,240) (17,836) || (3,756)
OTHER DATA: ||
Broadcast cash flow(4) .............. $ 5,248 $ 6,289 $ 9,742 $ 11,762 $ 10,666 || $ 4,020
Broadcast cash flow margin(4) ....... 29.2% 31.8% 37.1% 38.2% 33.4% || 39.0%
EBITDA(5) ........................... $ 3,646 $ 3,758 $ 7,632 $ 9,711 $ 8,909 || $ 3,419
Cash flows related to: ||
Operating activities .............. (406) 477 4,061 1,245 1,990 || (49)
Investing activities .............. (458) (10,013) (50) (4,408) (34,358) || $ (127,372)
Financing activities .............. 951 9,377 (2,855) 12,013 26,724 || 132,449
Capital expenditures ................ 371 333 623 321 449 || 808
Pro forma loss per common share(6) ...................................................................... || $ (0.40)
Weighted average number of shares ....................................................................... ||
outstanding(6) ........................................................................................ || 9,369,184
BALANCE SHEET DATA (END OF PERIOD): ||
Working capital, excluding current ||
portion of long-term debt ............................................................................. || $ 8,553
Intangible and other assets, net ........................................................................ || 208,555
Total assets ............................................................................................ || 238,568
Long-term debt, including current portion ............................................................... || 139,512
Total stockholders' equity .............................................................................. || 91,143
</TABLE>
- --------------------------
(1) The historical financial data set forth includes the results of
operations of Commodore through October 16, 1996, the date of the
Commodore Acquisition.
(2) The historical financial data set forth for the Company includes the
balance sheet data and results of operations of Commodore from its
date of acquisition on October 16, 1996.
(3) Other operating expenses consist of separation compensation in 1993
and long-term incentive compensation under restructured employment
agreements with Commodore's former President and Chief Executive
Officer and its former Chief Operating Officer in 1994 and 1995. In
the period ended October 16, 1996, it consists of merger related
compensation charges in connection with the Company's acquisition of
Commodore and in the period ended December 31, 1996, it includes
compensation charges in connection with certain warrants issued to the
President and Chief Executive Officer of the Company. Such expenses
are non-cash and/or are not expected to recur.
(4) Broadcast cash flow consists of operating income before depreciation,
amortization, corporate expenses and other operating expenses.
See "Glossary of Certain Terms and Market and Industry Data."
(5) EBITDA consists of operating income before depreciation, amortization
and other operating expenses. See "Glossary of Certain Terms
and Market and Industry Data."
(6) Reflects the effect of the Recapitalization on the number of shares
outstanding.
10
<PAGE> 13
SUMMARY PRO FORMA FINANCIAL DATA
The following table presents summary pro forma financial data of the
Company as of and for the year ended December 31, 1996. The pro forma summary
operating data reflects adjustments to the summary historical financial data of
the Company and its predecessor, Commodore, to illustrate the effects of the
following acquisitions and their related financing, including the Offering, as
if each had occurred on January 1, 1996: (i) the Commodore Acquisition; (ii)
the Osborn Transactions; (iii) the Benchmark Acquisition; (iv) the Other
Acquisitions (as defined); and (v) all acquisitions and dispositions completed
by Commodore, Osborn, Benchmark, and the entities to be acquired by the Company
in the Other Acquisitions, from January 1, 1996 through the date of acquisition
of such entities by the Company. The pro forma balance sheet data at December
31, 1996 have been prepared as if any such transaction not completed by
December 31, 1996 occurred on that date. The summary pro forma financial data
are not necessarily indicative of either future results of operations or the
results that would have occurred if those transactions had been consummated on
the indicated date. The following financial information should be read in
conjunction with the Financial Statements of the Company, Commodore, Osborn,
Benchmark and the Other Acquisitions and the Pro Forma Financial Information
and, in each case, the related notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
---------------------
YEAR ENDED
DECEMBER 31, 1996
----------------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C>
OPERATING DATA:
Net revenue........................................................................... $145,863
Station operating expenses............................................................ 103,255
Depreciation and amortization......................................................... 22,492
Corporate expenses.................................................................... 7,361
Other operating expenses.............................................................. 987
Operating income...................................................................... 11,768
Interest expense...................................................................... 53,130
Net loss.............................................................................. (18,583)
OTHER DATA:
Broadcast cash flow(1)................................................................ $ 42,608(2)
Broadcast cash flow margin(1)......................................................... 29.2%
EBITDA(3)............................................................................. $ 35,247(2)
Pro forma loss per common share(4)....................................................
Weighted average number of shares outstanding (4).....................................
Capital expenditures.................................................................. 3,000
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital, excluding current portion of long-term debt.......................... $ 29,427
Intangible and other assets, net...................................................... 555,593
Total assets.......................................................................... 684,576
Long-term debt, including current portion............................................. 403,681
Total stockholders' equity............................................................ 239,329
</TABLE>
- ---------------------------
(1) Broadcast cash flow consists of operating income before depreciation,
amortization, corporate expense and other operating expenses.
See "Glossary of Certain Terms and Market and Industry Data."
(2) The pro forma financial results exclude the effects of cost savings
resulting from (i) the Commodore Acquisition, (ii) the Osborn
Transactions, (iii) the Benchmark Acquisition, and (iv) the Other
Acquisitions (collectively, the "Transactions"). On a pro forma basis,
assuming the consummation of the Transactions, including related cost
savings as if they had occurred on January 1, 1996, broadcast cash
flow and EBITDA would have been $____ million and $____ million,
respectively, for the year ended December 31, 1996. The Company
expects to realize approximately $____ million of cost savings
resulting from the elimination of redundant operating expenses arising
from the Transactions, including elimination of certain management
positions, the consolidation of facilities and new rates associated
with revised vendor contracts. In addition, the Company expects to
realize approximately $_______ of cost savings, on a pro forma basis,
resulting from the elimination of certain corporate overhead
functions, net of increased costs associated with the implementation
of the Company's corporate management structure. Corporate cost
savings reflect the expected level of annual corporate expenditures
arising from the Transactions. The Company anticipates that corporate
expenses will increase upon consummation of additional acquisitions.
There can be no assurances that any operating or corporate cost
savings will be achieved.
(3) EBITDA consists of operating income before depreciation, amortization
and other operating expenses. See "Glossary of Certain Terms and Market
and Industry Data."
(4) Reflects the effect of the Recapitalization and the Offering on the
number of shares outstanding.
11
<PAGE> 14
RISK FACTORS
This Prospectus contains forward-looking statements. The words
"anticipate," "believe," "expect," "plan," "intend," "estimate," "project,"
"will," "could," "may" and similar expressions are intended to identify
forward-looking statements. Such statements reflect the Company's current views
with respect to future events and financial performance and involve risks and
uncertainties, including without limitation the risks described in "Risk
Factors." Should one or more of these risks or uncertainties occur, or should
underlying assumptions prove incorrect, actual results may vary materially and
adversely from those anticipated, believed, expected, planned, intended,
estimated, projected or otherwise indicated. Investors should carefully
consider the following risk factors, in addition to the other information
contained in this Prospectus, before purchasing the shares of Class A Common
Stock offered hereby.
RISKS OF ACQUISITION STRATEGY
The Company intends to pursue growth through the acquisition of radio
broadcasting companies, radio station groups and individual radio stations in
mid-sized markets. The Company cannot predict whether it will be successful in
pursuing such acquisition opportunities or what the consequences of any such
acquisitions would be. The Company is currently evaluating certain
acquisitions; however, other than as described in "The Pending Acquisitions,"
the Company currently has no binding commitments to acquire any specific
business or other material assets. The Company must obtain additional financing
to consummate the Pending Acquisitions and there can be no assurance that such
financing will be available to the Company on terms acceptable to its
management or at all. Consummation of the Pending Acquisitions is subject to
various conditions, including FCC and other regulatory approval. The
consummation of the Offering is not conditioned on the consummation of any of
the Pending Acquisitions. No assurances can be given that such transactions
will be consummated or that, if completed, they will be successful. The
Company's acquisition strategy involves numerous risks, including difficulties
in the integration of operations and systems and the management of a large and
geographically diverse group of stations, the diversion of management's
attention from other business concerns and the potential loss of key employees
of acquired stations. There can be no assurance that the Company's management
will be able to manage effectively the resulting business or that such
acquisitions will benefit the Company. Depending upon the nature, size and
timing of future acquisitions, the Company may be required to raise additional
financing in addition to the financing necessary to consummate the Pending
Acquisitions. There can be no assurance that the indenture to which Capstar is
a party (the "Indenture"), the credit facility under which Commodore will be the
borrower (the "New Credit Facility"), the indenture to which Commodore is a
party (the "Commodore Indenture") or any other loan agreements to which the
Company may become a party will permit such additional financing or that such
additional financing will be available to the Company on terms acceptable to
its management or at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
R. Steven Hicks is a party to a noncompetition agreement with SFX,
which, among other things, prohibits Mr. Hicks, the Company and any affiliate
of Hicks Muse in which Mr. Hicks has an ownership interest or to which Mr.
Hicks acts as an advisor from competing with, owning any direct or indirect
interest in or providing any services to any person which is in the business of
owning or operating one or more radio stations licensed or having a transmitter
site within any county in the MSA of certain specified SFX markets in various
states. Until its termination on October 31, 1997, Mr. Hicks' noncompetition
agreement with SFX will limit the Company's ability to enter the markets
identified in the noncompetition agreement. [Benchmark, prior to the Benchmark
Acquisition, owned and operated eight radio stations in the Greenville, South
Carolina and Jackson, Mississippi markets, which are located in prohibited
markets under the noncompetition agreement. Prior to the Benchmark Acquisition,
the Company assigned its right to acquire such radio stations to another
company in which neither Mr. Hicks nor the Company has an ownership interest or
acts as an advisor. Management expects that such other company will transfer
the radio stations to the Company after the noncompetition agreement has
terminated, although no assurances can be given that the Company will ever own
and operate such radio stations.] [Explanatory Note: Resolution of the
bracketed disclosure is pending.]
LIMITED OPERATING HISTORY; HISTORY OF NET LOSSES; MANAGEMENT OF GROWTH
The Company began operations in October 1996 and, consequently, has a
limited operating history upon which investors may base their evaluation of the
Company's performance. The Company has grown very rapidly, through
acquisitions, which will place significant demands on its administrative,
12
<PAGE> 15
operational and financial resources. The Company had a net loss of $3.8 million
for period October 17, 1996 through December 31, 1996 and Commodore, the
Company's predecessor, had a net loss for the period January 1, 1996 through
October 16, 1996, and for each of the four years ended December 31, 1995, 1994,
1993 and 1992. There can be no assurance that the Company will become
profitable. The Company's future performance and profitability will depend in
part on its ability to make additional radio station acquisitions in mid-sized
markets, to integrate successfully the operations and systems of acquired radio
stations and radio groups, to hire additional personnel, and to implement
necessary enhancements to its management systems to respond to changes in its
business. The inability of the Company to do any of the foregoing could have a
material adverse effect on the Company. See "Business."
SUBSTANTIAL LEVERAGE
The Company has, and after giving effect to the Offering, the Pending
Acquisitions and the financing thereof and the application of the net proceeds
therefrom, will continue to have, consolidated indebtedness that is substantial
in relation to its stockholders' equity. As of December 31, 1996, on a pro
forma basis after giving effect to the following acquisitions and their related
financing, including the Offering, and the application of the net proceeds
therefrom, (i) the Transactions and (ii) all acquisitions and dispositions
completed by Commodore, Osborn, Benchmark, and the entities to be acquired by
the Company in the Other Acquisitions from January 1, 1996, through the date of
their acquisition by the Company, the Company would have had outstanding, on a
consolidated basis, long-term indebtedness (including current portions) of
approximately $403.7 million and stockholders' equity of approximately $239.3
million. See "Capitalization." The Indenture limits the incurrence of
additional indebtedness by the Company and its subsidiaries, and both the New
Credit Facility and the Commodore Indenture limit the incurrence of additional
indebtedness by the Company's subsidiaries, in each case subject to certain
significant exceptions. See "Description of Indebtedness."
The level of the Company's indebtedness could have several important
consequences to the holders of the Class A Common Stock, including, but not
limited to, the following: (i) a substantial portion of the Company's cash flow
from operations will be dedicated to debt service and will not be available for
other purposes; (ii) the Company's ability to obtain additional financing for
working capital, capital expenditures, acquisitions and general corporate or
other purposes may be impaired in the future; (iii) certain of the Company's
borrowings will be at variable rates of interest (including any borrowings
under the New Credit Facility), which will expose the Company to the risk of
increased interest rates; (iv) the Company's leveraged position and the
covenants contained in the New Credit Facility, the Commodore Indenture and the
Indenture could limit the Company's ability to compete, expand and make capital
improvements; (v) the Company's level of indebtedness could make it more
vulnerable to economic downturns, limit its ability to withstand competitive
pressures and reduce its flexibility in responding to changing business and
economic conditions; and (vi) certain restrictive covenants contained in the
Indenture, the Commodore Indenture and the New Credit Facility limit the
ability of Capstar to pay dividends and make other distributions to its
stockholders. See "Description of Indebtedness."
The Company's ability to satisfy its debt obligations will depend upon
its future financial and operating performance, which, in turn, is subject to
prevailing economic conditions and financial, business and other factors,
certain of which are beyond its control. If the Company's cash flow and capital
resources are insufficient to fund its debt service obligations, the Company
may be forced to reduce or delay planned expansion and capital expenditures,
sell assets, obtain additional equity capital or restructure its debt. There
can be no assurance that the Company's operating results, cash flow and capital
resources will be sufficient for payment of its debt service and other
obligations in the future. In the absence of such operating results and
resources, the Company could face substantial liquidity problems and might be
required to sell material assets or operations to meet its debt service and
other obligations, and there can be no assurance as to the timing of such sales
or the proceeds that the Company could realize therefrom or that such sales can
be effected on terms satisfactory to the Company or at all. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition --
Liquidity and Capital Resources" and "Description of Indebtedness."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture, the Commodore Indenture and the New Credit Facility
contain certain covenants that restrict, among other things, the ability of
Commodore and its subsidiaries to incur additional indebtedness, incur liens,
pay dividends or make certain other restricted payments, consummate certain
asset sales, enter into certain transactions with affiliates, merge or
consolidate with any other person or sell, assign, transfer, lease, convey or
13
<PAGE> 16
otherwise dispose of all or substantially all of the assets of Commodore. The
New Credit Facility also requires the Company to maintain specified financial
ratios and to satisfy certain financial condition tests. The Company's ability
to meet those financial ratios and financial condition tests can be affected by
events beyond its control, and there can be no assurance that the Company will
meet those tests. A breach of any of these covenants could result in a default
under the New Credit Facility, the Indenture and/or the Commodore Indenture. In
the event of an event of default under the New Credit Facility or the Commodore
Indenture, the lenders thereunder could elect to declare all amounts outstanding
thereunder, together with accrued interest, to be immediately due and payable.
In the case of the New Credit Facility, if Commodore were unable to repay those
amounts, the lenders thereunder could proceed against the collateral granted to
them to secure that indebtedness. If the New Credit Facility indebtedness were
to be accelerated, there can be no assurance that the assets of Commodore would
be sufficient to repay in full such indebtedness and the other indebtedness of
Commodore and the indebtedness of the Company. See "Description of
Indebtedness."
COMPETITION; BUSINESS RISKS
Radio broadcasting is a highly competitive business. The Company's
radio stations, now owned or to be acquired upon completion of the Pending
Acquisitions, compete for audiences and advertising revenues within their
respective markets directly with other radio stations, as well as with other
media, such as newspapers, magazines, cable television, outdoor advertising and
direct mail. In addition, certain of the Company's stations compete, and in the
future other of the Company's stations may compete, with groups of two or more
stations operated by a single operator. Audience ratings and market shares are
subject to change and any adverse change in a particular market could have a
material adverse effect on the revenue of stations located in that market.
While the Company already competes with other stations with comparable
programming formats in many of its markets, if another radio station in the
market were to convert its programming format to a format similar to one of the
Company's stations, if a new station were to adopt a competitive format, or if
an existing competitor were to strengthen its operations, the Company's
stations could suffer a reduction in ratings and/or advertising revenue and
could require increased promotional and other expenses. The Telecom Act
facilitates the entry of other radio broadcasting companies into the markets in
which the Company operates or may operate in the future. Some of such companies
may be larger and have more financial resources than the Company. Future
operations are further subject to many variables which could have a material
adverse effect upon the Company's financial performance. These variables
include economic conditions, both generally and relative to the radio
broadcasting industry; shifts in population and other demographics; the level
of competition for advertising dollars with other radio stations, television
stations and other entertainment and communications media; fluctuations in
operating costs; technological changes and innovations; changes in labor
conditions; and changes in governmental regulations and policies and actions of
federal regulatory bodies, including the United States Department of Justice
("DOJ"), the Federal Trade Commission (the "FTC") and the FCC. Although the
Company believes that substantially all of its radio stations, now owned or to
be acquired upon completion of the Pending Acquisitions, are positioned to
compete effectively in their respective markets, there can be no assurance that
any such station will be able to maintain or increase its current audience
ratings and advertising revenues. See "Business -- Competition; Changes in the
Broadcasting Industry."
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 and the introduction of digital
audio broadcasting ("DAB"). DAB may deliver by satellite to nationwide and
regional audiences multi-channel, multi-format digital radio services with
sound quality equivalent to compact discs. The Company cannot predict the
effect, if any, that any such new technologies may have on the radio
broadcasting industry or the Company. See "Business --Competition; Changes in
the Broadcasting Industry."
CONTROL OF THE COMPANY; RESTRICTIONS ON CHANGE OF CONTROL
Upon the consummation of the Offering, the purchasers of the Class A
Common Stock offered hereby will own approximately ______% of the outstanding
Class A Common Stock, representing approximately ______% of the total voting
power of the outstanding Common Stock. R. Steven Hicks, Capstar's President,
Chief Executive Officer and Chairman of the Board, and Capstar L.P. will hold
all the outstanding Class C Common Stock, representing approximately ______% of
the total voting power of the outstanding Common Stock. Affiliates of Hicks
Muse will own 100% of the Class B Common Stock. See "Security Ownership of
Certain Beneficial Owners" and "Description of Capital Stock."
14
<PAGE> 17
The outstanding Class C Common Stock is subject to a voting agreement
as described in "Certain Transactions -- Stockholders Agreements -- Affiliate
Stockholders Agreement." Hicks Muse is a party to the Affiliate Stockholders
Agreement (as defined) that requires the parties to such agreement to vote
their shares (i) in favor of election to the Company's Board of Directors of
such individuals as may be designated by Hicks Muse and its affiliates to fill
the seats of the Classified Directors (as defined) and (ii) on other matters as
the holders of a majority of the voting power of the outstanding shares of
Common Stock vote on such matters. Thomas O. Hicks is the controlling
stockholder of Hicks Muse and serves as its Chairman of the Board, President
and Chief Executive Officer. Accordingly, immediately after the consummation of
the Offering, Thomas O. Hicks will be able to control the vote on all matters
submitted to the vote of stockholders, and, therefore, will be able to direct
the management and policies of the Company, except with respect to those
matters requiring a class vote by applicable law and except that the holders of
Class A Common Stock, voting as a separate class, will be entitled to elect two
members of the Board of Directors of Capstar. Control by Thomas O. Hicks may
have the effect of discouraging certain types of transactions involving an
actual or potential change of control of Capstar, including transactions in
which the holders of Class A Common Stock might otherwise receive a premium for
their shares over then-current market prices. See "Security Ownership of
Certain Beneficial Owners" and "Description of Capital Stock."
The Communications Act and certain regulations of the FCC require the
prior consent of the FCC to any change of control of the Company. See "--
Governmental Regulation of Broadcasting Industry" and "Business -- Federal
Regulation of Radio Broadcasting."
ANTI-TAKEOVER PROVISIONS
Capstar's Restated Certificate of Incorporation (i) provides for
staggered terms for certain directors, (ii) requires certain procedures to be
followed and time periods to be met for any stockholder to propose matters to
be considered at annual meetings of stockholders, including nominating
directors for election at those meetings, (iii) prohibits stockholders from
calling special meetings of stockholders, and (iv) authorizes the Board of
Directors of Capstar to issue up to 10,000,000 shares of preferred stock
without stockholder approval and to set the rights, preferences, and other
designations, including voting rights, of those shares as the Board of
Directors may determine. These provisions, alone or in combination with each
other and with the matters described in "--Control of the Company; Restrictions
on Change of Control," may discourage transactions involving actual or
potential changes of control of Capstar, including transactions that otherwise
could involve payment of a premium over prevailing market prices to holders of
Common Stock. Capstar also is subject to provisions of the Delaware General
Corporation Law that may make some business combinations more difficult. See
"Description of Capital Stock -- Delaware Law and Certain Charter Provisions."
CONFLICT OF INTEREST
After the Offering, Thomas O. Hicks will control ___% of the voting
power of the outstanding Common Stock. Thomas O. Hicks also controls
approximately 90.1% of the voting power of GulfStar Communications, Inc.
("GulfStar"), a radio broadcasting company that owns and operates stations in
mid-sized markets in Texas, Louisiana, Arkansas and New Mexico and is seeking
to acquire additional radio stations in Texas and Louisiana. In addition, two
of Capstar's four directors are also two of the four directors of GulfStar, and
R. Steven Hicks, Capstar's Chairman of the Board and Chief Executive Officer,
and Eric C. Neuman, an Executive Vice President of Capstar, also serve in the
same positions with GulfStar. Accordingly, R. Steven Hicks and Eric C. Neuman
will not expend all of their professional time on behalf of the Company. See
"Management" and "Security Ownership of Certain Beneficial Owners."
Directors and executive officers of Capstar who are also directors and
executive officers of GulfStar may have conflicts of interest with respect to
matters potentially or actually involving or affecting the Company and
GulfStar, such as acquisitions, operations, financings and other corporate
opportunities that may be suitable for both the Company and GulfStar. To the
extent that such opportunities arise, such directors and executive officers may
consult with their legal advisors and make determinations with respect to such
opportunities after consideration of a number of factors, including whether
such opportunities are presented to any such director or executive officer in
his capacity as a director or executive officer of Capstar, whether such
opportunities are consistent with the Company's strategic objectives and
whether the Company will be able to undertake or benefit from such
opportunities. In addition, determinations may be made by Capstar's Board of
Directors, when appropriate, by a vote of the disinterested directors only. No
15
<PAGE> 18
assurances can be given that such disinterested director approval will be sought
or that any such conflicts will be resolved in favor of the Company.
In November 1996, Capstar and GulfStar entered into a letter of intent
to merge the two companies. Subsequent to execution of the letter of intent,
the parties received early termination of the applicable waiting period with
respect to the merger under the HSR Act. Thereafter, the parties terminated the
letter of intent and ceased negotiations to consummate the merger. The Company
is again considering a business combination with GulfStar, although no letter
of intent or definitive agreement has been entered into. Such a business
combination would be subject to, among other things, the Company and GulfStar
reaching agreement on material terms and conditions, obtaining the FCC's
approval of the transfer of control of broadcast licenses, and obtaining the
approval of the advisory committee or limited partners of Hicks, Muse, Tate &
Furst Equity Fund III, L.P. ("HM Fund III"). See "Security Ownership of Certain
Beneficial Owners." No assurances can be given that the Company and GulfStar
will negotiate or enter into such an agreement, that such an agreement would
contain terms and conditions favorable to the Company, that the advisory
committee or limited partners of HM Fund III would approve a combination of the
Company and GulfStar, that the FCC would approve the transfer of control of the
broadcast licenses, or that such a combination would strengthen the Company's
business, operations or financial position.
GOVERNMENTAL REGULATION OF BROADCASTING INDUSTRY
The broadcasting industry is subject to extensive federal regulation
that, among other things, requires approval by the FCC for the issuance,
renewal, transfer of control and assignment of broadcasting station operating
licenses and limits the number of broadcasting properties that the Company may
acquire in any market. Additionally, the Communications Act and FCC rules
impose limitations on alien ownership and voting of the capital stock of the
Company. The Telecom Act creates significant new opportunities for broadcasting
companies but also creates uncertainties as to how the FCC and the courts will
enforce and interpret the Telecom Act.
In addition, the number of radio stations the Company may acquire in
any market is limited by FCC rules and may vary depending upon whether the
interests in other radio stations or certain other media properties of certain
individuals affiliated with the Company are attributable to those individuals
under FCC rules. Moreover, under the FCC's cross-interest policy, the FCC in
certain instances may prohibit one party from acquiring an attributable
interest in one media outlet and a substantial non-attributable economic
interest in another media outlet in the same market, thereby prohibiting a
particular acquisition by the Company.
The FCC generally applies its ownership limits to "attributable"
interests held by an individual, corporation, partnership or other association.
The interests of the Company's officers, directors and majority stockholder are
generally attributable to the Company. Certain of the Company's officers and
directors have attributable broadcast interests, which will limit the number of
radio stations that the Company may acquire or own in any market in which such
officers or directors hold or acquire attributable broadcast interests.
The Company's Restated Certificate of Incorporation restricts the
ownership, voting and transfer of the Company's capital stock in accordance
with the Communications Act and the rules of the FCC to prohibit ownership of
more than 25.0% of the Company's outstanding capital stock, or more than 25.0%
of the voting rights it represents, by or for the account of Aliens (as
defined) or corporations otherwise subject to domination or control by Aliens.
The Restated Certificate of Incorporation provides that shares of capital stock
of the Company determined by the Company's Board of Directors to be owned
beneficially by an Alien or an entity directly or indirectly owned by Aliens in
whole or in part shall always be subject to redemption by the Company by action
of the Board of Directors to the extent necessary, in the judgment of the Board
of Directors, to comply with the Alien ownership restrictions of the
Communications Act and the FCC rules and regulations.
The consummation of radio broadcasting acquisitions requires prior
approval of the FCC with respect to the transfer of control or assignment of
the broadcast licenses of the acquired stations. Certain of the Pending
Acquisitions have not yet received FCC approval. There can be no assurance that
the FCC will approve future acquisitions by the Company (including the Pending
Acquisitions). The consummation of certain acquisitions, including certain of
the Pending Acquisitions, is also subject to applicable waiting periods and
possible review by the DOJ or the FTC under the HSR Act. Since the passage of
the Telecom Act, several radio broadcasting acquisitions, including the
16
<PAGE> 19
Benchmark Acquisition, have been the subject of "second requests" for additional
information by federal authorities under the HSR Act. The second request with
respect to the Benchmark Acquisition was resolved favorably to the Company. The
Company understands that the DOJ is currently reviewing its internal guidelines
for antitrust review of radio broadcasting acquisitions. See "Business --
Federal Regulation of Radio Broadcasting."
The Company's business will be dependent upon maintaining its
broadcasting licenses issued by the FCC, which are ordinarily issued for a
maximum term of eight years. Although it is rare for the FCC to deny a license
renewal application, there can be no assurance that the future renewal
applications of the Company will be approved or that such renewals will not
include conditions or qualifications that could adversely affect the Company.
Moreover, governmental regulations and policies may change over time and there
can be no assurance that such changes would not have a material adverse impact
upon the Company. See "Business -- Federal Regulation of Radio Broadcasting."
DEPENDENCE ON KEY PERSONNEL
The Company's business depends upon the continued efforts, abilities
and expertise of its executive officers and other key employees, including R.
Steven Hicks, Capstar's President, Chief Executive Officer and Chairman of the
Board. The Company has employment agreements with several of its key employees,
including R. Steven Hicks, Paul D. Stone, the Company's Executive Vice
President and Chief Financial Officer, William S. Banowsky, Jr., the Company's
Executive Vice President and General Counsel, James T. Shea, Jr., the chief
executive officer of the Northeast Region, Frank D. Osborn, the chief executive
officer of the Southeast Region and Dex Allen, the president and chief
operating officer of the West Region. The Company will enter into an employment
agreement with David J. Benjamin, III who will serve as the chief executive
officer of the West Region upon consummation of the Community Pacific
Acquisition. The Company believes that the loss of any of these individuals
could have a material adverse effect on the Company. See "Management."
DILUTION
Persons purchasing shares of Class A Common Stock in the Offering will
incur immediate dilution in the net tangible book value per share of Class A
Common Stock of approximately $ per share. This dilution is calculated based on
an assumed initial public offering price of $ per share (the midpoint of the
estimated offering range). Dilution for this purpose represents the difference
between the per share initial public offering price of the Class A Common Stock
and the pro forma net tangible book value per share of Class A Common Stock
after giving effect to (i) the decrease per share attributable to the Osborn
Transactions, the Benchmark Acquisition and the Other Acquisitions, (ii) the
increase per share attributable to Other Investments (as defined), and (iii)
the Offering and the use of proceeds therefrom. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Upon completion of the Offering and the Pending Acquisitions, Capstar
will have outstanding _______________ shares of Class A Common Stock, 1,818,181
shares of Class B Common Stock and 12,548,452 shares of Class C Common Stock
outstanding. Of these shares, the ___________ shares of Class A Common Stock
sold in the Offering (________________ shares if the Underwriters'
over-allotment options are exercised in full) will be freely transferable
without restriction under the Securities Act of 1933 (the "Securities Act"), by
persons other than "affiliates" of the Company within the meaning of Rule 144
promulgated under the Securities Act ("Rule 144"). Capstar issued the remaining
810,935 shares of Class A Common Stock, 1,818,181 shares of Class B Common
Stock and the 12,548,452 shares of Class C Common Stock in reliance on
exemptions from the registration requirements of the Securities Act, and those
shares are "restricted" securities under Rule 144. For purposes of Rule 144,
there will be (i) 9,300,000 shares of Class C Common Stock eligible for sale
beginning October 16, 1997, (ii) 98,000 shares of Class A Common Stock eligible
for sale beginning November 26, 1997, (iii) 50,000 shares of Class A Common
Stock and 10,000 shares of Class C Common Stock eligible for sale beginning
January 27, 1998, (iv) 236,362 shares of Class A Common Stock, 1,818,181 shares
of Class B Common Stock and 3,163,452 shares of Class C Common Stock eligible
for sale beginning February 20, 1998, (v) 272,727 shares of Class A Common
Stock eligible for sale beginning April 10, 1998, an (vi) 153,846 shares of
Class A Common Stock and 75,000 shares of Class C Common Stock eligible for
sale beginning ____________________, 1998, based on current Securities and
Exchange Commission ("Commission") rules and subject to compliance with the
manner-of-sale, volume and other limitations of Rule 144.
17
<PAGE> 20
Notwithstanding the foregoing, Capstar is a party to a stockholders
agreement (the "Affiliate Stockholders Agreement") with certain of its
stockholders, including R. Steven Hicks and affiliates of Hicks Muse, which
grants those stockholders, who will hold an aggregate of 14,639,360 shares of
Common Stock, the right to require Capstar, subject to certain limitations, to
effect up to three "demand" registrations under the Securities Act for the sale
of such stockholders' shares of Common Stock. Capstar is also a party to
another stockholders agreement (the "Management Stockholders Agreement" and,
together with the Affiliate Stockholders Agreement, the "Stockholders
Agreements") with its other stockholders. The Stockholders Agreements provide
that in the event that Capstar proposes to register any shares of its Common
Stock under the Securities Act, whether or not for its own account, at any time
or times, the stockholders that are parties to the Stockholders Agreements
shall be entitled, with certain exceptions, to include their shares of Common
Stock in such registration unless the managing underwriters of such offering
exclude some or all of such shares from such registration under the
circumstances specified in the Stockholders Agreements. The parties to the
Stockholders Agreements have waived their rights to participate as selling
stockholders in the Offering.
Each of Capstar, its officers and directors, Hicks Muse and its
affiliates and the other stockholders of the Company has agreed that it will
not sell, solicit an offer to buy, contract to sell, grant any option to
purchase or otherwise transfer or dispose of, or register or announce the sale
or offering of, any shares of Common Stock, or any securities that are
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 Credit Suisse First Boston Corporation, except pursuant to certain
limited exceptions. See "Shares Eligible for Future Sale" and "Underwriting."
Future sales of substantial amounts of Class A Common Stock, or the
perception that such sales could occur, may affect the market price of the
Class A Common Stock prevailing from time to time. See "Shares Eligible for
Future Sale" and "Underwriting."
NO PRIOR PUBLIC MARKET
Prior to the Offering, 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 be sustained after the Offering or that the initial public offering
price corresponds to the price at which the Class A Common Stock will trade in
the public market subsequent to the Offering. The initial public offering price
for the Class A Common Stock will be determined by negotiations among Capstar
and the representatives of the Underwriters based upon the consideration of
certain factors set forth herein under "Underwriting." Market conditions in the
radio industry and market fluctuations in the stock market generally may have
an adverse impact on the market price of the Class A Common Stock.
18
<PAGE> 21
USE OF PROCEEDS
The net proceeds to be received by Capstar from the Offering (after
deducting the underwriting discounts and commissions and estimated offering
expenses), based on an assumed initial public offering price of $______ per
share, the midpoint of the estimated offering range, are estimated to be
approximately $90.0 million ($99.3 million if the Underwriters' over-allotment
option is exercised in full). The net proceeds from the Offering will be used
by Capstar to repay an estimated $90.0 million (including accrued and unpaid
interest) in bank indebtedness under the New Credit Facility incurred in
connection with the Benchmark Acquisition.
DIVIDEND POLICY
Capstar's sole source for cash from which to make dividend payments
will be dividends distributed or other payments made to it by Commodore. The
right of Capstar to participate in any distribution of earnings or assets of
Commodore is subject to the prior claims of the creditors of Commodore. The
Commodore Indenture and the New Credit Facility contain certain restrictive
covenants, including covenants that restrict or prohibit Commodore's ability to
pay dividends and make other distributions to Capstar, and the Indenture
contains certain restrictive covenants, including covenants that restrict or
prohibit Capstar's ability to pay dividends and make other distributions.
Capstar intends to retain future earnings for use in the Company's business and
does not anticipate declaring or paying any cash or stock dividends on shares
of its Common Stock in the foreseeable future. Further, any determination to
declare and pay dividends whether in cash, if available, or in stock or other
assets, will be made by the Board of Directors of Capstar in light of the
Company's earnings, financial position, capital requirements and credit
agreements and such other factors as the Board of Directors deems relevant. See
"Risk Factors -- Restrictions Imposed by Terms of Indebtedness" and
"Description of Indebtedness."
19
<PAGE> 22
DILUTION
Capstar's deficit in net tangible book value at December 31, 1996, was
$116.5 million, or approximately $12.37 per share of Common Stock after giving
effect to the Recapitalization. Net tangible book value per share represents
Capstar's tangible assets reduced by its total liabilities, divided by the
number of shares of Common Stock outstanding. After giving effect to the Osborn
Transactions, the Benchmark Acquisition, the Pending Acquisitions, Capstar's
receipt of the net proceeds from the Offering and the Other Investments and the
application of the net proceeds therefrom, the Company's pro forma net tangible
book value as of December 31, 1996, would have been $__________, or $____ per
share. This represents an immediate increase in pro forma net tangible book
value of $_____ per share to existing holders of Common Stock based on an
initial public offering price of $____ per share and an immediate dilution in
pro forma net tangible book value of $______ per share to new investors
purchasing shares in the Offering. The following table illustrates the per
share dilution in pro forma net tangible book value to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
-------
Net tangible book value (deficit) per share at
December 31, 1996........................................... $(12.37)
Decrease per share attributable to the acquisitions(1)......
Increase per share attributable to Other Investments(2)..... -------
Increase per share attributable to the Offering............. -------
Pro forma net tangible book value (deficit)..................... --------
Net tangible book value dilution per share to new investors..... $
========
</TABLE>
- ---------------------------
(1) Amount gives effect to the following acquisitions of the Company: the
Osborn Transactions, the Benchmark Acquisition and the Other
Acquisitions.
(2) "Other Investments" means (i) the $600,000 Management Equity
Investment, (ii) the $1.8 million Osborn Contribution, (iii) the $2.0
million equity investment in connection with the Benchmark
Acquisition, and (iv) the $750,000 of equity issued in connection with
the guarantee by the Company of the indebtedness of a subsidiary of HM
Fund III ("Fund III Acquisition Sub").
The following table sets forth on a pro forma basis at December 31, 1996, the
number of shares of Common Stock purchased from Capstar, the total consideration
paid, and the average price per share paid by existing stockholders and the
Other Investors and to be paid (at an assumed initial public offering price of
$_____ per share) (the midpoint of the estimated offering range) by new
investors purchasing shares offered hereby (before deducting estimated
underwriting discounts and commissions and offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
-------------------------- ----------------------------- -------------
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------ ---------- ------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders ... ------% $ ------% $ -----
Other Investors ......... ------% ------% -----
New investors ........... ----- ------% ---- ------% -----
Total .......... ===== ======% $ ==== ======% $ =====
</TABLE>
The preceding table is based on the number of shares of Common Stock
outstanding as of December 31, 1996. The preceding table excludes options
outstanding on December 31, 1996, to purchase up to __________________ shares
of Class A Common Stock at a weighted average exercise price of $___________
per share, none of which are currently exercisable. The preceding table also
excludes ________________ shares of Class A Common Stock available
20
<PAGE> 23
for issuance under the Stock Option Plan (as defined) and shares of Class C
Common Stock issuable upon exercise of the Warrants (as defined).
CAPITALIZATION
The following table sets forth the historical capitalization of the
Company at December 31, 1996 ("Actual") and the unaudited pro forma
capitalization of the Company, after giving effect to (i) the Osborn
Transactions and the Benchmark Acquisition ("Pro Forma Completed
Transactions"), (ii) in addition to the foregoing, the Offering ("Pro Forma for
the Offering"), (iii) in addition to the foregoing, the Other Acquisitions
("Pro Forma"), and (iv) in each case, the financing of each of the foregoing
transactions, and the application of the net proceeds therefrom. This table
should be read in conjunction with the Consolidated Financial Statements of the
Company, and its predecessor, Commodore, Osborn, Benchmark, Community Pacific,
Madison, the Pro Forma Financial Information and, in each case, the related
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------------
PRO FORMA PRO FORMA
COMPLETED FOR THE
ACTUAL TRANSACTIONS OFFERING PRO FORMA
--------- ------------ --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-term debt (including current maturities):
Commodore:
Old Credit Facilities(1) ........................................ $ 24,700 $ -- $ -- $ --
New Credit Facility(2) .......................................... -- 184,250 94,250 173,585
13 1/4% Senior Subordinated Notes due 2003(3) ................... 79,812 79,812 79,812 79,812
--------- --------- --------- ---------
Total Commodore Long-term Debt ............................... 104,512 264,062 174,062 253,397
Capstar Broadcasting Partners, Inc.:
Former Term Loan Facility(4) .................................... 35,000 -- -- --
12 3/4% Senior Discount Notes due 2009(5) ....................... -- 150,284 150,284 150,284
--------- --------- --------- ---------
Total Long-term Debt ......................................... 139,512 414,346 324,346 403,681
--------- --------- --------- ---------
Stockholders' Equity:
Class A Common Stock (150,000,000 shares authorized;
94,155,000 shares issued and outstanding Actual; and
______ shares issued and outstanding Pro Forma) ............ 942 5 5 5
Class B Common Stock (50,000,000 shares authorized;
no shares issued and outstanding Actual; and 1,818,181
issued and outstanding shares Pro Forma) ................... -- 18 18 18
Class C Common Stock (50,000,000 shares authorized;
no shares issued and outstanding Actual; and 12,531,145
shares issued and outstanding Pro Forma) ................... -- 125 125 125
Paid-in Capital .............................................. 93,957 154,701 244,701 244,701
Accumulated Deficit(6) ....................................... (3,756) (5,520) (5,520) (5,520)
--------- --------- --------- ---------
Total Stockholders' Equity(7) ............................. 91,143 149,329 239,329 239,329
--------- --------- --------- ---------
Total Capitalization ................................... $ 230,655 $ 563,675 $ 563,675 $ 643,010
========= ========= ========= =========
</TABLE>
(1) Refers to (i) Commodore's former credit facility (the "Former Credit
Facility") with the AT&T Commercial Finance Corporation, the indebtedness
under which was repaid in connection with the consummation of the Osborn
Acquisition and the financing thereof, and (ii) Commodore's former credit
facility with Bankers Trust Company, as administrative agent, dated as of
February 20, 1997 (the "Refinanced Credit Facility"), which was refinanced
with the New Credit Facility in connection with the consummation of the
Benchmark Acquisition.
(2) [Explanatory note: The terms of the New Credit Facility will be provided by
amendment to this Registration Statement.]
(3) The actual amount at December 31, 1996 of approximately $79.8 million
includes an unamortized premium of $3.0 million. Commodore's 13 1/4%
Senior Subordinated Notes due 2003 (the "Commodore Notes") are limited in
aggregate principal amount to $76.8 million and bear interest at a rate of
13 1/4% per annum, of which only 7 1/2% is payable in cash up to May 1,
1998. On May 1, 1998 and thereafter, the Commodore Notes will bear cash
interest at a rate of 13 1/4% per annum until maturity. The carrying value
will increase through accretion until May 1998. Subsequently, the premium
will amortize until the Commodore Notes are reduced to their face value of
$76.8 million at maturity in 2003.
(4) Capstar's credit facility with Bankers Trust Company, as administrative
agent, dated as of October 16, 1996 (the "Former Term Loan Facility"), was
repaid in full in connection with the consummation of the Osborn
Acquisition and the financing thereof.
(5) The 12 3/4% Senior Discount Notes due 2009 (the "Notes") were issued by
Capstar at a substantial discount from their aggregate principal amount at
maturity of $277.0 million in aggregate and generated gross proceeds to
the Company of approximately $150.3 million. The Notes pay no cash
interest until August 1, 2002. Accordingly, the carrying value will
increase through accretion until August 1, 2002. Thereafter, interest will
be payable semi-annually, in cash, on February 1 and August 1 of each
year.
(6) In connection with the Benchmark Acquisition, Capstar issued $750,000 of
Class C Common Stock to an affiliate of Hicks Muse in consideration for
its agreement to purchase Fund III Acquisition Sub's indebtedness from the
lender upon the occurrence of certain events, including, among other
events, a default by the borrower. The issuance of Class C Common Stock in
connection with such agreement to
21
<PAGE> 24
purchase was recorded as an extraordinary item in the period in which the
Company consummated the Benchmark Acquisition. Had the Benchmark
Acquisition been consummated at December 31, 1996, the Company would have
recorded an extraordinary charge of approximately $750,000.
(7) The pro forma capitalization of the Company excludes certain equity
investments made subsequent to December 31, 1996 which were not made in
connection with the transactions given effect in the pro forma financial
statements. These equity investments totaled $3.8 million.
22
<PAGE> 25
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro
Forma Financial Information") is based on the audited historical financial
statements of the Company and Commodore (the Company's predecessor), Osborn,
Benchmark, Community Pacific and Madison, and, in each case, the related notes
included elsewhere in this Prospectus.
The pro forma statement of operations for the year ended December 31,
1996 has been prepared to illustrate the effects of the following acquisitions
and their related financing, including the Offering, as if each had occurred on
January 1, 1996: (i) the Commodore Acquisition, (ii) the Osborn Transactions,
(iii) the Benchmark Acquisition, (iv) the Other Acquisitions, and (v) all
acquisitions and dispositions completed by Commodore, Osborn, Benchmark, and
the entities to be acquired by the Company in the Other Acquisitions, from
January 1, 1996 through the date of their acquisition by the Company. The pro
forma balance sheet as of December 31, 1996 has been prepared as if any such
transaction not yet consummated on that date had occurred on that date. The Pro
Forma Financial Information and accompanying notes should be read in
conjunction with the financial statements and other financial information
included elsewhere herein pertaining to the Company, Commodore, Osborn,
Benchmark, Community Pacific and Madison, including "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The unaudited pro forma adjustments are based upon available
information and certain assumptions that the Company believes are reasonable.
The Pro Forma Financial Information is not necessarily indicative of either
future results of operations or the results that might have been achieved if
such transactions had been consummated on the indicated date.
All acquisitions given effect in the Pro Forma Financial Information
are accounted for using the purchase method of accounting. The aggregate
purchase price of each such transaction is allocated to the tangible and
intangible assets and liabilities acquired based upon their respective fair
values. The allocation of the aggregate purchase price reflected in the Pro
Forma Financial Information is preliminary for transactions to be closed after
January 1, 1997. The final allocation of the purchase price is contingent upon
the receipt of final appraisals of the acquired assets and the revision of
other estimates; however, the allocation is not expected to differ materially
from the preliminary allocation.
For the purpose of the Pro Forma Financial Information, (i) "Commodore
Combination" means the Commodore Acquisition and all acquisitions or
dispositions completed by Commodore since January 1, 1996 through the date of
the Commodore Acquisition, (ii) "Osborn Combination" means the Osborn
Transactions and all acquisitions or dispositions completed by Osborn since
January 1, 1996 through the date of the Osborn Acquisition, (iii) "Benchmark
Combination" means the Benchmark Acquisition and all acquisitions or
dispositions completed by Benchmark since January 1, 1996 through the date of
the Benchmark Acquisition, and (iv) "Other Acquisitions" collectively refers to
the Madison Acquisition and the Community Pacific Acquisition.
23
<PAGE> 26
As used in the Pro Forma Financial Information, (i) "The Company
Combined" presents unaudited pro forma financial data for the Company,
including its predecessor, Commodore, (ii) "Pro Forma Completed Transactions"
gives effect to the Osborn Transactions, the Benchmark Acquisition and the
acquisitions and dispositions of Osborn and Benchmark completed prior to the
consummation of the Osborn Acquisition and the Benchmark Acquisition,
respectively, and the financings thereof, (iii) "Pro Forma for the Offering"
gives effect to the foregoing transactions and the Offering, and (iv) "Pro
Forma" gives effect to each of the foregoing transactions, the Other
Acquisitions and the anticipated financing thereof.
The following table presents a summary of the Pro Forma Financial
Information included on the following pages.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------
PRO FORMA PRO FORMA
THE COMPANY COMPLETED FOR THE
COMBINED TRANSACTIONS OFFERING PRO FORMA
---------- ------------ --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING DATA:
Net revenue .............................. $ 44,615 $ 125,617 $ 125,617 $ 145,863
Station operating expenses ............. 29,858 88,355 88,355 103,255
Depreciation and amortization .......... 3,489 20,121 20,121 22,492
Corporate expenses ..................... 2,358 6,422 6,422 7,361
Other operating expenses ............... 14,578 987 987 987
Operating income (loss) ................ (5,668) 9,732 9,732 11,768
Interest expense ....................... 13,896 53,302 42,502 53,130
Net loss ............................... (21,521) (20,849) (10,049) (18,583)
OTHER DATA: ..............................
Broadcast cash flow (1) ................ $ 14,757 $ 37,262 $ 37,262 $ 42,608
Broadcast cash flow margin (1) ......... 33.1% 29.7% 29.7% 29.2%
EBITDA (2) ............................. $ 12,399 $ 30,840 $ 30,840 $ 35,247
Pro forma loss per common share
Weighted average number of shares
outstanding (3)
</TABLE>
(1) Broadcast cash flow consists of operating income before depreciation,
amortization, corporate expenses and other operating expenses. See
"Glossary of Certain Terms and Market and Industry Data."
(2) EBITDA consists of operating income before depreciation, amortization
and other operating expenses. See "Glossary of Certain Terms and Market
and Industry Data."
(3) Reflects the effect of the Recapitalization and the Offering on the
number of shares outstanding.
24
<PAGE> 27
CAPSTAR BROADCASTING PARTNERS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS
FOR THE FOR THE
COMMODORE OSBORN
COMBINATION COMBINATION
THE AND THE AND THE
COMPANY RELATED OSBORN RELATED
COMBINED(A) FINANCING COMBINED(A) FINANCING
------------- ------------- ----------- ----------
<S> <C> <C> <C>
Net revenue ................................. $ 44,615 $ -- $ 41,001 $ --
Station operating expenses .................. 29,858 -- 30,466 --
Depreciation and amortization ............... 3,489 3,657 (B) 4,626 1,928 (B)
Corporate expenses .......................... 2,358 -- 2,238 --
Other operating expenses .................... 14,578 (13,834)(C) 243 --
--------- -------- --------- ---------
Operating income (loss) ................. (5,668) 10,177 3,428 (1,928)
Interest expense ............................ 13,896 3,943 (D) 1,928 8,842 (F)
Gain (loss) on sale of assets ............... -- -- 12,324 --
Other (income) expense ...................... 1,824 (1,981)(C) 248 --
--------- --------- --------- ---------
Income (loss) before provision for
income taxes .......................... (21,388) 8,215 13,576 (10,770)
Provision (benefit) for income taxes ........ 133 (133)(E) 2,408 (2,408)(E)
--------- --------- --------- ---------
Net income (loss) ........................... $ (21,521) $ 8,348 $ 11,168 $ (8,362)
========= ========= ========= =========
Pro forma loss per common share(CC)
Weighted average number of
common shares
<CAPTION>
ADJUSTMENTS
FOR THE
BENCHMARK
COMBINATION
AND THE PRO FORMA
BENCHMARK RELATED COMPLETED
COMBINED (A) FINANCING TRANSACTIONS
------------ ----------- ------------
<S> <C> <C> <C>
Net revenue ................................. $ 40,001 $ -- $125,617
Station operating expenses .................. 28,031 -- 88,355
Depreciation and amortization ............... 5,559 862 (B) 20,121
Corporate expenses .......................... 1,826 -- 6,422
Other operating expenses .................... -- -- 987
-------- --------- --------
Operating income (loss) ................. 4,585 (862) 9,732
Interest expense ............................ 3,446 21,247 (G) 53,302
Gain (loss) on sale of assets ............... 9,612 -- 21,936
Other (income) expense ...................... (876) -- (785)
-------- --------- --------
Income (loss) before provision for
income taxes .......................... 11,627 (22,109) (20,849)
Provision (benefit) for income taxes ........ -- -- --
-------- --------- --------
Net income (loss) ........................... $ 11,627 $ (22,109) $(20,849)
======== ========= ========
Pro forma loss per common share(CC)
Weighted average number of
common shares
</TABLE>
See Accompanying Notes to Pro Forma Financial Information.
25
<PAGE> 28
CAPSTAR BROADCASTING PARTNERS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS PRO FORMA OTHER
COMPLETED FOR THE FOR THE ACQUISITIONS
TRANSACTIONS OFFERING OFFERING COMBINED (I)
------------ ----------- ----------- ------------
<S> <C> <C> <C>
Net revenue ............................... $ 125,617 $ -- $ 125,617 $ 20,246
Station operating expenses ................ 88,355 -- 88,355 14,900
Depreciation and amortization ............. 20,121 -- 20,121 3,359
Corporate expenses ........................ 6,422 -- 6,422 939
Other operating expenses .................. 987 -- 987 --
--------- --------- --------- ---------
Operating income (loss) ............... 9,732 -- 9,732 1,048
Interest expense .......................... 53,302 (10,800)(H) 42,502 2,004
Gain (loss) on sale of assets ............. 21,936 -- 21,936 (11)
Other (income) expense .................... (785) -- (785) 69)
--------- --------- --------- ---------
Income (loss) before provision for
income taxes ........................ (20,849) 10,800 (10,049) (898)
Provision (benefit) for income taxes ...... -- -- -- 189
--------- --------- --------- ---------
Net income (loss) ......................... $ (20,849) $ 10,800 $ (10,049) $ (1,087)
========= ========= ========= =========
Pro forma loss per common share(CC) ....... $ (--)
=========
Weighted average number of
common shares ........................... --
=========
<CAPTION>
ADJUSTMENTS
FOR THE
OTHER
ACQUISITIONS
AND THE
RELATED
FINANCING PRO FORMA
------------ ---------
<S> <C> <C>
Net revenue ............................... $ -- $ 145,863
Station operating expenses ................ -- 103,255
Depreciation and amortization ............. (988)(B) 22,492
Corporate expenses ........................ -- 7,361
Other operating expenses .................. -- 987
--------- ---------
Operating income (loss) ............... 988 11,768
Interest expense .......................... 8,624 (J) 53,130
Gain (loss) on sale of assets ............. -- 21,925
Other (income) expense .................... -- (854)
--------- ---------
Income (loss) before provision for
income taxes ........................ (7,636) (18,583)
Provision (benefit) for income taxes ...... (189)(E) --
--------- ---------
Net income (loss) ......................... $ (7,447) $ (18,583)
========= =========
Pro forma loss per common share(CC) .......
$ (--)
=========
Weighted average number of
common shares
$ --
=========
</TABLE>
See Accompanying Notes to Pro Forma Financial Information.
26
<PAGE> 29
CAPSTAR BROADCASTING PARTNERS, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
ADJUSTMENTS FOR THE
FOR THE OSBORN BENCHMARK
ACQUISITION ACQUISITION
AND THE AND THE PRO FORMA
THE OSBORN RELATED BENCHMARK RELATED COMPLETED
COMPANY COMBINED(K) FINANCING COMBINED (K) FINANCING TRANSACTIONS
-------- ----------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ........... $ 5,028 $ 3,757 $ 5,040 (L) $ 11,983 $ (770)(S) $ 24,292
(596)(M) (150)(T)
Accounts receivable, net ............ 8,913 6,613 (160)(M) 6,422 (1,414)(S) 20,374
Prepaid expenses and other .......... 444 2,404 (157)(M) 671 (5)(S) 3,357
--------- --------- --------- --------- --------- --------
Total current assets .............. 14,385 12,774 4,127 19,076 (2,339) 48,023
Property and equipment, net ......... 15,628 12,313 19,332 (M) 15,509 7,799 (S) 70,581
Intangible and other assets, net..... 208,555 29,990 94,429 (M) 46,560 93,186 (S) 486,637
2,472 (M) 12,459 (S)
(1,014)(N)
--------- --------- --------- --------- --------- --------
Total assets ................... $ 238,568 $ 55,077 $ 119,346 $ 81,145 $ 111,105 $605,241
========= ========= ========= ========= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other
accrued expenses ................... $ 5,832 $ 7,849 $ (100)(M) $ 6,081 $ (217)(S) $ 18,596
(849)(O)
Current portion of long-term debt.... 3,750 478 (478)(P) 14,259 (14,259)(U) --
(3,750)(O)
--------- --------- --------- --------- --------- ---------
Total current liabilities ....... 9,582 8,327 (5,177) 20,340 (14,476) 18,596
Long-term debt, less current portion ... 135,762 16,074 (55,950)(O) 30,783 184,250 (U) 414,346
(16,074)(P) 60,000 (W)
150,284 (Q) 60,000 (W)
(30,783) (U)
Other long-term liabilities ............ 2,081 4,562 3,200 (M) 193 (57)(S) 22,970
12,991 (M)
--------- --------- --------- --------- --------- --------
Total liabilities ............... 147,425 28,963 89,274 51,316 138,934 455,912
Stockholders' equity (deficit) ......... 91,143 26,114 31,086 (R) 29,829 (29,829)(V)(W) 149,329
(1,014)(N) 750 (W)
(750)(W)
2,000 (V)
---------- ---------- --------- --------- --------- --------
Total liabilities and stockholders'
equity ............................. $ 238,568 $ 55,077 $ 119,346 $ 81,145 $ 111,105 $605,241
========== ========== ========= ========= ========= ========
</TABLE>
See Accompanying Notes to Pro Forma Financial Information.
27
<PAGE> 30
CAPSTAR BROADCASTING PARTNERS, INC.
UNAUDITED PRO FORMA BALANCE SHEET (CONTINUED)
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE OTHER
ACQUISITIONS
PRO FORMA ADJUSTMENTS PRO FORMA OTHER AND THE
COMPLETED FOR THE FOR THE ACQUISITIONS RELATED
TRANSACTIONS OFFERING OFFERING COMBINED(I) FINANCING PRO FORMA
------------ ----------- --------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .............. $ 24,292 $ -- $ 24,292 $ 379 $ (379)(Y) $ 24,292
Accounts receivable, net ............... 20,374 -- 20,374 3,794 (3,794)(Y) 20,374
Prepaid expenses and other ............. 3,357 -- 3,357 251 (251)(Y) 3,357
--------- --------- --------- --------- --------- ---------
Total current assets ................. 48,023 -- 48,023 4,424 (4,424) 48,023
Property and equipment, net ............ 70,581 -- 70,581 6,870 3,509 (Y) 80,960
Intangible and other assets, net ....... 486,637 -- 486,637 26,238 37,540 (Y) 555,593
5,178 (Y)
--------- --------- --------- --------- --------- ---------
Total assets ......................... $ 605,241 $ -- $ 605,241 $ 37,532 $ 41,803 $ 684,576
========= ========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other accrued
expenses ............................. $ 18,596 $ -- $ 18,596 $ 1,253 $ (1,253)(Y) $ 18,596
Current portion of long-term debt ...... -- -- -- 2,088 (2,088)(Z) --
--------- --------- --------- --------- --------- ---------
Total current liabilities ............ 18,596 -- 18,596 3,341 (3,341) 18,596
Long-term debt, less current portion ....... 414,346 (90,000)(X) 324,346 17,322 79,335 (AA) 403,681
(17,322)(Z)
Other long-term liabilities ................ 22,970 -- 22,970 1,369 (1,369)(Y) 22,970
--------- --------- --------- --------- --------- ---------
Total liabilities .................... 455,912 (90,000) 365,912 22,032 57,303 445,247
Stockholders' equity (deficit) ............. 149,329 90,000 (X) 239,329 15,500 (15,500)(BB) 239,329
--
--------- --------- --------- --------- --------- ---------
Total liabilities and stockholders'
equity ............................... $ 605,241 $ -- $ 605,241 $ 37,532 $ 41,803 $ 684,576
========= ========= ========= ========= ========= =========
</TABLE>
See Accompanying Notes to Pro Forma Financial Information.
28
<PAGE> 31
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
(A) The schedules below give effect to (i) the historical acquisitions and
dispositions of the indicated entities consummated prior to December
31, 1996, and (ii) the acquisitions and dispositions of the indicated
entities which were pending at December 31, 1996, and were consummated
prior to the date of the Offering.
THE COMPANY
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE
HISTORICAL
ACQUISITIONS
AND
THE HISTORICAL DISPOSITIONS BY THE COMPANY
COMPANY (1) COMMODORE COMMODORE COMBINED
------------ ------------ --------------- ------------
<S> <C> <C> <C> <C>
Net revenue .......................................... $ 10,303 $ 31,957 $ 2,355 $ 44,615
Station operating expenses ........................... 6,283 21,291 2,284 29,858
Depreciation and amortization ........................ 1,331 2,158 -- 3,489
Corporate expenses ................................... 601 1,757 -- 2,358
Other operating expenses ............................. 744 13,834 -- 14,578
------------ ------------ ------------ ------------
Operating income (loss) .......................... 1,344 (7,083) 71 (5,668)
Interest expense ..................................... 5,035 8,861 -- 13,896
Gain on sale of assets ............................... -- -- -- --
Other (income) expense ............................... 65 1,759 -- 1,824
------------ ------------ ------------ ------------
Income (loss) before provision for income tax .... (3,756) (17,703) 71 (21,388)
Provision (benefit) for income taxes ................. -- 133 -- 133
------------ ------------ ------------ ------------
Net income (loss) ................................ $ (3,756) $ (17,836) $ 71 $ (21,521)
============ ============ ============ ============
Loss per common share ............................ $ (0.04)
============
Weighted average number of shares
outstanding .................................... 93,691,842
============
</TABLE>
- -----------
(1) The column represents the consolidated results of operations of the
Company and its subsidiary, Commodore, from October 16, 1996, the date
of the consummation of the Commodore Acquisition.
OSBORN
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE
HISTORICAL
ACQUISITIONS
AND PENDING PENDING
DISPOSITIONS ACQUISITIONS DISPOSITIONS
HISTORICAL BY BY BY OSBORN
OSBORN OSBORN OSBORN OSBORN COMBINED
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net revenue .......................................... $ 37,215 $ (773) $ 6,249 $ (1,690) $ 41,001
Station operating expenses ........................... 28,824 (413) 4,125 (2,070) 30,466
Depreciation and amortization ........................ 4,756 -- 244 (374) 4,626
Corporate expenses ................................... 1,850 -- 388 -- 2,238
Other operating expenses ............................. -- -- 243 -- 243
---------- ---------- ---------- ---------- ----------
Operating income (loss) .......................... 1,785 (360) 1,249 754 3,428
Interest expense ..................................... 2,202 -- 61 (335) 1,928
Gain on sale of assets ............................... 12,322 -- 2 -- 12,324
Other (income) expense ............................... 291 -- 16 (59) 248
---------- ---------- ---------- ---------- ----------
Income (loss) before provision for
income taxes ................................... 11,614 (360) 1,174 1,148 13,576
Provision (benefit) for income taxes ................. 2,379 -- 29 -- 2,408
---------- ---------- ---------- ---------- ----------
Net income (loss) ................................ $ 9,235 $ (360) $ 1,145 $ 1,148 $ 11,168
========== ========== ========== ========== ==========
</TABLE>
29
<PAGE> 32
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(A) (Continued)
BENCHMARK
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE
HISTORICAL
ACQUISITIONS PENDING
AND ACQUISITIONS
HISTORICAL DISPOSITIONS BY BY BENCHMARK
BENCHMARK BENCHMARK BENCHMARK COMBINED
---------- --------------- ------------ ----------
<S> <C> <C> <C> <C>
Net revenue .......................................... $ 27,255 $ 4,941 $ 7,805 $ 40,001
Station operating expenses ........................... 21,253 2,107 4,671 28,031
Depreciation and amortization ........................ 5,320 -- 239 5,559
Corporate expenses ................................... 1,513 -- 313 1,826
Other operating expenses ............................. -- -- -- --
---------- ---------- ---------- ----------
Operating income (loss) .......................... (831) 2,834 2,582 4,585
Interest expense ..................................... 3,384 -- 62 3,446
Gain on sale of assets ............................... 9,612 -- -- 9,612
Other (income) expense ............................... (679) -- (197) (876)
---------- ---------- ---------- ----------
Income (loss) before provision for
income taxes ................................... 6,076 2,834 2,717 11,627
Provision (benefit) for income taxes ................. -- -- -- --
---------- ---------- ---------- ----------
Net income (loss) ................................ $ 6,076 $ 2,834 $ 2,717 $ 11,627
========== ========== ========== ==========
</TABLE>
(B) The adjustment reflects (i) a change in depreciation and amortization
resulting from conforming the estimated useful lives of the acquired
stations and (ii) the additional depreciation and amortization expense
resulting from the allocation of the purchase price of the acquired
stations including an increase in property and equipment and intangible
assets to their estimated fair market value and the recording of
goodwill associated with the acquisitions. Goodwill is being amortized
over 40 years.
(C) The adjustment reflects the elimination of (i) merger related
compensation expenses and (ii) other expenses related to the Commodore
Acquisition, including costs related to the abandoned initial public
offering of Commodore. These expenses were recognized by Commodore in
connection with the Commodore Acquisition.
(D) The adjustment reflects interest expense associated with (i) the
Commodore Notes, (ii) Commodore's Former Credit Facility, (iii) the
Company's Former Term Loan Facility and (iv) the amortization of
deferred financing fees associated with the Former Term Loan Facility,
all net of interest expense related to the existing indebtedness of the
Company. Deferred financing fees are amortized over the term of the
related debt.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Commodore Notes .................................................... $ 8,878
Former Credit Facility (Commodore) ................................. 4,047
Former Term Loan Facility (Capstar) ................................ 2,209
----------
Interest expense before amortization of deferred financing fees .... 15,134
Amortization of deferred financing fees ............................ 2,705
----------
Pro forma interest expense ..................................... 17,839
Historical interest expense of the Company ......................... (5,035)
Historical interest expense of Commodore ........................... (8,861)
----------
Net adjustment ................................................. $ 3,943
==========
</TABLE>
30
<PAGE> 33
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(E) The adjustment reflects the elimination of historical income tax
expense as the Company would have generated a taxable loss during the
pro forma period.
(F) The adjustment reflects interest expense associated with (i) the
Commodore Notes, (ii) the Notes, and (iii) amortization of deferred
financing fees associated with the Notes, all net of interest expense
related to the existing indebtedness of Osborn and the Company.
Deferred financing fees are amortized over the term of the related
debt.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Commodore Notes ................................................................ $ 8,878
12 3/4% Senior Discount Notes .................................................. 19,567
------------
Interest expense before amortization of deferred financing fees ................ 28,445
Amortization of deferred financing fees ........................................ 164
------------
Pro forma interest expense ................................................. 28,609
Pro forma interest expense for the Commodore Acquisition ....................... (17,839)
Historical interest expense of Osborn including adjustments for acquisitions
pending and completed at December 31, 1996 ................................... (1,928)
------------
Net adjustment ............................................................. $ 8,842
============
</TABLE>
(G) The adjustment reflects interest expense associated with (i) the
Commodore Notes, (ii) the Notes, and (iii) the New Credit Facility,
and (iv) amortization of deferred financing fees associated with the
Notes and the New Credit Facility, all net of interest expense on the
existing indebtedness of Benchmark and the Company. Deferred financing
fees are amortized over the term of the related debt.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Commodore Notes ................................................................ $ 8,878
12 3/4% Senior Discount Notes .................................................. 19,567
New Credit Facility ............................................................ 22,110
------------
Interest expense before amortization of deferred financing fees ................ 50,555
Amortization of deferred financing fees ........................................ 2,747
------------
Pro forma interest expense ................................................. 53,302
Pro forma interest expense for the Commodore Acquisition
and the Osborn Transactions .................................................. (28,609)
Historical interest expense of Benchmark including adjustments for
acquisitions pending and completed at December 31, 1996 ...................... (3,446)
------------
Net adjustment ............................................................. $ 21,247
============
</TABLE>
(H) Adjustment reflects the reduction of interest expense as a result of
the Offering.
<TABLE>
<S> <C>
Pro forma interest expense of the New Credit Facility for the Offering
before amortization of deferred financing fees ............................... $ 11,310
Pro forma interest expense under New Credit Facility for the Completed
Transactions, before amortization of deferred financing fees ................. (22,110)
------------
Adjustment to interest expense ............................................. $ (10,800)
============
</TABLE>
31
<PAGE> 34
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(I) The column represents the combined financial statements of Madison's
predecessors, Midcontinent Broadcasting Co. of Wisconsin and Point
Communications Limited Partnership, and Community Pacific.
OTHER ACQUISITIONS
Statements of Operations
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL OTHER
HISTORICAL POINT COMMUNITY ACQUISITIONS
MIDCONTINENT COMMUNICATIONS PACIFIC COMBINED
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Net revenue ................................... $ 3,446 $ 5,601 $ 11,199 $ 20,246
Station operating expenses .................... 2,555 3,429 8,916 14,900
Depreciation and amortization ................. 405 1,538 1,416 3,359
Corporate expenses ............................ -- 179 760 939
Other expense ................................. -- -- -- --
------------ ------------ ------------ ------------
Operating income (loss) ................... 486 455 107 1,048
Interest expense .............................. -- 1,071 933 2,004
Loss on sale of assets ........................ -- -- (11) (11)
Other (income) expense ........................ (69) (8) 8 (69)
------------ ------------ ------------ ------------
Income (loss) before provision for
income tax .............................. 555 (608) (845) (898)
Provision (benefit) for income taxes .......... 189 -- -- 189
------------ ------------ ------------ ------------
Income (loss) before extraordinary loss ... 366 (608) (845) (1,087)
Extraordinary loss on early extinguishment
of debt ..................................... -- -- -- --
------------ ------------ ------------ ------------
Net income (loss) ......................... $ 366 $ (608) $ (845) $ (1,087)
============ ============ ============ ============
</TABLE>
Balance Sheets
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL OTHER
HISTORICAL POINT COMMUNITY ACQUISITIONS
MIDCONTINENT COMMUNICATIONS PACIFIC COMBINED
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................ $ 79 $ 261 $ 39 $ 379
Accounts receivable, net ................. 718 1,368 1,708 3,794
Prepaid expenses and other ............... 17 137 97 251
------------ ------------ ------------ ------------
Total current assets .................. 814 1,766 1,844 4,424
Property and equipment, net .................. 686 2,340 3,844 6,870
Intangible and other assets, net ............. 3,133 10,163 12,942 26,238
------------ ------------ ------------ ------------
Total assets .......................... $ 4,633 $ 14,269 $ 18,630 $ 37,532
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other accrued
expenses .............................. $ 152 $ 380 $ 721 $ 1,253
Current portion of long-term debt ........ -- 913 1,175 2,088
------------ ------------ ------------ ------------
Total current liabilities ............. 152 1,293 1,896 3,341
Long-term debt, less current portion ......... -- 8,625 8,697 17,322
Other long-term liabilities .................. 1,369 -- -- 1,369
------------ ------------ ------------ ------------
Total liabilities ..................... 1,521 9,918 10,593 22,032
Stockholders' equity (deficit) ............... 3,112 4,351 8,037 15,500
------------ ------------ ------------ ------------
Total liabilities and stockholders'
equity ............................. $ 4,633 $ 14,269 $ 18,630 $ 37,532
============ ============ ============ ============
</TABLE>
32
<PAGE> 35
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(J) Adjustment reflects interest expense associated with (i) the Commodore
Notes, (ii) the Notes, (iii) the New Credit Facility, and (iv)
amortization of deferred financing costs associated with the Notes and
the New Credit Facility, all net of interest expense related to the
existing indebtedness of Madison, Community Pacific and the Company.
Deferred financing fees are amortized over the term of the related
debt.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Commodore Notes ...................................................... $ 8,878
12 3/4% Senior Discount Notes ........................................ 19,567
New Credit Facility .................................................. 31,632
------------
Interest expense before amortization of deferred financing fees ...... 60,077
Amortization of deferred financing fees .............................. 3,853
------------
Pro forma interest expense ....................................... 63,930
Pro forma interest expense for the Commodore Acquisition
and the Osborn Transactions and Benchmark Acquisition ............ (53,302)
Historical interest expense of Madison and Community Pacific ......... (2,004)
------------
Net adjustment ................................................... $ 8,624
============
</TABLE>
(K) The schedules below give effect to the acquisitions and dispositions
of the indicated entities which were pending at December 31, 1996, and
were consummated prior to the date of the Offering.
OSBORN
<TABLE>
<CAPTION>
HISTORICAL TUSCALOOSA- TUSCALOOSA- OSBORN
OSBORN WTXT WACT HUNTSVILLE JACKSON FT. MYERS COMBINED
---------- ----------- ----------- ---------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ............... $ 2,944 $ 425 $ 10 $ 217 $ 161 $ -- $ 3,757
Accounts receivable, net ................ 5,505 295 50 948 287 (472) 6,613
Prepaid expenses and other .............. 2,114 -- -- 133 223 (66) 2,404
---------- ----------- ----------- ---------- ------- --------- --------
Total current assets ................. 10,563 720 60 1,298 671 (538) 12,774
Property and equipment, net ................. 13,712 42 328 214 52 (2,035) 12,313
Intangible and other assets, net ............ 33,180 146 540 497 658 (5,031) 29,990
---------- ----------- ----------- ---------- ------- --------- --------
Total assets ......................... $ 57,455 $ 908 $ 928 $ 2,009 $ 1,381 $ (7,604) $ 55,077
========== =========== =========== ========== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other accrued
expenses ............................. $ 6,783 $ 17 $ 13 $ 966 $ 70 $ -- $ 7,849
Current portion of long-term debt ....... 320 158 -- -- -- -- 478
---------- ----------- ----------- ---------- ------- --------- --------
Total current liabilities ............ 7,103 175 13 966 70 -- 8,327
Long-term debt, less current portion ........ 13,880 866 -- 261 1,067 -- 16,074
Other long-term liabilities ................. 4,562 -- -- -- -- -- 4,562
---------- ----------- ----------- ---------- ------- --------- --------
Total liabilities .................... 25,545 1,041 13 1,227 1,137 -- 28,963
Stockholders' equity (deficit) .............. 31,910 (133) 915 782 244 (7,604) 26,114
---------- ----------- ----------- ---------- ------- --------- --------
Total liabilities and stockholders'
equity ............................ $ 57,455 $ 908 $ 928 $ 2,009 $ 1,381 $ (7,604) $ 55,077
========== =========== =========== ========== ======= ========= ========
</TABLE>
33
<PAGE> 36
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(K) Continued
BENCHMARK
<TABLE>
<CAPTION>
HISTORICAL BENCHMARK
BENCHMARK COLUMBIA STATESVILLE MONTGOMERY COMBINED
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ............... $ 11,179 $ 34 $ 184 $ 586 $ 11,983
Accounts receivable, net ................ 4,731 277 305 1,109 6,422
Prepaid expenses and other .............. 645 21 4 1 671
---------- ---------- ---------- ---------- ----------
Total current assets .................. 16,555 332 493 1,696 19,076
Property and equipment, net ................. 13,722 28 1,459 300 15,509
Intangible and other assets, net ............ 43,854 3 201 2,502 46,560
---------- ---------- ---------- ---------- ----------
Total assets .......................... $ 74,131 $ 363 $ 2,153 $ 4,498 $ 81,145
========== ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and other accrued
expenses .............................. $ 5,845 $ 19 $ 82 $ 135 $ 6,081
Current portion of long-term debt ....... 14,219 40 -- -- 14,259
---------- ---------- ---------- ---------- ----------
Total current liabilities ............. 20,064 59 82 135 20,340
Long-term debt, less current portion ........ 29,841 569 -- 373 30,783
Other long-term liabilities ................. 79 57 -- 57 193
---------- ---------- ---------- ---------- ----------
Total liabilities ..................... 49,984 685 82 565 51,316
Stockholders' equity (deficit) .............. 24,147 (322) 2,071 3,933 29,829
---------- ---------- ---------- ---------- ----------
Total liabilities and stockholders'
equity ............................. $ 74,131 $ 363 $ 2,153 $ 4,498 $ 81,145
========== ========== ========== ========== ==========
</TABLE>
(L) The adjustment reflects the excess cash generated in connection with
the Osborn Acquisition and the financing thereof which will be used
for working capital requirements and to consummate certain pending
transactions.
(M) The adjustment reflects (i) the assumption of $3,200 in liabilities in
connection with the Osborn Acquisition and (ii) the allocation of the
purchase price of Osborn, the Osborn Add-on Acquisitions, the WTXT-FM
station located in Tuscaloosa, Alabama, and the WYNU-FM station
located in Jackson, Tennessee, net of the proceeds from the Osborn Ft.
Myers Disposition, to the assets acquired and liabilities assumed
resulting in adjustments to property and equipment to their estimated
fair values and the recording of goodwill associated with the
acquisitions as follows:
<TABLE>
<CAPTION>
ALLOCATION OF CARRYING
PURCHASE PRICE VALUE ADJUSTMENTS
-------------- -------------- --------------
<S> <C> <C> <C>
Cash and cash equivalents ............... $ 3,161 $ 3,757 $ (596)
Accounts receivable, net ................ 6,453 6,613 (160)
Prepaid expenses and other .............. 2,247 2,404 (157)
Property and equipment, net ............. 31,645 12,313 19,332
Intangible and other assets, net ........ 123,420 28,991 94,429
Deferred financing ...................... 3,471 999 2,472
Accounts payable and other accrued
expenses ............................ (7,749) (7,849) (100)
Other long-term liabilities ............. (1,501) (1,501) --
Deferred tax liability .................. (16,052) (3,061) 12,991
--------------
Total purchase price and deferred
financing charges ................. $ 145,095
==============
</TABLE>
34
<PAGE> 37
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(N) The adjustment reflects the amortization of the deferred financing
costs associated with the Company's Former Term Loan Facility, which
was recognized as a component of interest expense in the period the
refinancing occurred.
(O) The adjustment reflects the repayment in connection with the financing
of (i) the Company's Former Term Loan Facility, (ii) the accrued
interest of $849 related to the Company's Former Term Loan Facility
and (iii) Commodore's Former Credit Facility.
(P) The adjustment reflects the elimination of (i) the historical debt of
Osborn of $14,200 and (ii) the combined historical debt of the
acquisitions and dispositions by Osborn of $2,352.
(Q) The adjustment reflects the issuance of the Notes for proceeds of
$150,284 with an aggregate principal amount at maturity of $277,000.
(R) The adjustment reflects the net effect of (i) the elimination of the
historical stockholders' equity of Osborn of $31,910, (ii) the
elimination of the combined stockholders' deficit of the acquisitions
and dispositions by Osborn of $5,796, (iii) the Equity Investment (as
defined) of $54,800, (iv) the equity investment of $600 by certain
members of the Company's management team in January 1997 (the
"Management Equity Investment"), and (v) in connection with the Osborn
Acquisition, the contribution by Frank D. Osborn, the President and
Chief Executive Officer of Osborn, of certain shares of common stock
of Osborn to the Company in exchange for shares of Class A Common
Stock having a deemed value of $1,800 (the "Osborn Contribution"). See
"Certain Transactions--Management and Affiliates Equity Investments."
The pro forma equity adjustments exclude certain equity investments
made subsequent to December 31, 1996, which were not made in
connection with the transactions given effect in the pro forma
financial statements. These equity investments totaled $3,750.
(S) The adjustment reflects the allocation of the purchase price of
Benchmark, including Benchmark's acquisitions which were pending at
December 31, 1996, to the assets acquired and liabilities assumed
resulting in an adjustment to property and equipment to their
estimated fair values and the recording of goodwill associated with
the acquisitions as follows:
<TABLE>
<CAPTION>
ALLOCATION OF CARRYING
PURCHASE PRICE VALUE ADJUSTMENTS
-------------- -------------- --------------
<S> <C> <C> <C>
Cash and cash equivalents ............... $ 11,213 $ 11,983 $ (770)
Accounts receivable, net ................ 5,008 6,422 (1,414)
Prepaid expenses and other .............. 666 671 (5)
Property and equipment, net ............. 23,308 15,509 7,799
Intangible and other assets, net ........ 139,295 46,109 93,186
Deferred financing ...................... 12,910 451 12,459
Accounts payable and other accrued
expenses ............................ (5,864) (6,081) (217)
Other long-term liabilities ............. (136) (193) (57)
--------------
Total purchase price and deferred
financing charges ................. $ 186,400
==============
</TABLE>
(T) Benchmark deposited $150 in escrow as security for Benchmark's
obligation to consummate the acquisition of WFMX-FM and WSIC-AM
located in Statesville, North Carolina. The adjustment reflects the
use of the $150 deposit to pay a portion of the purchase price in
connection with the acquisition.
35
<PAGE> 38
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(U) The adjustment reflects (i) borrowings of $184,250 under the New
Credit Facility with an annual interest rate of 12.0% and (ii)
repayment of the existing debt of Benchmark and the pending
acquisitions of Benchmark of $45,042, including the current portion of
$14,259, in connection with the Benchmark Acquisition and the related
financing.
(V) The adjustment reflects (i) the net effect of the elimination of the
historical partnership capital of Benchmark and the pending
acquisitions of Benchmark, based on the purchase method of accounting,
of $29,829 and (ii) the common equity investment of $2,000 by a former
partner of Benchmark. See "Certain Transactions -- Management and
Affiliates Equity Investments."
(W) As part of the Benchmark Acquisition, a subsidiary of HM Fund III (the
"Fund III Acquisition Sub") entered into a senior credit agreement
(the "Acquisition Sub Credit Agreement") with Bankers Trust Company to
borrow up to $62,000, the proceeds of approximately $60,000 of which
were loaned to Benchmark to enable Benchmark to consummate four
separate acquisitions of radio stations properties and for certain
other corporate purposes of Benchmark. The Company has unconditionally
guaranteed all of the Fund III Acquisition Sub's indebtedness under
the Acquisition Sub Credit Agreement. HM Fund III has agreed, and is
required, to purchase the outstanding obligations owing to Bankers
Trust Company under the Acquisition Sub Credit Agreement from Bankers
Trust Company upon the occurrence of certain events, including a
default in the payment of principal or interest when due under the
terms of the Acquisition Sub Credit Agreement. Simultaneously with the
Benchmark Acquisition, the Fund III Acquisition Sub was merged with
the Company and the Acquisition Sub Credit Agreement was repaid (the
"Repayment") with proceeds of the New Credit Facility. In connection
with the Repayment, the Company issued $750 of Class C Common Stock to
HM Fund III in consideration of its agreement to purchase the
obligations owing to Bankers Trust Company under the Acquisition Sub
Credit Agreement and recorded an extraordinary charge of $750.
The related pro forma adjustments are as follows:
<TABLE>
<S> <C>
Loans to Benchmark under the Acquisition
Sub Credit Agreement ........................... $ 60,000
Repayment of the Acquisition Sub Credit
Agreement in connection with the Benchmark
Acquisition with proceeds from the New
Credit Facility ................................ $(60,000)
Issuance of Common Stock in connection with the
Company's guarantee ............................ $ 750
Extraordinary change ........................... $ (750)
</TABLE>
(X) The adjustment reflects the proceeds of the Offering of $100,000, net
of fees and expenses of $10,000.
(Y) The adjustment reflects the allocation of the purchase prices of the
Other Acquisitions to the assets acquired and liabilities assumed
resulting in an adjustment to property and equipment to their
estimated fair values and the recording of goodwill associated with
the acquisitions as follows:
<TABLE>
<CAPTION>
ALLOCATION CARRYING
OF PURCHASE VALUE OF OTHER
PRICES ACQUISITIONS ADJUSTMENTS
------------ -------------- --------------
<S> <C> <C> <C>
Cash and cash equivalents ..................................... $ -- $ 379 $ (379)
Account receivable, net ....................................... -- 3,794 (3,794)
Prepaid expenses and other .................................... -- 251 (251)
Property and equipment, net ................................... 10,379 6,870 3,509
Intangibles and other assets, net ............................. 63,421 25,881 37,540
Deferred financing ............................................ 5,535 357 5,178
Accounts payable and other accrued expenses ................... -- (1,253) (1,253)
Other long-term liabilities ................................... -- (1,369) (1,369)
--------------
Total purchase prices and deferred financing charges ... $ 79,335
==============
</TABLE>
(Z) The adjustment reflects the elimination of the historical debt of the
Other Acquisitions of $19,410, including the current portion of
$2,088.
(AA) The adjustment reflects borrowings of $79,335 under the New Credit
Facility with an annual interest rate of 12.0%.
(BB) The adjustment reflects the net effect of the elimination of the
historical equity of the Other Acquisitions based on the purchase
method of accounting of $15,500.
36
<PAGE> 39
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(CC) Pro forma net loss per share is based on the weighted average number
of shares of Common Stock and Common Stock equivalents outstanding
during the pro forma period. The pro forma weighted average shares
include all shares of Common Stock outstanding prior to the Offering,
shares to be issued in the Offering and the additional shares issued
in connection with certain acquisitions all adjusted for the
Recapitalization.
37
<PAGE> 40
SELECTED HISTORICAL FINANCIAL DATA
The following financial information should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," "Business," the Consolidated Financial Statements of the Company
and its predecessor, Commodore, and the related notes thereto, included
elsewhere in this Prospectus.
THE COMPANY (AND ITS PREDECESSOR, COMMODORE)
The operating and other data in the following table have been derived
from audited financial statements of the Company for the period October 17,
1996 through December 31, 1996, the audited financial statements of Commodore
for the period January 1, 1996 through October 16, 1996 and for the years ended
December 31, 1995 and 1994, all of which are included elsewhere in this
Prospectus, and from audited financial statements for the years ended December
31, 1993 and 1992. The selected balance sheet data in the following table have
been derived from the audited financial statements of the Company as of
December 31, 1996 and from the audited financial statements of Commodore as of
December 31, 1995 which are included elsewhere in this Prospectus, and from the
audited financial statements of Commodore as of December 31, 1994, 1993 and
1992.
<TABLE>
<CAPTION>
COMMODORE THE COMPANY
-------------------------------------------------------------------- ----------------
YEARS ENDED DECEMBER 31, JANUARY 1, 1996-| |OCTOBER 17, 1996
--------------------------------------------------- OCTOBER 16, | | DECEMBER 31,
1992 1993 1994 1995 1996(1) | | 1996(2)
--------- --------- --------- --------- ------------ | |---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) | |
<S> <C> <C> <C> <C> <C> | | <C>
OPERATING DATA: | |
Net revenue .............................. $ 17,961 $ 19,798 $ 26,225 $ 30,795 $ 31,957 | | $ 10,303
Station operating expenses ............... 12,713 13,509 16,483 19,033 21,291 | | 6,283
Depreciation and amortization ............ 1,676 1,129 2,145 1,926 2,158 | | 1,331
Corporate expenses ....................... 1,602 2,531 2,110 2,051 1,757 | | 601
Other operating expense(3) ............... -- 1,496 2,180 2,007 13,834 | | 744
Operating income (loss) .................. 1,970 1,133 3,307 5,778 (7,083) | | 1,344
Interest expense ......................... 4,614 4,366 3,152 7,806 8,861 | | 5,035
Extraordinary gain (loss) on | |
extinguishment of debt ................. 430 -- -- (444) -- | | --
Net loss ................................. (2,580) (3,782) (527) (2,240) (17,836) | | (3,756)
OTHER DATA: | |
Broadcast cash flow(4) ................... $ 5,248 $ 6,289 $ 9,742 $ 11,762 $ 10,666 | | $ 4,020
Broadcast cash flow margin(4) ............ 29.2% 31.8% 37.1% 38.2% 33.4% | | 39.0%
EBITDA(5) ................................ $ 3,646 $ 3,758 $ 7,632 $ 9,711 $ 8,909 | | $ 3,419
Cash flows related to: | |
Operating activities .................. (406) 477 4,061 1,245 1,990 | | (49)
Investing activities .................. (458) (10,013) (50) (4,408) (34,358) | | (127,372)
Financing activities .................. 951 9,377 (2,855) 12,013 26,724 | | 132,449
Capital expenditures ..................... 371 333 623 321 449 | | 808
Pro forma loss per common share(6) ....... | | (0.40)
Weighted average number of | |
Shares outstanding(6) ................. | | 9,369,184
BALANCE SHEET DATA (END OF PERIOD): | |
Cash and cash equivalents ................ $ 1,045 $ 887 $ 2,042 $ 10,891 | | $ 5,028
Working capital, excluding current | |
portion of long-term debt ............. 1,094 3,393 3,012 13,729 | | 8,553
Intangible and other assets, net ......... 13,819 22,419 21,096 27,422 | | 208,555
Total assets ............................. 27,508 36,192 36,283 52,811 | | 238,568
Long-term debt, including current | |
portion ............................... 51,934 41,773 36,962 66,261 | | 139,512
Redeemable preferred stock ............... 5,800 10 8,414 -- | | --
Total stockholders' equity (deficit) ..... (28,766) (8,097) (18,038) (18,555) | | 91,143
</TABLE>
(1) The historical financial data set forth includes the results of
operations of Commodore through October 16, 1996, the date of the
Commodore Acquisition.
(2) The historical financial data set forth for the Company includes the
balance sheet data and results of operations of Commodore from its
date of acquisition on October 16, 1996.
(3) Other operating expenses consist of separation compensation in 1993
and long-term incentive compensation under restructured employment
agreements with Commodore's former President and Chief Executive
Officer and its former Chief Operating Officer in 1995 and 1994. In
the period ended October 16, 1996, it consists of merger related
compensation charges in connection with the Company's acquisition of
38
<PAGE> 41
Commodore and in the period ended December 31, 1996, it includes
compensation charges in connection with certain warrants issued to the
President and Chief Executive Officer of the Company. Such expenses
are non-cash and/or are not expected to recur.
(4) Broadcast cash flow consists of operating income before depreciation,
amortization, corporate expense and other expense. See "Glossary of
Certain Terms and Market and Industry Data."
(5) EBITDA consists of operating income before depreciation, amortization
and other expense. See "Glossary of Certain Terms and Market and
Industry Data."
(6) Reflects the effect of the Recapitalization on the number of shares
outstanding.
39
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis of financial condition and
results of operations of the Company and its predecessor, Commodore, should be
read in conjunction with the consolidated financial statements and related
notes thereto of the Company and Commodore included elsewhere in this
Prospectus. Periodically, the Company may make statements about trends, future
plans and the Company's prospects. Actual results may differ materially from
those described in such forward looking statements based on the risks and
uncertainties facing the Company, including but not limited to, the following:
business conditions and growth in the radio broadcasting industry and the
general economy; competitive factors; changes in interest rates; the failure or
inability to renew one or more of the Company's broadcasting licenses; and the
factors described in "Risk Factors."
A radio broadcast company's revenues are derived primarily from the
sale of time to local and national advertisers. Those revenues are affected by
the advertising rates that a radio station is able to charge and the number of
advertisements that can be broadcast without jeopardizing listener levels (and
resulting ratings). Advertising rates tend to be based upon demand for a
station's advertising inventory and its ability to attract audiences in
targeted demographic groups, as measured principally by Arbitron. Radio
stations attempt to maximize revenues by adjusting advertising rates based upon
local market conditions, controlling advertising inventory and creating demand
and audience ratings.
Seasonal revenue fluctuations are common in the radio broadcasting
industry and are due primarily to fluctuations in advertising expenditures by
local and national advertisers, with revenues typically being lowest in the
first quarter and highest in the second and fourth quarters of each year. A
radio station's operating results in any period also may be affected by the
occurrence of advertising and promotional expenditures that do not produce
commensurate revenues in the period in which the expenditures are made. Because
Arbitron reports audience ratings on a quarterly basis, a radio station's
ability to realize revenues as a result of increased advertising and
promotional expenses and any resulting audience ratings improvements may be
delayed for several months.
In October 1996, the Company commenced operations upon consummation of
the Commodore Acquisition. Upon completion of the Pending Acquisitions, the
Company will own and operate or provide services to 121 radio stations serving
31 mid-sized markets. The Company anticipates that it will consummate the
Pending Acquisitions; however, the closing of each such acquisition is subject
to various conditions, including FCC and other governmental approvals, which
are beyond the Company's control, and the availability of financing to the
Company on acceptable terms. No assurances can be given that regulatory
approval will be received, that the New Credit Facility, the Commodore
Indenture, the Indenture or any other loan agreements to which the Company will
be a party will permit additional financing for the Pending Acquisitions or
that such financing will be available to the Company on acceptable terms. See
"Risk Factors -- Risks of Acquisition Strategy."
The Company incurred, and will incur, substantial indebtedness to
finance the Commodore Acquisition, the Osborn Transactions, the Benchmark
Acquisition and the Pending Acquisitions for which it has, and will continue to
have, significant debt service requirements. In addition, the Company has, and
will continue to have, significant charges for depreciation and amortization
expense related to the fixed assets and intangibles acquired, or to be
acquired, in its acquisitions. Consequently, the Company expects that it will
report net losses for the foreseeable future.
In the following analysis, management discusses broadcast cash flow
and EBITDA. Broadcast cash flow consists of operating income before
depreciation, amortization, corporate expenses and other expense. EBITDA
consists of operating income before depreciation, amortization and other
expense. Although broadcast cash flow and EBITDA are not measures of
performance calculated in accordance with generally accepted accounting
principles ("GAAP"), management believes that they are useful to an investor in
evaluating the Company because they are measures widely used in the broadcast
industry to evaluate a radio company's operating performance. However,
broadcast cash flow and EBITDA should not be considered in isolation or as
substitutes for net income, cash flows from operating activities and other
income or cash flow statement data prepared in accordance with GAAP or as a
measure of liquidity or profitability.
39
<PAGE> 43
THE COMPANY (AND ITS PREDECESSOR, COMMODORE)
Commodore was acquired by and became a wholly-owned subsidiary of the
Company on October 16, 1996 upon consummation of the Commodore Acquisition. The
Company is a holding company and has no significant operations or operating
assets of its own. The historical results of operations for the year ended
December 31, 1996 reflect the combined results of the Company since the date of
its acquisition of Commodore with the results of operations of Commodore from
January 1, 1996 through October 16, 1996. The results of operations for the
years ended December 31, 1995, 1994 and 1993 reflect the results of operations
of Commodore. As of December 31, 1996, Commodore owned, operated or provided
services to 33 radio stations in six mid-sized markets. The following table
presents stations acquired by Commodore or to which Commodore began providing
services from January 1, 1993 through December 31, 1996.
<TABLE>
<CAPTION>
MONTH
YEAR MARKET STATION ACQUIRED
---- ------ ------- --------
<S> <C> <C> <C>
1996 Acquisitions Coal Grove, Ohio . . . . . . . . . . . . . WBVB-FM October
Ironton, Ohio . . . . . . . . . . . . . . WIRO-AM October
WMLV-FM October
Huntington, West Virginia . . . . . . . . WKEE-FM October
WKEE-AM October
Milton, West Virginia . . . . . . . . . . WFXN-FM October
WZZW-AM October
Fairfield, Connecticut . . . . . . . . . . WSTC-AM May
WKHL-FM May
WINE-AM March
WRKI-FM March
Ft. Pierce-Stuart- Vero Beach, Florida . . WBBE-FM May
WAVW-FM May
WAXE-AM May
Westchester-Putnam Counties, New York . . WPUT-AM March
WZZN-FM March
WAXB-FM March
1995 Acquisitions Ft. Pierce-Stuart-Vero Beach, Florida . . WPAW-FM August
WQOL-FM June
Allentown-Bethlehem, Pennsylvania . . . . WKAP-AM March
1993 Acquisitions Allentown-Bethlehem, Pennsylvania . . . . WZZO-FM December
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Revenue. Net revenue increased approximately $11.5 million or
37.3% to $42.3 million in the year ended December 31, 1996 from $30.8 million
in the year ended December 31, 1995. The inclusion of revenue from the
acquisitions of radio stations and revenue generated from JSAs and LMAs entered
into during the year ended December 31, 1996 provided approximately $10.8
million of the increase. For stations owned and operated for a comparable
period in 1996 and 1995, net revenue improved $700,000 or 2.4% to $30.0 million
in 1996 from $29.3 million in 1995 primarily due to increased ratings and
improved selling efforts.
40
<PAGE> 44
Station Operating Expenses. Station operating expenses increased
approximately $8.6 million or 45.3% to $27.6 million in the year ended December
31, 1996 from $19.0 million during the year ended December 31, 1995. The
increase was primarily attributable to the station operating expenses of the
radio station acquisitions and the JSAs and LMAs entered into during the year
ended December 31, 1996, which contributed $9.0 million to the increase. For
stations owned and operated for a comparable period in 1996 and 1995, station
operating expenses declined approximately $400,000, or 2.2% to $17.6 million in
1996 from $18.0 million in 1995 which reflected more efficient operations.
Broadcast Cash Flow. As a result of the factors described above,
broadcast cash flow increased approximately $2.9 million or 24.6% to $14.7
million in the year ended December 31, 1996 from $11.8 million in the year
ended December 31, 1995. The broadcast cash flow margin was 34.8% for the
period in 1996 as compared to 38.2% during the same period in 1995. The
inclusion of broadcast cash flow from acquisitions and LMAs accounted for $1.7
million of the increase. Excluding the effects of the acquisitions and LMAs,
broadcast cash flow increased $1.1 million or 9.7% to $12.4 million in 1996
from $11.3 million in 1995 and the broadcast cash flow margin increased to
41.3% from 38.6%.
Corporate Expenses. Corporate expenses increased approximately
$400,000 or 20.0% during the 1996 period to $2.4 million from $2.0 million in
the 1995 period as a result of higher salary expense for additional staffing.
EBITDA. As a result of the factors described above, EBITDA increased
approximately $2.6 million or 26.8% to $12.3 million in the year ended
December 31, 1996 from $9.7 million in the year ended December 31, 1995. The
EBITDA margin decreased to 29.2% in 1996 period from 31.5% in 1995 period.
Other Operating Expenses. Depreciation and amortization increased
approximately $1.6 million or 84.2% to $3.5 million in 1996 from $1.9 million
in 1995 primarily due to certain radio station acquisitions consummated in
1996. In 1996, Commodore recognized approximately $13.8 million in merger
related compensation charges in connection with the Commodore Acquisition.
Merger related long-term incentive compensation expense incurred by Commodore
pursuant to the prior employment agreements of Bruce A. Friedman and James T.
Shea was $2.0 million in 1995.
Other (Income) Expenses. Interest expense increased approximately
$6.1 million or 78.2% to $13.9 million in the year ended December 31, 1996 from
$7.8 million during the same period in 1995 primarily due to the interest
expense associated with (i) the Commodore Notes (ii) $24.7 million in
acquisition and working capital funding from Commodore's Former Credit
Facility, and (iii) $35.0 million in acquisition funding from the Company's
Former Term Loan Facility. Other (income) expenses, net, decreased
approximately $2.2 million to $1.8 million in expenses for the year ended
December 31, 1996 from $400,000 in income for the period ended December 31,
1995. The increase in expense was primarily due to approximately $500,000 in
expenses associated with the filing of Commodore's Registration Statement on
Form S-1 with the Commission on May 17, 1996, which was subsequently withdrawn,
and approximately $1.4 million of merger related costs and expenses in
connection with the Commodore Acquisition. Commodore earned $300,000 in
interest income on its temporary cash investments in 1996. Additionally, there
was a $400,000 decrease in the loss on extraordinary items in 1996 as there was
no early extinguishment of debt during the period.
Net Loss. As a result of the factors described above, net loss
increased approximately $19.4 million or 881.8% to $21.6 million for the year
ended December 31, 1996 from $2.2 million for the year ended December 31,
1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Revenue. Net revenue increased approximately $4.6 million or
17.6% to $30.8 million in 1995 from $26.2 million in 1994. The inclusion of
revenue from the acquisition and revenue generated from JSAs and LMAs entered
into during 1995 provided approximately $1.5 million of the increase. For
stations owned and operated for a comparable period in 1995 and 1994, net
revenue improved approximately $3.1 million or 11.8% to $29.3 million in 1995
from $26.2 million in 1994, primarily due to higher ratings and improved
selling efforts.
Station Operating Expenses. Station operating expenses increased
approximately $2.5 million or 15.2% to $19.0 million in 1995 from $16.5 million
in 1994 partially due to the inclusion of station operating expenses from the
newly acquired radio station and from the JSA and LMA activity in 1995, which
contributed approximately $1.0 million
41
<PAGE> 45
to the increase. For stations owned and operated for a comparable period in
1995 and 1994, station operating expenses increased approximately $1.5 million
or 9.1% to $18.0 million in 1995 from $16.5 million in 1994 due to increased
selling expenses.
Broadcast Cash Flow. As a result of the factors described above,
broadcast cash flow increased approximately $2.1 million or 21.6% to $11.8
million in 1995 from $9.7 million in 1994. The broadcast cash flow margin was
38.2% in 1995 as compared to 37.0% in 1994. The inclusion of broadcast cash
flow from acquisitions, JSAs and LMAs accounted for $500,000 of the increase.
Excluding the effects of the acquisitions, broadcast cash flow increased $1.6
million or 16.5% to $11.3 million in 1995 from $9.7 million in 1994 and the
broadcast cash flow margin increased to 38.6% from 37.0%.
Corporate Operating Expenses. Corporate expenses decreased
approximately $100,000 or 4.8% to $2.0 million in 1995 from $2.1 million in
1994 as a result of reduced travel and entertainment expenses.
EBITDA. As a result of the factors described above, EBITDA increased
approximately $2.1 million or 27.6% to $9.7 million in the year ended December
31, 1995 from $7.6 million in the year ended December 31, 1994. The EBITDA
margin increased to 31.5% in 1995 from 29.0% in 1995.
Other Operating Expenses. Depreciation and amortization decreased
approximately $200,000 or 9.5% to $1.9 million in 1995 from $2.1 million in
1994 primarily as a result of Commodore fully amortizing certain costs
associated with the acquisition in December 1993. Long-term incentive
compensation decreased approximately $200,000 or 9.1% to $2.0 million in 1995
from $2.2 million in 1994. The 1995 expense reflects the balance of the
long-term incentive compensation obligations due Mr. Friedman and Mr. Shea
pursuant to their prior employment agreements.
Other (Income) Expenses. Interest expense increased approximately
$4.6 million or 143.8% to $7.8 million in 1995 from $3.2 million in 1994. The
increase was due primarily to higher floating rates on Commodore's prior senior
credit facilities and the cash and noncash interest on the Commodore Notes
issued in the Recapitalization Transactions (as defined) which was partially
offset by an increase in the amortization of the deferred financing charges
associated with the Recapitalization Transactions and Commodore's prior credit
facilities. "Recapitalization Transactions" means the completed offering of the
Commodore Notes, the net proceeds of which were used to repay indebtedness of
Commodore and redeem certain outstanding shares of preferred stock of
Commodore. Other income, net, increased approximately $800,000 or 200.0% to
$400,000 in income in 1995 from $400,000 in expenses in 1994 primarily due to a
decrease in the loss on sale of assets. Additionally, there was a decrease of
approximately $200,000 or 66.7% in provision for income taxes and an
approximate $400,000 loss on the early extinguishment of debt in 1995.
Net Loss. As a result of the factors described above, net loss
increased approximately $1.7 million or 340.0% to $2.2 million in 1995 from
$500,000 in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The pursuit by the Company of its acquisition strategy has required a
significant portion of the Company's capital resources. In October 1996, the
Company funded the $213.6 million purchase price (including assumed debt of
$93.7 million) for its first acquisition, the Commodore Acquisition, from the
proceeds of the sale of $94.0 million of Class A Common Stock to affiliates of
Hicks Muse, R. Steven Hicks and certain other investors and with $34.8 million
of borrowings under the Company's Former Term Loan Facility. The Company funded
the $143.7 million purchase price (including transaction costs) for the Osborn
Transactions from the proceeds of the issuance of the Notes, the Equity
Investment, the Management Equity Investment and the Osborn Contribution. The
Company funded the $12.1 million purchase price (including transaction costs)
for the Space Coast Acquisitions with $12.1 million of borrowings under the
Refinanced Credit Facility. The Company funded the $186.4 million purchase
price (including transactions costs) for the Benchmark Acquisition through a
combination of borrowings under the New Credit Facility and the issuance of
capital stock.
As a result of the financing of its acquisitions, the Company has a
substantial amount of long-term indebtedness, and for the foreseeable future,
payments under the Company's credit agreement, payments under the Company's
outstanding subordinated notes and future acquisitions will be the Company's
principal uses of cash.
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<PAGE> 46
In October 1996, the Company assumed the Commodore Notes in connection
with the Commodore Acquisition. The Commodore Notes accrue interest at a
stated rate of 13 1/4% per annum of their face value of $76.8 million. The
Commodore Notes require semi-annual cash interest payments on each May 1 and
November 1 of $2.9 million through May 1, 1998 and $5.2 million from May 1,
1998 until maturity. On February 20, 1997, the Company issued the Notes at a
substantial discount from their principal amount at maturity of $277.0 million
in aggregate. The Notes generated gross proceeds of approximately $150.3
million and pay no cash interest until August 1, 2002. Accordingly, the
carrying value will increase through accretion until August 1, 2002.
Thereafter, interest will be payable semi-annually, in cash, on February 1 and
August 1 of each year. In connection with the Benchmark Acquisition, the
Company entered into the New Credit Facility. Borrowings under the New Credit
Facility bear interest at floating rates and require interest payments on
varying dates depending on the interest rate option selected by the Company.
The New Credit Facility consists of [to be completed]. All loans outstanding
under the New Credit Facility will mature in . See "Description of
Indebtedness."
In addition to debt service, the Company's principal liquidity
requirements will be for working capital and general corporate purposes,
including capital expenditures, which are not expected to be material in
amount, and to consummate the Pending Acquisitions and, as appropriate
opportunities arise, to acquire additional radio stations. The Company used
the $10.0 million in net proceeds of the Osborn Ft. Myers Disposition to repay
indebtedness under the Refinanced Credit Facility. The Company intends to fund
the $106.7 million aggregate purchase price for the Pending Acquisitions
through a combination of borrowings under the New Credit Facility and a
combination of indebtedness of Commodore and/or the Company and/or capital
stock of the Company or its subsidiaries. See "Pro Forma Financial
Information." The Company anticipates that it will fund the Pending
Acquisitions with indebtedness, rather than capital stock, to the fullest
extent then permitted under the debt incurrence covenants contained in the New
Credit Facility, as it may be amended, the Commodore Indenture and the
Indenture. See "Description of Indebtedness." The Company has not determined
the terms of any such indebtedness or capital stock. The Company's ability to
make such borrowings and issue such indebtedness and capital stock will depend
upon many factors, including, but not limited to, the Company's success in
operating and integrating its radio stations and the condition of the capital
markets at the times of consummation of the Pending Acquisitions. No assurances
can be given that such financings can be consummated on terms considered to be
favorable by management or at all.
Management believes that cash from operating activities, together with
available revolving credit borrowings under the New Credit Facility, should be
sufficient to permit the Company to fund its operations and meet its
obligations under the agreements governing its existing indebtedness. The
Company may require financing for additional future acquisitions, if any, and
there can be no assurance that it would be able to obtain such financing on
terms considered to be favorable by management. Management evaluates potential
acquisition opportunities on an on-going basis and has had, and continues to
have, preliminary discussions concerning the purchase of additional stations.
The Company expects that in connection with the financing of future
acquisitions, it may consider disposing of stations in its markets. The
Company has no current plans or arrangements to dispose of any of its stations
other than the disposition of station KASH-AM in Anchorage, Alaska after
consummation of the Community Pacific Acquisition.
Net cash provided by operating activities was $1.9 million, $1.2
million and $4.1 million for the years ended December 31, 1996, 1995 and 1994,
respectively. Changes in the Company's net cash provided by operating
activities are primarily the result of the Company's completed acquisitions and
station operating agreements entered into during the periods and their effects
on income from operations and working capital requirements.
Net cash used in investing activities was $161.7 million, $4.4 million
and $50,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
Net cash provided by financing activities was $159.2 million and $12.0 million
for the years ended December 31, 1996 and 1995, respectively, and net cash used
by financing activities was $2.9 million in 1994. These cash flows primarily
reflect the borrowings, capital contributions and expenditures for station
acquisitions and dispositions and includes the effects of the Commodore
Acquisition in 1996.
RECENT PRONOUNCEMENTS
In February 1997, the FASB issued FASB Statement No. 128 "Earnings Per
Share ("SFAS No. 128")" which establishes standards for computing and
presenting earnings per share. SFAS No. 128 is effective for fiscal years
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<PAGE> 47
beginning after December 15, 1997. Management does not believe the
implementation of SFAS No. 128 will have a material effect on its financial
statements.
In February 1997, the FASB issued FASB Statement No. 129 "Disclosure
of Information About Capital Structure" ("SFAS No. 129") which establishes
disclosure requirements for an entity's capital structure. SFAS No. 129 is
effective for fiscal years beginning after December 15, 1997. Management does
not believe the implementation of SFAS No. 129 will have a material effect on
its financial statements.
EXTRAORDINARY ITEM
In connection with the Benchmark Acquisition, Capstar issued $750,000
of Class C Common Stock to an affiliate of Hicks Muse in consideration for its
agreement to purchase the outstanding obligations of Bankers Trust Company
under the Acquisition Sub Credit Agreement upon the occurrence of certain
events. The issuance of Class C Common Stock in connection with the agreement
to purchase the outstanding obligations of Bankers Trust Company under the
Acquisition Sub Credit Agreement will be reported as an extraordinary item in
the period in which the Company consummated the Benchmark Acquisition. Had the
Benchmark Acquisition been consummated at December 31, 1996, the Company would
have recorded an extraordinary charge of approximately $750,000.
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<PAGE> 48
BUSINESS
THE COMPANY
The Company is the largest radio broadcaster in the United States
operating exclusively in mid-sized markets. The Company currently owns and
operates or provides services to 99 radio broadcasting stations in 28 mid-sized
markets located primarily in the northeastern, southeastern and western United
States. The Company has entered into seven agreements to acquire 32 additional
stations in seven new markets (including ten stations in four new markets for
which the Company currently provides services pursuant to an LMA) and three
existing markets, which acquisitions are expected to occur subsequent to the
Offering. Upon completion of the Pending Acquisitions, the Company will own
and operate or provide services to 121 radio broadcasting stations in 31
mid-sized markets located throughout the country. These stations comprise the
leading radio group, in terms of revenue share and/or audience share, in 20 of
these markets.
In February 1996, as a result of the passage of the Telecom Act, radio
broadcasting companies were permitted to increase their ownership of stations
within a single market from a maximum of four to a maximum of between five and
eight stations, depending on market size. More importantly, the Telecom Act
also eliminated the national ownership restriction that generally had limited
companies to the ownership of no more than 40 stations (20 AM and 20 FM)
throughout the United States. In order to capitalize on the opportunities
created by the Telecom Act, R. Steven Hicks, an executive with over 30 years of
experience in the radio broadcasting industry, and Hicks Muse formed Capstar to
acquire and operate radio station clusters in mid-sized markets. The Company
generally defines mid-sized markets as those MSAs ranked between 50 and 200,
each of which has approximately $10.0 million to $35.0 million in radio
advertising revenue.
The Company believes that mid-sized markets represent attractive
operating environments because, as compared to the 50 largest markets in the
United States, they are generally characterized by (i) lower radio station
purchase prices as a multiple of broadcast cash flow, (ii) less sophisticated
and undercapitalized competitors, including both radio and competing
advertising media such as newspaper and television, and (iii) less direct
format competition resulting from fewer stations in any given market. The
Company believes that the attractive operating characteristics of mid-sized
markets coupled with the opportunity provided by the Telecom Act to create
in-market radio station cluster groups will enable the Company to achieve
substantial revenue growth and cost efficiencies. As a result, management
believes that the Company can generate broadcast cash flow margins that are
comparable to the higher margins that heretofore were generally achievable only
in the top 50 markets.
To effectively and efficiently manage its stations, the Company has
developed a flexible management structure designed to manage a large and
growing portfolio of radio stations throughout the United States. Initially,
the station portfolio will be organized into three regions, the Northeast, the
Southeast and the West, each of which will be managed by regional executives in
conjunction with general managers in each of the Company's markets.
STATION PORTFOLIO
In October 1996, the Company consummated its first acquisition when it
purchased Commodore. Since such time, the Company has consummated the Osborn
Acquisition in February 1997, the Space Coast Acquisitions in April 1997 and
the Benchmark Acquisition in June 1997. On a pro forma basis after giving
effect to such acquisitions as if they had occurred on January 1, 1996, the
Company would have had net revenue and broadcast cash flow of $ million
and $ million, respectively, for the year ended December 31, 1996.
The Company has agreed, subject to various conditions, to acquire 32
additional radio stations (22 FM and 10 AM) in seven separate transactions.
The Company's portfolio is comprised of three geographical regions -- the
Northeast Region, the Southeast Region and the West Region -- which will
include a total of 121 stations located in 31 mid-sized markets in the United
States upon completion of the Pending Acquisitions. On a pro forma basis after
giving effect to the Pending Acquisitions as if they had occurred on January 1,
1996, the Company would have had net revenue and broadcast cash flow of $
million and $ million, respectively, for the year ended December
31, 1996.
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<TABLE>
<CAPTION>
COMPANY COMPANY COMPANY
MSA STATIONS REVENUE AUDIENCE
--------------- SHARE SHARE
MARKET(1) RANK(2) FM AM RANK(3) RANK(4) SOURCE COMPANY
--------- ------- -- -- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
NORTHEAST REGION
Allentown-Bethlehem, PA(5) . . 64 2 2 1 1 Commodore
Melbourne-Titusville-Cocoa, FL 96 3 2 1 1 Space Coast
Fairfield County, CT(6) . . . . 112 3 3 2 2 Commodore
Ft. Pierce-Stuart-Vero Beach, FL(5) 121 5 1 1 1 Commodore
Huntington, WV-Ashland, KY(5) . 139 5 5 1 1 Commodore
Salisbury-Ocean City, MD . . . 153 2 -- 3 4 Benchmark
Dover, DE . . . . . . . . . . . NA 2 1 1 1 Benchmark
Wilmington, DE . . . . . . . . NA 1 1 2 2 Commodore
Westchester-Putnam Counties, NY(7) NA 3 2 NA 1 Commodore
-- --
SUBTOTAL . . . . . . . . 26 17
SOUTHEAST REGION
Greenville, SC . . . . . . . . 59 3 1 2 2 Benchmark
Columbia, SC . . . . . . . . . 88 4 2 1 1 Benchmark/Emerald City
Huntsville, AL . . . . . . . . 114 1 2 1 1 Osborn
Jackson, MS . . . . . . . . . . 118 2 2 2 2 Benchmark
Shreveport, LA . . . . . . . . 126 1 1 2 3 Benchmark
Montgomery, AL . . . . . . . . 142 3 -- 2 2 Benchmark
Asheville, NC . . . . . . . . . 179 1 1 1 1 Osborn
Tuscaloosa, AL . . . . . . . . 212 2 1 1 1 Osborn
Wheeling, WV(5) . . . . . . . . 213 5 2 1 1 Osborn
Winchester, VA . . . . . . . . 219 2 1 2 1 Benchmark
Jackson, TN . . . . . . . . . . 257 2 1 1 1 Osborn
Roanoke, VA . . . . . . . . . . NA 4 1 2 1 Benchmark/Cavalier/WRIS
Lynchburg, VA . . . . . . . . . NA 3 1 1 1 Benchmark/Cavalier
Statesville, NC . . . . . . . . NA 1 1 NA NA Benchmark
Gadsden, AL(8) . . . . . . . . NA 1 1 NA 1 Osborn
-- --
SUBTOTAL . . . . . . . . 35 18
WEST REGION
Stockton, CA(5) . . . . . . . . 85 1 1 3 3 Community Pacific
Des Moines, IA(5) . . . . . . . 89 2 1 4 4 Community Pacific
Madison, WI . . . . . . . . . . 120 4 2 1 1 Madison
Modesto, CA(5) . . . . . . . . 121 1 1 2 2 Community Pacific
Anchorage, AK(5) . . . . . . . 165 4 2 2 1 Community Pacific/COMCO
Fairbanks, AK(6) . . . . . . . NA 2 1 NA 1 COMCO
Yuma, AZ . . . . . . . . . . . NA 2 1 NA 1 Commonwealth
-- --
SUBTOTAL . . . . . . . . 16 9
-- --
TOTAL(9) . . . . . . . . 77 44
== ==
</TABLE>
- ---------------
NA Information not available.
(1) Actual city of license may be different from metropolitan market served.
Market may be different from market definition used under FCC multiple
ownership rules.
(2) MSA rank obtained from Arbitron's Summer 1996 Radio Market Survey Schedule.
(3) Company revenue share rank compiled from data in BIA Publications Radio
Analyzer-BIA's Master Access, Version 1.7 (copyright 1996) ( current as of
February 27, 1997), based upon 1996 gross revenue for the indicated
markets.
(4) Company audience share rank obtained from Arbitron's Radio Market Reports,
based on average quarter hour estimates for the last available reporting
period ending either Spring, Summer or Fall 1996 for the demographic of
persons ages 25-54, listening Monday through Sunday, 6 a.m. to midnight,
except for the Yuma, Arizona market which was obtained from
AccuRatings(TM). To account for listeners lost to other nearby markets, a
radio station's "local" audience share is derived by comparing the radio
station's average quarter hour share to the total average quarter hour
share for all stations whose signals are heard within the MSA, excluding
audience share for listeners who listen to stations whose signals originate
outside the MSA.
(5) The Company provides certain sales and marketing services to stations
WKAP-AM in Allentown, Pennsylvania, WPAW-FM in Ft. Pierce-Stuart-Vero
Beach, Florida and WEEL-FM in Wheeling, West Virginia, pursuant to JSAs.
The Company provides certain sales, programming and marketing services to
station WHRD-AM in Huntington, West Virginia, and, pending consummation of
the Community Pacific Acquisition, to stations KFIV-AM and KJSN-FM in
Modesto, California, KVFX-FM and KJAX-FM in Stockton, California, KASH-FM,
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<PAGE> 50
KENI-AM and KBFX-FM in Anchorage, Alaska, and KDMI-AM, KHKI-FM and KGGO-FM
in Des Moines, Iowa, pursuant to LMAs. The chart includes these stations.
(6) Fairfield County is a CSA as defined by Arbitron. The CSA includes the
Arbitron markets of Bridgeport, Stamford- Norwalk and Danbury, Connecticut
with market rankings of 112, 132 and 191, respectively. MSA rank is listed
for the Bridgeport market only. The combined rank for the CSA has not been
estimated. Fairbanks, Alaska is a CSA as defined by Arbitron, for which
audience share rank was obtained from Arbitron's Fall 1996 CSA Market
Report.
(7) Westchester-Putnam Counties, New York are a sub-set of the greater New York
City Metropolitan Area, which is ranked as the largest MSA by Arbitron.
(8) Company audience share rank obtained from Arbitron's June 1996 County
Report (for field work performed in 1995) survey, from the County of
Etowah, Alabama which is Gadsden's home county.
(9) The chart does not include (i) station WING-FM in Dayton, Ohio, which is
owned by the Company and for which an unrelated third party, who has an
option to purchase such station, currently provides certain sales,
programming and marketing services pursuant to an LMA, (ii) station WDRR-FM
in Ft. Myers, Florida, in which the Company owns a 50% nonvoting interest
and which the Company intends to sell or (iii) station KASH-AM in
Anchorage, Alaska, which the Company will own upon consummation of the
acquisition of Community Pacific, but expects to sell subsequent thereto to
remain in compliance with the station ownership limitations under the
Communications Act. See "The Pending Acquisitions."
ACQUISITION STRATEGY
The Company is the leading consolidator of radio stations in mid-sized
markets throughout the United States. Management has achieved this position
through the application of an acquisition strategy that it believes allows the
Company to develop radio station clusters at attractive prices. First, the
Company enters attractive new mid-sized markets by acquiring a leading station
(or a group that owns a leading station) in such market. The Company then
utilizes the initial acquisition as a platform to acquire additional stations
which further enhance the Company's position in a given market. Management
believes that once it has established operations in a market with an initial
acquisition, it can acquire additional stations at reasonable prices and, by
leveraging its existing infrastructure, knowledge of and relationships with
advertisers and substantial management experience, improve the operating
performance and financial results of those stations.
OPERATING STRATEGY
The Company's objective is to maximize the broadcast cash flow of each
of its radio station clusters through the application of the following
strategies:
Enhance Revenue Growth through Multiple Station Ownership. Management
believes that the ownership of multiple stations in a market allows the Company
to coordinate its programming to appeal to a broad spectrum of listeners. Once
the station cluster has been created, the Company can provide one-stop shopping
to advertisers attempting to reach a wide range of demographic groups.
Simplifying the buying of advertising time for customers encourages increased
advertiser usage thereby enhancing the Company's revenue generating potential.
Broad demographic coverage also allows the Company to compete more effectively
against alternative media, such as newspaper and television, thus potentially
increasing radio's share of the total advertising dollars spent in a given
market.
Create Low Cost Operating Structure. Management believes that it is
less expensive to operate radio stations in mid-sized markets than in large
markets for several reasons. First, because stations in mid-sized markets
typically have less direct format competition, the Company is less reliant on
expensive on-air talent and costly advertising and promotional campaigns to
capture listeners. Second, the ownership of multiple stations within a market
allows the Company to achieve substantial cost savings through the
consolidation of facilities, management, sales and administrative personnel,
operating resources (such as on-air talent, programming and music research) and
through the reduction of redundant corporate expenses. Furthermore, management
expects that the Company, as a result of the large size of its portfolio,
combined with the consolidated purchasing power of the Hicks Muse portfolio
companies, will be able to realize substantial economies of scale in such areas
as national representation commissions, employee benefits, casualty insurance
premiums, long distance telephone rates and other operating expenses. Finally,
the incorporation of digital automation in certain markets allows the Company
to operate radio stations at off-peak hours with minimal human involvement
while improving the quality of programming.
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<PAGE> 51
Utilize Sophisticated Operating Techniques. Following the acquisition
of a station or station group, the Company seeks to capitalize on management's
extensive large market operating experience by implementing sophisticated
techniques such as advertising inventory management systems, sales training
programs and in-depth music research studies which improve both the efficiency
and profitability of its stations. Prior to the passage of the Telecom Act,
management believes that many operators in mid-sized markets did not generate
sufficient revenue to justify the incurrence of expenditures to develop these
techniques.
Provide Superior Customer Service. The Company believes that
advertising customers in mid-sized markets typically do not have extensive
resources to create and implement advertising campaigns. The Company provides
many of its advertising customers with extensive advertising support which may
include (i) assistance in structuring advertising and promotional campaigns,
(ii) creating and producing customer advertisements and (iii) analyzing the
effectiveness of the customer's media programs. Management believes that this
type of superior customer service attracts new customers to the Company and
increases the loyalty of the Company's existing customers, thereby providing
stability to the Company's revenue, often despite fluctuations in station
ratings.
Develop Decentralized Management Structure. The Company has developed
experienced, highly motivated, regional and local management teams, derived
primarily from station groups acquired by the Company, and has decentralized
decision-making so that these regional and local managers have the flexibility
to develop operating cultures that capitalize on the unique qualities of each
region and market. The Company also relies on local managers to source
additional acquisition opportunities. In addition, in order to incentivize
regional management, the Company intends to link compensation to regional
operating performance as well as the combined results of the Company.
OWNERSHIP AND MANAGEMENT
In April 1996, Hicks Muse combined its financial expertise with the
operating experience of R. Steven Hicks to form the Company. Mr. Hicks is a
30-year veteran of the radio broadcasting industry (including 18 years as a
station owner) who has owned and operated or managed in excess of 150 radio
stations in large and mid-sized markets throughout the United States. In
addition, in 1993, Mr. Hicks co-founded SFX for which he served as Chief
Executive Officer for three years until his resignation in 1996.
Hicks Muse is a private investment firm based in Dallas, New York, St.
Louis and Mexico City that specializes in acquisitions, recapitalizations and
other principal investing activities. Since the firm's inception in 1989,
affiliates of Hicks Muse have completed more than 70 transactions having a
combined transaction value exceeding $19.0 billion. In 1994, an affiliate of
Hicks Muse made its first major investment in the radio broadcasting industry
when Hicks, Muse, Tate & Furst Equity Fund II, L.P. founded Chancellor, which,
in the three years since its inception, has become one of the largest radio
broadcasting companies in the United States. HM Fund III and its affiliates
have invested $148.5 million in the Class A Common Stock of Capstar.
The Company has designed an organizational structure to effectively
manage its existing station portfolio as well as to accommodate future
in-market or group acquisitions. Each of the Company's existing and future
operating regions is or, will be, headquartered within the region and staffed
with a team of regional executives which manage, or will manage, the operations
of that region's station portfolio. A chief executive officer and/or a chief
operating officer of each region oversees the regional and general managers of
the stations within a particular region. In addition, a controller in each
region directly oversees the business managers of the stations within a region.
Each regional operating executive reports directly to R. Steven Hicks while
each regional controller reports to the Company's chief financial officer. In
assembling each of the existing regional management teams, the Company has
sought to retain the senior management of some of the station groups that it
has acquired so as to (i) retain and capitalize on the local market experience
and knowledge of these experienced executives and (ii) foster a culture that is
consistent with the unique attributes of each of the local markets acquired.
Furthermore, the Company believes that each of its regional executives
possesses considerable knowledge of its region's competitors and is therefore
well situated to identify strategic acquisition candidates.
R. Steven Hicks, the President and Chief Executive Officer of the
Company, has invested $3.1 million in Class A Common Stock. Certain other
members of the Company's management, including certain of the Company's
regional executives, have invested an additional $6.1 million in Class A Common
Stock. The Company's regional executive
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<PAGE> 52
management teams are compensated based upon the financial performance of their
respective regions and the Company as a whole with such compensation awarded in
the form of cash bonuses and stock options. Management believes that the
ownership interests of management and this compensation structure fosters
teamwork and the sharing of the best practices across regions to maximize the
overall financial performance of the Company.
Each of the Company's regional executives has extensive experience
operating radio stations in mid-sized markets, as described below.
Northeast Region. The chief executive officer of the Northeast Region
is James T. Shea, Jr., the President (and former Chief Operating Officer) of
Commodore. Mr. Shea has more than 20 years of experience in the radio
broadcasting industry. Mr. Shea's operating knowledge and strong advertiser
relationships helped Commodore become a leading radio group in each of its
markets. Pro forma for the Pending Acquisitions, Mr. Shea will manage 43
stations in nine markets in the Northeast Region.
Southeast Region. Frank D. Osborn, President and Chief Executive
Officer of Osborn since its inception in 1984, is the chief executive officer
of the Southeast Region. Mr. Osborn brings more than 19 years of radio industry
experience to the Company, including prior positions as Senior Vice President
of Price Communications, Vice President of Finance and Administration at NBC
Radio and General Manager of WYNY-FM in New York City. Mr. Osborn has been
successful in developing leading station clusters in each of Osborn's markets.
The Company intends to hire a chief operating officer for the Southeast Region,
who will assist Mr. Osborn in overseeing the operations of the radio stations
in the region. Pro forma for the Pending Acquisitions, the Southeast Region
will include 53 stations in 15 markets.
West Region. The West Region will be managed by two radio executives,
David J. Benjamin III and Dex Allen, with an aggregate of 52 years of
experience in the radio broadcasting industry. Mr. Benjamin, the current
President and Chief Executive Officer of Community Pacific, will serve as the
chief executive officer of the West Region upon consummation of the Community
Pacific Acquisition. Mr. Allen has served as the managing member of
Commonwealth since 1984 and is expected to continue to serve in such position
until the consummation of the Commonwealth Acquisition. Mr. Allen became the
president and chief operating officer of the West Region effective January 1,
1997. Pro forma for the Pending Acquisitions, the West Region will include 25
stations in seven markets.
REGIONAL OPERATING GROUPS
Northeast Region
The Company's portfolio of radio stations in the Northeast Region
includes 43 radio stations (26 FM and 17 AM) located in nine markets in
Connecticut, Delaware, Florida, Kentucky, Maryland, New York, Ohio,
Pennsylvania and West Virginia. The Company will have the leading radio station
cluster based on revenue share rank in five of its nine markets.
History. The Commodore Acquisition, which initially formed the basis
for the Northeast Region, provided the Company with 33 stations located in the
following six markets: Allentown-Bethlehem, Pennsylvania (four stations);
Fairfield County, Connecticut (six stations); Ft. Pierce-Stuart-Vero Beach,
Florida (six stations); Huntington, West Virginia-Ashland, Kentucky (10
stations); Westchester-Putnam Counties, New York (five stations); and
Wilmington, Delaware (two stations). Commodore entered each of these six
markets with an initial acquisition of one or two stations during the 1980's.
The portfolio of Commodore stations has undergone significant growth during the
past two years, as the management team completed acquisitions of 22 stations in
the six original markets in 1995 and 1996, especially after the passage of the
Telecom Act in February 1996. As a result of the recent acquisition of many of
the Commodore stations, management believes that the station clusters in the
original Commodore markets have not yet realized the full potential of their
recent consolidations.
Recently completed acquisitions will enhance the Company's Northeast
Region station portfolio through the addition of 10 stations in three new
markets. The Benchmark Acquisition provided the Company with three stations in
Dover, Delaware and two stations in Salisbury-Ocean City, Maryland, and the
Space Coast Acquisitions provided the Company with five new stations in the
Melbourne-Titusville-Cocoa, Florida market. The Company expects to realize
substantial revenue growth and economies of scale from these acquisitions in
the Northeast Region because each
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<PAGE> 53
of the three new markets is adjacent to one of the original Commodore markets,
as both the Dover and Salisbury-Ocean City markets are near Wilmington, and
Melbourne-Titusville-Cocoa is adjacent to Ft. Pierce-Stuart-Vero Beach.
Management. The chief executive officer of the Northeast Region is
James T. Shea, Jr., the President (and former Chief Operating Officer) of
Commodore, who has more than 20 years of experience in the radio broadcasting
industry. Under the guidance of Mr. Shea, Commodore grew from 11 stations in
1992 to its current size. In addition, Commodore realized compound annual
growth in estimated net revenue and broadcast cash flow of 28.7% and 32.6%,
respectively, for the three years ending December 31, 1996. Reporting to Mr.
Shea will be regional managers, each of whom will oversee the operations of
several markets. In addition, each of the markets in the Northeast Region will
be managed by a general manager who will manage the day-to-day operations of
the radio stations in each market.
Markets. Management believes that the station portfolio in the
Northeast Region has significant growth potential resulting from the recent
formation of station clusters in most of the Company's markets. The Company's
Allentown-Bethlehem, Pennsylvania market is the most developed of Commodore's
radio station clusters and has been operating as a cluster for approximately
two years. In this market, the Company owns four stations, including two of the
five viable stations in the market. The two FM and two AM stations target a
broad demographic spectrum with four different formats: News/Talk; Contemporary
Hit Radio; Album Rock; and Middle of the Road. The potential of radio station
clustering is highlighted by this group's results. The stations comprise the
leading radio station group in the market based on local audience share and
maintain the number one revenue rank. Furthermore, the cluster has increased
net revenue from $7.4 million in 1993 to an estimated $10.2 million in 1996,
representing compound annual growth of 11.8%, and has increased its broadcast
cash flow margins from 33.8% to 48.1% during the same period. These financial
results exclude station WKAP-AM, with which Commodore entered into a JSA in
March 1995.
The Company seeks to replicate the success it has enjoyed in
Allentown-Bethlehem with station clusters in each of the other markets in the
Northeast Region. Management believes that the recently formed clusters in most
of the other markets in the region should be able to generate substantial cash
flow improvements given the Company's strong station positions. For example, in
Huntington, West Virginia-Ashland, Kentucky, the Company owns or provides
services to ten stations, including six of the ten viable stations in the
market. Commodore acquired two of the stations in 1982, entered into LMAs with
eight additional stations in April 1996 and subsequently acquired seven of
these stations in October 1996. On a combined basis, this newly formed cluster
has the number one revenue and audience share ranks in the market. In markets
such as Salisbury-Ocean City, Maryland where the Company has only two stations,
the Company will seek to enhance its station cluster through future
acquisitions of additional stations, or, if that proves not to be feasible,
consider exiting the market.
50
<PAGE> 54
The following table summarizes certain information relating to the
Company's radio stations in the Northeast Region.
<TABLE>
<CAPTION>
TARGET COMPANY STATION
DEMO- REVENUE AUDIENCE
MARKET AND YEAR SOURCE MSA GRAPHIC SHARE SHARE
STATION CALL LETTERS(1) ACQUIRED COMPANY RANK(2) GROUP RANK(3) RANK(4) FORMAT
- ----------------------- -------- ------- ------- ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
ALLENTOWN-BETHLEHEM, PA . 64 1
WAEB-AM . . . . . . . . 1982 Commodore 35+ 6 News/Talk
WAEB-FM . . . . . . . . 1982 Commodore W18-49 3 Contemporary Hits Radio
WZZO-FM . . . . . . . . 1993 Commodore M18-49 4 Album Rock
WKAP-AM(5) . . . . . . 1995 Commodore 35+ 8 Middle-of-the-Road
MELBOURNE-TITUSVILLE- COCOA, FL 96 1
WMMB-AM . . . . . . . . 1986 Space Coast 50+ 5t Middle-of-the-Road
WGGD-FM . . . . . . . . 1986 Space Coast 35-64 4 Oldies
WMYM-AM . . . . . . . . 1982 Space Coast 35-64 7t Adult Contemporary
WLRQ-FM . . . . . . . . 1982 Space Coast 25-54 1 Adult Contemporary
WHKR-FM . . . . . . . . 1989 Space Coast 25-54 3 Classical
FAIRFIELD COUNTY, CT(6) . 112 2
WNLK-AM . . . . . . . . 1989 Commodore 35+ 9t Talk
WEFX-FM . . . . . . . . 1989 Commodore M18-49 6 Classic Rock
WSTC-AM . . . . . . . . 1996 Commodore 25-54 9t News/Talk
WKHL-FM . . . . . . . . 1996 Commodore 25-54 4 Oldies
WINE-AM . . . . . . . . 1996 Commodore 25-54 14 News
WRKI-FM . . . . . . . . 1996 Commodore M18-49 7 Album Rock
FT. PIERCE-STUART-VERO BEACH, FL 121 1
WZZR-FM . . . . . . . . 1987 Commodore M18-49 2 Album Rock
WQOL-FM . . . . . . . . 1995 Commodore 25-54 3t Oldies
WPAW-FM(5) . . . . . . 1995 Commodore 25-54 7 Country
WBBE-FM . . . . . . . . 1996 Commodore 25-54 1 Classic Country
WAVW-FM . . . . . . . . 1996 Commodore 25-54 5t Country
WAXE-AM . . . . . . . . 1996 Commodore 35+ 14t Nostalgia
HUNTINGTON, WV-ASHLAND, KY 139 1
WTCR-AM . . . . . . . . 1982 Commodore 25-54 10 Classic Country
WTCR-FM . . . . . . . . 1982 Commodore 25-54 1 Country
WIRO-AM . . . . . . . . 1996 Commodore M25-54 14t Sports
WHRD-AM(5) . . . . . . 1996 Commodore M25-54 NA Sports
WZZW-AM . . . . . . . . 1996 Commodore M25-54 NA Sports
WKEE-AM . . . . . . . . 1996 Commodore 35t 12t Middle-of-the-Road
WKEE-FM . . . . . . . . 1996 Commodore 25-54 2 Country
WAMX-FM . . . . . . . . 1996 Commodore M25-54 5t Classic Rock
WFXN-FM . . . . . . . . 1996 Commodore M25-54 7 Classical
WBVB-FM . . . . . . . . 1996 Commodore M18-49 8 Adult Contemporary
SALISBURY-OCEAN CITY, MD 153 3
WWFG-FM . . . . . . . . 1993 Benchmark 25-54 4 Country
WOSC-FM . . . . . . . . 1994 Benchmark 18-34 12 Contemporary Hits Radio
DOVER, DE . . . . . . . . NA 1
WDSD-FM . . . . . . . . 1990 Benchmark 25-54 1 Country
WSRV-FM . . . . . . . . 1994 Benchmark 25-54 2 Adult Contemporary
WDOV-AM . . . . . . . . 1990 Benchmark 25-54 NA News/Talk
WILMINGTON, DE . . . . . NA 2
WJBR-AM . . . . . . . . 1985 Commodore W25-54 5t Middle-of-the-Road
WJBR-FM . . . . . . . . 1985 Commodore 35+ 2 Adult Contemporary
WESTCHESTER-PUTNAM
COUNTIES, NY(6)(7) NA NA
WFAS-AM . . . . . . . . 1986 Commodore 35+ NA Middle-of-the-Road
WPUT-AM . . . . . . . . 1996 Commodore 35+ NA Country
WFAS-FM . . . . . . . . 1986 Commodore W25-54 1 Adult Contemporary
WZZN-FM . . . . . . . . 1996 Commodore W25-54 NA Album Rock
WAXB-FM . . . . . . . . 1996 Commodore 25-54 NA Oldies
</TABLE>
- --------------
NA Information not available.
t Tied with another radio station.
(1) Actual city of license may be different from metropolitan market
served. Market may be different from market definition used under FCC
multiple ownership rules.
(2) MSA rank obtained from Arbitron's Summer 1996 Radio Market Survey
Schedule. Fairfield County is a CSA as defined by Arbitron. The CSA
includes the Arbitron markets of Bridgeport, Stamford-Norwalk, and
Danbury, Connecticut with market rankings of 112, 132, and 191,
respectively. MSA Rank is listed for the Bridgeport market only. The
combined rank for the CSA has not been estimated.
(3) Company revenue share rank obtained from data in BIA Publications --
Radio Analyzer, BIA's Master Access, Version 1.7 (copyright 1996)
(current as of February 27, 1997), based upon 1996 gross revenue for
the indicated markets. Rankings for Wilmington, Delaware and Dover,
Delaware markets were determined separately, using the City of License
to determine the split of the market.
51
<PAGE> 55
(4) Station audience share rank obtained from Arbitron's Radio Market
Reports, based on average quarter hour estimates for the reporting
period ending Fall 1996, for the demographic of persons ages 25-54,
listening Monday through Sunday, 6 a.m. to midnight. To account for
listeners lost to other nearby markets, a radio station's "local"
audience share is derived by comparing the radio station's average
quarter hour share to the total average quarter hour share for all
stations whose signals are heard within the MSA, excluding audience
share for listeners who listen to stations whose signals originate
outside the MSA.
(5) The Company provides certain sales and marketing services to stations
WKAP-AM in Allentown, Pennsylvania and WPAW-FM in Ft.
Pierce-Stuart-Vero Beach, Florida, pursuant to JSAs. The Company
provides certain sales, programming and marketing services to station
WHRD-AM in Huntington, West Virginia pursuant to an LMA.
(6) Fairfield County, Connecticut and Westchester-Putnam Counties, New
York, CSA audience share and revenues obtained from Arbitron's Custom
Survey Area Report for the Fall 1996 period.
(7) Westchester-Putnam Counties, New York are sub-sets of the greater New
York City Metropolitan Area, which is ranked as the largest MSA by
Arbitron.
Southeast Region
Upon consummation of the Pending Acquisitions, the Company's portfolio
of radio stations in the Southeast Region will include 53 radio stations (35 FM
and 18 AM) located in 15 markets in Alabama, Louisiana, Mississippi, North
Carolina, South Carolina, Tennessee, Virginia and West Virginia. The Company's
stations will comprise the leading radio station group based on revenue share
rank in eight of these markets.
History. Osborn is the core of the Southeast Region with 20 stations
located in the following six markets: Huntsville, Alabama (three stations);
Asheville, North Carolina (two stations); Tuscaloosa, Alabama (three stations);
Wheeling, West Virginia (seven stations); Jackson, Tennessee (three stations);
and Gadsden, Alabama (two stations). Osborn's portfolio of stations and
markets has undergone significant growth during the past two years, during
which time Osborn has completed acquisitions of 12 stations in seven markets.
Management believes that the station clusters in the six markets have not yet
reached the full potential of their recent consolidations.
The recently-completed Benchmark Acquisition will enhance the
Company's Southeast Region station portfolio by providing the Company with 26
stations in the following new markets: Greenville, South Carolina (four
stations); Columbia, South Carolina (five stations); Roanoke, Virginia (two
stations); Lynchburg, Virginia (one station); Jackson, Mississippi (four
stations); Shreveport, Louisiana (two stations); Montgomery, Alabama (three
stations); Winchester, Virginia (three stations); and Statesville, North
Carolina (two stations). The Pending Acquisitions will enhance the Company's
Southeast Region station portfolio through the acquisition of seven additional
stations in three existing markets. The Cavalier Acquisition will contribute
five stations in the Roanoke and Lynchburg, Virginia markets; the Emerald City
Acquisition will contribute an additional station in the Columbia, South
Carolina market; and the WRIS Acquisition will contribute an additional station
in the Roanoke, Virginia market, further enhancing the Company's market
clusters. The Company's management believes that the addition of the southeast
Benchmark, Cavalier, Emerald City and WRIS radio stations will enhance the
Southeast Region's operations by creating a greater critical mass in the
region, and by entering new markets which offer additional consolidation
opportunities.
Management. The chief executive officer of the Southeast Region is
Frank D. Osborn, the former Chief Executive Officer of Osborn, who brings to
the Company over 19 years of experience in the radio industry, including prior
positions as Senior Vice President of Price Communications, Vice President of
Finance and Administration at NBC Radio and General Manager of WYNY-FM in New
York City. The Company believes that Mr. Osborn's significant contacts and
station owner relationships in the radio industry, particularly in the
southeast, will facilitate the Company's efforts to acquire additional radio
stations in the region. The Company intends to hire a chief operating officer
for the Southeast Region, who will assist Mr. Osborn in overseeing the
operations of the radio stations in the Southeast Region. In addition, each of
the markets in the Southeast Region will be run by a general manager who will
manage the day-to-day operations of the radio stations in each market.
Markets. Management believes that the portfolio of markets in the
Southeast Region has significant consolidation and future add-on acquisition
potential. Management hopes to replicate its success in Wheeling, West
Virginia, where the Company has the number one radio franchise. Osborn
purchased four stations and entered into a JSA with a fifth station in the past
year in order to add to its two existing radio stations. The stations target a
broad demographic spectrum with five different formats: Country; Adult
Contemporary; Adult; Classic Rock; and Oldies.
52
<PAGE> 56
Osborn also operates the Country Music Hall and Jamboree in the Hills, a
country music festival, which complement the strong radio station cluster in
Wheeling. The Company's stations comprise the leading radio station group in
the Wheeling market based on local audience share and maintain the number one
revenue rank. The Company believes that Osborn has not yet fully realized the
benefits of the economies of scale or revenue enhancements associated with the
recent acquisitions in Wheeling.
The Company seeks to duplicate this strategy in each of its other
southeast markets. For example, upon consummation of the Cavalier Acquisition
and the WRIS Acquisition, the Southeast Region will combine Benchmark's three
radio stations in the Roanoke and Lynchburg, Virginia markets with five
Cavalier radio stations and one WRIS station located in those markets.
Management believes that the Company's strong position in these markets will
enable its radio clusters to generate substantial revenue and broadcast cash
flow growth.
The following table summarizes certain information relating to the
Company's radio stations in the Southeast Region, assuming consummation of the
Pending Acquisitions.
<TABLE>
<CAPTION>
TARGET COMPANY STATION
DEMO- REVENUE AUDIENCE
MARKET AND YEAR SOURCE MSA GRAPHIC SHARE SHARE
STATION CALL LETTERS(1) ACQUIRED COMPANY RANK(2) GROUP RANK(3) RANK(4) FORMAT
- ----------------------- -------- ------- ------- ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
GREENVILLE, SC . . . . . 59 2
WJMZ-FM . . . . . . . . 1990 Benchmark 25-54 2 Urban
WESC-FM . . . . . . . . 1995 Benchmark 25-54 4 Country
WESC-AM . . . . . . . . 1995 Benchmark 25-54 16t Sports
WFNQ-FM . . . . . . . . 1995 Benchmark 25-54 7 Country
COLUMBIA, SC . . . . . . 88 1
WCOS-FM . . . . . . . . 1993 Benchmark 25-54 2 Country
WHKZ-FM . . . . . . . . 1993 Benchmark 25-54 10 Country
WVOC-AM . . . . . . . . 1994 Benchmark 25-54 8t News/Talk
WSCQ-FM . . . . . . . . 1997 Benchmark 25-54 11t Adult
WCOS-AM . . . . . . . . 1993 Benchmark 25-54 13t Country
WNOK-FM . . . . . . . . 1994 Emerald City 25-54 3t Contemporary Hits
HUNTSVILLE, AL . . . . . 114 1
WDRM-FM . . . . . . . . 1997 Osborn 25-54 1 Country
WHOS-AM . . . . . . . . 1997 Osborn 25-54 NA Country
WBHP-AM . . . . . . . . 1997 Osborn 25-54 21t Country
JACKSON, MS . . . . . . . 118 2
WJMI-FM . . . . . . . . 1996 Benchmark 25-54 4 Urban
WOAD-AM . . . . . . . . 1996 Benchmark 25-54 10t Gospel
WKXI-AM . . . . . . . . 1996 Benchmark 25-54 20 Urban
WKXI-FM . . . . . . . . 1996 Benchmark 25-54 2 Urban
SHREVEPORT, LA . . . . . 126 2
KRMD-FM . . . . . . . . 1996 Benchmark 25-54 1 Country
KRMD-AM . . . . . . . . 1996 Benchmark 25-54 14 Country
MONTGOMERY, AL . . . . . 142 2
WZHT-FM . . . . . . . . 1997 Benchmark 25-54 1 Urban
WMCZ-FM . . . . . . . . 1997 Benchmark 25-54 4 Urban/Adult
Contemporary
WDHT-FM . . . . . . . . 1997 Benchmark 25-54 NA Urban
ASHEVILLE, NC . . . . . . 179 1
WWNC-AM . . . . . . . . 1994 Osborn 25-54 3 Country
WKSF-FM . . . . . . . . 1994 Osborn 25-54 1 Hot Country
TUSCALOOSA, AL . . . . . 212 1
WACT-AM . . . . . . . . 1997 Osborn 25-54 10t Gospel
WACT-FM . . . . . . . . 1997 Osborn 25-54 9 Country
WTXT-FM . . . . . . . . 1997 Osborn 25-54 1 Country
Radio/Urban
WHEELING, WV . . . . . . 213 1
WWVA-AM . . . . . . . . 1987 Osborn 25-54 8t Country
WOVK-FM . . . . . . . . 1987 Osborn 25-54 1 Hot Country
WKWK-FM . . . . . . . . 1996 Osborn 25-54 2 Adult Contemporary
WBBD-AM . . . . . . . . 1996 Osborn 25-54 8t Adult
WRIR-FM . . . . . . . . 1996 Osborn 25-54 5 Classic Rock
WEGW-FM . . . . . . . . 1996 Osborn 25-54 4 Classic Rock
WEEL-FM(5) . . . . . . 1996 Osborn 25-54 6t Oldies
</TABLE>
53
<PAGE> 57
<TABLE>
<CAPTION>
TARGET COMPANY STATION
DEMO- REVENUE AUDIENCE
MARKET AND YEAR SOURCE MSA GRAPHIC SHARE SHARE
STATION CALL LETTERS(1) ACQUIRED COMPANY RANK(2) GROUP RANK(3) RANK(4) FORMAT
- ----------------------- -------- ------- ------- ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
WINCHESTER, VA . . . . . 219 2
WUSQ-FM . . . . . . . . 1991 Benchmark 25-54 1 Country
WFQX-FM . . . . . . . . 1994 Benchmark 18-49 4 Contemporary Hits
Radio
WNTW-AM . . . . . . . . 1994 Benchmark 25-54 NA News/Talk
JACKSON, TN . . . . . . . 257 1
WTJS-AM . . . . . . . . 1986 Osborn 25-54 8t News/Talk
WTNV-FM . . . . . . . . 1986 Osborn 25-54 3 Country
WYNU-FM . . . . . . . . 1997 Osborn 25-54 1 Classic Rock
ROANOKE, VA . . . . . . . NA 1
WROV-AM . . . . . . . . 1996 Benchmark 25-54 NA Oldies
WROV-FM . . . . . . . . 1996 Benchmark 18-49 1 Album Rock
WRDJ-FM . . . . . . . . 1996 Cavalier 35-64 8t Oldies
WJJS-FM . . . . . . . . 1996 Cavalier 18-34 3 Contemporary Hits
WJLM-FM . . . . . . . . 1969 WRIS 25-54 5 Country
LYNCHBURG, VA . . . . . . NA 1
WLDJ-FM . . . . . . . . 1996 Cavalier 35-64 2 Oldies
WJJX-FM . . . . . . . . 1996 Cavalier 18-34 4t Contemporary Hits
WJJS-AM . . . . . . . . 1996 Cavalier 18-34 8t Contemporary Hits
WYYD-FM . . . . . . . . 1995 Benchmark 25-54 1 Country
STATESVILLE, NC . . . . . NA NA
WFMX-FM . . . . . . . . 1996 Benchmark 25-54 NA Country
WSIC-AM . . . . . . . . 1996 Benchmark 25-54 NA News/Talk
GADSDEN, AL(6) . . . . . NA NA
WAAX-AM . . . . . . . . 1994 Osborn 25-54 5 News/Talk
WQEN-FM . . . . . . . . 1994 Osborn 25-54 2 Adult Contemporary
</TABLE>
NA Information not available.
t Tied with another radio station.
(1) Actual city of license may be different from metropolitan market
served. Market may be different from market definition used under FCC
multiple ownership rules.
(2) MSA rank obtained from Arbitron's Summer 1996 Radio Market Survey
Schedule. The table does not include (i) station WING-FM in Dayton,
Ohio, which station is owned by the Company and for which an unrelated
third party, who has an option to purchase such station, currently
provides certain sales, programming and marketing services pursuant to
an LMA or (ii) station WDRR-FM in Ft. Myers, Florida, in which the
Company owns a 50% nonvoting interest and which the Company intends to
sell.
(3) Company revenue share rank obtained from data in BIA
Publications-Radio Analyzer, BIA's MasterAccess, version 1.7
(copyright 1996) (current of February 27, 1997), based upon 1996 gross
revenue for the indicated markets. Rankings for the Roanoke, Virginia
and Lynchburg, Virginia markets were determined separately, using the
City of License to determine the split of the market.
(4) Station audience share rank obtained from Arbitron's Radio Market
Reports, based on average quarter hour estimates for the reporting
period ending Fall 1996, except for Winchester, Virginia, Asheville,
North Carolina, Tuscaloosa, Alabama, Wheeling, West Virginia and,
Jackson, Tennessee, which are reported as of Spring or Summer 1996
because the markets were not ranked for the Fall 1996 period, for the
demographic of persons ages 25-54, listening Monday through Sunday, 6
a.m. to midnight. To account for listeners lost to other nearby
markets, a radio station's "local" audience share is derived by
comparing the radio station's average quarter hour share to the total
average quarter hour share for all stations whose signals are heard
within the MSA, excluding audience share for listeners who listen to
stations whose signals originate outside the MSA.
(5) The Company provides certain sales and marketing services to station
WEEL-FM in Wheeling, West Virginia, pursuant to a JSA.
(6) Audience share rank obtained from Arbitron's June 1996 County Report
(for field work performed in 1995) survey, from the County of Etowah,
Alabama which is Gadsden's home county.
West Region
Upon consummation of the Pending Acquisitions, the Company will own
and operate or provide services to 25 radio stations (16 FM and nine AM) in the
West Region. These stations are located in seven markets in Alaska, Arizona,
California, Iowa and Wisconsin. The Company's stations will comprise the
leading radio station cluster based on revenue share in one of these markets.
History. The West Region will be formed through the completion of
four pending acquisitions: COMCO (six stations); Commonwealth (three stations);
Community Pacific (10 stations); and Madison (six stations). Each of these
54
<PAGE> 58
acquisitions provides the Company with a leading station cluster in at least
one of the markets in the West Region. The acquisition of COMCO provides the
Company with three stations in the Fairbanks, Alaska market. All of the
stations acquired as part of the Commonwealth Acquisition are located in Yuma,
Arizona. In Madison, Wisconsin, the Company is ranked number one in revenue and
audience share. In Anchorage, Alaska, the Company will create a newly formed
station cluster with the number one revenue and audience share ranks through
the acquisitions of COMCO and Community Pacific.
Management. The West Region will be managed by two radio executives,
David J. Benjamin and Dex Allen, with an aggregate of 52 years of experience in
the radio broadcasting industry. Mr. Benjamin, the current President and Chief
Executive Officer of Community Pacific, will serve as the chief executive
officer of the West Region upon consummation of the Community Pacific
Acquisition. Mr. Allen has served as the managing member of Commonwealth since
1984 and is expected to continue to serve in such position until the
consummation of the Commonwealth Acquisition. Mr. Allen became the president
and chief operating officer of the West Region effective January 1, 1997. Mr.
Allen has extensive experience operating radio stations in large markets,
having served as both general manager and sales manager at various stations in
San Diego prior to his employment by Commonwealth. Most recently, Mr. Allen has
been a successful owner and operator of radio stations located in mid-sized
markets. The Company expects that the significant operating experience of Mr.
Benjamin and Mr. Allen will serve to improve the results of the stations in the
West Region and also benefit the Company in the pursuit of additional
acquisitions throughout the West Region.
Markets. Although the Company's station clusters in the West Region
have leading positions based on audience share in four of the seven markets,
management believes that substantial opportunity exists to improve the
profitability of these clusters by acquiring additional stations in each of
these markets. For example, in the Des Moines, Iowa market, the Company
operates two FM stations and one AM station. Both FM stations serve the Adult
25-54 demographic, one of which is programmed as an album oriented rock station
and the other as a country station. The Company intends to pursue acquisitions
of additional stations in the Des Moines, Iowa market in order to capitalize on
its existing infrastructure and market presence and to enhance the financial
performance of the station cluster. Management intends to pursue such add-on
acquisitions in each of the markets in the West Region.
Management expects to divide the current West Region into additional
geographic regions as more stations are acquired in the midwest and western
United States and as more experienced management personnel are added to the
Company.
The following table summarizes certain information relating to the
Company's radio stations in the West Region, assuming the consummation of the
Pending Acquisitions.
<TABLE>
<CAPTION>
TARGET COMPANY STATION
DEMO- REVENUE AUDIENCE
MARKET AND YEAR SOURCE MSA GRAPHIC SHARE SHARE
STATION CALL LETTERS(1) ACQUIRED COMPANY RANK(2) GROUP RANK(3) RANK(4) FORMAT
- ----------------------- -------- ------- ------- ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
STOCKTON, CA . . . . . . 85 3
KVFX-FM(5) . . . . . . 1994 Community Pacific 18-49 4 Classic Rock
KJAX-AM(5) . . . . . . 1996 Community Pacific 35-64 6 Talk
DES MOINES, IA . . . . . 89 4
KHKI-FM(5) . . . . . . 1995 Community Pacific 25-54 7 Country
KGGO-FM(5) . . . . . . 1995 Community Pacific 25-54 5 Album Rock
KDMI-AM(5) . . . . . . 1995 Community Pacific NA NA Religion
MADISON, WI . . . . . . . 120 1
WIBA-AM . . . . . . . . 1995 Madison 35-64 8t News/Talk
WIBA-FM . . . . . . . . 1995 Madison 25-54 4 Classic Rock
WMAD-FM . . . . . . . . 1995 Madison 18-34 5 Modern Rock
WTSO-AM . . . . . . . . 1997 Madison 35-64 14 News/Talk
WZEE-FM . . . . . . . . 1997 Madison 18-49 2 Hot Adult
Contemporary
WMLI-FM . . . . . . . . 1997 Madison 35-64 13 Soft Hits
MODESTO, CA . . . . . . . 121 2
KJSN-FM(5) . . . . . . 1982 Community Pacific 25-54 3 Soft Adult
Contemporary
KFIV-AM(5) . . . . . . 1982 Community Pacific 35-64 7t Talk
</TABLE>
55
<PAGE> 59
<TABLE>
<CAPTION>
TARGET COMPANY STATION
DEMO- REVENUE AUDIENCE
MARKET AND YEAR SOURCE MSA GRAPHIC SHARE SHARE
STATION CALL LETTERS(1) ACQUIRED COMPANY RANK(2) GROUP RANK(3) RANK(4) FORMAT
- ----------------------- -------- ------- ------- ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
ANCHORAGE, AK(6)............. 165 2
KBFX-FM(5)................. 1993 Community Pacific 18-49 7 Classic Rock
KASH-FM(5)................. 1985 Community Pacific 25-54 1t Country
KENI-AM(5)................. 1995 Community Pacific 25-54 3t News/Talk
KYAK-AM.................... 1993 COMCO 25-54 13t Adult Contemporary
KGOT-FM.................... 1993 COMCO 25-54 4 Contemporary Hits
KYMG-FM.................... 1984 COMCO 25-54 5 Adult Contemporary
FAIRBANKS, AK(7)............. NA NA
KIAK-FM.................... 1993 COMCO 25-54 1 Country
KIAK-AM.................... 1993 COMCO 25-54 7 News/Talk
KAKQ-FM.................... 1994 COMCO 25-54 2t Adult Contemporary
YUMA, AZ..................... NA NA
KYJT-FM.................... 1986 Commonwealth 25-49 1 Classic Hits
KTTI-FM.................... 1995 Commonwealth 25-54 2 Country
KBLU-AM.................... 1995 Commonwealth 35-64 8t Oldies
</TABLE>
- ---------------------------
NA Information not available.
t Tied with another radio station.
(1) Actual city of license may be different from metropolitan market served.
Market may be different from market definition used under FCC multiple
ownership rules.
(2) MSA rank obtained from Arbitron's Summer 1996 Radio Market Survey Schedule.
(3) Company revenue share rank obtained from data in BIA Publications-Radio
Analyzer, BIA's MasterAccess, version 1.7, 1996 (current as of February
27, 1997), based upon 1996 gross revenue for the indicated markets.
(4) Company audience share rank obtained from Arbitron's Radio Market Reports,
based on average quarter hour estimates for the reporting period ending
Fall 1996, for the demographic of persons ages 25-54, listening Monday
through Sunday, 6 a.m. to midnight, except for the Yuma, Arizona market
which was obtained from AccuRatings(TM). To account for listeners lost to
other nearby markets, a radio station's "local" audience share is derived
by comparing the radio station's average quarter hour share to the total
average quarter hour share for all stations whose signals are heard within
the MSA, excluding audience share for listeners who listen to stations
whose signals originate outside the MSA.
(5) The Company provides certain sales, programming and marketing services,
pending the consummation of the Community Pacific Acquisition, to stations
KVFX-FM and KJAX-AM in Stockton, California; KHKI-FM, KGGO-FM and KDMI-AM
in Des Moines, Iowa; KJSN-FM and KFIV-AM in Modesto, California; and
KBFX-FM, KASH-FM and KENI-AM in Anchorage, Alaska.
(6) The table does not include station KASH-AM in Anchorage, Alaska. The
Company expects to sell station KASH-AM subsequent to consummation of the
Community Pacific Acquisition in order to remain in compliance with the
station ownership limitations under the Communications Act.
(7) Fairbanks, Alaska is a CSA as defined by Arbitron. Audience share and
audience share rank obtained from Arbitron's Fall 1996 CSA Market Report.
OTHER BUSINESSES
The Company operates several country music-related entertainment
businesses in Wheeling, West Virginia. The Company enhances and capitalizes on
its strong ratings in country music by integrating its radio stations with its
Capitol Music Hall, a 2,500-seat theater that hosts approximately 100 music,
comedy and dramatic performances each year, and Jamboree in the Hills, an
annual outdoor festival featuring 20 or more country music stars held on a
200-acre site owned by the Company outside of Wheeling. The Company also
distributes programmed music, primarily Muzak, in the Atlanta, Macon and
Albany, Georgia and Ft. Myers, Florida markets. As the exclusive Muzak
franchisee in these markets, the Company provides subscribers with
commercial-free Muzak programming ranging from traditional background music to
newer formats including country and soft rock. The Company also sells, leases
and installs the equipment required to receive the programming via satellite
and other media and also designs, sells and installs sound, closed-circuit
video and security systems and equipment in locations such as offices, schools,
hospitals, shopping malls and stadiums. In addition, the Company is an
authorized distributor of the Rauland-Borg line of communications equipment for
schools and hospitals in various markets.
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INDUSTRY OVERVIEW
Radio stations generate the majority of their revenue from the sale of
advertising time to local and national spot advertisers and national network
advertisers. Radio serves primarily as a medium for local advertising. During
the past decade, local advertising revenue as a percentage of total radio
advertising revenue in a given market has ranged from approximately 74% to 78%.
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 (the "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 either inflation or the GNP. Total
advertising revenue in 1995 of $11.5 billion, which represents a 7.6% increase
over 1994, as reported by the Radio Advertising Bureau ("RAB"), was its highest
level in the industry's history.
Radio is considered an efficient means of reaching specifically
identified demographic groups. Stations are typically classified by their
on-air format, such as country, adult contemporary, oldies or news/talk. A
station's format and style of presentation enable it to target certain
demographic and psychographic groups. By capturing a specific listening
audience share of a market's radio audience, with particular concentration in a
targeted demographic group, 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 demographic
groups listen to specific stations.
Stations determine the number of advertisements broadcast hourly that
will maximize available revenue dollars without jeopardizing listening levels.
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 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. The Company has
entered into a national advertising agreement with Katz Communications, Inc., a
national advertising firm.
According to the RAB's Radio Marketing Guide and Fact Book for
Advertisers, 1993-1994, radio reaches approximately 96% of all Americans over
the age of 12 each week. More than one-half of all radio listening is done
outside the home, in contrast to other advertising mediums, 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. The
highest portion of radio listenership 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 12 years
of age and, as a result, radio advertising sold during this period achieves
premium advertising rates. Radio listeners have gradually shifted over the
years from AM (amplitude modulation) to FM (frequency modulation) stations. FM
reception, as compared to AM, is generally clearer and provides greater tonal
range and higher fidelity. 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.
COMPETITION; CHANGES IN BROADCASTING INDUSTRY
The radio broadcasting industry is highly competitive. 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
particular demographic group. By building a strong listener base consisting of
a specific demographic group in each of its markets, the Company is able to
attract advertisers seeking to reach those listeners.
Factors that are material to a radio station's competitive position
include management experience, the station's local audience rank in its market,
transmitter power, assigned frequency, audience characteristics, local program
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acceptance and the number and characteristics of other radio stations in the
market area. The Company attempts to improve its competitive position with
promotional campaigns aimed at the demographic groups targeted by its stations
and by sales efforts designed to attract advertisers. Recent changes in the
FCC's policies and rules permit increased ownership and operation of multiple
local radio stations. Management believes that radio stations that elect to
take advantage of joint arrangements such as LMAs or JSAs may in certain
circumstances have lower operating costs and may be able to offer advertisers
more attractive rates and services. Although the Company currently operates
several multiple station groups and intends to pursue the creation of
additional multiple station groups, the Company's competitors in certain
markets include operators of multiple stations or operators who already have
entered into LMAs or JSAs.
The radio broadcasting industry is highly competitive, although 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 that regulate the number of stations that may be owned
and controlled by a single entity. See "-- Federal Regulation of Radio
Broadcasting."
The Company's stations also compete for advertising revenue with other
media, including broadcast television, cable television, newspapers, magazines,
direct mail, coupons and billboard advertising. 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. DAB may
deliver by satellite to nationwide and regional audiences, multi-channel,
multi-format, digital radio services with sound quality equivalent to compact
discs. The delivery of information through the presently unregulated 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 television broadcasting,
cable television, audio tapes and compact disks. 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 has allocated spectrum for a new technology, digital audio
radio services ("DARS"), to deliver audio programming. The FCC has adopted
licensing and operating rules for DARS and in April 1997 awarded two licenses
for this service. DARS may provide a medium for the delivery by satellite or
terrestrial means of multiple new audio programming formats to local and/or
national audiences. Digital technology also may be used in the future by
terrestrial radio broadcast stations either on existing or alternate
broadcasting frequencies, and the FCC has stated that it will consider making
changes to its rules to permit AM and FM radio stations to offer digital sound
following industry analysis of technical standards. In addition, the FCC has
authorized an additional 100 kHz of bandwidth for the AM band and has allotted
frequencies in this new band to certain existing AM station licensees that
applied for migration to the expanded AM band prior to the FCC's cut-off date,
subject to the requirement that such licensees apply to the FCC to implement
operations on their expanded band frequencies. At the end of a transition
period, 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.
The Company 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.
The Company employs a number of on-air personalities and generally
enters into employment agreements with certain of these personalities to
protect its interests in those relationships that it believes to be valuable.
The loss of certain of these personalities could result in a short-term loss of
audience share, but the Company does not believe that any such loss would have
a material adverse effect on the Company.
FEDERAL REGULATION OF RADIO BROADCASTING
The ownership, operation and sale of radio stations 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, revokes and modifies station licenses;
determines whether to approve changes in ownership or control of station
licenses; regulates equipment
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used by stations; and adopts and implements regulations and policies that
directly affect the ownership, operation and employment practices of stations.
The FCC has the power to impose penalties for violation of its rules or the
Communications Act.
The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. Reference
should be made to the Communications Act, FCC rules and the public notices and
rulings of the FCC for further information concerning the nature and extent of
federal regulation of radio stations.
FCC Licenses. Radio stations operate pursuant to broadcasting licenses
that are ordinarily granted by the FCC for maximum terms of eight years and are
subject to renewal upon application to the FCC. The FCC licenses for the
Company's stations are held by certain of the Company's subsidiaries. During
certain periods when renewal applications are pending, petitions to deny
license renewals can be filed by interested parties, including members of the
public. Historically, the Company's management has not experienced any material
difficulty in renewing any licenses for stations under its control. The FCC is
required to hold hearings on a station's renewal application if a substantial
or material question of fact exists as to whether (i) the station has served
the public interest, convenience and necessity, (ii) there have been serious
violations by the licensee of the Communications Act or the FCC rules
thereunder or (iii) there have been other violations by the licensee of the
Communications Act or the FCC rules thereunder that, taken together, constitute
a pattern of abuse. Historically, FCC licenses have generally been renewed. The
Company has no reason to believe that its licenses will not be renewed in the
ordinary course, although there can be no assurance to that effect. The
non-renewal of one or more of the Company's licenses could have a material
adverse effect on the Company.
The FCC classifies each AM and FM station. An AM station operates on
either a clear channel, regional channel or local channel. A clear channel is
one on which AM stations are assigned to serve wide areas. Clear channel AM
stations are classified as either: Class A stations, which operate on an
unlimited time basis and are designated to render primary and secondary service
over an extended area; Class B stations, which operate on an unlimited time
basis and are designed to render service only over a primary service area; and
Class D stations, which operate either during daytime hours only, during
limited times only or on an unlimited time basis with low nighttime power. A
regional channel is one on which Class B and Class D AM stations may operate
and serve primarily a principal center of population and the rural areas
contiguous to it. A local channel is one on which AM stations operate on an
unlimited time basis and serve primarily a community and the suburban and rural
areas immediately contiguous thereto. Class C AM stations operate on a local
channel and are designed to render service only over a primary service area
that may be reduced as a consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial
FM stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1 and C.
The table in Annex A hereto sets forth the market, FCC license
classification and frequency of each of the Company's stations (including those
with which the Company has or will have a JSA or LMA), assuming the
consummation of the Pending Acquisitions, and the date on which each station's
FCC license expires. Each of the Company's AM stations is a regional channel
station other than WSTC-AM, WFAS-AM, WIRO-AM, WBBD-AM, WBHP-AM, WMMB-AM, KRMD-
AM, WSIC-AM, WCOS-AM and WROV-AM, which are local channel stations, and
WINE-AM, WPUT-AM, WKEE-AM, WWVA-AM, WHOS-AM, WESC-AM, KYAK-AM and WTSO-AM,
which are clear channel stations.
Ownership Matters. The Communications Act prohibits the assignment of
a broadcast license or the transfer of control of a broadcast licensee without
the prior approval of the FCC. In determining whether to grant such approval,
the FCC considers a number of factors pertaining to the licensee, including
compliance with the various rules limiting common ownership of media
properties, the "character" of the licensee and those persons holding
"attributable" interests therein, and compliance with the Communications Act's
limitations on alien ownership as well as compliance with other FCC policies,
including FCC equal employment opportunity requirements.
A transfer of control of a corporation controlling a broadcast license
may occur in various ways. For example, a transfer of control occurs if an
individual stockholder gains or loses "affirmative" or "negative" control of
such
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corporation through issuance, redemption or conversion of stock. "Affirmative"
control would consist of control of more than 50% of such corporation's
outstanding voting power and "negative" control would consist of control of
exactly 50% of such voting power. To obtain the FCC's prior consent to assign
or transfer control of a broadcast license, appropriate applications must be
filed with the FCC. If the application involves a "substantial change" in
ownership or control, the application must be placed on public notice for a
period of approximately 30 days during which petitions to deny the application
may be filed by interested parties, including members of the public. If the
application does not involve a "substantial change" in ownership or control, it
is a "pro forma" application. The "pro forma" application is nevertheless
subject to having informal objections filed against it. If the FCC grants an
assignment or transfer application, interested parties have approximately 30
days from public notice of the grant to seek reconsideration of that grant.
Generally, parties that do not file initial petitions to deny or informal
objections against the application face a high hurdle in seeking
reconsideration of the grant. The FCC normally has approximately an additional
ten days to set aside such grant on its own motion. When passing on an
assignment or transfer application, the FCC is prohibited from considering
whether the public interest might be served by an assignment or transfer of the
broadcast license to any party other than the assignee or transferee specified
in the application.
In response to the Telecom Act, the FCC amended its multiple ownership
rules to eliminate the national limits on ownership of AM and FM stations.
Additionally, it established new local ownership rules that use a sliding scale
of permissible ownership, depending on market size. In radio markets with 45 or
more commercial radio stations, a licensee may own up to eight stations, no
more than five of which can be in a single radio service (i.e., no more than
five AM or five FM). In radio markets with 30 to 44 commercial radio stations,
a licensee may own up to seven stations, no more than four of which can be in a
single radio service. In radio markets having 15 to 29 commercial radio
stations, a licensee may own up to six radio stations, no more than four of
which can be in a single radio service. Finally, in radio markets having 14 or
fewer commercial radio stations, a licensee may own up to five radio stations,
no more than three of which can be in the same service; provided that the
licensee may not own more than one half of the radio stations in the market.
FCC ownership rules continue to permit an entity to own one FM and one AM
station in a local market regardless of market size.
The Communications Act and FCC rules also prohibit the common
ownership, operation or control of a radio broadcast station and a television
broadcast station serving the same geographic market (subject to a waiver of
such prohibition if certain conditions are satisfied) and of a radio broadcast
station and a daily newspaper serving the same geographic market. Under these
rules, absent waivers, the Company would not be permitted to acquire any daily
newspaper or television broadcast station (other than low-power television) in
any geographic market in which it now owns radio broadcast properties. On
October 1, 1996, the FCC commenced a proceeding to explore possible revisions
of its policies concerning waiver of the newspaper/radio cross-ownership
restrictions.
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, or through subsidiaries controlling,
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 (or 10% or more of such stock in the case of insurance companies,
investment companies and bank trust departments that are passive investors) are
generally attributable.
R. Steven Hicks, the Company's President, Chief Executive Officer and
Chairman of the Board, is the Chairman, Chief Executive Officer and a director
of GulfStar, which is the licensee through its subsidiaries of radio stations
in various markets throughout the states of Texas, Louisiana, Arkansas and New
Mexico and is seeking to acquire additional radio stations in the states of
Texas and Louisiana. Thomas O. Hicks, a director of Capstar and GulfStar, is
the President and a director of HM2/Chancellor Holdings, Inc., which through
its subsidiaries holds attributable interests in radio stations in various
markets in the States of California, Florida, Minnesota, New York, Ohio,
Kentucky, Arizona, Colorado, Georgia, Maryland, Pennsylvania, New Jersey,
Wisconsin and Washington, D.C. and is seeking to acquire an interest in
stations in Illinois and Michigan. Thomas O. Hicks is also the President, Chief
Executive Officer and Chief Operating Officer and 100% stockholder of
HM3/Sunrise, Inc., which through subsidiaries owns television stations in
California, New York and Michigan and is seeking to acquire an attributable
interest in a television station in Ohio. Eric C. Neuman is an Executive Vice
President and a director of Capstar, a Vice President of GulfStar, the Vice
President and Secretary of HM2/Chancellor Holdings, Inc., and the Vice
President of HM3/Sunrise, Inc.
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In determining whether the Company is in compliance with the local
ownership limits on AM and FM stations, the FCC will consider the Company's AM
and FM holdings as well as the attributable broadcast interests of the
Company's officers, directors and attributable stockholders. Accordingly, the
attributable broadcast interests of the Company's officers and directors
described in the preceding paragraph will limit the number of radio stations
the Company may acquire or own in any market in which such officers or
directors hold or acquire attributable broadcast interests. In addition, the
Company's officers and directors may from time to time hold various
nonattributable interests in media properties.
Under its "cross-interest" policy, the FCC considers certain
"meaningful" relationships among competing media outlets in the same market,
even if the ownership rules do not specifically prohibit the relationship.
Under the cross-interest policy, the FCC in certain instances may prohibit one
party from acquiring an attributable interest in one media outlet and a
substantial non-attributable economic interest in another media outlet in the
same market. Under this policy, the FCC may consider significant equity
interests combined with an attributable interest in a media outlet in the same
market, joint ventures, and common key employees among competitors. The
cross-interest policy does not necessarily prohibit all of these interests, but
requires that the FCC consider whether, in a particular market, the
"meaningful" relationships between competitors could have a significant adverse
effect upon economic competition and program diversity. Heretofore, the FCC has
not applied its cross-interest policy to LMAs and JSAs between broadcast
stations. In its ongoing rulemaking proceeding concerning the attribution rules
described below, the FCC has sought comment on, among other things, (i) whether
the cross-interest policy should be applied only in smaller markets and (ii)
whether non-equity financial relationships such as debt, when combined with
multiple business interrelationships such as LMAs and JSAs, raise concerns
under the cross-interest policy.
The Communications Act prohibits the issuance of broadcast licenses
to, or the holding of broadcast licenses by, any corporation of which more than
20% of the capital stock is owned of record or voted by non-U.S. citizens or
their representatives or by a foreign government or a representative thereof,
or by any corporation organized under the laws of a foreign country
(collectively, "Aliens"). The Communications Act also authorizes the FCC, if
the FCC determines that it would be in the public interest, to prohibit the
issuance of a broadcast license to, or the holding of a broadcast license by,
any corporation directly or indirectly controlled by any other corporation of
which more than 25% of the capital stock is owned of record or voted by Aliens.
The Company has been advised that the FCC staff has interpreted this provision
to require a public interest finding in favor of such a grant or holding before
a broadcast license may be granted to or held by any such corporation and has
made such a finding only in limited circumstances generally involving licenses
other than broadcast licenses. The FCC has issued interpretations of existing
law (i) under which these restrictions in modified form apply to other forms of
business organizations, including partnerships and (ii) indicating how alien
interests in a company that are held directly through intermediate entities
should be considered in determining whether that company is in compliance with
these alien ownership restrictions. As a result of these provisions, the
licenses granted to the radio station subsidiaries of the Company by the FCC
could be revoked if, among other restrictions imposed by the FCC, more than 25%
of the Capstar's stock were directly or indirectly owned or voted by Aliens.
Accordingly, Capstar's Restated Certificate of Incorporation restricts the
ownership, voting and transfer of Capstar's capital stock in accordance with
the Communications Act and the rules of the FCC, and prohibits ownership of
more than 25% of Capstar'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 Restated Certificate
of Incorporation authorizes Capstar's Board of Directors to adopt such
provisions as it deems necessary to enforce these prohibitions. In addition,
the Restated Certificate of Incorporation provides that shares of capital stock
of Capstar determined by Capstar's Board of Directors to be owned beneficially
by an Alien or an entity directly or indirectly owned by Aliens in whole or in
part shall always be subject to redemption by Capstar by action of the Board of
Directors to the extent necessary, in the judgment of the Board of Directors,
to comply with these alien ownership restrictions.
Local Marketing Agreements. Over the past few years, a number of radio
stations have entered into what have commonly been referred to as local
marketing agreements or LMAs. While these agreements may take varying forms,
under a typical LMA, separately owned and licensed radio stations agree to
enter into cooperative arrangements of varying sorts, subject to compliance
with the requirements of antitrust laws and with the FCC's rules and policies.
Under these arrangements, separately-owned stations could agree to function
cooperatively in programming, advertising sales and similar matters, subject to
the requirement that the licensee of each station maintain independent control
over the programming and operations of its own station. One typical type of LMA
is a programming agreement between two separately-owned radio stations serving
a common service area, whereby the licensee of one station programs substantial
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portions of the broadcast day on the other licensee's station, subject to
ultimate editorial and other controls being exercised by the latter licensee,
and sells advertising time during those program segments. Such arrangements are
an extension of the concept of "time brokerage" agreements, under which a
licensee of a station sells blocks of time on its station to an entity or
entities that program the blocks of time and sell their own commercial
advertising announcements during the time periods in question.
The FCC has specifically revised its "cross-interest" policy to make
that policy inapplicable to time brokerage arrangements. Furthermore, the staff
of the FCC's Mass Media Bureau has held that LMAs are not contrary to the
Communications Act provided that the licensee of the station that is being
substantially programmed by another entity maintains complete responsibility
for, and control over, programming and operations of its broadcast station and
assures compliance with applicable FCC rules and policies.
The FCC's multiple ownership rules specifically permit radio station
LMAs to continue to be entered into and implemented, but provide that a
licensee or a radio station that brokers more than 15% of the weekly broadcast
time on another station serving the same market will be considered to have an
attributable ownership interest in the brokered station for purposes of the
FCC's multiple ownership rules. As a result, in a market where it owns a radio
station, the Company would not be permitted to enter into an LMA with another
local radio station in the same market that it could not own under the revised
local ownership rules, unless the Company's programming constituted 15% or less
of the other local station's programming time on a weekly basis. The FCC 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) through a time brokerage or LMA arrangement where the brokered and
brokering stations which it owns or programs serve substantially the same area.
Such 25% simulcasting limitation also applies to commonly owned stations in the
same broadcast service that serve substantially the same area.
Joint Sales Agreements. Over the past few years, a number of radio
stations have entered into cooperative arrangements commonly known as joint
sales agreements or JSAs. While these agreements may take varying forms, under
the typical JSA, a station licensee obtains, for a fee, the right to sell
substantially all of the commercial advertising on a separately- owned and
licensed station in the same market. The typical JSA also customarily involves
the provision by the selling licensee of certain sales, accounting and "back
office" services to the station whose advertising is being sold. The typical
JSA is distinct from an LMA in that a JSA normally does not involve
programming.
The FCC has determined that issues of joint advertising sales should
be left to enforcement by antitrust authorities, and therefore does not
generally regulate joint sales practices between stations. Currently, stations
for which a licensee sells time under a JSA are not deemed by the FCC to be
attributable interests of that licensee. However, in connection with its
ongoing rulemaking proceeding concerning the attribution rules, the FCC is
considering whether JSAs should be considered attributable interests or within
the scope of the FCC's cross-interest policy, particularly when JSAs contain
provisions for the supply of programming services and/or other elements
typically associated with LMAs. If JSAs become attributable interests as a
result of changes in the FCC rules, the Company may be required to terminate
any JSA it might have with a radio station which the Company could not own
under the FCC's multiple ownership rules.
Programming and Operation. The Communications Act requires
broadcasters to serve the "public interest." The FCC gradually has relaxed or
eliminated many of the more formalized procedures it had developed in the past
to promote the broadcast of certain types of programming responsive to the
needs of a station's community of license. A licensee continues to be required,
however, to present programming that is responsive to issues of the station's
community 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 renewal applications of a licensee,
although listener complaints may be filed at any time and generally may be
considered by the FCC at any time. Stations also must pay regulatory and
application fees and follow various rules promulgated under the Communications
Act that regulate, among other things, political advertising, sponsorship
identifications, the advertisement of contests and lotteries, obscene and
indecent broadcasts, and technical operations, including limits on radio
frequency radiation. In addition, licensees must develop and implement
affirmative action programs designed to promote equal employment opportunities
and must submit reports to the FCC with respect to these matters on an annual
basis and in connection with a renewal application.
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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" (less than the full term) license renewal or, for particularly
egregious violations, the denial of a license renewal application or the
revocation of a license.
Proposed and Recent Changes. The FCC has a pending rulemaking
proceeding that seeks, among other things, comment on whether the FCC should
modify its radio and television broadcast ownership "attribution" rules by (i)
raising the basic benchmark for attributing ownership in a corporate licensee
from 5% to 10% of the licensee's outstanding voting power, (ii) increasing from
10% to 20% of the licensee's outstanding voting power the attribution benchmark
for "passive investors" in corporate licensees, (iii) attributing certain
minority stockholdings in corporations with a single majority shareholder and
(iv) attributing certain LMA, JSA, debt or non-voting stock interests that have
heretofore been non-attributable.
Moreover, Congress and the FCC have under consideration, and in the
future may consider and adopt, new laws, regulations and policies regarding a
wide variety of matters that could affect, directly or indirectly, the
operation, ownership and profitability of the Company's radio stations, result
in the loss of audience share and advertising revenues for the Company's radio
stations, and affect the ability of the Company to acquire additional radio
stations or to finance those acquisitions. Such matters may include spectrum
use or other fees on FCC licenses; foreign ownership of broadcast licenses;
revisions to the FCC's equal employment opportunity rules and rules relating to
political broadcasting; technical and frequency allocation matters; 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 and
attribution policies; new technologies such as DAB; and proposals to auction
the right to use the radio broadcast spectrum to the highest bidder.
The Company cannot predict what other matters might be considered in
the future by the FCC or Congress, nor can it judge in advance what impact, if
any, the implementation of any of these proposals or changes might have on its
business.
Federal Antitrust Laws. In addition to the risks associated with the
acquisition of radio stations, the Company is also aware of the possibility
that certain acquisitions it proposes to make may be investigated by the FTC or
the DOJ, which are the agencies responsible for enforcing the federal antitrust
laws. The agencies have recently investigated several radio station
acquisitions where an operator proposed to acquire new stations in its existing
markets, including the Benchmark Acquisition, which was resolved favorably to
the Company. Any decision by the FTC or the DOJ to challenge a proposed
acquisition could affect the ability of the Company to consummate the
acquisition or to consummate it on the proposed terms.
For an acquisition meeting certain size thresholds, the HSR Act and
the rules promulgated thereunder require the parties to file Notification and
Report Forms with the FTC and the DOJ and to observe specified waiting period
requirements before consummating the acquisition. During the initial 30 day
period after the filing, the agencies decide which of them will investigate the
transaction. If the investigating agency determines that the transaction does
not raise significant antitrust issues, then it will either terminate the
waiting period or allow it to expire after the initial 30 days. On the other
hand, if the agency determines that the transaction requires a more detailed
investigation, then at the conclusion of the initial 30 day period, it will
issue a formal request for additional information ("Second Request"). The
issuance of a Second Request extends the waiting period until the twentieth
calendar day after the date of substantial compliance by all parties to the
acquisition. Thereafter, such waiting period may only be extended by court
order or with the consent of the parties. In practice, complying with a Second
Request can take a significant amount of time. In addition, if the
investigating agency raises substantive issues in connection with a proposed
transaction, then the parties frequently engage in lengthy discussions or
negotiations with the investigating agency concerning possible means of
addressing those issues, including but not limited to persuading the agency
that the proposed acquisition would not violate the antitrust laws,
restructuring the proposed acquisition, divestiture of other assets of one or
more parties, or abandonment of the transaction. Such discussions and
negotiations can be time-consuming, and the parties may agree to delay
consummation of the acquisition during their pendency.
At any time before or after the consummation of a proposed
acquisition, the FTC or the DOJ could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking to
enjoin the acquisition or seeking divestiture of the business acquired or other
assets of the Company. Acquisitions that are not
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<PAGE> 67
required to be reported under the HSR Act may be investigated by the FTC or the
DOJ under the antitrust laws before or after consummation. In addition, private
parties may under certain circumstances bring legal action to challenge an
acquisition under the antitrust laws.
The Company does not believe that any Pending Acquisition will be
adversely affected in any material respect by review under the HSR Act. The
Company has received early termination of the applicable waiting period under
the HSR Act in regard to the Community Pacific Acquisition and the Madison
Acquisition, and no other Pending Acquisition is subject to the HSR Act.
As part of its increased scrutiny of radio station acquisitions, the
DOJ has stated publicly that it believes that LMAs, JSAs and other similar
agreements customarily entered into in connection with radio station transfers
prior to the expiration of the waiting period under the HSR Act could violate
the HSR Act.
EMPLOYEES
At December 31, 1996, the Company had a staff of 303 full-time
employees and 139 part-time employees. If the Osborn Transactions, the
Benchmark Acquisition and the Space Coast Acquisitions had been consummated as
of December 31, 1996, the Company would have had a staff of approximately 880
full-time employees and 425 part-time employees as of such date. There are no
collective bargaining agreements between the Company and its employees. The
Company does have, however, one union member employed in connection with its
Muzak franchise in Atlanta, Georgia, and is negotiating a collective bargaining
agreement with the American Federation of Television and Radio Artists of
America ("AFTRA") which represents the on-air performance staff of WFAS-AM/FM
in Westchester County, New York for collective bargaining purposes. WFAS-AM/FM
has approximately nine employees that would be represented by AFTRA. The
Company believes that its relations with its employees are good.
SEASONALITY
Seasonal revenue fluctuations are common in the radio broadcasting
industry and are due primarily to fluctuations in advertising expenditures by
retailers. The Company's revenues and broadcast cash flows are typically lowest
in the first quarter and highest in the second and fourth quarters.
PROPERTIES AND FACILITIES
The types of properties required to support each of the Company's
radio stations include offices, studios and transmitter/antenna sites. A
station's studios are generally housed with its offices in downtown or business
districts. The transmitter/antenna sites generally are located so as to provide
maximum market coverage.
The Company owns transmitter and antenna sites in Gadsden and
Tuscaloosa, Alabama; Norwalk and Brookfield, Connecticut; Wilmington and Dover,
Delaware; Ft. Pierce, Melbourne, Port St. Lucie and Vero Beach, Florida;
Catlettsburg, Kentucky; Jackson, Mississippi; Hartsdale and Brewster, New York;
Asheville and Statesville, North Carolina; Dayton, Ohio; Whitehall,
Pennsylvania; Columbia, Garrison and Greenville, South Carolina; Jackson,
Tennessee; Amherst County, Bedford County, Roanoke and Winchester, Virginia;
and Huntington and Wheeling, West Virginia. The Company also leases transmitter
and antenna sites in Huntsville and Tuscaloosa, Alabama; Stamford, Connecticut;
Bethany Beach, Delaware; Indian River County, Cocoa and Vero Beach, Florida;
Caddo Parish, Louisiana; Jackson and Pelahatchi, Mississippi; Asheville and
Cool Springs, North Carolina; Bridgeport and Dayton, Ohio; Washington Township
and Bethlehem, Pennsylvania; Columbia, South Carolina; Boonea Mill and
Winchester, Virginia; Huntington, Milton and Cabell County and Wheeling, West
Virginia; Pawling and Bedford, New York; and Ocean City, Maryland. The Company
typically leases studio and office space, although it owns its facilities in
Gadsden and Tuscaloosa, Alabama; Brookfield, Connecticut; Dover, Delaware; Port
St. Lucie and Ft. Pierce, Florida; Catlettsburg, Kentucky; Shreveport,
Louisiana; Hartsdale and Patterson, New York; Asheville and Statesville, North
Carolina; Columbia and Greenville, South Carolina; Jackson, Tennessee; Roanoke,
Virginia; and Huntington and Wheeling, West Virginia.
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<PAGE> 68
The Company generally considers its facilities to be suitable and of
adequate size for its current and intended purposes. The Company does not
anticipate any difficulties in renewing any facility leases or in leasing
additional space, if required.
The Company 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.
The principal executive offices of the Company are located at 600
Congress Avenue, Suite 1400, Austin, Texas 78701. The telephone number of the
Company at that address is (512) 404-6840.
LITIGATION
The Company is involved in litigation from time to time in the
ordinary course of its business. In management's opinion, the litigation in
which the Company is currently involved, individually and in the aggregate, is
not material to the Company's financial condition or results of operations.
THE PENDING ACQUISITIONS
As part of the Company's overall strategy to take advantage of the
passage of the Telecom Act, the Company has entered into agreements to acquire
or assume agreements to provide services to an additional 32 stations in seven
new markets and three existing markets and, upon completion of the Pending
Acquisitions, the Company will own and operate or provide services to 121 radio
stations in 31 mid-sized markets located throughout the United States. The
Company must obtain additional financing to consummate the Pending Acquisitions
and there can be no assurance that such financing will be available to the
Company on terms acceptable to its management or at all. The consummation of
the Pending Acquisitions is subject to various conditions, including FCC and
other regulatory approval. The consummation of the Offering is not conditioned
on the consummation of any of the Pending Acquisitions. No assurances can be
given that the Pending Acquisitions will be consummated or that, if completed,
they will be successful.
COMMUNITY PACIFIC ACQUISITION
On December 26, 1996, the Company agreed to acquire substantially all
of the assets of Community Pacific (the "Community Pacific Acquisition"). The
purchase price of the Community Pacific Acquisition will equal approximately
$35.0 million payable in cash. Community Pacific owns and operates 11 radio
stations (six FM and five AM) in four markets located in Anchorage, Alaska,
Modesto and Stockton, California and Des Moines, Iowa. In January 1997, the
Company and Community Pacific each filed an (i) application with the FCC for
approval to transfer control of such radio stations to the Company and (ii) a
Notification and Report Form with the DOJ and the FTC. The applicable waiting
period under the HSR Act terminated on February 21, 1997, after which time the
Company and Community Pacific entered into an LMA in connection with Community
Pacific's radio stations pursuant to which the Company provides certain sales,
programming and marketing services for Community Pacific's stations under an
LMA. The FCC approved the Community Pacific Acquisition in April 1997. The
Company anticipates that the Community Pacific Acquisition will be consummated
in November 1997. See "-- COMCO Acquisition."
Under the terms of the acquisition agreement, which was entered into
by Pacific Star, the acquisition agreement may be terminated by Community
Pacific prior to consummation of the asset purchase under various
circumstances, including, but not limited to, a material breach of any
representation, warranty, covenant or agreement, by Pacific Star. If the
acquisition agreement is terminated due to a material breach of any
representation, warranty, covenant or agreement by Pacific Star, then Community
Pacific will be entitled to liquidated damages in the amount of $2.6 million as
Community Pacific's exclusive remedy. Pacific Star has secured its obligation
to consummate the asset purchase by placing into escrow a letter of credit in
the amount of $2.6 million. See "Description of Indebtedness -- Letters of
Credit."
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MADISON ACQUISITION
On January 27, 1997, the Company agreed to acquire substantially all
of the assets of Madison (the "Madison Acquisition"). The purchase price of the
Madison Acquisition will equal approximately $38.8 million payable in cash.
Madison owns and operates six radio stations (four FM and two AM) in Madison,
Wisconsin. In February 1997, the Company and Madison filed an application with
the FCC for approval to transfer control of such radio stations to the Company.
The Company and Madison filed a Notification and Report Form with the DOJ and
the FTC in February 1997. The applicable waiting period under the HSR Act
terminated on March 11, 1997. The Company anticipates that the Madison
Acquisition will be consummated in October 1997.
Under the terms of the acquisition agreement, which was entered into
by Point Madison Acquisition Company, Inc., a subsidiary of the Company
("Madison Acquisition Co."), the acquisition agreement may be terminated by
Madison prior to consummation of the asset purchase under various
circumstances, including a material breach of any representation, warranty,
covenant or agreement by Madison Acquisition Co. If the acquisition agreement
is terminated due to a material breach of any representation, warranty,
covenant or agreement by Madison Acquisition Co., then Madison will be entitled
to liquidated damages in the amount of $3.2 million as Madison's exclusive
remedy. Madison Acquisition Co. has secured its obligation to consummate the
asset purchase by placing into escrow a letter of credit in the amount of $3.2
million. See "Description of Indebtedness -- Letters of Credit."
COMMONWEALTH ACQUISITION
On January 27, 1997, the Company agreed to acquire substantially all
of the assets of Commonwealth (the "Commonwealth Acquisition"). The purchase
price of the Commonwealth Acquisition will equal approximately $5.3 million
payable in cash. Commonwealth owns and operates three radio stations (two FM
and one AM) in Yuma, Arizona. In February 1997, the Company and Commonwealth
filed an application with the FCC for approval to transfer control of such
radio stations to the Company. No filing under the HSR Act is required. The
Company anticipates that the Commonwealth Acquisition will be consummated in
October 1997.
Under the terms of the acquisition agreement, which was entered into
by Pacific Star., the acquisition agreement may be terminated by Commonwealth
prior to consummation of the asset purchase under various circumstances,
including a material breach of any representation, warranty, covenant or
agreement by Pacific Star. If the acquisition agreement is terminated due to a
material breach of any representation, warranty, covenant or agreement, by
Pacific Star, then Commonwealth will be entitled to liquidated damages in the
amount of $262,500 as Commonwealth's exclusive remedy. Pacific Star has secured
its obligation to consummate the asset purchase by placing into escrow a letter
of credit in the amount of $262,500. See "Description of Indebtedness --
Letters of Credit."
CAVALIER ACQUISITION
On January 27, 1997, the Company agreed to acquire substantially all
of the assets of Cavalier (the "Cavalier Acquisition"). The purchase price of
the Cavalier Acquisition will equal approximately $8.3 million payable in cash.
Cavalier owns and operates five radio stations (four FM and one AM) in the
Roanoke and Lynchburg, Virginia markets. In February 1997, the Company and
Cavalier filed an application with the FCC for approval to transfer control of
such radio stations to the Company. No filing under the HSR Act is required.
The Company anticipates that the Cavalier Acquisition will be consummated in
October 1997.
Under the terms of the acquisition agreement, which was entered into
by Cavalier Acquisition Co., the acquisition agreement may be terminated by
Cavalier prior to consummation of the asset purchase under various
circumstances, including a material breach of any representation, warranty,
covenant or agreement, by Cavalier Acquisition Co. If the acquisition agreement
is terminated due to a material breach of any representation, warranty,
covenant or agreement by Cavalier Acquisition Co., then Cavalier will be
entitled to liquidated damages in the amount of $900,000 as Cavalier's
exclusive remedy. Cavalier Acquisition Co. has secured its obligation to
consummate the asset purchase by placing into escrow a letter of credit in the
amount of $900,000. See "Description of Indebtedness -- Letters of Credit."
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COMCO ACQUISITION
On February 3, 1997, the Company agreed to acquire substantially all
of the assets of COMCO (the "COMCO Acquisition"). The purchase price of the
COMCO Acquisition will equal approximately $6.7 million payable in cash. COMCO
owns and operates six radio stations (four FM and two AM) in the Anchorage and
Fairbanks, Alaska markets. The Company and COMCO filed an application with the
FCC for approval to transfer control of such radio stations to the Company in
February 1997. No filing under the HSR Act is required. The Company anticipates
that the COMCO Acquisition will be consummated in October 1997.
Under the terms of the agreement, which was entered into by Pacific
Star, the acquisition agreement may be terminated by COMCO prior to
consummation of the asset purchase under various circumstances, including a
material breach of any representation, warranty, covenant or agreement, by
Pacific Star. If the acquisition agreement is terminated due to a material
breach of any representation, warranty, covenant or agreement by Pacific Star,
then COMCO will be entitled to liquidated damages in the amount of $335,000 as
COMCO's exclusive remedy. Pacific Star has secured its obligation to consummate
the asset purchase by placing into escrow a letter of credit in the amount of
$335,000. See "Description of Indebtedness -- Letters of Credit."
Upon consummation of the Community Pacific Acquisition and the COMCO
Acquisition, the Company will own and operate seven radio stations (four FM and
three AM) in the Anchorage, Alaska market, which number exceeds the multiple
station ownership limitations under the Communications Act. Accordingly, the
Company has sought permission from the FCC to consummate both the Community
Pacific Acquisition and the COMCO Acquisition provided that the Company agrees
to sell radio station KASH-AM in Anchorage, Alaska within 18 months of the date
on which the Community Pacific Acquisition is consummated. The Company would be
in compliance with the ownership limitations of the Communications Act in the
Anchorage, Alaska market once it disposes of KASH-AM. No assurances can be
given that the FCC will grant permission to the Company to consummate both the
Community Pacific Acquisition and the COMCO Acquisition and dispose of KASH-
AM, or if the FCC grants such permission, that the Company will be able to sell
KASH-AM. See "-- Community Pacific Acquisition."
EMERALD CITY ACQUISITION
On March 10, 1997, the Company agreed to acquire substantially all of
the assets of Emerald City (the "Emerald City Acquisition") used or useful in
the operations of Emerald City's three radio stations (two FM and one AM) in
the Columbia, South Carolina market. The Company has agreed to assign WNOK
Acquisition Co.'s right to acquire two of Emerald City's radio stations
(WOIC-AM and WMFX-FM) on or before the date on which the Company acquires
Emerald City's third radio station (WNOK-FM) to Clear Channel Radio Licensing,
Inc. The purchase price of the Emerald City Acquisition will equal
approximately $14.9 million payable in cash, of which approximately $9.5
million has been allocated to station WNOK-FM and will be payable by the
Company.
The Company and Emerald City intend to file an application with the
FCC in April 1997 for approval to transfer control of WNOK-FM to the Company.
No assurances can be given that the FCC will grant permission to the Company to
consummate the Emerald City Acquisition. No filing under the HSR Act is
required. The Company anticipates that the Emerald City Acquisition will be
consummated in July 1997.
Under the terms of the agreement, which was entered into by WNOK
Acquisition Company, Inc., a subsidiary of the Company ("WNOK Acquisition
Co."), the acquisition agreement may be terminated by Emerald City prior to
consummation of the asset purchase under various circumstances, including a
material breach of any representation, warranty, covenant or agreement by WNOK
Acquisition Co. If the acquisition agreement is terminated due to a material
breach of any representation, warranty, covenant or agreement by WNOK
Acquisition Co., then Emerald City will be entitled to liquidated damages in
the amount of $500,000 as Emerald City's exclusive remedy. WNOK Acquisition Co.
has secured its obligation to consummate the asset purchase by placing into
escrow cash in the amount of $75,000 and has agreed that $425,000 of the loan
described below will be forgiven if Emerald City becomes entitled to liquidated
damages.
In connection with the Emerald City Acquisition, the Company has
loaned Emerald City approximately $13.5 million, the proceeds of which were
used by Emerald City (i) to pay matured indebtedness of Emerald City to Clear
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Channel Radio, Inc. in the amount of approximately $13.3 million, including
principal and interest, and (ii) for other business purposes in the amount of
approximately $200,000. The loan matures on the earlier to occur of (i) October
31, 1997, (ii) the closing of the Emerald City Acquisition or (iii) within 75
days after the termination of the acquisition agreement with WNOK Acquisition
Co.
WRIS ACQUISITION
On April 11, 1997, the Company agreed to acquire substantially all of
the assets of WRIS used or held for use in the operation of station WJLM-FM in
Salem, Virginia (the "WRIS Acquisition"). The purchase price of the WRIS
Acquisition will equal approximately $3.1 million payable in cash. In April
1997, the Company and WRIS will file an application with the FCC for approval
to transfer control of such radio station to the Company. No filing under the
HSR Act is required. The Company anticipates that the WRIS Acquisition will be
consummated in August 1997.
Under the terms of the acquisition agreement, which was entered into
by Capstar Acquisition Company, Inc., a subsidiary of the Company ("Capstar
Acquisition Co."), the acquisition agreement may be terminated by WRIS prior to
consummation of the asset purchase under various circumstances, including a
material breach of any representation, warranty, covenant or agreement by
Capstar Acquisition Co. If the acquisition agreement is terminated due to a
material breach of any representation, warranty, covenant or agreement by
Capstar Acquisition Co., then WRIS will be entitled to liquidated damages in
the amount of $150,000 as WRIS's exclusive remedy. Capstar Acquisition Co. has
secured its obligation to consummate the asset purchase by placing into escrow
a letter of credit in the amount of $150,000. See "Description of Indebtedness
- -- Letters of Credit."
POSSIBLE ACQUISITIONS
The Company has entered into seven separate nonbinding letters of
intent to acquire and/or exchange substantially all of the assets of the
respective potential sellers used or useful in the operations of each seller's
radio stations, each of which is subject to various conditions, including the
ability of the Company to enter into a definitive agreement to acquire such
assets. No assurances can be given that definitive agreements will be entered
into to acquire such assets or that such acquisitions will be consummated. As
part of the Company's ongoing acquisition strategy, the Company is continually
evaluating certain other potential acquisition opportunities. See "Risk Factors
- -- Risks of Acquisition Strategy."
MANAGEMENT
The directors and executive officers of the Company are listed below.
Each of the directors will hold office until the next annual meeting of
stockholders and until his successor has been duly elected and qualified. The
holders of the Class A Common Stock, voting separately as a class, will be
entitled to elect two members of Capstar's Board of Directors (the "Class A
Directors"). Executive officers are generally elected annually by the Board of
Directors to serve, subject to the discretion of the Board of Directors, until
their successors are appointed.
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<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
R. Steven Hicks 47 Chairman of the Board, President, Chief
Executive Officer and Director
Paul D. Stone 36 Executive Vice President and Chief
Financial Officer
William S. Banowsky, Jr. 35 Executive Vice President, General Counsel
and Secretary
Eric C. Neuman 52 Executive Vice President and Director
James T. Shea, Jr. 44 President of Commodore
Frank D. Osborn 49 President and Chief Executive Officer of
Osborn
David J. Benjamin, III (1) 50 Chairman of the Board and Chief Executive
Officer of Pacific Star
Dex Allen 54 President and Chief Operating Officer of
Pacific Star
Thomas O. Hicks 51 Director
Lawrence D. Stuart, Jr. 52 Director
</TABLE>
- ---------------------------
(1) David J. Benjamin, III will become the President and Chief Operating
Officer of Pacific Star upon consummation of the Community Pacific
Acquisition.
R. Steven Hicks has served as the Chairman of the Board, President,
Chief Executive Officer and as a director of the Company since its inception in
October 1996. Mr. Hicks has also served as Chairman of the Board and Chief
Executive Officer of GulfStar since January 1987. From November 1993 to May
1996, he was President and Chief Executive Officer of SFX, a publicly traded
radio broadcasting company. Mr. Hicks is a 30-year veteran of the radio
broadcasting industry, including 18 years as a station owner. Mr. Hicks is the
brother of Thomas O. Hicks.
Paul D. Stone has served as Executive Vice President and the Chief
Financial Officer of the Company since January 1997. Mr. Stone was an Executive
Vice President and the Chief Financial Officer of GulfStar from April 1996
until January 1997 at which time Mr. Stone resigned from such positions. Prior
to January 1997, Mr. Stone was Vice President and Controller of Hicks Muse for
six years. He holds a Masters Degree in Accounting from the University of North
Texas and is a Certified Public Accountant.
William S. Banowsky, Jr. has served as Executive Vice President and
the General Counsel of the Company since January 1997. Mr. Banowsky was an
attorney with Snell, Banowsky & Trent, P.C., Dallas, Texas, for six years
before joining the Company. Prior to that time, he was an attorney for Johnson
& Gibbs, P.C., Dallas, Texas, for four years.
Eric C. Neuman has served as Executive Vice President and a director
of the Company since its inception in October 1996. Mr. Neuman has served as an
officer of Hicks Muse since 1993 and as a Senior Vice President thereof since
1996. Before joining Hicks Muse, Mr. Neuman served for eight years as Managing
General Partner of Communications Partners, Ltd., a Dallas-based private
investment firm. Mr. Neuman has served as a director of Chancellor Broadcasting
Company since 1996.
James T. Shea, Jr. is President of Commodore and has served in such
position since October 16, 1996. Mr. Shea joined Commodore as the President of
its MidAtlantic Region in March 1992. He joined Wilks-Schwartz as Vice
President, General Manager, and Partner of WKRZ, Wilkes Barre, Pennsylvania in
1980, and became Vice President, General Manager and Partner of WQQQ/WEEX,
Allentown, Pennsylvania in 1984, was promoted to Executive Vice
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President and Partner in 1986 and served in such capacity until 1992. Prior to
serving as President of Commodore, Mr. Shea served as Chief Operating Officer
of Commodore from January 1995 to October 1996.
Frank D. Osborn has been President and Chief Executive Officer of
Osborn since Osborn's inception in 1984. He is Chairman of the Board of
Fairmont Communications and is a member of the Board of Directors of Northstar
Television Group. From 1983 to 1985, Osborn served as Senior Vice
President/Radio for Price Communications Corporation. From 1981 to 1983, Mr.
Osborn served as Vice President and General Manager of WYNY, NBC's New York FM
radio station, and was Vice President of Finance and Administration of NBC
Radio from 1977 to 1981.
David J. Benjamin, III, has been President and Chief Executive Officer
of Community Pacific since 1992. Prior to such time, he co-founded and served
as Chairman and Chief Executive Officer of Community Pacific's predecessor,
Community Pacific Broadcasting Corporation, which positions he had held since
1974. Mr. Benjamin is a former President of the Oregon Association of
Broadcasters and a former board member of the National Association of
Broadcasters. Upon consummation of the Community Pacific Acquisition, Mr.
Benjamin will serve as Chairman of the Board and Chief Executive Officer of
Pacific Star.
Dex Allen serves as the President and Chief Operating Officer of
Pacific Star. Mr. Allen has served as the managing member of Commonwealth since
1984 and is expected to continue to serve in such position until consummation
of the Commonwealth Acquisition. Prior to 1984, Mr. Allen was Vice
President/General Manager of KOGO-AM and KPRI-FM in San Diego, California and
the Sales Manager of KCBQ-AM in San Diego, California. Mr. Allen is a 29-year
veteran of the radio broadcasting industry, including 12 years as a station
owner.
Thomas O. Hicks has been a director of the Company since its inception
in October 1996. Thomas O. Hicks has been Chairman and Chief Executive Officer
of Hicks Muse since co-founding the firm in 1989. Prior to forming Hicks Muse,
Thomas O. Hicks co-founded Hicks & Haas Incorporated in 1983 and served as its
Co-Chairman and Co-Chief Executive Officer through 1989. Thomas O. Hicks also
serves as a director of Chancellor Broadcasting Company, Berg Electronics
Corp., Sybron International Corporation and Neodata Corporation. Thomas O.
Hicks is the brother of R. Steven Hicks.
Lawrence D. Stuart, Jr. has served as a director of the Company since
January 1997. Mr. Stuart has been a Managing Director and Principal of Hicks
Muse since 1995. Prior to joining Hicks Muse, Mr. Stuart had served for over 20
years as the principal outside legal counsel for the investment firms and
portfolio companies led by Thomas O. Hicks. From 1989 to 1995, Mr. Stuart was
the Managing Partner of the Dallas office of Weil, Gotshal & Manges (a Limited
Liability Partnership including Professional Corporations).
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation of Capstar provides that the
Board of Directors shall consist of at least five but no more than nine
directors, two of whom shall be elected by the holders of the Class A Common
Stock voting as a class, and the remainder of whom (the "Classified Directors")
shall be elected by the holders of the Class A Common Stock and the Class C
Common Stock, voting together as a single class. It is expected that the Class
A directorships will be vacant immediately following the completion of the
Offering and will be filled at the next annual meeting of the stockholders of
Capstar, provided that such vacancies may be filled by the Board of Directors
before the next annual meeting of stockholders and such appointees would then
be nominated for election as the Class A Directors at the next annual meeting
of stockholders. The Classified Directors are divided into three classes of
directors, designated as Class I, Class II and Class III directors. The Class A
Directors will be elected for one-year terms at each annual meeting of the
stockholders of Capstar commencing after the Offering. The Classified Directors
will be elected for three-year terms. The initial term of office of the Class I
directors expires at the 1998 annual meeting of stockholders, the initial term
of the Class II directors expires at the 1999 annual meeting of stockholders
and the initial term of the Class III directors expires at the 2000 annual
meeting of stockholders. Beginning with the 1998 annual meeting, and at each
annual meeting of stockholders thereafter, Classified Directors in the class to
be elected at such meeting will be elected to succeed those directors whose
terms expire at such meeting. The Class I director is Eric C. Neuman; the Class
II director is Lawrence D. Stuart, Jr.; and the Class III directors are R.
Steven Hicks and Thomas O. Hicks.
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BOARD COMMITTEES
In January 1997, the Company's Board of Directors established an Audit
Committee and a Compensation Committee. The Audit Committee's functions include
recommending to the Board of Directors the engagement of the Company's
independent public accountants, reviewing with such accountants the plans for
and the results and scope of their auditing engagement and certain other
matters relating to their services provided to the Company, including the
independence of such accountants. The Compensation Committee determines the
compensation of executive officers and administers the Stock Option Plan and
the Stock Purchase Plan. Lawrence D. Stuart, Jr. and Eric C. Neuman currently
serve on the Audit Committee. The Audit Committee will consist of two
independent directors who will be appointed after the Offering. R. Steven
Hicks, Thomas O. Hicks and Mr. Stuart serve on the Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation received or accrued by the Company's Chief Executive Officer and
its other most highly compensated executive officers (collectively, the "Named
Executive Officers") for services rendered during the fiscal year ended
December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- -----------------------
OTHER SECURITIES ALL OTHER
ANNUAL UNDERLYING LTIP COMPENSATION
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION OPTIONS(#) PAYOUTS($) ($)
- --------------------------- --------- -------- ------------ ---------- ---------- ---
<S> <C> <C> <C> <C> <C> <C>
R. Steven Hicks...................... 135,400 -- -- 930,000(1) -- 744,000(1)
Chairman of the Board, President
and Chief Executive Officer
James T. Shea, Jr.................... 262,500 -- 6,000 720,880 170,000 3,412,495(2)
President of Commodore
Frank D. Osborn...................... 387,000 300,000 -- -- -- 1,778,375(3)
President of Osborn
</TABLE>
(1) See "Certain Transactions -- Warrants."
(2) Represents the amount paid to Mr. Shea in connection with the
Commodore Acquisition in settlement of such executive officer's
outstanding options to purchase shares of common stock of Commodore.
(3) Frank D. Osborn became an executive officer of the Company upon
consummation of the Osborn Acquisition in February 1997. Mr. Osborn's
employment agreement with Osborn prior to the Osborn Acquisition
obligated Osborn to pay $16,000 annually into a retirement benefit
arrangement for Mr. Osborn. Mr. Osborn elected to have such amount
deposited into Osborn's Non-Qualified Deferred Compensation Plan. In
1996, Mr. Osborn also received $1,746,875 in compensation from the
exercise of non-qualified stock options granted by Osborn and $15,500
from the exercise of incentive stock options granted by Osborn.
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<PAGE> 75
The following table contains information about stock options and stock
purchase rights granted to the Named Executive Officers during the fiscal year
ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------------
NAME GRANTED(#) IN 1996 PER SHARE DATE 5%($) 10%($)
---- ---------- ---------------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
R. Steven Hicks.................... 930,000(2) 100% $10.00(2) 10-16-06 $5,848,720 $14,821,805
James T. Shea, Jr.................. 72,088(3) 17.86% $10.00 11-26-06 $ 453,358 $ 1,148,897
35,000(4) 8.67% $10.00 12-26-96 -- --
Frank D. Osborn.................... -- -- -- -- -- --
</TABLE>
- ---------------------------
(1) The assumed rates are compounded annually for the full terms of the
options and warrants.
(2) See "Certain Transactions -- Warrants."
(3) Represents options granted pursuant to the Company's Stock Option Plan
(as defined).
(4) Represents stock purchase rights granted pursuant to the Company's
Stock Purchase Plan (as defined).
The following table sets forth certain information (i) with respect to
the number of shares of Common Stock issued upon exercises of options and stock
purchase rights by the Named Executive Officers during the fiscal year ended
December 31, 1996 and (ii) with respect to the unexercised options granted
under the Stock Option Plan held by the Named Executive Officers at December
31, 1996.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1996 DECEMBER 31, 1996($)(1)
ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Steven Hicks................. -- -- 744,000(2) 186,000(2) $744,000 $186,000
James T. Shea, Jr............... -- -- -- 72,088(3) -- 72,088
35,000(4) -- -- -- -- --
Frank D. Osborn................. -- -- -- -- -- --
</TABLE>
- ---------------------------
(1) There is no public market for the Common Stock. Based on the per share
price of the Equity Investment and the Osborn Contribution of $11.00.
(2) See "Certain Transactions-- Warrants."
(3) Represents options granted pursuant to the Stock Option Plan.
(4) Represents stock purchase rights granted pursuant to the Stock
Purchase Plan.
EMPLOYMENT AGREEMENTS
R. Steven Hicks Employment Agreement. Capstar has entered into an
employment agreement with R. Steven Hicks pursuant to which Mr. Hicks serves as
Chairman of the Board, President and Chief Executive Officer of Capstar. Mr.
Hicks' employment agreement terminates on December 31, 2001, and will be
automatically renewed for successive one year terms unless Mr. Hicks or Capstar
gives the other party written notice of his or its intention not to renew the
employment agreement at least six months prior to the date the employment
agreement would otherwise expire (but no more than 12 months prior to such
expiration date). Mr. Hicks' current base salary is $250,000 per year and is
subject to further annual increases at least equal to five percent of the then
current annual base salary. He is also entitled to
72
<PAGE> 76
receive such annual performance bonuses as Capstar's Board of Directors may
determine. Further, Mr. Hicks is entitled to receive stock options to purchase
shares of Class A Common Stock. If Capstar terminates Mr. Hicks' employment for
cause or Mr. Hicks terminates his employment for other than good reason,
Capstar must pay Mr. Hicks all accrued obligations and other benefits earned
prior to the date of termination. If Capstar terminates Mr. Hicks' employment
agreement other than for cause or Mr. Hicks terminates his employment agreement
for good reason, Mr. Hicks' employment agreement provides for (A) a lump sum
payment of (x) two times Mr. Hicks' then current annual salary and (y) any
accrued obligations and other benefits earned prior to the date of termination
and (B) unless the Board of Directors of the Company determines that Mr. Hicks
has not satisfactorily performed his obligations and duties under the
agreement, the immediate vesting of all stock options between the Company and
Mr. Hicks and the right to exercise those options until the earlier of (x) the
expiration date of those options or (y) the 90th day after Mr. Hicks'
termination. Mr. Hicks has entered into a substantially similar employment
agreement with GulfStar.
James T. Shea, Jr. Employment Agreement. Capstar and Commodore have
entered into an employment agreement with James T. Shea, Jr. pursuant to which
Mr. Shea serves as the President of Commodore. Mr. Shea's employment agreement
terminates on April 30, 1999. Mr. Shea's current base salary is $275,625, which
increases at the beginning of each calendar year by an amount which shall not
be less than five percent of his then current base salary. Mr. Shea is also
entitled to receive annual bonuses as the Board of Directors of Commodore may
determine, provided that the bonus shall not be more than $150,000. In
addition, the employment agreement provides for an automobile allowance,
participation in the retirement, savings, and welfare benefit plans of
Commodore, a life insurance policy of $650,000 and stock options to purchase
720,880 shares of Class A Common Stock of the Company at $1.00 per share under
the Stock Option Plan (which stock options were granted in 1996). If Commodore
terminates Mr. Shea's employment for cause, Commodore is obligated to pay Mr.
Shea's then accrued base salary, reimbursable expenses, and any other
compensation then due and owing. In addition, Commodore must continue to fund
Mr. Shea's life insurance policy. If the employment agreement is terminated due
to death or disability, without cause or by Mr. Shea for good reason, Mr. Shea
will be entitled to (i) the continuation of his annual base salary, as then in
effect, for a period equal to (A) if the termination date occurs after April
21, 1998 but prior to April 30, 1999, a 12-month period commencing on the
termination date or (B) if the termination date occurs on or prior to April 21,
1998, the lesser of (x) a 24-month period commencing on the termination date
and (y) the period starting on the termination date and ending on April 30,
1999, (ii) a pro rata amount of his annual bonus, (iii) any annual base salary
and annual bonus then accrued but not yet paid, (iv) the continuation of his
welfare benefits for a period equal to (A) if the termination date occurs after
April 21, 1998 but prior to April 30, 1999, a 12-month period commencing on the
termination date or (B) if the termination date occurs on or prior to April 21,
1998, the lesser of (x) a 24-month period commencing on the termination date
and (y) the period starting on the termination date and ending on April 30,
1999, (v) the continuation of his life insurance policy, (vi) any other
compensation and benefits as may be provided in accordance with the terms and
provisions of any applicable plans and programs, (vii) reimbursement for
certain expenses incurred as of the termination date but not yet paid as of the
date of termination and (viii) any other rights afforded to him under other
written agreements between Mr. Shea and the Company.
Frank D. Osborn Employment Agreement. Upon consummation of the Osborn
Acquisition, Osborn entered into an employment agreement with Frank D. Osborn
pursuant to which Mr. Osborn serves as the President and Chief Executive
Officer of Osborn. Mr. Osborn's employment agreement terminates on the fifth
anniversary of the consummation of the Osborn Acquisition. Mr. Osborn's base
salary is $375,000, and commencing on January 1, 1998, and on each subsequent
January 1, his base salary will be adjusted to reflect the annual increase in
the Consumer Price Index during the preceding year. Mr. Osborn is entitled to a
$300,000 signing bonus. In addition, Mr. Osborn is entitled to a guaranteed
bonus of $25,000 per month for a period of 60 months after the date of the
agreement and an annual bonus as determined by Osborn's Board of Directors.
Further, Mr. Osborn was granted non-qualified stock options for 1,500,000
shares of Class A Common Stock of the Company. Except as otherwise provided in
the employment agreement or in the Stock Option Plan, the stock options will
vest with respect to 20.0% of the shares of Class A Common Stock subject
thereto on the first anniversary of the date of grant, and 1/60th of such
shares shall vest on the last day of each calendar month thereafter. If Mr.
Osborn's employment is terminated by Osborn for cause or by Mr. Osborn for
other than good reason, Osborn is obligated to pay all accrued obligations and
other benefits to Mr. Osborn. If the employment agreement is terminated by
Osborn other than for cause or disability or by Mr. Osborn for good reason, Mr.
Osborn's employment agreement provides for (A) a lump sum payment of any
accrued obligations and other benefits earned prior to the date of termination,
(B) the payment in regular installments of (x) if the remainder of the
employment period is 24 months or less, Mr. Osborn's then current salary for
the remainder of the employment period,
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<PAGE> 77
(y) if the remainder of the employment period is more than 24 months but less
than 36 months, twice the sum of Mr. Osborn's then current salary, plus Mr.
Osborn's then current salary for a period of 12 months after the 24 months have
expired from the termination date, (C) the payment of the guaranteed bonus as
if Mr. Osborn's employment had not been terminated and (D) unless the Board of
Directors of Osborn determines that Mr. Osborn has not satisfactorily performed
his obligations and duties under the agreement, the immediate vesting of all
stock options between the Company and Mr. Osborn and the right to exercise
those options until the earlier of (x) the expiration date of those options or
(y) the 90th day after Mr. Osborn's termination. Mr. Osborn is also entitled to
participate in Osborn's employee medical benefit plan for 24 months following
termination unless Osborn fails to achieve 60.0% of its annual budget for
operating profit for the last calendar year ended prior to termination. In that
case, Mr. Osborn is entitled to participate in such plan for 12 months
following termination.
Paul D. Stone Employment Agreement. Capstar has entered into an
employment agreement with Paul D. Stone pursuant to which Mr. Stone serves as
an Executive Vice President and the Chief Financial Officer of Capstar. Mr.
Stone's employment agreement terminates on December 31, 2001, and will be
renewed automatically for successive one year terms unless Mr. Stone or Capstar
gives the other party written notice of his or its intention not to renew the
employment agreement at least six months prior to the date the employment
agreement would otherwise expire (but no more than 12 months prior to such
expiration date). Mr. Stone's current base salary is $200,000 per year, subject
to annual increases at least equal to the percentage increase, if any, in the
Consumer Price Index during the preceding calendar year. Mr. Stone is also
entitled to receive such annual bonuses as Capstar's Board of Directors may
determine. Further, Mr. Stone is entitled to receive stock options to purchase
shares of Class A Common Stock. If Capstar terminates Mr. Stone's employment
for cause or Mr. Stone terminates his employment for other than good reason,
Capstar must pay Mr. Stone all accrued obligations and other benefits earned
prior to the date of termination. If Capstar terminates Mr. Stone's employment
agreement other than for cause or Mr. Stone terminates his employment agreement
for good reason, Mr. Stone's employment agreement provides for (A) a lump sum
payment of (x) two times Mr. Stone's then current annual salary and (y) any
accrued obligations and other benefits earned prior to the date of termination
and (B) unless the Board of Directors of the Company determines that Mr. Stone
has not satisfactorily performed his obligations and duties under the
agreement, the immediate vesting of all stock options between the Company and
Mr. Stone and the right to exercise those options until the earlier of (x) the
expiration date of those options or (y) the 90th day after Mr. Stone's
termination.
William S. Banowsky, Jr. Employment Agreement. Capstar has entered
into an employment agreement with William S. Banowsky pursuant to which Mr.
Banowsky serves as an Executive Vice President and the General Counsel of the
Company. Mr. Banowsky's employment agreement terminates on December 31, 2001,
and will be renewed automatically for successive one-year terms unless Mr.
Banowsky or Capstar gives the other party written notice of his or its
intention not to renew the employment agreement at least six months prior to
the date the employment agreement would otherwise expire (but not more than 12
months prior to such expiration date). Mr. Banowsky's current base salary is
$200,000 per year, subject to annual increases at least equal to the percentage
increase, if any, in the Consumer Price Index during the preceding calendar
year. Mr. Banowsky is also entitled to receive such annual bonuses as the
Company's Board of Directors may determine. Further, Mr. Banowsky is entitled
to receive stock options to purchase shares of Class A Common Stock. If Capstar
terminates Mr. Banowsky's employment for cause or Mr. Banowsky terminates his
employment for other than good reason, Capstar must pay Mr. Banowsky all
accrued obligations and other benefits earned prior to the date of termination.
If Capstar terminates Mr. Banowsky's employment agreement other than for cause
or Mr. Banowsky terminates his employment agreement for good reason, Mr.
Banowsky's employment agreement provides for (A) a lump sum payment of (x) two
times Mr. Banowsky's then current annual salary and (y) any accrued obligations
and other benefits earned prior to the date of termination and (B) unless the
Board of Directors of the Company determines that Mr. Banowsky has not
satisfactorily performed his obligations and duties under the agreement, the
immediate vesting of all stock options between the Company and Mr. Banowsky and
the right to exercise those options until the earlier of (x) the expiration
date of those options or (y) the 90th day after Mr. Banowsky's termination.
Dex Allen Employment Agreement. Dex Allen is the President and Chief
Operating Officer of Pacific Star. Pacific Star and Mr. Allen have entered into
an employment agreement having the following terms: (i) Mr. Allen will serve as
President and Chief Operating Officer of Pacific Star; (ii) Mr. Allen's term of
employment is five years, provided that on the fifth anniversary and on each
anniversary thereafter, Mr. Allen's employment period shall automatically be
extended for one additional year unless Mr. Allen or Pacific Star gives the
other party written notice
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<PAGE> 78
of his or its intention not to renew the employment agreement at least six
months prior to such anniversary (but no more than 12 months prior to such
anniversary); (iii) Mr. Allen will receive a base salary of $150,000 during his
first year of employment, which will increase to $200,000 per year thereafter,
subject to further annual increases at least equal to the percentage increase,
if any, in the Consumer Price Index during the preceding calendar year; and
(iv) Mr. Allen will be entitled to receive an annual bonus of at least $50,000
per year if certain financial goals, as determined by Pacific Star's Board of
Directors are achieved. The Company and Mr. Allen also agreed that (i) if
Pacific Star terminates Mr. Allen's employment for cause or Mr. Allen
terminates his employment for other than good reason, Pacific Star will only be
obligated to make a lump sum payment to Mr. Allen of any accrued obligations of
Pacific Star to Mr. Allen, including Mr. Allen's salary earned or accrued
through the date of his termination, and (ii) if Pacific Star terminates Mr.
Allen's employment other than for cause or disability or Mr. Allen terminates
his employment for good reason, Mr. Allen's employment agreement provides for
(A) a severance payment of Mr. Allen's then current base salary in regular
installments for a one year period, (B) a lump sum payment of any accrued
obligations and other benefits earned prior to the date of termination, and (C)
unless the Board of Directors of Pacific Star determines that Mr. Allen has not
satisfactorily performed his obligations and duties under the agreement, the
immediate vesting of all stock options between the Company and Mr. Allen and
the right to exercise those options until the earlier of (x) the expiration
date of those options or (y) the 90th day after Mr. Allen's termination.
David J. Benjamin, III Employment Agreement. Upon consummation of the
Community Pacific Acquisition, Pacific Star will enter into an employment
agreement with David J. Benjamin, III pursuant to which Mr. Benjamin will serve
as Chairman and Chief Executive Officer of Pacific Star and chief executive
officer of the West Region. Mr. Benjamin's employment agreement will terminate
on the fifth anniversary of the consummation of the Community Pacific
Acquisition. The employment agreement will automatically be renewed for
successive one-year terms unless Mr. Benjamin or the Company gives written
notice of his or its intention not to renew the agreement at least six months
(but no more than 12 months) prior to the date the agreement would otherwise
expire. Mr. Benjamin's base salary will be $200,000, subject to annual
increases at least equal to the percentage increase, if any, in the Consumer
Price Index during the preceding calendar year. Mr. Benjamin is also entitled
to receive an annual bonus of $50,000 per year if certain financial goals, as
determined by the Board of Directors of Pacific Star, are achieved. In
addition, Mr. Benjamin is entitled to receive stock options to purchase shares
of Common Stock. Except as otherwise provided in the employment agreement or in
the Stock Option Plan, the stock options will vest with respect to 20.0% of the
shares of Common Stock subject thereto on the first anniversary of the date of
grant, and 1/60th of such shares shall vest on the last day of each calendar
month thereafter. If the Company terminates Mr. Benjamin's employment for cause
or Mr. Benjamin terminates his employment for other than good reason, Pacific
Star will not be obligated to make any further salary payments to Mr. Benjamin
except those earned prior to the date of termination. If Pacific Star
terminates Mr. Benjamin's employment without cause or Mr. Benjamin terminates
his employment for good reason, Mr. Benjamin's employment agreement provides
for (A) a lump sum payment equal to any accrued obligations of Pacific Star to
Mr. Benjamin, (B) in regular installments of (x) if the remainder of the
employment period is less than 24 months, Mr. Benjamin's then annual salary for
the remainder of the employment period, (y) if the remainder of the employment
period is more than 24 but less than 36 months, the sum of two times Mr.
Benjamin's then annual salary plus his annual salary for a period of 12 months
after 24 months have expired from the date of his termination, or (z) if the
remainder of the employment period is greater than 36 months, the sum of two
times Mr. Benjamin's then annual salary plus his annual salary for a period of
12 months after 24 months have expired from the date of his termination and (C)
the payment of his bonus as if the termination did not occur and (D) unless the
Board of Directors of Pacific Star determines that Mr. Benjamin has not
satisfactorily performed his obligations and duties under the agreement, the
immediate vesting of all stock options between the Company and Mr. Benjamin and
the right to exercise those options until the earlier of (x) the expiration
date of those options or (y) the 90th day after Mr. Benjamin's termination.
Notwithstanding clause (B) of the immediately preceding sentence, if the
Company's West Region fails to achieve at least 60.0% of its annual budget for
operating profit for the last calendar year ended prior to termination, Pacific
Star will only be obligated to pay Mr. Benjamin's then current salary for 12
months. If Mr. Benjamin's employment is terminated due to death or disability,
Pacific Star shall pay all accrued obligations and investments, guaranteed
bonuses and other benefits for 12 months after the termination date.
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<PAGE> 79
BENEFIT PLANS
Stock Option Plan
The Company's 1996 Stock Option Plan (the "Stock Option Plan") gives
certain individuals and key employees of the Company and any parent corporation
or subsidiary corporation thereof (such parent and subsidiary corporations are
referred to as "Related Entities") who are responsible for the continued growth
of the Company an opportunity to acquire a proprietary interest in the Company,
and thus to create in such persons an increased interest in and a greater
concern for the welfare of the Company and any Related Entities. After giving
effect to the Recapitalization, the Stock Option Plan provides for the grant of
options to acquire up to 9,000,000 shares of Class A Common Stock. Grants of
stock options with respect to 706,895 shares of Class A Common Stock have been
made under the Stock Option Plan.
The Stock Option Plan is administered by the Company's Compensation
Committee. The Compensation Committee has authority, subject to the terms of
the Stock Option Plan (including the formula grant provisions and the
provisions relating to incentive stock options contained therein), to determine
when and to whom to make grants or awards under the Stock Option Plan, the
number of shares to be covered by the grants or awards, the types and terms of
the grants and awards, and in the case of grants of stock options, the exercise
price of stock options. Moreover, the Compensation Committee will have the
authority, subject to the provisions of the Stock Option Plan, to establish
such rules and regulations as it deems necessary for the proper administration
of the Stock Option Plan and to make such determinations and interpretations
and to take such action in connection with the Stock Option Plan and any grants
and awards thereunder as it deems necessary or advisable. The Compensation
Committee's determinations and interpretations under the Stock Option Plan are
final, binding and conclusive on all participants and need not be uniform and
may be made by the Compensation Committee selectively among persons who
receive, or are eligible to receive, grants and awards under the Stock Option
Plan.
Grants of "incentive stock options" within the meaning of section 422
of the Internal Revenue Code of 1986, as amended (the "Code") and non-qualified
stock options (options which do not qualify under section 422 of the Code) may
be made under the Stock Option Plan to key employees. Grants of non-qualified
stock options may be made to eligible non-employees (as defined in the Stock
Option Plan). No incentive stock option may be granted pursuant to the Stock
Option Plan after October 16, 2006.
The exercise price per share of Class A Common Stock under each option
is fixed by the Compensation Committee at the time of grant and must equal at
least 100.0% of the fair market value (as defined in the Stock Option Plan) of
a share of Class A Common Stock on the date of grant; provided, however , that
the exercise price of an incentive stock option granted to a person who, at the
time of grant, owns shares of the Company or any Related Entity which possess
more than 10.0% of the total combined voting power of all classes of stock of
the Company or of any Related Entity may not be less than 110.0% of the fair
market value of a share of Class A Common Stock on the date of grant. No option
is exercisable after the expiration of ten years from the date of grant,
unless, as to any non-qualified stock option, otherwise expressly provided in
the option agreement; provided, however , that no incentive stock option
granted to a person who, at the time of grant, owns stock of the Company, or
any Related Entity, possessing more than 10.0% of the total combined voting
power of all classes of stock of the Company, or any Related Entity, is
exercisable after the expiration of five years from the date of grant.
In the event of a change of control or sale of the Company, all
outstanding stock options may, subject to the sole discretion of the
Compensation Committee, become exercisable in full at such time or times as the
Compensation Committee may determine. Each stock option accelerated by the
Compensation Committee would terminate on such date (not later than the stated
exercise date) as the Compensation Committee determines.
Unless an option or other agreement provides otherwise, upon the date
of death of an optionee (or upon the termination of an optionee because of such
optionee's disability), the person who acquires the right to exercise the
option of such optionee (or the optionee in the case of disability) must
exercise such option within 180 days after the date of death (or termination in
the case of disability), unless a longer period is expressly provided in such
incentive stock option or a shorter period is established by the Compensation
Committee, but in no event after the expiration date of such option. Following
an optionee's termination of employment for cause, all stock options held by
such optionee will immediately be canceled as of the date of termination of
employment. Following an optionee's termination of employment for other than
cause, such optionee must exercise his stock option within 30 days after the
date of such termination, unless a longer period is expressly provided in such
stock option or a shorter period is established by the Compensation Committee,
provided that no incentive stock option shall be exercisable more than three
months after such termination.
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<PAGE> 80
The option exercise price may be paid in cash or, in the discretion of
the Compensation Committee, by the delivery of shares of Class A Common Stock
of the Company then owned by the participant, or by a combination of these
methods. Also, in the discretion of the Compensation Committee, payment may
also be made by delivering a properly executed exercise notice to the Company
together with a copy of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds to pay the exercise
price.
Except as otherwise expressly provided in any non-qualified stock
option, stock options may be transferred by a participant only by will or by
the laws of descent and distribution and may be exercised only by the
participant during his lifetime.
If an optionee's employment is terminated for any reason or a change
of control occurs, the Company, or its designee, may purchase the remaining
options and/or shares of Class A Common Stock held by such optionee at a price
per share equal to fair market value. Prior to the transfer by an optionee of
any shares of Class A Common Stock issued to such optionee upon exercise of a
stock option, the Company or its designee has the right to acquire such shares
of Class A Common Stock on the same terms and conditions as the proposed
transfer.
Stock Purchase Plan
The Company's 1996 Stock Purchase Plan (the "Stock Purchase Plan")
gives certain key employees of the Company and any Related Entities who are
expected to contribute materially to the success of the Company and any Related
Entities an opportunity to acquire a proprietary interest in the Company, and
thus to retain such persons and create in such persons an increased interest in
and a greater concern for the welfare of the Company and any Related Entities.
The Stock Purchase Plan provides for the grant of stock purchase rights to
acquire up to 315,500 shares of Class A Common Stock. To date, grants of stock
purchase rights with respect to 115,500 shares of Class A Common Stock have
been made under the Stock Purchase Plan, all of which have been exercised. The
Company intends to terminate the Stock Purchase Plan upon consummation of the
Offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There was no compensation committee of the Board of Directors during
1996. Compensation decisions in 1996 were made by the entire Board of
Directors, the members of which were R. Steven Hicks (Capstar's President and
Chief Executive Officer), Eric C. Neuman (an Executive Vice President of
Capstar) and Thomas O. Hicks. In February 1997, R. Steven Hicks, Thomas O.
Hicks and Lawrence D. Stuart, Jr. were appointed to the Compensation Committee
of the Board of Directors, of which Thomas O. Hicks serves as chairman.
COMPENSATION OF DIRECTORS
Directors of the Company do not presently receive compensation for
their services as directors. Directors of the Company are entitled to
reimbursement of their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the Board of Directors or
committees thereof.
After the consummation of the Offering, the non-employee directors of
Capstar will receive an annual retainer of $12,000 for serving as directors of
Capstar and its subsidiaries. Non-employee directors will also receive
attendance fees of $1,000 ($500 in the case of telephonic meetings) for each
meeting which they attend. Directors who are officers or employees of the
Company are not presently expected to receive compensation for their services
as directors. Directors of Capstar will continue to be entitled to
reimbursement of their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the Board of Directors or
committees thereof.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Restated Certificate of Incorporation provides that no
director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for breach of his fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) in respect of certain unlawful dividend payments or stock
redemptions or purchases or (iv) for any transaction from which the
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<PAGE> 81
\
director derived an improper personal benefit. The effect of these provisions
is to eliminate the rights of the Company and its stockholders (through
stockholders' derivative suits on behalf of the Company) to recover monetary
damages against a director for breach of fiduciary duty as a director
(including breaches resulting from grossly negligent behavior), except in the
situations described above.
The Company has entered into indemnification agreements with each of
its directors and executive officers under which the Company has agreed to
indemnify the director or officer to the fullest extent permitted by law and to
advance expenses, if the director or officer becomes a party to or witness or
other participant in any threatened, pending or completed action, suit or
proceeding (a "Claim") by reason of any occurrence related to the fact that the
person is or was a director, officer, employee, agent or fiduciary of the
Company or a subsidiary of the Company or another entity at the Company's
request (an "Indemnifiable Event"), unless a reviewing party (either outside
counsel or a committee appointed by the Board of Directors) determines that the
person would not be entitled to indemnification under applicable law. In
addition, if a change in control or a potential change in control of the
Company occurs and if the person indemnified so requests, the Company will
establish a trust for the benefit of the indemnitee and fund the trust in an
amount sufficient to satisfy all expenses reasonably anticipated at the time of
the request to be incurred in connection with any Claim relating to an
Indemnifiable Event. The reviewing party will determine the amount deposited in
the trust. An indemnitee's rights under the indemnification agreement are not
exclusive of any other rights under the Company's Restated Certificate of
Incorporation or By-laws or applicable law.
The Company believes that these provisions and agreements will assist
the Company in attracting and retaining qualified individuals to serve as
directors and officers.
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<PAGE> 82
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below gives effect to the Recapitalization and the Offering
and sets forth, as if each of the foregoing had occurred on December 31, 1996,
(i) the number and percentage of outstanding shares of each class of the
capital stock of Capstar that are beneficially owned by (a) each person or
group beneficially owning five percent or more of any class of the capital
stock of Capstar, (b) each director of Capstar, (c) each Named Executive
Officer, and (d) all directors and executive officers of Capstar as a group and
(ii) the combined percentage of all classes of the capital stock of Capstar
that is beneficially owned by each of such person or group of persons. Except
as noted below, each individual or entity named below is believed to have sole
investment and voting power with respect to all the shares of capital stock
reflected below.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
COMMON STOCK (1) COMMON STOCK (2) COMMON STOCK (3)
------------------- -------------------- ---------------------
NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT PERCENT OF
OF OF OF OF OF OF ECONOMIC
NAME OF BENEFICIAL OWNER SHARES CLASS SHARES CLASS SHARES CLASS INTEREST
------------------------ -------- --------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Capstar Broadcasting Partners, L.P. -- -- -- -- 12,238,452 97.5% %
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Capstar BT Partners, L.P. -- -- 1,818,181 100% -- -- %
200 Crescent Court, Suite 1600
Dallas, Texas 75201
R. Steven Hicks (4) -- -- -- -- 1,258,255 9.3% %
Thomas O. Hicks (5) 272,727 % 1,818,181 100% 13,496,707 100% %
Eric C. Neuman -- -- -- -- -- -- --
Lawrence D. Stuart, Jr. -- -- -- -- -- -- --
James T. Shea, Jr. 35,000 * -- -- -- -- *
Frank D. Osborn 163,636 * -- -- -- -- *
All directors and executive
officers as a group (10 persons) . 594,089 % 1,818,181 100% 13,496,707 100% %
</TABLE>
- ------------------------------
* Less than one percent.
(1) Capstar proposes to issue __________ shares of Class A Common Stock in
the Offering (________ shares if the Underwriters exercise their
over-allotment option in full). Such shares of Class A Common Stock
will represent immediately after the Offering, _____% of the combined
voting power of all classes of Common Stock (_____% if the
Underwriters exercise their over-allotment option in full). The
holders of the Class A Common Stock will be entitled as a class to
elect two members of the Board of Directors of Capstar. See
"Description of Capital Stock."
(2) The holders of shares of Class B Common Stock will not be entitled to
vote, except as required by law. The shares of Class B Common Stock
are convertible in whole but not in part, at the option of the holder
or holders thereof, into the same number of shares of Class A Common
Stock, subject to certain conditions. See "Description of Capital
Stock."
(3) The holders of the Class C Common Stock will be entitled to vote with
the holders of the Class A Common Stock on all matters submitted to a
vote of stockholders of Capstar, except with respect to the election
of the Class A Directors, certain "going private" transactions and as
otherwise required by law and except under the circumstances described
under "Description of Capital Stock." Each share of Class C Common
Stock will be entitled to ten votes per share on all matters submitted
to a vote of stockholders. See "Description of Capital Stock."
(4) The number of shares of Class C Common Stock includes (i) 10,000
shares owned of record by R. Steven Hicks' children, (ii) 744,000
shares purchasable by R. Steven Hicks pursuant to the terms of the
Warrant and (iii) 204,255 shares purchasable by R. Steven Hicks
pursuant to the terms of the New Warrant. See "Certain Transactions
-- Stockholders Agreements -- Affiliate Stockholders Agreement" and
"-- Warrants." R. Steven Hicks has voting rights to the shares owned
by his children under the terms of the Affiliate Stockholders
Agreement. R. Steven Hicks disclaims beneficial ownership of the
shares of Common Stock not owned by him of record. The shares owned of
record by R. Steven Hicks and his children are subject to a voting
agreement as described in "Certain Transactions -- Stockholders
Agreements -- Affiliate Stockholders Agreement."
(5) The number of shares of Class A Common Stock is comprised of 272,727
shares owned of record by Capstar Boston Partners, L.L.C., which
shares are subject to a voting agreement as described in "Certain
Transactions -- Stockholders Agreements -- Affiliate Stockholders
Agreement. The number of shares of Class B Common Stock is comprised
of the 1,818,181 shares owned of record by Capstar BT Partners, L.P.,
which shares are subject to the Affiliate Stockholders Agreement as
described in "Certain Transactions --
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Stockholders Agreements -- Affiliate Stockholders Agreement." The
number of shares of Class C Common Stock includes (i) 10,000 shares
owned of record by R. Steven Hicks' children, which shares are subject
to a voting agreement as described in "Certain Transactions --
Stockholders Agreements -- Affiliate Stockholders Agreement," (ii)
744,000 shares purchasable by R. Steven Hicks pursuant to the terms of
the Warrant, which shares are subject to a voting agreement as
described in "Certain Transactions -- Stockholders Agreements --
Affiliate Stockholders Agreement," (iii) 204,255 shares that are
purchasable by R. Steven Hicks pursuant to the terms of the New
Warrant, which shares are subject to a voting agreement as described
in "Certain Transactions -- Stockholders Agreements -- Affiliate
Stockholders Agreement," and (iv) 12,238,452 shares owned of record by
Capstar L.P., of which the ultimate general partner is an entity
controlled by Thomas O. Hicks and (iv) 300,000 shares owned of record
by R. Steven Hicks who is a party to the Affiliate Stockholders
Agreement, which shares are subject to a voting agreement as described
in "Certain Transactions -- Stockholders Agreements -- Affiliate
Stockholders Agreement," Hicks Muse is a party to the Affiliate
Stockholders Agreement which agreement requires the parties to such
agreement to vote their shares (i) in favor of the election to the
Company's Board of Directors of such individuals as may be designated
by Hicks Muse and its affiliates (including Capstar L.P.) and (ii) on
other matters as the holders of a majority of the voting power of the
outstanding shares of Common Stock vote on such matters. Thomas O.
Hicks is the controlling stockholder of Hicks Muse and serves as its
Chairman of the Board, President, Chief Executive Officer, Chief
Operating Officer and Secretary. Accordingly, Thomas O. Hicks may be
deemed to be the beneficial owner of all of the Common Stock subject
to the Affiliate Stockholders Agreement. Thomas O. Hicks disclaims
beneficial ownership of the shares of Common Stock not owned by him of
record.
CERTAIN TRANSACTIONS
MONITORING AND OVERSIGHT AGREEMENT
The Company has entered into a monitoring and oversight agreement (the
"Monitoring and Oversight Agreement") with Hicks, Muse & Co. Partners, L.P.
("Hicks Muse Partners"). Pursuant thereto, the Company has agreed to pay to
Hicks Muse Partners an annual fee of $100,000 for ongoing financial oversight
and monitoring services. The annual fee is adjustable upward or downward at the
end of each fiscal year to an amount equal to 0.2% of the budgeted consolidated
annual net sales of the Company for the then-current fiscal year; provided,
that such fee shall at no time be less than $100,000 per year. The annual fee
in 1997 is estimated to be $320,000. Hicks Muse Partners is also entitled to
reimbursement for any out-of-pocket expenses incurred by it in connection with
rendering services under the Monitoring and Oversight Agreement. In addition,
the Company has agreed to indemnify Hicks Muse Partners, its affiliates and
shareholders, and their respective directors, officers, agents, employees and
affiliates from and against all claims, actions, proceedings, demands,
liabilities, damages, judgments, assessments, losses and costs, including fees
and expenses, arising out of or in connection with the services rendered by
Hicks Muse Partners in connection with the Monitoring and Oversight Agreement.
Hicks Muse Partners has reserved the right to seek an increase in the amount of
its annual fee based on the increased scope of the Company's operations. Any
such increase will be subject to the approval of the Board of Directors of the
Company, including a majority of the disinterested directors, based on the
exercise of their independent judgment.
The Monitoring and Oversight Agreement makes available on an ongoing
basis the resources of Hicks Muse Partners concerning a variety of financial
matters. The services that have been and will continue to be provided by Hicks
Muse Partners could not otherwise be obtained by the Company without the
addition of personnel or the engagement of outside professional advisors. The
Monitoring and Oversight Agreement expires on the earlier to occur of (i)
October 16, 2006 or (ii) the date on which HM Fund III and its affiliates cease
to own beneficially, directly or indirectly, any securities of the Company or
its successors.
FINANCIAL ADVISORY AGREEMENT
The Company is a party to a financial advisory agreement (the
"Financial Advisory Agreement") with Hicks Muse Partners. Pursuant to the
Financial Advisory Agreement, Hicks Muse Partners is entitled to receive a fee
equal to 1.5% of the transaction value (as defined in the Financial Advisory
Agreement) for each add-on transaction (as defined) in which the Company or any
of its subsidiaries is involved. Hicks Muse Partners is also entitled to
reimbursement for any out-of-pocket expenses incurred by it in connection with
rendering services under the Financial Advisory Agreement. The term
"transaction value" means the total value of any add-on transaction, including,
without limitation, the aggregate amount of the funds required to complete the
add-on transaction (excluding any fees payable pursuant to the Financial
Advisory Agreement, but including the amount of any indebtedness, preferred
stock or similar items assumed or remaining outstanding). The term "add-on
transaction" means any future proposal for a tender offer, acquisition, sale,
merger, exchange offer, recapitalization, restructuring, or other similar
transaction directly or indirectly involving the Company or any of its
subsidiaries and any other person or entity. In addition, the Company has
agreed to indemnify Hicks Muse Partners, its affiliates and partners, and their
respective directors, officers, agents, employees and affiliates from and
against all claims, actions, proceedings, demands, liabilities, damages,
judgments, assessments,
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losses and costs, including fees and expenses, arising out of or in connection
with the services rendered by Hicks Muse Partners in connection with the
Financial Advisory Agreement.
Pursuant to the Financial Advisory Agreement, Hicks Muse Partners
provides investment banking, financial advisory and other similar services with
respect to the add-on transactions in which the Company is involved. Such
transactions require additional attention beyond that required to monitor and
advise the Company on an ongoing basis and accordingly the Company pays
separate financial advisory fees with respect to such matters in addition to
those paid in connection with the Monitoring and Oversight Agreement. The
services that have been and will continue to be provided by Hicks Muse Partners
could not otherwise be obtained by the Company without the addition of
personnel or the engagement of outside professional advisors. The Financial
Advisory Agreement will terminate concurrently with the termination of the
Financial Monitoring and Oversight Agreement. The Company has paid Hicks Muse
Partners financial advisory fees of approximately $8.0 million since the
Company's inception in October 1996.
STOCKHOLDERS AGREEMENTS
Affiliate Stockholders Agreement. R. Steven Hicks, five of his
children, Capstar BT Partners, L.P., Capstar Boston Partners, L.L.C. and
Capstar L.P. (the "Affiliate Stockholders") have entered into the Affiliate
Stockholders Agreement with the Company and Hicks Muse that provides, among
other things, that the Affiliate Stockholders may require the Company, subject
to certain registration volume limitations, to effect up to three demand
registrations of their Common Stock under the Securities Act at any time after
consummation of a Qualified IPO (as defined in the Affiliate Stockholders
Agreement). The Affiliate Stockholders Agreement also provides that in the
event the Company proposes to register any shares of its Common Stock under the
Securities Act, whether or not for its own account, the Affiliate Stockholders
will be entitled, with certain exceptions, to include their shares of Common
Stock in such registration.
The Affiliate Stockholders Agreement also requires the Affiliate
Stockholders, subject to certain conditions, to vote their shares (i) in favor
of the election to the Company's Board of Directors of such individuals as may
be designated by Hicks Muse and its affiliates (including Capstar L.P.) and
(ii) on other matters as the holders of a majority of the voting power of the
outstanding shares of Common Stock vote on such matters. If certain conditions
are met, including Mr. Hicks serving as the President and Chief Executive
Officer of the Company or holding not less than 3.0% of the fully-diluted
Common Stock of the Company, the Affiliate Stockholders Agreement provides that
Mr. Hicks shall be one of such designees to serve on the Company's Board of
Directors.
The Affiliate Stockholders Agreement provides that (i) R. Steven Hicks
shall retain the voting rights of any securities (subject to such agreement)
which he transfers, conveys, assigns or hypothecates to an affiliate or any of
his family members and (ii) Mr. Hicks may not transfer, convey, assign or
hypothecate any of his securities (subject to the Affiliate Stockholders
Agreement) to an affiliate or to any family member of Mr. Hicks unless such
affiliate or family member joins in the Affiliate Stockholders Agreement.
Management Stockholders Agreement . Certain employees of the Company
and other persons have entered into the Management Stockholders Agreement with
the Company and Hicks Muse that provides, among other things, that in the event
the Company proposes to register any shares of its Common Stock under the
Securities Act, whether or not for its own account, the stockholders that are
parties to the Management Stockholders Agreement will be entitled, with certain
exceptions, to include their shares of Common Stock in such registration.
REGISTRATION RIGHTS AGREEMENT
Frank D. Osborn entered into a registration rights agreement with the
Company upon consummation of the Osborn Acquisition which provides, among other
things, that Mr. Osborn may require the Company to effect a demand registration
of his Common Stock under the Securities Act at any time within 30 days after
the tenth anniversary of the date of the registration rights agreement. Mr.
Osborn's right to demand a registration will terminate upon the first to occur
of a Qualified IPO or a change in control (both as defined in the registration
rights agreement). Accordingly, Mr. Osborn's right to demand a registration
will terminate upon completion of the Offering. If the Offering is not
completed, then after receipt of a demand for registration of Common Stock
pursuant to the registration rights agreement, the Company would have the
option to purchase all of the shares of Common Stock, then held by Mr. Osborn
for a 30-day period, at appraised value (as defined in the registration rights
agreement).
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WARRANTS
On October 16, 1996, the Company issued a warrant (the "Warrant") to
R. Steven Hicks. Pursuant to the terms of the Warrant, Mr. Hicks is entitled to
purchase 744,000 shares of Class C Common Stock at any time or from time to
time and, upon the fulfillment of a certain triggering event, may purchase an
additional 186,000 shares of Class C Common Stock. The exercise price of the
Warrant is equal to a per share price of $10.00 as increased by an annual rate
of interest equal to 8.0% per year commencing as of October 16, 1996. The term
"triggering event" means the date upon which distributions equal to an internal
rate of return of at least 30.0%, calculated in accordance with generally
accepted financial practice, on the initial investment of Capstar L.P. of $90.0
million in the Company (which investment was made on October 16, 1996) have
been made to Hicks Muse and its affiliates and its and their respective
officers, directors and employees (and members of their respective families
(other than Mr. Hicks) and trusts for the primary benefit of those family
members). The Warrant will terminate on October 16, 2006. The Warrant and the
Class C Common Stock issuable thereunder are subject to the Affiliate
Stockholders Agreement.
Under the terms (prior to the Offering) of the Affiliate Stockholders
Agreement, the Company issued a new warrant (the "New Warrant" and collectively
with the Warrant, the "Warrants") to Mr. Hicks upon completion of the Hicks
Muse Equity Investment (as defined). Pursuant to the terms of the New Warrant,
Mr. Hicks is entitled to purchase 204,255 shares of Class C Common Stock at any
time or from time to time and, upon the fulfillment of the triggering event
(which is based on Capstar L.P.'s $34.8 million investment in the Company made
on February 20, 1997), may purchase an additional 51,063 shares of Class C
Common Stock. See "-- Management and Affiliate Equity Investments." The
exercise price of the New Warrant is equal to a per share price of $11.00 per
share as increased by an annual rate of interest equal to 8.0% per year
commencing as of February 20, 1997. The New Warrant will terminate ten years
from the date of grant. The remaining terms of the New Warrant are
substantially similar to the terms of the Warrant.
MANAGEMENT AND AFFILIATE EQUITY INVESTMENTS
HM Fund III and its affiliates (including Capstar L.P.) have invested
$125.7 million in the Class C Common Stock, including $90.0 million for
9,000,000 shares in connection with the Commodore Acquisition, $34.8 million
for 3,163,452 shares in connection with the Osborn Acquisition (the "Hicks Muse
Equity Investment") and $750,000 for 75,000 shares in connection with the
Benchmark Acquisition. In connection with the Osborn Acquisition, Capstar BT
Partners, L.P., a limited partnership controlled by Hicks Muse, invested $20.0
million for 1,818,181 shares of Class B Common Stock (the "BT Equity
Investment" and, collectively with the Hicks Muse Equity Investment, the
"Equity Investment"). In a similar transaction, Capstar Boston Partners,
L.L.C., a Delaware limited liability company controlled by Hicks Muse, invested
$3.0 million for 272,727 shares of Class A Common Stock.
R. Steven Hicks, the President and Chief Executive Officer of Capstar,
has invested $3.1 million for 310,000 shares of Class C Common Stock. James T.
Shea, Jr., the chief executive officer of the Northeast Region, has invested
$350,000 for 35,000 shares of Class A Common Stock. In connection with the
Osborn Acquisition, Frank D. Osborn, the President and Chief Executive Officer
of Osborn and the chief executive officer of the Southeast Region, contributed
certain shares of common stock of Osborn to the Company in exchange for 163,636
shares of Class A Common Stock having a deemed value of $1.8 million. David J.
Benjamin, who will serve as the chief executive officer of the West Region, and
Dex Allen, who serves as the chief operating officer of the West Region, have
each invested $400,000 for 36,363 shares of Class A Common Stock. In
connection with the Benchmark Acquisition, Joseph L. Mathias IV, the President
and Chief Operating Officer of Benchmark Communications, Inc., an indirectly
wholly-owned subsidiary of Capstar, received 153,846 shares of Class A Common
Stock having a deemed value of $2.0 million in consideration of part of his
ownership interest in Benchmark. Certain other members of the Company's
management have invested approximately $1.1 million for 113,000 shares of Class
A Common Stock.
INDEBTEDNESS OF MANAGEMENT
In connection with his employment, Dex Allen, the chief operating
officer of the West Region, purchased 36,363 shares of Class A Common Stock in
exchange for $200,000 in cash and a promissory note payable to Capstar in the
principal amount of $200,000. The note is secured by the Class A Common Stock
purchased by Mr. Allen and bears interest at a rate of 9% per annum with
interest payable monthly and principal payable at maturity. The note will
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mature and be payable on the first to occur of (i) October 31, 1997 or (ii)
consummation of the Commonwealth Acquisition. Such shares are subject to the
Management Stockholders Agreement. See "-- Stockholders Agreements."
David J. Benjamin, who will serve as the chief executive officer of
the West Region upon consummation of the Community Pacific Acquisition,
purchased 36,363 shares of Class A Common Stock in exchange for a promissory
note payable to Capstar in the principal amount of $400,000. The note is
secured by the Class A Common Stock purchased by Mr. Benjamin and bears
interest at a rate of 9% per annum with principal and interest payments due at
maturity. The note will mature and be payable on the first to occur of (i)
November 10, 1997 or (ii) consummation of the Community Pacific Acquisition.
The Company will have the right to repurchase Mr. Benjamin's shares of Class A
Common Stock (by forgiveness of the note) if (i) the Community Pacific
Acquisition is not closed by November 10, 1997 or (ii) the acquisition
agreement therefor is terminated. Such shares are subject to the Management
Stockholders Agreement. See "-- Stockholders Agreements."
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of Capstar gives effect
to the Recapitalization, which will occur prior to the Offering, and the
proposed sale of shares of Class A Common Stock in
the Offering. The Company's authorized capital stock consists of (i)
150,000,000 shares of Class A Common Stock, of which shares are issued and
outstanding, (ii) 50,000,000 shares of Class B Common Stock of which 1,818,181
shares are issued and outstanding, and (iii) 50,000,000 shares of Class C
Common Stock, of which 12,548,452 shares are issued and outstanding, and (iv)
10,000,000 shares of Preferred Stock, $.01 par value per share ("Preferred
Stock"), none of which are issued and outstanding. In addition, the Company
has reserved for issuance (i) 1,185,318 shares of Class C Common Stock upon the
exercise of the Warrants and (ii) 9,000,000 shares of Class A Common Stock
under the Stock Option Plan. See "Management -- Benefit Plans."
COMMON STOCK
The rights of holders of the Common Stock are identical in all
respects, except for voting rights. All the outstanding shares of Class A
Common Stock, Class B Common Stock and Class C Common Stock are, and the shares
of Class A Common Stock sold in the Offering will be, upon issuance and payment
of the purchase price therefor, validly issued, fully paid and nonassessable.
Dividends. Subject to the right of the holders of any class of
Preferred Stock, holders of shares of Common Stock are entitled to receive such
dividends as may be declared by Capstar's Board of Directors out of funds
legally available for such purpose. No dividend may be declared or paid in
cash or property on any share of any class of Common Stock unless
simultaneously the same dividend is declared or paid on each share of the other
class of Common Stock, provided that, in the event of stock dividends, holders
of a specific class of Common Stock shall be entitled to receive only
additional shares of such class.
Voting Rights. The Class A Common Stock and the Class C Common Stock
vote together as a single class on all matters submitted to a vote of
stockholders, with each share of Class A Common Stock entitled to one vote and
each share of Class C Common Stock entitled to ten votes, except (i) that the
holders of Class A Common Stock, voting as a separate class, are entitled
initially to elect two members of the Board of Directors of Capstar; (ii) with
respect to any proposed "going private" transaction (as defined in Rule 13e-3
under the Securities Exchange Act of 1934 (the "Exchange Act")) with Hicks Muse
or any of its affiliates (a "Rule 13e-3 Transaction"), each share of Class A
Common Stock and Class C Common Stock shall be entitled to one vote; and (iii)
as otherwise required by law. The Class B Common Stock has no voting rights
except as otherwise required by law.
In the election of directors, the holders of Class A Common Stock,
voting as a separate class, will be entitled to elect two persons to Capstar's
Board of Directors, each of whom must be an "independent director." For this
purpose, an "independent director" means a person who is not an officer or
employee of Capstar or its subsidiaries, and who does not have a relationship
which, in the opinion of the Board of Directors, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director. Capstar anticipates that the Class A Directors will be elected by the
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holders of the Class A Common Stock at the next regularly scheduled annual
meeting of stockholders of Capstar occurring after the Offering, provided that
such vacancies may be filled by the Board of Directors before the next annual
meeting of stockholders and such appointees would then be nominated for
election as the Class A Directors at the next annual meeting of stockholders.
The holders of Class A Common Stock and Class C Common Stock, voting as a
single class, are entitled to elect the Classified Directors. Notwithstanding
the foregoing, upon the earlier to occur of (i) the date on which Hicks Muse
and its affiliates ceases to own beneficially more than 50% of the numbers of
shares of Class C Common Stock owned by them upon completion of the Offering
and (ii) the third anniversary date of the completion of the Offering, the
holders of Class A Common Stock and Class C Common Stock shall vote together as
a single class upon the election of all directors. Holders of Common Stock are
not entitled to cumulate votes in the election of directors.
Under Delaware law, the affirmative vote of the holders of a majority
of the outstanding shares of any class of Common Stock is required to approve
any amendment to the certificate of incorporation of Capstar that would
increase or decrease the aggregate number of authorized shares of such class,
increase or decrease the par value of the shares of such class, or modify or
change the powers, preferences or special rights of the shares of any class so
as to affect such class adversely.
Liquidation Rights. Upon liquidation, dissolution or winding-up of
Capstar, the holders of the Common Stock are entitled to ratably share in all
assets available for distribution after payment in full of creditors and
holders of the Preferred Stock, if any.
Conversion of Class B Common Stock. The shares of Class B Common
Stock are convertible, in whole but not in part, at the option of the holder or
holders thereof at any time into a like number of shares of Class A Common
Stock, subject to certain conditions. Upon the sale or other transfer of any
share or shares of Class B Common Stock to any person (subject to certain
exceptions) other than Hicks Muse and its affiliates, each share so sold or
transferred shall automatically be converted into one share of Class A Common
Stock, subject to certain conditions.
Conversion of Class C Common Stock. The shares of Class C Common
Stock are convertible, in whole but not in part, at the option of the holder or
holders thereof at any time into a like number of shares of Class A Common
Stock. Upon the sale or other transfer of any share or shares of Class C
Common Stock to any person other than Hicks Muse or its affiliates, each share
so sold or transferred shall automatically be converted into one share of Class
A Common Stock.
Preemptive Rights. The holders of Common Stock are not entitled to
preemptive or similar rights.
Transfer Agent. Harris Trust & Savings Bank is the Transfer Agent and
Registrar for the Class A Common Stock.
PREFERRED STOCK
Capstar is authorized to issue 10,000,000 shares of Preferred Stock.
The Board of Directors of Capstar, in its sole discretion, may designate and
issue one or more series of Preferred Stock from the authorized and unissued
shares of Preferred Stock. Subject to limitations imposed by law or Capstar's
Restated Certificate of Incorporation, the Board of Directors is empowered to
determine the designation of and the number of shares constituting a series of
Preferred Stock. The dividend rate for the series, the terms and conditions of
any voting and conversion rights for the series, the amounts payable on the
series upon redemption or upon the liquidation, dissolution or winding-up of
Capstar, the provisions of any sinking fund for the redemption or purchase of
shares of any series, and the preferences and relative rights among the series
of Preferred Stock. Such rights, preferences, privileges and limitations could
adversely effect the rights of holders of Common Stock.
FOREIGN OWNERSHIP
The Restated Certificate of Incorporation restricts the ownership,
voting and transfer of Capstar's capital stock, including the Common Stock, in
accordance with the Communications Act and the rules of the FCC, which prohibit
ownership of more than 25% of Capstar'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
Restated Certificate of Incorporation authorizes the Board of Directors to
adopt such provisions as it deems necessary to enforce these prohibitions,
including the inclusion of a legend regarding restrictions on foreign ownership
of such stock on the certificates representing the Common Stock. In addition,
the Restated Certificate of Incorporation provides that shares
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of capital stock of Capstar determined by the Board of Directors to be owned
beneficially by an Alien or an entity directly or indirectly owned by Aliens in
whole or in part shall always be subject to redemption by Capstar by action of
the Board of Directors to the extent necessary, in the judgment of the Board of
Directors, to comply with the Alien ownership restrictions of the
Communications Act and the FCC rules and regulations.
CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND
RESTATED BYLAWS OF THE COMPANY
Capstar's Restated Certificate of Incorporation and Restated Bylaws
include certain provisions that could have an anti-takeover effect. These
provisions are intended to enhance the likelihood of continuity and stability
in the composition of the Board of Directors and in the policies formulated by
the Board of Directors. These provisions also are intended to help ensure that
the Board of Directors, if confronted by a surprise proposal from a third party
which has acquired a block of stock of the Company, will have sufficient time
to review the proposal and appropriate alternatives to the proposal and to act
in what it believes to be the best interests of the stockholders.
The following is a summary of selected provisions included in the
Restated Certificate of Incorporation and Restated Bylaws of the Company and is
qualified in its entirety by reference to such documents, copies of which will
be filed as exhibits to the Registration Statement of which this Prospectus
forms a part. The Board of Directors has no current plans to formulate or
effect additional measures that could have an anti-takeover effect.
Classified Board of Directors. In addition to the Class A Directors,
the Restated Certificate of Incorporation provides for three additional classes
of directors, which serve staggered three-year terms and which shall be elected
by the holders of the Class A Common Stock and Class C Common Stock, voting as
a single class. Under certain circumstances, the classification of directors
has the effect of making it more difficult for stockholders to change the
composition of the Board of Directors in a relatively short period of time. At
least two annual meetings of stockholders, instead of one, will generally be
required to effect a change in a majority of the Board of Directors at any time
Capstar has seven or more directors. See "Management." Stockholders may
remove a director only for cause upon the vote of holders of at least 66 2/3%
of the outstanding shares of Common Stock entitled to vote thereon.
Advance Notice Requirements for Stockholder Proposals and Director
Nominees. The Restated Bylaws will include an advance notice procedure with
regard to business proposed to be submitted by a stockholder at any annual or
special meeting of stockholders of the Company, including the nomination of
candidates for election as directors. The procedure provides that a notice of
proposed stockholder business must be timely given in writing to the Secretary
of Capstar prior to the meeting. In all cases, to be timely, notice relating
to an annual meeting must be received at the principal executive office of
Capstar not less than 60 days nor more than 90 days before the first
anniversary of the prior year's annual meeting.
Notice to Capstar from a stockholder who proposes to nominate a person
at a meeting for election as a director must contain all information relating
to such person that is required to be disclosed in solicitations of proxies for
election of directors pursuant to Regulation 14A under the Exchange Act,
including such person's written consent to being named in the proxy statement
as a nominee and to serve as a director if elected.
Special Meetings; Action by Written Consent. The Restated Certificate
of Incorporation provides that special meetings of holders of Common Stock may
be called only by Capstar's Board of Directors and that only business proposed
by the Board of Directors may be considered at special meetings of the holders
of Common Stock. The Restated Certificate of Incorporation also provides that
holders of Common Stock may act at annual or special meetings of holders of
Common Stock and by written consent.
Blank Check Preferred Stock. Capstar's Restated Certificate of
Incorporation provides that the Board of Directors of Capstar may authorize the
issuance of up to 10,000,000 shares of preferred stock in one or more classes
or series and may designate the dividend rate, voting rights and other rights,
preferences and restrictions of each such class or series. The Board of
Directors of Capstar has no present intention to issue any preferred stock;
however, the Board of Directors of Capstar has the authority, without further
shareholder approval, to issue one or more series of preferred stock that
could, depending on the terms of such series, either impede or facilitate the
completion or a merger, tender offer or other takeover attempt. Although the
Board of Directors of Capstar is required to make any
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<PAGE> 89
determination to issue such stock based on its judgment as to the best
interests of the stockholders of Capstar, the Board of Directors of Capstar
could act in a manner that would discourage an acquisition attempt or other
transaction that some, or a majority, of the stockholders might believe to be
in their best interests or in which stockholders might receive a premium for
their stock over the then market price of such stock. The Board of Directors
of Capstar does not intend to seek stockholder approval prior to any issuance
of such stock, unless otherwise required by law.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Generally, Section 203 of the General Corporation Law of the State of
Delaware 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 one of the following events occurs: (i) prior to
the date of the business combination, 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
and by the affirmative vote of at least two-thirds of the outstanding voting
stock which is not owned by the interested stockholder. A "business
combination" includes mergers, asset sales and 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.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common
Stock of Capstar. The sale, or availability for sale, of substantial amounts
of Common Stock in the public market subsequent to the Offering, could
adversely affect the prevailing market price of the shares of Class A Common
Stock and could impair Capstar's ability to raise additional capital through
the sale of equity securities.
Upon completion of the Offering, Capstar will have outstanding a total
of shares of Class A Common Stock ( shares
if the Underwriters' over-allotment option is exercised in full), 1,818,181
shares of Class B Common Stock and 12,548,452 shares of Class C Common Stock.
Of these outstanding shares, the shares of Class A Common Stock
sold in the Offering ( shares if the Underwriters' over-allotment
option is exercised in full) will be freely transferable without restriction
under the Securities Act, except for any such shares purchased by an
"affiliate" (as defined in Rule 144 under the Securities Act) of Capstar, which
shares will be subject to the resale volume limitations of Rule 144. The
remaining 810,935 shares of Class A Common Stock, all 1,818,181 shares of Class
B Common Stock and all 12,548,452 shares of Class C Common stock will be
"restricted securities" for purposes of Rule 144 and may not be resold unless
registered under the Securities Act or sold pursuant to an applicable exemption
thereunder, including the exemption contained in Rule 144.
In general, under Rule 144, as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned restricted
securities for at least one year (including persons who may be deemed
"affiliates" of the Company under Rule 144) is entitled to sell a number of
shares within any three-month period that does not exceed the greater of 1% of
the then outstanding shares of the Common Stock or the average weekly trading
volume of such stock during the four calendar weeks preceding such sale,
subject to certain manner of sale limitations. A stockholder who is deemed not
to have been an affiliate of the Company for at least three months prior to the
date of sale and who has beneficially owned restricted securities for at least
two years would be entitled to sell such shares under Rule 144 without regard
to the volume or manner of sale limitations described above. Approximately
9,300,000 shares of the restricted securities of Capstar will be eligible for
sale on the open market under Rule 144 (subject to the foregoing volume and
manner of sale limitations of such rule) on October 16, 1997.
Notwithstanding the foregoing, Capstar is a party to the Affiliate
Stockholders Agreement with certain of its stockholders, including R. Steven
Hicks and affiliates of Hicks Muse, which grants those stockholders, who after
the Recapitalization will hold an aggregate of 14,639,360 to certain
limitations, to effect up to three "demand" registrations under the Securities
Act for the sale of such stockholders' shares of Common Stock. Capstar is also
a party to the Stockholders Agreements with its other stockholders. The
Stockholders Agreements provide that in the event that
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<PAGE> 90
Capstar proposes to register any shares of its Common Stock under the
Securities Act, whether or not for its own account, at any time or times, the
stockholders that are parties to the Stockholders Agreements shall be entitled,
with certain exceptions, to include their shares of Common Stock in such
registration unless the managing underwriters of such offering exclude some or
all of such shares from such registration under the circumstances specified in
the Stockholders Agreements. The parties to the Stockholders Agreements have
waived their rights to participate as selling stockholders in the Offering.
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<PAGE> 91
DESCRIPTION OF INDEBTEDNESS
SENIOR DISCOUNT NOTES
The Notes were issued under an Indenture dated as of February 20, 1997
(the "Indenture"), between Capstar and U.S. Trust Company of Texas, N.A., as
trustee (the "Trustee"). Capstar will offer (the "Exchange Offer") to exchange
new notes ("New Notes") for the Notes. The terms of the New Notes are
identical in all material respects to the Notes, except that the New Notes will
have been registered under the Securities Act and, therefor, will not bear
legends restricting their transfer. Upon the issuance of the New Notes, the
Indenture will be subject to and governed by the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"). The Notes and the New Notes are
collectively referred to herein as the "Notes." The following summary of
certain provisions of the Indenture and the Notes does not purport to be
complete, is subject to, and is qualified in its entirety by reference to, the
provisions of the Indenture and the Notes and assumes that the exchange offer
has been completed.
The Notes are unsecured, senior obligations of Capstar and are limited
to $277,000,000 aggregate principal amount at maturity and will mature on
February 1, 2009. No interest will accrue on the Notes prior to February 1,
2002. Thereafter, interest on the Notes will accrue at the rate of 12 3/4% and
will be payable in cash semiannually on February 1 and August 1 commencing on
August 1, 2002 to holders of record on the immediately preceding January 15 and
July 15. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from February 1, 2002.
Interest will be computed on the basis of a 360-day year comprised of twelve
30- day months.
The yield to maturity of the Notes is 12 3/4% (computed on a
semi-annual bond equivalent basis), calculated from February 20, 1997. The
Notes were offered at a substantial discount from their principal amount at
maturity.
The Notes may be redeemed (subject to contractual and other
restrictions with respect thereto and to the legal availability of funds
therefor) at any time on or after February 1, 2002, in whole or in part, at the
option of Capstar, at the redemption prices (expressed as a percentage of the
accreted value thereof on the applicable redemption date) set forth below, plus
accrued and unpaid interest, if any, to the redemption date, if redeemed during
the 12-month period beginning February 1 of each of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 106.375%
2003 105.313%
2004 104.250%
2005 103.188%
2006 102.125%
2007 100.000%
</TABLE>
In addition, prior to February 1, 2001, Capstar may, at its option,
use the net cash proceeds of one or more public equity offerings (as defined in
the Indenture) or major asset sales (as defined in the Indenture) to redeem up
to 25% of the principal amount at maturity of the Notes at a redemption price
of 112.75% of the accreted value thereof at the redemption date of the Notes so
redeemed; provided, however, that after any such redemption, at least 75% in
aggregate principal amount at maturity of Notes would remain outstanding
immediately after giving effect to such redemption. Any such redemption will be
required to occur on or prior to the date that is one year after the receipt by
Capstar of the proceeds of a public equity offering or major asset sale.
Capstar shall effect such redemption on a pro rata basis.
In addition, prior to February 1, 2002, Capstar may, at its option,
redeem the Notes upon a change of control (as defined in the Indenture). See
"-- Change of Control."
The Commodore Indenture and the New Credit Facility restrict
Commodore's ability to pay dividends or make other restricted payments to
Capstar and, accordingly, may also limit the ability of Capstar to redeem the
Notes. See "--New Credit Facility" and "--Commodore Notes."
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<PAGE> 92
Change of Control. The Indenture provides that, upon the occurrence
of a change of control, each holder will have the right to require that Capstar
purchase all or a portion of such holder's Notes in cash pursuant to the offer
to purchase the Notes at a purchase price equal to (i) 101% of the accreted
value on the change of control payment date (as defined therein) if the change
of control payment date is on or before February 1, 2002 and (ii) 101% of the
principal amount at maturity thereof, plus, without duplication, all accrued
and unpaid interest, if any, to the change of control payment date if such
change of control payment date is after February 1, 2002.
Limitation on Incurrence of Additional Indebtedness and Issuance of
Preferred Stock of Subsidiaries. Under the Indenture, Capstar will not, and
will not permit any of its subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to (collectively, "incur") any
indebtedness, other than permitted indebtedness, and Capstar's subsidiaries
will not issue any preferred stock (as defined in the Indenture); provided,
however, that Capstar and its subsidiaries may incur indebtedness and
Capstar's subsidiaries may issue shares of preferred stock if, in either case,
the Company's leverage ratio at the time of incurrence of such indebtedness or
the issuance of such preferred stock, as the case may be, after giving pro
forma effect to such incurrence or issuance as of such date and to the use of
proceeds therefrom is less than 7.0 to 1.
Limitation on Restricted Payments. The Indenture provides that
neither Capstar nor any of its subsidiaries will, directly or indirectly, make
any restricted payment (as defined in the Indenture) if at the time of such
restricted payment and immediately after giving effect thereto:
(i) a default or event of default shall have occurred and
be continuing at the time of or after giving effect to such restricted
payment; or
(ii) the Company is not able to incur $1.00 of additional
indebtedness (other than permitted indebtedness) in compliance with
the "Limitation on Incurrence of Additional Indebtedness and Issuance
of Preferred Stock of Subsidiaries" covenant; or
(iii) the aggregate amount of restricted payments made
subsequent to the issue date of the Notes exceeds the sum of (a) (x)
100% of the aggregate consolidated EBITDA (as defined in the
Indenture) of the Company (or, in the event such consolidated EBITDA
shall be a deficit, minus 100% of such deficit) accrued subsequent to
the issue date to the most recent date for which financial information
is available to the Company, taken as one accounting period, less (y)
1.4 times consolidated interest expense (as defined in the Indenture)
for the same period, plus (b) 100% of the aggregate net proceeds,
received by Capstar from any person (other than a subsidiary of
Capstar) from the issuance and sale on or subsequent to the issue date
of qualified capital stock (as defined in the Indenture) of Capstar,
plus (c) without duplication of any amount included in clause (iii)(b)
above, 100% of the aggregate net proceeds, received by Capstar as a
capital contribution on or after the issue date, plus (d) the amount
equal to the net reduction in investments, other than permitted
investments, made by Capstar or any of its subsidiaries in any person
resulting from (i) repurchases or redemptions of such investments by
such person, proceeds realized upon the sale of such investment to an
unaffiliated purchaser and repayments of loans or advances or other
transfers of assets by such person to Capstar or any subsidiary of
Capstar or (ii) the redesignation of unrestricted subsidiaries (as
defined in the Indenture) as subsidiaries, plus (e) the aggregate net
cash proceeds received by a person in consideration for the issuance
of such person's capital stock, other than disqualified capital stock
(as such terms are defined in the Indenture), that are held by such
person at the time such person is merged with and into the Company.
Other Restrictive Covenants. The Indenture contains certain other
restrictive covenants that, among other things, impose limitations (subject to
certain exceptions) on the Company with respect to (i) sales of assets by the
Company and its subsidiaries, (ii) asset swaps and (iii) the merger or sale of
all or substantially all the assets of the Company.
Events of Default. The following events are defined in the Indenture
as "Events of Default": (i) the failure to pay interest on the Notes when the
same becomes due and payable and the default continues for a period of 30 days;
(ii) the failure to pay the accreted value of or premium, if any, on any Notes
when such accreted value or premium, if any, becomes due and payable, at
maturity, upon redemption or otherwise; (iii) a default in the observance or
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<PAGE> 93
performance of any other covenant or agreement contained in the Notes or the
Indenture, which default continues for a period of 30 days after Capstar
receives written notice thereof specifying the default from the Trustee or
holders of at least 25% in aggregate principal amount at maturity of
outstanding Notes; (iv) the failure to pay at the final stated maturity (giving
effect to any extensions thereof) the principal amount of any indebtedness of
Capstar or any subsidiary of Capstar, or the acceleration of the final stated
maturity of any such indebtedness, if the aggregate principal amount of such
indebtedness, together with the aggregate principal amount of any other such
indebtedness in default for failure to pay principal at the final stated
maturity (giving effect to any extensions thereof) or which has been
accelerated, aggregates $5,000,000 or more at any time in each case after a
10-day period during which such default shall not have been cured or such
acceleration rescinded; (v) one or more judgments in an aggregate amount in
excess of $5,000,000 (which are not covered by insurance as to which the
insurer has not disclaimed coverage) being rendered against Capstar or any of
its significant subsidiaries (as defined in the Indenture) and such judgment or
judgments remain undischarged or unstayed for a period of 60 days after such
judgment or judgments become final and nonappealable; and (vi) certain events
of bankruptcy, insolvency or reorganization affecting Capstar or any of its
significant subsidiaries.
Upon the happening of any Event of Default specified in the Indenture,
the Trustee may, and the Trustee upon the request of holders of 25% in
principal amount at maturity of the outstanding Notes shall, or the holders of
at least 25% in principal amount at maturity of outstanding Notes may, declare
the accreted value of all the Notes, together with all accrued and unpaid
interest and premium, if any, to be due and payable by notice in writing to
Capstar and the Trustee specifying the respective Event of Default and that it
is a "notice of acceleration" (the "Acceleration Notice"), and the same (i)
shall become immediately due and payable or (ii) if there are any amounts
outstanding under the New Credit Facility, will become due and payable upon the
first to occur of an acceleration under the New Credit Facility or five
business days after receipt by the Company and the agent under the New Credit
Facility of such Acceleration Notice (unless all Events of Default specified in
such Acceleration Notice have been cured or waived). For purposes of the
immediately preceding sentence, "New Credit Facility" includes the New Credit
Facility, as it may be amended, supplemented or otherwise modified from time to
time and any renewal, extension, refunding, restructuring, replacement or
refinancing thereof (whether with the original agent and lenders or another
agent or agents or other lenders and whether provided under the original New
Credit Facility or any other credit agreement. If an Event of Default with
respect to bankruptcy proceedings relating to the Company occurs and is
continuing, then such amount will ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of the Notes.
COMMODORE NOTES
The following summary of certain terms of the Commodore Notes and the
Commodore Indenture does not purport to be complete and is qualified in its
entirety by reference to the Trust Indenture Act of 1939, as amended, and to
the full text of the Commodore Indenture, which is filed as an exhibit to the
registration statement to which this Prospectus is a part.
The Commodore Notes were issued pursuant to the Commodore Indenture
among Commodore, the guarantors named therein and IBJ Schroder Bank & Trust
Company, as Trustee. The Commodore Notes mature on May 1, 2003, are limited in
aggregate principal amount to $76,808,000 and bear cash interest at a rate of 7
1/2% per annum from the date of original issuance until May 1, 1998, and at a
rate of 13 1/4% per annum from and including May 1, 1998 until maturity.
Interest is payable semi-annually in arrears on May 1 and November 1.
The Commodore Notes are general unsecured obligations of Commodore
subordinated in right of payment to all senior indebtedness (as defined in the
Commodore Indenture) and senior in rights of payment to any current or future
indebtedness of Communications which, by its terms, is subordinated to the
Commodore Notes. The Commodore Notes are unconditionally guaranteed, on a
senior subordinated basis, as to payment of principal, premium, if any, and
interest, jointly and severally, by the guarantors named in the Commodore
Indenture.
The Commodore Notes are redeemable at the option of Commodore, in
whole or in part, at any time on or after (i) May 1, 1999 at 107.5% of their
principal amount, (ii) May 1, 2000, at 105.0% of their principal amount, (iii)
May 1, 2001, at 102.5% of their principal amount and (iv) May 1, 2002 and
thereafter, at 100.0% of their principal amount, together, in each case, with
accrued and unpaid interest to the redemption date. Notwithstanding the
foregoing, Commodore may redeem in the aggregate up to one-third of the
original principal amount of the Commodore Notes at
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<PAGE> 94
any time and from time to time prior to May 1, 1998 at a redemption price equal
to 108% of the Accreted Value of the Commodore Notes thereof plus accrued
interest to the redemption date out of the net proceeds of one or more public
equity offerings (as defined in the Commodore Indenture), provided, that at
least $50 million in aggregate principal amount of Commodore Notes remains
outstanding immediately after the occurrence of any such redemption and that
any such redemption occurs within 120 days following the closing of any such
public equity offering.
Limitation on Additional Indebtedness. Under the Commodore Indenture,
Commodore will not, and will not permit any restricted subsidiary of Commodore
to, directly or indirectly, incur any indebtedness (including acquired
indebtedness as such term is defined in the Commodore Indenture) unless (i)
after giving effect to the incurrence of such indebtedness and the receipt and
application of the proceeds thereof, the ratio of Commodore's total
indebtedness to Commodore's EBITDA (determined on a pro forma basis for the
last four fiscal quarters of Commodore for which financial statements are
available at the date of determination) is less than 6.75 to 1 if the
indebtedness is incurred prior to May 1, 1998 and 6.25 to 1 if the indebtedness
is incurred thereafter and (ii) no default or event of default (as such terms
are defined in the Commodore Indenture) shall have occurred and be continuing
at the time or immediately after giving effect to the incurrence of such
indebtedness.
Limitation on Restricted Payments. Subject to certain exceptions set
forth in the Commodore Indenture, Commodore will not make, and will not permit
any of its restricted subsidiaries to, directly or indirectly, make, any
restricted payment (as defined in the Commodore Indenture), unless: (i) no
default or event of default shall have occurred and be continuing at the time
of or immediately after giving effect to such restricted payment; (ii)
immediately after giving pro forma effect to such restricted payment, Commodore
could incur $1.00 of additional indebtedness (other than permitted
indebtedness) in compliance with the covenant described above under "Limitation
on Additional Indebtedness"; and (iii) immediately after giving effect to such
restricted payment, the aggregate of all restricted payments declared or made
after the issue date of the Commodore Notes does not exceed the sum of (a) 50%
of Commodore's cumulative consolidated net income (or in the event such
consolidated net income shall be a deficit, minus 100% of such deficit) after
the issue date, plus (b) 100% of the aggregate net proceeds and the fair market
value of securities or other property received by Commodore from the issue or
sale, after the issue date, of capital stock of Commodore (other than
disqualified capital stock as such term is defined in the Commodore Indenture
or capital stock of Commodore issued to any subsidiary of Commodore) or any
indebtedness or other securities of Commodore convertible into or exercisable
or exchangeable for capital stock (other than disqualified capital stock) of
Commodore which has been so converted or exercised or exchanged, as the case
may be.
Change of Control. Under the Commodore Indenture, in the event of a
Change of Control (as defined therein) of Commodore, Commodore will be required
to make an offer to purchase the outstanding Commodore Notes at a purchase
price equal to 101% of their accreted value (as defined in the Commodore
Indenture), plus any accrued and unpaid interest, if any, to the date of
repurchase.
Other Restrictive Covenants. The Commodore Indenture contains certain
other restrictive covenants that, among other things, impose limitations
(subject to certain exceptions) on Commodore with respect to (i) the issuance
of preferred stock by any of Commodore's subsidiaries, (ii) the sale, pledge,
hypothecation or other transfer of any capital stock of a subsidiary of
Commodore, (iii) the issuance of any capital stock of Commodore's subsidiaries
other than to Commodore or a wholly-owned subsidiary, (iv) sales of assets by
the Company and its subsidiaries, (v) transactions with stockholders and
affiliates, (vi) the existence of liens on the assets of the Company or its
subsidiaries, (vii) investments by the Company and its subsidiaries, (viii) the
creation or acquisition of subsidiaries, (ix) the incurrence of indebtedness
senior to the Commodore Notes and subordinate to other indebtedness of the
Company, (x) the guarantee of indebtedness, (xi) the merger or sale of all or
substantially all the assets of Commodore and (xii) limitations on assets
swaps.
Events of Default. Under the Commodore Indenture, each of the
following events constitutes an "Event of Default": (i) a default in the
payment of any principal of, or premium, if any, on the Commodore Notes when
the same becomes due and payable; (ii) a default in the payment of any interest
on any Commodore Note when the same becomes due and payable and the default
continues for a period of 30 days; (iii) Commodore or any guarantor defaults in
the observance or performance of any covenant in the Commodore Notes or
Commodore Indenture for 60 days after written notice from the trustee or the
holders of not less than 25% in the aggregate principal amount of the Commodore
Notes then outstanding; (iv) Commodore or any guarantor fails to pay when due
principal, interest or premium aggregating
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<PAGE> 95
$1,000,000 or more with respect to any indebtedness of Commodore or any
restricted subsidiary thereof, or the acceleration of any such indebtedness
aggregating $1,000,000 or more which default is not cured, waived or postponed
pursuant to an agreement with the holders of such indebtedness within 60 days
after written notice; (v) a court of competent jurisdiction enters a final and
unappealable judgment or judgments for the payment of money in excess of
$1,000,000 against Commodore or any restricted subsidiary thereof and such
judgment remains undischarged and unbonded, for a period of 60 consecutive days
during which a stay of enforcement of such judgment is not in effect by reason
of appeal or otherwise; and (vi) certain events of bankruptcy, insolvency, or
reorganization affecting Commodore or any of its restricted subsidiaries.
Upon the happening of any Event of Default specified in the Commodore
Indenture, the trustee may, and upon the request of holders of at least 25% in
principal amount of the Commodore Notes, shall, or the holders of at least 25%
in principal amount of outstanding Commodore Notes may, declare the principal
of and accrued but unpaid interest, if any, on all of such Commodore Notes to
be due and payable.
NEW CREDIT FACILITY
Commodore will enter into a Credit Facility (the "New Credit Facility")
with Bankers Trust Company, an affiliate of BT Securities Corporation, as
administrative agent (the "Agent"), and the other institutions party thereto
(the "Banks"), in connection with the Benchmark Acquisition. The New Credit
Facility will consist of [to be completed]. The following description of certain
provisions of the New Credit Facility does not purport to be complete and is
qualified in its entirety by reference to the full text of the New Credit
Facility, which is filed as an exhibit to the registration statement to which
this Prospectus forms a part.
[Explanatory Note: The terms of the New Credit Facility will be provided by
amendment to this Form S-1 Registration Statement.]
LETTERS OF CREDIT
The acquisition agreement for each Pending Acquisition may be
terminated prior to consummation of the Pending Acquisition under various
circumstances, including, generally, a breach (a material breach in the case of
certain Pending Acquisitions) of any representation or warranty, or any
material breach of any covenant or agreement, by the Company. If the
acquisition agreement for any of the Community Pacific Acquisition, the Madison
Acquisition, the Commonwealth Acquisition, the Cavalier Acquisition, the COMCO
Acquisition or the WRIS Acquisition is terminated due to any such breach by the
Company, the seller will be entitled to liquidated damages as such seller's
exclusive remedy. The Company has secured its obligation to consummate each
such Pending Acquisition by placing into escrow a letter of credit. The letters
of credit (the "Letters of Credit") for all Pending Acquisitions total
approximately $7.4 million. If the Pending Acquisition is not consummated due
to any such breach by the Company, the escrow agent will, upon joint written
instruction by the Company and the seller, release the letter of credit in
connection therewith to the seller. If the Pending Acquisition is not
consummated for any other reason, or upon consummation of such Pending
Acquisition, the escrow agent will, upon joint written instruction by the
Company and the seller, release the letter of credit to the Company. See "The
Pending Acquisitions" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
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<PAGE> 96
UNDERWRITING
Under the terms and subject to the conditions contained in an
Underwriting Agreement dated (the "Underwriting Agreement"), the Underwriters
named below (the "Underwriters"), for whom Credit Suisse First Boston
Corporation, Alex. Brown & Sons Incorporated, BT Securities Corporation and
Donaldson, Lufkin & Jenrette Securities Corporation are acting as
representatives (the "Representatives"), have severally but not jointly agreed
to purchase from Capstar the following respective numbers of shares of Class A
Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ----------------
<S> <C>
Credit Suisse First Boston Corporation . . . . . . . . . . . . . . . . . . . .
Alex. Brown & Sons Incorporated . . . . . . . . . . . . . . . . . . . . . . .
BT Securities Corporation . . . . . . . . . . . . . . . . . . . . . . . . . .
Donaldson, Lufkin & Jenrette Securities Corporation . . . . . . . . . . . . .
----------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
================
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Class A Common
Stock offered hereby (other than those shares covered by the over-allotment
option described below) if any are purchased. The Underwriting Agreement
provides that, in the event of a default by an Underwriter, in certain
circumstances the purchase commitments of nondefaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
The Company has granted to the Underwriters an option, expiring at the
close of business on the 30th day after the date of this Prospectus, to
purchase up to additional shares of Class A Common Stock
at the initial public offering price less the underwriting discounts and
commissions, all as set forth on the cover page of this Prospectus. Such
option may be exercised only to cover over-allotments, if any, in the sale of
the shares of Class A Common Stock. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Class A
Common Stock as it was obligated to purchase pursuant to the Underwriting
Agreement.
The Company has been advised by the Representatives that the
Underwriters propose to offer the shares of Class A Common Stock to the public
initially at the public offering price set forth on the cover page of this
Prospectus and, through the Representatives, to certain dealers at such price
less a concession of $ per share. The Underwriters and such dealers may
allow a discount of $ per share on sales to certain other dealers. After
the initial public offering, the public offering price and concession and
discount to dealers may be changed by the Representatives.
The Representatives have informed the Company that they do not expect
discretionary sales by the Underwriters to exceed five percent of the shares
of Class A Common Stock being offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or
contribute to payments which the Underwriters may be required to make in
respect thereof.
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<PAGE> 97
The Company, its officers and directors, and Hicks Muse and its
affiliates and all other stockholders of the Company have agreed that they will
not offer, sell, contract to sell, announce their intention to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Commission a
registration statement under the Securities Act relating to any shares of
Common Stock, or any securities that are 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 Credit Suisse
First Boston Corporation, except (i) in the case of Capstar, pursuant to
employee stock option plans or in connection with other employee or
non-employee director compensation arrangements or agreements, in each case, in
effect on the date of this Prospectus and (ii) in connection with the
acquisition by the Company of all or substantially all of the assets or all of
the capital stock (including by way of merger) of any entity engaged solely in
the ownership and operation of broadcast businesses or businesses reasonably
related thereto, the voting capital stock of which is traded on a national
securities exchange or The Nasdaq National Market.
BT Securities Corporation, an NASD member, owns approximately 13% of
the equity of the Company and is serving as a Representative of the
Underwriters of the Offering. The Offering, therefore, is being conducted in
accordance with the applicable provisions of Rule 2720 (previously Schedule E
to the By-laws of the NASD) of the Conduct Rules of the NASD. Rule 2720
requires that the initial public offering price of the Class A Common Stock not
be higher than that recommended by a "qualified independent underwriter"
meeting certain standards. Accordingly, Credit Suisse First Boston Corporation
is assuming the responsibilities of acting as the qualified independent
underwriter and conducting due diligence. The initial public offering price of
the Class A Common Stock set forth on the cover page of this Prospectus will be
no higher than the price recommended by Credit Suisse First Boston Corporation.
Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price for the shares of Class A
Common Stock will be determined by negotiations between the Company and the
Representatives. Among the factors to be considered in determining the initial
public offering price will be prevailing market conditions, the results of
operations of the Company in recent periods, the market capitalizations and
stages of development of other companies that the Company and the
Representatives believe to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development, and other factors deemed relevant.
The Company has applied to list the shares of Class A Common Stock on
the . In connection with the listing of the Class A Common Stock
on the , the Underwriters will undertake to sell round lots of 100
or more shares of Class A Common Stock to a minimum of
beneficial owners.
Bankers Trust Company, an affiliate of BT Securities Corporation, is
the administrative agent and a lender under the New Credit Facility. The net
proceeds of the Offering will be used to repay in part outstanding indebtedness
owed to Bankers Trust Company under the New Credit Facility. Bankers Trust
Company has from time to time issued letters of credit for the account of the
Company or an affiliate thereof. See "Description of Indebtedness." BT
Investment Partners, Inc., an affiliate of BT Securities Corporation, is the
limited partner of Capstar BT Partners, L.P. which purchased 1,818,181 shares
of Class B Common Stock. See "Certain Transactions -- Management and Affiliate
Equity Investments." In addition, each of Bankers Trust Company and BT
Securities Corporation, or affiliates thereof, have from time to time
performed, and may, from time to time, perform certain advisory and banking
services for Hicks Muse, the Company and their respective affiliates for which
each has, and may in the future, receive customary fees and expenses. BT
Investment Partners, Inc. is a limited partner of Hicks, Muse, Tate & Furst
Fund II, L.P. and is a limited partner of HM Fund III. See "Use of Proceeds."
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed
a specified maximum. Syndicate covering transactions involve purchases of
securities in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when
the securities originally sold by such syndicate member are purchased in a
syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the securities to be higher than it would otherwise be in
the absence of such transaction.
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NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the shares of Class A Common Stock in Canada is
being made only on a private placement basis exempt from the requirement that
the Company prepare and file a prospectus with the securities regulatory
authorities in each province where trades of shares of Class A Common Stock are
effected. Accordingly, any resale of the shares of Class A Common Stock in
Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to
be made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the shares of Class A Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of shares of Class A Common Stock in Canada who
receives a purchase confirmation will be deemed to represent to the Company and
the dealer from whom such purchase confirmation is received that (i) such
purchaser is entitled under applicable provincial securities laws to purchase
such shares of Class A Common Stock without the benefit of a prospectus
qualified under such securities laws, (ii) where required by law, that such
purchaser is purchasing as principal and not as agent, and (iii) such purchaser
has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts
named herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of shares of Class A Common Stock to whom the Securities
Act (British Columbia) applies is advised that such purchaser is required to
file with the British Columbia Securities Commission a report within ten days
of the sale of any shares of Class A Common Stock acquired by such purchaser
pursuant to this offering. Such report must in the form attached to British
Columbia Securities Commission Blanket Order BOR #95/17, a copy of which may be
obtained from the Company. Only one such report must be filed in respect of
shares of Class A Common Stock acquired on the same date and under the same
prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of shares of Class A Common Stock should consult
their own legal and tax advisers with respect to the tax consequences of an
investment in the shares of Class A Common Stock in their particular
circumstances and with respect to the eligibility of the shares of Class A
Common Stock for investment by the purchaser under relevant Canadian
legislation.
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LEGAL MATTERS
The validity of the shares of Class A Common Stock offered hereby will
be passed upon for the Company by Vinson & Elkins L.L.P., Dallas, Texas.
Certain legal matters in connection with the Offering will be passed upon for
the Underwriters by Cahill Gordon & Reindel (a partnership including a
professional corporations, New York, New York).
EXPERTS
The consolidated balance sheet of Capstar Broadcasting Partners, Inc.
and Subsidiaries as of December 31, 1996 and the consolidated statements of
operations, stockholders' equity and cash flows for the period from October 11,
1996 ("inception") to December 31, 1996 included in this Prospectus, have been
included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated balance sheet of Commodore Media, Inc. and
Subsidiaries, the Predecessor Company of Capstar Broadcasting Partners, Inc.,
as of December 31, 1995, and for the period from January 1, 1996 to October 16,
1996 and for the years ended December 31, 1995 and 1994, appearing in this
Prospectus, have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report appearing herein given upon such firm as experts in
accounting and auditing.
The consolidated balance sheets of Osborn Communications Corporation
as of December 31, 1996 and 1995, and for each of the three years in the period
ended December 31, 1996, appearing in this Prospectus, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report appearing
herein, given upon such firm as experts in accounting and auditing.
The combined balance sheets of Benchmark Communications Radio Limited
Partnership as of December 31, 1996 and 1995 and the combined statements of
operations, changes in partners' equity (deficit) and cash flows for each of
the three years in the period ended December 31, 1996 included in this
Prospectus, have been included herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The balance sheet of Midcontinent Broadcasting Co. of Wisconsin, Inc.
as of December 31, 1996 and the statements of income and retained earnings and
cash flows for the year ended December 31, 1996 included in this Prospectus,
have been included herein in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
The balance sheet of Point Communications Limited Partnership as of
December 31, 1996 and the statements of operations, partners' equity and cash
flows for the year ended December 31, 1996 included in this Prospectus, have
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The balance sheet of Community Pacific Broadcasting Company L.P. as of
December 31,1996 and the statements of operations, changes in partners' equity
and cash flows for the year ended December 31, 1996 included in this
Prospectus, have been included herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The statements of operations and deficit and cash flows of Q
Broadcasting, Inc. for each of the three years in the period ended September
30, 1995 included in this Prospectus, have been included herein in reliance on
the report of Holtz Rubenstein & Co., L.L.P., independent accountants, given on
the authority of that firm as experts in accounting and auditing.
The statements of operations and accumulated deficit and cash flows of
Danbury Broadcasting, Inc. for the year ended June 30, 1995 included in this
prospectus, have been included herein in reliance on the report of Paneth,
Haber & Zimmerman L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
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The balance sheet of Adventure Communications-Huntington (Division of
Adventure Communications, Inc.) as of December 31, 1995 and the statements of
operations, division's deficit and cash flows for the year ended December 31,
1995 included in this Prospectus, have been included herein in reliance on the
report of Brown, Edwards & Co., LLP, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
AVAILABLE INFORMATION
Capstar has filed with the Commission a registration statement on Form
S-1 (together with all amendments and exhibits, the "Registration Statement")
under the Securities Act. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules to the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Class A Common Stock offered
hereby, reference is made to the Registration Statement and to its exhibits and
schedules. Statements in this Prospectus about the contents of any contract or
other document are not necessarily complete; reference is made in each instance
to the copy of the contract or other document filed as an exhibit to the
Registration Statement. Each such statement is qualified in all respects by
this reference to the exhibit. The Registration Statement, including exhibits,
may be inspected without charge at the SEC's principal office located at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511, and at Seven World Trade Center,
Suite 1300, New York, New York 10048, and copies of all or any part thereof may
be obtained from those offices after payment of prescribed fees.
GLOSSARY OF CERTAIN TERMS AND MARKET AND INDUSTRY DATA
"advertising inventory" refers to the amount of advertising air time a
radio station has available to sell to advertisers.
"broadcast cash flow" consists of operating income before
depreciation, amortization, corporate and other compensation expenses.
Although broadcast cash flow is not a measure of performance calculated in
accordance with generally accepted accounting principles ("GAAP"), management
believes that it is useful to an investor in evaluating the Company because it
is a measure widely used in the broadcast industry to evaluate a radio
company's operating performance. However, broadcast cash flow should not be
considered in isolation or as a substitute for net income, cash flows from
operating activities and other income or cash flow statement data prepared in
accordance with GAAP as a measure of liquidity or profitability.
"Benchmark Acquisition" means the pending acquisitions of, and mergers
of directly and indirectly wholly-owned subsidiaries of HM Fund III with,
Benchmark Communications Radio Limited Partnership, L.P. and certain of its
subsidiary partnerships (collectively, "Benchmark").
"Benchmark Combination" means the Benchmark Acquisition and all
acquisitions or dispositions completed by Benchmark since January 1, 1996
through the date of the Benchmark Acquisition.
"broadcast cash flow margin" represents the percentage of net revenue
which is attributable to broadcast cash flow.
"BT Equity Investment" means BT Investment Partners, Inc.'s $20.0
million investment in Capstar BT Partners, L.P., a limited partnership
controlled by Hicks Muse, which used such investment to acquire $20.0 million
of the nonvoting Class B Common Stock of Capstar.
"Capstar" and the "Company" each means, unless the context otherwise
requires, Capstar Broadcasting Partners, Inc. and its subsidiaries after
consummation of the Pending Acquisitions.
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"Cavalier Acquisition" means the Company's pending acquisition of
substantially all of the assets of Cavalier Communications, L.P. ("Cavalier").
"COMCO Acquisition" means the Company's pending acquisition of
substantially all of the assets of COMCO Broadcasting, Inc. ("COMCO").
"Commodore Acquisition" means the Company's completed acquisition of
Commodore Media, Inc. ("Commodore").
"Commodore Combination" means the Commodore Acquisition and all
acquisitions or dispositions completed by Commodore since January 1, 1996
through the date of the Commodore Acquisition.
"Commodore Notes" refers to Commodore's 13 1/4% Senior Subordinated
Notes due 2003.
"Commonwealth Acquisition" means the Company's pending acquisition of
substantially all of the assets of Commonwealth Broadcasting of Arizona, L.L.C.
("Commonwealth").
"Communications Act" means the Communications Act of 1934, as amended.
"Community Pacific Acquisition" means the Company's pending
acquisition of substantially all of the assets of Community Pacific
Broadcasting Company L.P. ("Community Pacific").
"EBITDA" consists of operating income before depreciation,
amortization and other expenses. Although EBITDA is not a measure of
performance calculated in accordance with GAAP, management believes that it is
useful to an investor in evaluating the Company because it is a measure widely
used in the broadcast industry to evaluate a radio company's operating
performance. However, EBITDA should not be considered in isolation or as a
substitute for net income, cash flows from operating activities and other
income or cash flow statement data prepared in accordance with GAAP as a
measure of liquidity or profitability.
"Emerald City Acquisition" means the Company's pending acquisition of
substantially all of the assets of Emerald City Radio Partners, L.P. ("Emerald
City") used or held for use in connection with station WNOK-FM in the Columbia,
South Carolina market.
"Equity Investment" collectively refers to the Hicks Muse Equity
Investment and the BT Equity Investment.
"Gadsden Acquisition" means Osborn's completed acquisition of
substantially all the assets of WAAX-AM/WQEN-FM, Gadsden, Alabama.
"Hicks Muse Equity Investment" means the purchase by an affiliate of
Hicks Muse of certain shares of Class A Common Stock for $34.8 million in cash
concurrently with the consummation of the Osborn Acquisition.
"Huntington Acquisition" collectively refers to certain defined assets
of radio stations WKEE-FM and WKEE-AM in Huntington, West Virginia; WZZW-AM and
WFXN-FM in Milton, West Virginia; WBVB-FM in Coal Grove, Ohio; and WIRO-AM and
WMLV-FM in Ironton, Ohio, acquired by Commodore.
"JSA" refers to a joint sales agreement, whereby a station licensee
obtains, for a fee, the right to sell substantially all of the commercial
advertising on a separately-owned and licensed station. JSAs take varying
forms. A JSA, unlike an LMA, normally does not involve programming.
"LMA" refers to a local marketing agreement, whereby a radio station
outsources the management of certain limited functions of its operations. LMAs
take varying forms; however, the FCC requires that, in all cases, the licensee
maintain independent control over the programming and operations of the
station.
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"Madison Acquisition" means the Company's pending acquisition of
substantially all of the assets of the Madison Radio Group ("Madison") which is
comprised of the stations formerly owned by Midcontinent Broadcasting Co. of
Wisconsin, Inc. and Point Communication Limited Partnership.
"Management Equity Investment" means the $600,000 investment in Common
Stock by certain members of the Company's management in January 1997.
"Notes" means Capstar's 12 3/4% Senior Discount Notes due 2009.
"Osborn Acquisition" means the Company's completed acquisition of
Osborn Communications Corporation ("Osborn").
"Osborn Add-on Acquisitions" means the Company's completed
acquisitions of (i) all of the issued and outstanding capital stock of Dixie
Broadcasting, Inc. and Radio WBHP, Inc. and (ii) substantially all of the
assets of Taylor Communications Corporation ("Taylor") utilized in the
operations of Taylor's stations in the Tuscaloosa, Alabama market.
"Osborn Combination" means the Osborn Transactions and all
acquisitions or dispositions completed by Osborn since January 1, 1996 through
the date of the Osborn Acquisition.
"Osborn Contribution" means the contribution by Frank D. Osborn, the
President and Chief Executive Officer of Osborn, of certain shares of common
stock of Osborn to the Company in exchange for shares of Class A Common Stock
having a deemed value of $1.8 million.
"Osborn Ft. Myers Disposition" means Osborn's completed disposition of
substantially all of the assets used or held for use in connection with the
business and operations of Osborn's stations in the Port Charlotte and Ft.
Myers, Florida markets.
"Osborn Transactions" collectively refers to the Osborn Acquisition,
the Osborn Add-on Acquisitions and the Osborn Ft. Myers Disposition.
"Other Acquisitions" collectively refers to the Madison Acquisition
and the Community Pacific Acquisition.
"Pending Acquisitions" collectively refers to the Madison Acquisition,
the Community Pacific Acquisition, the Commonwealth Acquisition, the COMCO
Acquisition, the Cavalier Acquisition, the WRIS Acquisition and the Emerald
City Acquisition.
"WRIS Acquisition" means the Company's pending acquisition of
substantially all of the assets of WRIS, Inc. ("WRIS").
Unless otherwise indicated herein, (i) MSA rankings by population were
obtained from the Summer 1996 Radio Market Survey Schedule (copyright 1996), as
provided by The Arbitron Company ("Arbitron"), (ii) all audience share
rankings, except for the Yuma, Arizona market and where specifically stated to
the contrary, have been derived from surveys of persons, ages 25 to 54,
listening Monday through Sunday, 6 a.m. to 12 midnight, and are based on
either the Spring, Summer or Fall 1996 survey period, as reported in Radio
Market Reports, Metro Audience Trends (copyright 1996), a publication of
Arbitron, (iii) audience share rankings in Yuma, Arizona, are based on the
Spring 1996 survey period, as reported in AccuRatings(TM) (Copyright 1996), a
publication of Strategic Radio Research, Inc. ("AccuRatings(TM)") and (iv) all
revenue share rankings are based on data compiled as of February 27, 1997, as
reported in BIA Publications Radio Analyzer -- BIA's Master Access, Version 1.7
(copyright 1996), a computer database by BIA Publications Inc. ("BIA").
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES AND ITS PREDECESSOR
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Balance Sheets as of December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Operations for the period ended December 31, 1996, for the period
ended October 16, 1996, and for the years ended December 31, 1995 and 1994 . . . . . . . . . F-6
Consolidated Statements of Stockholders' Equity (Deficit) for the period ended December 31,
1996, for the period ended October 16, 1996, and for the years ended December 31, 1995 and
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Consolidated Statements of Cash Flows for the period ended December 31, 1996, for the period
ended October 16, 1996, and for the years ended December 31, 1995 and 1994 . . . . . . . . . F-8
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
OSBORN COMMUNICATIONS CORPORATION
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
Consolidated Balance Sheets as of December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . F-33
Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994 . . F-34
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31,
1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-35
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-36
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-37
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-47
Combined Balance Sheets as of December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . F-48
Combined Statements of Operations for the years ended December 31, 1996, 1995 and 1994 . . . . F-49
Combined Statements of Changes in Partners' Equity (Deficit) for the years ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-50
Combined Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 . . . . F-51
Notes to Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-52
MIDCONTINENT BROADCASTING CO. OF WISCONSIN, INC.
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-61
Balance Sheet as of December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-62
Statement of Income and Retained Earnings for the year ended December 31, 1996 . . . . . . . . F-63
Statement of Cash Flows for the year ended December 31, 1996 . . . . . . . . . . . . . . . . . F-64
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-65
POINT COMMUNICATIONS LIMITED PARTNERSHIP
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-68
Balance Sheet as of December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-69
Statement of Operations for the year ended December 31, 1996 . . . . . . . . . . . . . . . . . F-70
Statement of Partners' Equity for the year ended December 31, 1996 . . . . . . . . . . . . . . F-71
Statement of Cash Flows for the year ended December 31, 1996 . . . . . . . . . . . . . . . . . F-72
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-73
COMMUNITY PACIFIC BROADCASTING COMPANY L.P.
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-77
Balance Sheet as of December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-78
Statement of Operations for the year ended December 31, 1996 . . . . . . . . . . . . . . . . . F-79
Statement of Changes in Partners' Equity for the year ended December 31, 1996 . . . . . . . . . F-80
</TABLE>
F-1
<PAGE> 104
<TABLE>
<S> <C>
Statement of Cash Flows for the year ended December 31, 1996 . . . . . . . . . . . . . . . . . F-81
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-82
Q BROADCASTING, INC.
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-87
Statements of Operations and Deficit for the years ended September 30, 1995, 1994 and 1993 . . F-88
Statements of Cash Flows for the years ended September 30, 1995, 1994 and 1993 . . . . . . . . F-89
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-90
DANBURY BROADCASTING, INC.
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-93
Statement of Operations and Accumulated Deficit for the year ended June 30, 1995 . . . . . . . F-94
Statement of Cash Flows for the year ended June 30, 1995 . . . . . . . . . . . . . . . . . . . F-95
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-96
ADVENTURE COMMUNICATIONS -- HUNTINGTON (DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-99
Balance Sheet as of December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-100
Statement of Operations for the year ended December 31, 1995 . . . . . . . . . . . . . . . . . F-101
Statement of Division's Deficit for the year ended December 31, 1995 . . . . . . . . . . . . . F-102
Statement of Cash Flows for the year ended December 31, 1995 . . . . . . . . . . . . . . . . . F-103
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-104
</TABLE>
F-2
<PAGE> 105
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Capstar Broadcasting Partners, Inc.:
We have audited the accompanying consolidated balance sheet of Capstar
Broadcasting Partners, Inc. and Subsidiaries as of December 31, 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the period from October 11, 1996 ("inception") to December 31, 1996.
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. These 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 consolidated financial
position of Capstar Broadcasting Partners, Inc. and Subsidiaries as of December
31, 1996 and the consolidated results of their operations and their cash flows
for the period from inception to December 31, 1996, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Austin, Texas
February 14, 1997
F-3
<PAGE> 106
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Capstar Broadcasting Partners, Inc.
We have audited the accompanying consolidated balance sheet of
Commodore Media, Inc. and Subsidiaries ("Commodore"), the Predecessor Company
of Capstar Broadcasting Partners, Inc., as of December 31, 1995. We have also
audited the consolidated statements of operations, stockholders' deficit and
cash flows for the period from January 1, 1996 to October 16, 1996 and for the
years ended December 31, 1995 and 1994. These financial statements are the
responsibility of Commodore'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. These 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 consolidated financial
position of Commodore as of December 31, 1995, and the consolidated results of
its operations and its cash flows for the period from January 1, 1996 to
October 16, 1996 and for the years ended December 31, 1995 and 1994, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 10, 1997
F-4
<PAGE> 107
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
PREDECESSOR
-----------
DECEMBER 31,
-----------------------------
1996 | | 1995
------------ | | -----------
<S> <C> | | <C>
Current assets: | |
Cash and short-term cash investments . . . . . . . . . . . . . . . . . . . $ 5,028,014 | | $10,891,489
| |
Accounts receivable, less allowance of $838,081 | |
in 1996 and $700,336 in 1995 . . . . . . . . . . . . . . . . . . . . . 8,913,390 | | 6,131,447
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . 443,900 | | 285,412
------------ | | -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 14,385,304 | | 17,308,348
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . 15,628,361 | | 8,080,043
FCC licenses and goodwill, net of accumulated amortization of | |
$1,047,768 in 1996 and $3,912,167 in 1995 . . . . . . . . . . . . . . . . 202,644,356 | | 20,767,625
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . 3,178,469 | | 1,761,306
Deferred charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800,234 | | 3,910,582
Deposits and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 931,340 | | 982,876
------------ | | -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $238,568,064 | | $52,810,780
============ | | ===========
| |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |
| |
Current liabilities: | |
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . $3,046,883 | | $ 1,774,256
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 422,062 | | 815,162
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,810,292 | | 960,368
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . -- | | 16,840
Current maturities of capital lease obligations . . . . . . . . . . . . . 16,056 | | 11,977
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . 3,750,000 | | --
Due to affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 536,738 | | --
------------ | | -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 9,582,031 | | 3,578,603
Long-term capital lease obligation . . . . . . . . . . . . . . . . . . . . . 49,629 | | 43,130
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,762,277 | | 66,261,339
Noncurrent compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . -- | | 1,482,275
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,031,580 | | --
------------ | | -----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $147,425,517 | | $71,365,347
------------ | | -----------
Stockholders' equity (deficit): | |
CAPSTAR: | |
Preferred Stock, $.01 par value, 10,000,000 | |
shares authorized, none issued and outstanding . . . . . . . . . . . . . -- | | --
Class A Common Stock, $.01 par value; 200,000,000 | |
shares authorized, 94,155,000 shares issued and outstanding . . . . . . 941,550 | |
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 93,957,450 | |
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,756,453) | |
COMMODORE: | |
Class A Common Stock, $0.01 par value; 3,000,000 | |
shares authorized and issued: 146,526 shares in 1995 . . . . . . . . . . -- | | 1,465
Class B Common Stock, convertible into Class A Common Stock, | |
$0.01 par value; 486,373 shares authorized and issued in 1995 . . . . . -- | | 4,864
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . -- | | 23,580,184
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . -- | | (42,115,080)
------------ | | -----------
| | (18,528,567)
Less treasury stock, at cost, 85,524 shares in 1995 . . . . . . . . . . . -- | | 26,000
------------ | | -----------
Total stockholders' equity (deficit) . . . . . . . . . . . . . . . . . . 91,142,547 | | (18,554,567)
------------ | | -----------
Total liabilities and stockholders' equity (deficit) . . . . . . . . . . . $238,568,064 | | $52,810,780
============ | | ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 108
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PREDECESSOR
------------------------------------------
PERIOD ENDED
----------------------------- YEAR ENDED DECEMBER 31,
DECEMBER 31, | | OCTOBER 16, --------------------------
1996 | | 1996 1995 1994
------------ | |----------- ----------- -----------
<S> <C> | |<C> <C> <C>
Total revenue . . . . . . . . . . . . . . . . $ 11,133,586 | |$34,826,060 $33,652,677 $28,686,381
Less agency commissions . . . . . . . . . . . (830,271)| | (2,869,014) (2,857,912) (2,461,478)
------------ | |----------- ----------- -----------
Net revenue . . . . . . . . . . . . . . . . . 10,303,315 | | 31,957,046 30,794,765 26,224,903
Operating expenses: | |
Programming, technical and news . . . . 1,836,667 | | 5,906,967 5,365,686 4,601,374
Sales and promotion . . . . . . . . . . 2,935,890 | | 9,303,914 8,796,481 7,325,549
General and administrative . . . . . . . 1,511,143 | | 6,081,262 4,870,463 4,556,515
Corporate expenses . . . . . . . . . . . . . 600,532 | | 1,756,797 2,051,181 2,109,741
Depreciation and amortization . . . . . . . . 1,331,386 | | 2,157,750 1,926,250 2,145,201
Other expense . . . . . . . . . . . . . . . . 744,000 | | 13,833,728 2,006,550 2,180,000
------------ | |----------- ----------- -----------
Operating income (loss) . . . . . . . . . . . 1,343,697 | | (7,083,372) 5,778,154 3,306,523
Interest expense . . . . . . . . . . . . . . 5,035,142 | | 8,860,958 7,805,525 3,152,352
Interest income . . . . . . . . . . . . . . . 34,063 | | 221,806 420,659 266
Other expenses, net . . . . . . . . . . . . . 99,071 | | 1,980,908 48,796 381,550
------------ | |----------- ----------- -----------
Loss before provision for income | |
taxes and extraordinary loss . . . . . (3,756,453)| |(17,703,432) (1,655,508) (227,113)
Provision for income taxes . . . . . . . . . -- | | 133,000 140,634 300,000
------------ | |----------- ----------- -----------
Loss before extraordinary loss . . . . . . . (3,756,453)| |(17,836,432) (1,796,142) (527,113)
Extraordinary loss on extinguishment of debt -- | | -- (443,521) --
------------ | |----------- ----------- -----------
Net loss . . . . . . . . . . . . . . . . . . $ (3,756,453)| |(17,836,432) $(2,239,663) $ (527,113)
============ | |=========== =========== ===========
Loss per common share:
Loss before extraordinary loss . . . . . $ (.04)
============
Extraordinary loss . . . . . . . . . . . $ --
============
Net loss . . . . . . . . . . . . . . . . $ (.04)
============
Weighted average number of shares outstanding 93,691,842
</TABLE>
See accompanying notes.
F-6
<PAGE> 109
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES AND ITS PREDECESSOR
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK
PAR VALUE ADDITIONAL
----------------------- PAID-IN ACCUMULATED
CLASS A CLASS B CAPITAL DEFICIT
--------- ------- ----------- -------------
<S> <C> <C> <C> <C>
PREDECESSOR:
Balance at January 1, 1994 . . . . . . . . . . . . . . . . . . $ 1,192 $ 4,864 $22,523,192 $ (38,348,304)
Cumulative dividends on redeemable preferred stock . . . . . . -- -- (690,660) --
Adjustment to carrying value of redeemable warrant . . . . . -- -- -- (1,000,000)
Loss for the year . . . . . . . . . . . . . . . . . . . . . . . -- -- -- (527,113)
--------- ------- ----------- -------------
Balance at December 31, 1994 . . . . . . . . . . . . . . . . . 1,192 4,864 21,832,532 (39,875,417)
Cumulative dividends on redeemable preferred stock . . . . . . -- -- (252,175) --
Allocation of net proceeds of debt offering to warrants . . . . -- -- 2,000,000 --
Repurchase of common stock . . . . . . . . . . . . . . . . . . -- -- -- --
Exercise of warrants . . . . . . . . . . . . . . . . . . . . . 273 -- (173) --
Loss for the year . . . . . . . . . . . . . . . . . . . . . . . -- -- -- (2,239,663)
--------- ------- ----------- -------------
Balance at December 31, 1995 . . . . . . . . . . . . . . . . . 1,465 4,864 23,580,184 (42,115,080)
Warrants issued with preferred stock facility . . . . . . . . -- -- 981,500 --
Dividends on senior exchangeable redeemable preferred stock . . -- -- (359,957) --
EFFECTS OF THE COMMODORE ACQUISITION (NOTE 1):
Recapitalization and acquisition of common shares by Capstar. . (1,455) (4,864) 32,092,400 --
Redemption of preferred stock . . . . . . . . . . . . . . . . . -- -- (1,101,235) --
Net loss for the period . . . . . . . . . . . . . . . . . . . . -- -- -- (17,836,432)
--------- ------- ----------- -------------
Balance at October 16, 1996 . . . . . . . . . . . . . . . . . . $ 10 $ -- $55,192,892 $ (59,951,512)
========= ======= =========== =============
CAPSTAR:
Balance at inception (October 11, 1996) . . . . . . . . . . . . $ -- $ -- $ --
--------- ----------- -------------
Issuance of common stock in connection with the Commodore
Acquisition (Note 1) . . . . . . . . . . . . . . . . . . . 932,750 92,342,250 --
Issuance of warrants . . . . . . . . . . . . . . . . . . . . . -- 744,000 --
Issuance of common stock (November 26, 1996) . . . . . . . . . 8,800 871,200 --
Net loss for the period . . . . . . . . . . . . . . . . . . . . -- -- (3,756,453)
--------- ----------- -------------
Balance at December 31, 1996 . . . . . . . . . . . . . . . . . $ 941,550 $93,957,450 $ (3,756,453)
========= =========== =============
<CAPTION>
TOTAL
STOCKHOLDERS'
TREASURY EQUITY
STOCK (DEFICIT)
---------- -------------
<S> <C> <C>
PREDECESSOR:
Balance at January 1, 1994 . . . . . . . . . . . . . . . . . . $ (1,000) $ (15,820,056)
Cumulative dividends on redeemable preferred stock . . . . . . -- (690,660)
Adjustment to carrying value of redeemable warrant . . . . . -- (1,000,000)
Loss for the year . . . . . . . . . . . . . . . . . . . . . . . -- (527,113)
---------- -------------
Balance at December 31, 1994 . . . . . . . . . . . . . . . . . (1,000) (18,037,829)
Cumulative dividends on redeemable preferred stock . . . . . . -- (252,175)
Allocation of net proceeds of debt offering to warrants . . . . -- 2,000,000
Repurchase of common stock . . . . . . . . . . . . . . . . . . (25,000) (25,000)
Exercise of warrants . . . . . . . . . . . . . . . . . . . . . -- 100
Loss for the year . . . . . . . . . . . . . . . . . . . . . . . -- (2,239,663)
---------- -------------
Balance at December 31, 1995 . . . . . . . . . . . . . . . . . (26,000) (18,554,567)
Warrants issued with preferred stock facility . . . . . . . . -- 981,500
Dividends on senior exchangeable redeemable preferred stock . . -- (359,957)
EFFECTS OF THE COMMODORE ACQUISITION (NOTE 1):
Recapitalization and acquisition of common shares by Capstar. . 26,000 32,112,081
Redemption of preferred stock . . . . . . . . . . . . . . . . . -- (1,101,235)
Net loss for the period . . . . . . . . . . . . . . . . . . . . -- (17,836,432)
---------- -------------
Balance at October 16, 1996 . . . . . . . . . . . . . . . . . . $ -- $ (4,758,610)
========== =============
CAPSTAR:
Balance at inception (October 11, 1996) . . . . . . . . . . . . $ --
-------------
Issuance of common stock in connection with the Commodore
Acquisition (Note 1) . . . . . . . . . . . . . . . . . . . 93,275,000
Issuance of warrants . . . . . . . . . . . . . . . . . . . . . 744,000
Issuance of common stock (November 26, 1996) . . . . . . . . . 880,000
Net loss for the period . . . . . . . . . . . . . . . . . . . . (3,756,453)
-------------
Balance at December 31, 1996 . . . . . . . . . . . . . . . . . $ 91,142,547
=============
</TABLE>
See accompanying notes.
F-7
<PAGE> 110
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------------------
PERIOD ENDED
------------------------------ YEAR ENDED DECEMBER 31,
DECEMBER 31, | | OCTOBER 16, -------------------------
1996 | | 1996 1995 1994
------------ | | ----------- ----------- -----------
<S> <C> | | <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES | |
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . $(3,756,453) | | $(17,836,432) $(2,239,663) $ (527,113)
| |
Adjustments to reconcile net loss to net cash provided by | |
operating activities: | |
Loss on extinguishment of debt . . . . . . . . . . . . . . . -- | | -- 443,521 --
Depreciation and amortization . . . . . . . . . . . . . . . . 1,331,386 | | 2,157,750 2,311,162 2,365,111
Noncash interest . . . . . . . . . . . . . . . . . . . . . . 2,407,739 | | 3,315,669 2,288,917 --
Long-term incentive compensation . . . . . . . . . . . . . . -- | | 1,066,893 79,000 2,180,000
Non-cash compensation . . . . . . . . . . . . . . . . . . . . 744,000 | | 12,731,587 -- --
Provision for uncollectible accounts and notes receivable . . 104,838 | | 488,320 556,137 468,155
Loss on disposition of assets . . . . . . . . . . . . . . . . | | -- 9,819 335,736
Net barter income . . . . . . . . . . . . . . . . . . . . . . | | (222,645) (184,300) (122,163)
Initial public offering and pending merger expenses . . . . . | | 1,909,648 -- --
Changes in assets and liabilities, net of amounts acquired: | |
Increase in accounts receivable . . . . . . . . . . . . . (1,057,861) | | (2,315,753) (1,847,015) (1,509,195)
(Increase) decrease in prepaid expenses and other | |
current assets . . . . . . . . . . . . . . . . . . . . . 91,280 | | (208,462) (88,787) (267,196)
Increase (decrease) in accounts payable and accrued | |
expenses . . . . . . . . . . . . . . . . . . . . . . . . 341,308 | | (337,896) (158,855) 326,251
(Decrease) increase in accrued compensation . . . . . . . 110,127 | | (496,177) (230,645) 197,881
(Decrease) increase in accrued interest . . . . . . . . . (902,248) | | 1,752,172 582,525 351,639
(Decrease) increase in accrued income taxes . . . . . . . -- | | 20,952 (277,135) 261,541
Increase in due to affiliate . . . . . . . . . . . . . . 536,738 | | -- -- --
------------ | | ------------ ----------- -----------
Total adjustments . . . . . . . . . . . . . . . . . . 3,707,307 | | 19,862,058 3,484,344 4,587,760
------------ | | ------------ ----------- -----------
Net cash provided by operating activities . . . . . . . . . . (49,146) | | 1,989,626 1,244,681 4,060,647
CASH FLOWS FROM INVESTING ACTIVITIES | |
Proceeds from redemption of note . . . . . . . . . . . . . . . -- | | -- -- 405,000
Proceeds from sale of property, plant and equipment . . . . . . -- | | -- -- 398,018
Repayment of loan by stockholder . . . . . . . . . . . . . . . -- | | 250,375 182,988 --
Purchase of property, plant and equipment . . . . . . . . . . . (807,532) | | (448,677) (320,980) (623,414)
Acquisition of Commodore . . . . . . . . . . . . . . . . . . . (125,494,171) | | -- -- --
Payments for acquisitions . . . . . . . . . . . . . . . . . . . | | (31,900,000) (3,100,000) --
Deferred acquisition costs incurred . . . . . . . . . . . . . . (1,070,262) | | (1,326,673) (417,020) (172,558)
Deposits on pending acquisitions . . . . . . . . . . . . . . . -- | | (745,000) (525,000) --
Loans to employees . . . . . . . . . . . . . . . . . . . . . . -- | | -- (315,863) (57,500)
Other investing activities, net . . . . . . . . . . . . . . . . -- | | (187,528) 87,528 --
------------ | | ------------ ----------- -----------
Net cash used in investing activities . . . . . . . . . . . . . (127,371,965) | | (34,357,503) (4,408,347) (50,454)
CASH FLOWS FROM FINANCING ACTIVITIES | |
Proceeds from issuance of Commodore | |
Notes and warrants . . . . . . . . . . . . . . . . . . . . . -- | | -- 64,956,422 --
Proceeds from Existing Credit Facility . . . . . . . . . . . . 6,000,000 | | 18,700,000 -- --
Proceeds from Existing Term Loan Facility . . . . . . . . . . . 35,000,000 | | -- -- --
Net proceeds from issuance of preferred stock . . . . . . . . . -- | | 9,822,520 -- --
Proceeds from issuance of common stock . . . . . . . . . . . . 94,155,000 | | -- 100 --
Payment of initial public offering and merger expenses . . . . -- | | (1,007,297) -- --
Repayment of amounts borrowed . . . . . . . . . . . . . . . . . -- | | -- (39,014,833) (2,738,166)
Payment of financing related costs . . . . . . . . . . . . . . (2,705,875) | | (781,170) (4,226,762) (104,245)
Redemption of preferred stock . . . . . . . . . . . . . . . . . -- | | -- (8,665,835) --
Purchase of redeemable warrant . . . . . . . . . . . . . . . . -- | | -- (1,000,000) --
Repurchase of common stock . . . . . . . . . . . . . . . . . . -- | | -- (25,000) --
Principal payments on capital leases . . . . . . . . . . . . . -- | | (9,812) (11,186) (12,389)
------------ | | ------------ ----------- -----------
Net cash provided by (used in) financing activities . . . . . . 132,449,125 | | 26,724,241 12,012,906 (2,854,800)
------------ | | ------------ ----------- -----------
Net (decrease) increase in cash and short-term cash | |
investments . . . . . . . . . . . . . . . . . . . . . . . . . | | (5,643,636) 8,849,240 1,155,393
Cash and short-term cash investments at beginning of period . . -- | | 10,891,489 2,042,249 886,856
------------ | | ------------ ----------- -----------
Cash and short-term cash investments at end of period . . . . . $ 5,028,014 | | $ 5,247,853 $10,891,489 $ 2,042,249
============ | | ============ =========== ===========
SUPPLEMENTARY CASH FLOW INFORMATION | |
Cash paid for interest . . . . . . . . . . . . . . . . . . . . $ 3,529,651 | | $ 3,793,117 $ 4,474,789 $ 2,580,522
Cash paid for income taxes . . . . . . . . . . . . . . . . . . -- | | 112,049 417,769 38,209
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES | |
ASSET ACQUISITIONS RECORDED IN CONNECTION WITH BARTER | |
TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . -- | | $ 189,982 $ 112,636 $ 144,500
</TABLE>
See accompanying notes.
F-8
<PAGE> 111
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, COMMODORE ACQUISITION AND BASIS
OF PRESENTATION
Organization and Nature of Business
Capstar Broadcasting Partners, Inc. (the "Company") was incorporated under
the laws of the State of Delaware on October 11, 1996. The Company's
wholly-owned subsidiary, Commodore Media, Inc. and Subsidiaries, the Company's
predecessor, ("Commodore") is comprised of radio stations that derive their
revenue from local, regional and national advertisers. The radio stations are
located in the following markets: Wilmington, Delaware; Hartsdale, Brewster,
Patterson, Mt. Kisco, New York; Huntington, West Virginia -- Ashland, Kentucky;
Allentown -- Bethlehem, Pennsylvania; Fort Pierce -- Stuart -- Vero Beach,
Florida; and Fairfield County, Connecticut. Commodore extends credit to its
customers in the normal course of business.
Basis of Presentation
The consolidated financial statements as of December 31, 1996 and for the
period from October 11, 1996 through December 31, 1996 include the accounts of
Capstar and its wholly-owned subsidiary, Commodore, since October 16, 1996, the
date of the Commodore Acquisition. The Company had no substantive operations
until its acquisition of Commodore and Commodore is considered the Company's
predecessor for financial reporting purposes. The accompanying consolidated
financial statements include the results of operations of Commodore and its
Subsidiaries for the period ended October 16, 1996, and as of and for the year
ended December 31, 1995 and the results of its operations for the year ended
December 31, 1994. The financial position and results of operations of
Commodore prior to the acquisition by the Company have not been adjusted to
give effect to the Commodore Acquisition. All intercompany accounts and
transactions have been eliminated in consolidation.
Commodore Acquisition
On October 16, 1996, the Company acquired Commodore pursuant to a merger
agreement dated June 21, 1996 (the "Commodore Acquisition"). The purchase
price was approximately $229.2 million including acquisition costs and assumed
liabilities of approximately $108.5 million. The purchase price was funded
through borrowings under the Former Term Loan Facility of approximately $35.0
million, the assumption of liabilities referred to above and the investment of
common stock of the Company of approximately $93.3 million by an affiliate of
Hicks, Muse, Tate & Furst, Incorporated (Hicks Muse) and members of management
of the Company. The Commodore Acquisition has been accounted for under the
purchase method of accounting. Accordingly, the purchase price has been
allocated to the assets and liabilities based upon their fair values at the
date of acquisition as described below.
The acquisition is summarized as follows:
<TABLE>
<S> <C>
Cash . . . . . . . . . . . . . . . . . . . . . . $ 6,074,954
Accounts receivable, net . . . . . . . . . . . . . . . . . 7,960,367
Prepaid expenses and other . . . . . . . . . . . . . . . . 535,180
Property and equipment . . . . . . . . . . . . . . . . . . 15,343,939
FCC licenses, goodwill and other intangible assets . . . . 202,304,691
Other assets . . . . . . . . . . . . . . . . . . . . . . 4,823,414
Accounts payable and accrued expenses . . . . . . . . . . . (5,701,978)
Other long-term liabilities . . . . . . . . . . . . . . . . (93,757)
Deferred tax liability . . . . . . . . . . . . . . . . . . (2,031,580)
--------------
Total purchase price . . . . . . . . . . . . $ 229,215,230
==============
</TABLE>
F-9
<PAGE> 112
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At the time of the merger, the holders of Commodore Class A Common
Stock and Class B Common Stock (collectively, the "Commodore Common Stock"),
received $140 per share as consideration for their interest. Each of the
option and warrant holders received the difference between $140 per share and
the exercise price per share in consideration for their interest. In addition,
the senior exchangeable redeemable preferred stock, Series A, $.01 par value
per share, was redeemed, including all accrued and unpaid dividends.
Commodore recognized as other expense approximately $12.7 million in
stock option compensation expense, and approximately $1.4 million of merger
related fees and expenses during the period ended October 16, 1996 in
connection with the Commodore Acquisition.
As a result of the Commodore Acquisition and the change of control
effected thereby, Commodore was obligated to satisfy the existing deferred
compensation and employment agreements with its then President and Chief
Executive Officer and its deferred compensation agreement with its then Chief
Operating Officer resulting in a charge to other expense of approximately $1.1
million during the period ended October 16, 1996. Furthermore, Commodore was
required to make an offer to purchase the outstanding 13 1/4% Senior
Subordinated Notes due 2003 ("Commodore Notes") at a purchase price equal to
101% of their accreted value, plus any accrued and unpaid interest. No
requests for repurchase were made by the note holders.
As a result of the merger, Commodore did not proceed with its
previously announced intention to undertake an initial public equity offering
and has, therefore, withdrew its registration statement filed on Form S-1 on
May 17, 1996 with the Securities and Exchange Commission. Included in other
expenses during the period ended October 16, 1996 are approximately $525,000 in
various fees and expenses incurred in connection with this filing.
Short-Term Cash Investments
The Company and Commodore consider investments which have a remaining
maturity of three months or less at the time of purchase to be short-term cash
investments. The Company and Commodore invest their excess cash in U.S.
Treasury Bills.
Income Taxes
The Company and Commodore account for income taxes in accordance with
FASB Statement No. 109, "Accounting for Income Taxes." Under this method,
deferred income taxes are provided for differences between the book and tax
bases of assets and liabilities. The Company and its subsidiaries plan to file
a consolidated federal income tax return.
Risks and Uncertainties -- 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
disclosures 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.
Risks and Uncertainties -- Regulatory Environment
The consummation of radio broadcasting acquisitions requires prior
approval of the Federal Communications Commission (the "FCC") with respect to
the transfer of control or assignment of the broadcast licenses of the acquired
stations. Certain of the pending acquisitions referred to in Note 7b have not
yet received FCC approval. There can be no assurance that the FCC will approve
future acquisitions by the Company, including the pending acquisitions.
F-10
<PAGE> 113
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On February 8, 1996, the President signed into law the
Telecommunications Act of 1996. Among other things, this legislation requires
the FCC, to relax its numerical restrictions on local ownership and affords
renewal applicants significant new protections from competing applications for
their broadcast licenses. The new legislation will enable the Company to
retain all of its current radio stations and to acquire more properties. At
the same time, this legislation will also allow other broadcast entities to
increase their ownership in markets where the Company currently operates
stations. The Company's management is unable to determine the ultimate effect
of this legislation on its competitive environment.
The consummation of certain acquisitions, including certain of the
pending acquisitions, is also subject to applicable waiting periods and
possible review by the U.S. Department of Justice (the "DOJ") or the Federal
Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"). The Company understands that since the
passage of the Telecom Act several radio broadcasting acquisitions have been
the subject of "second requests" for additional information by federal
authorities under the HSR Act. The Company also understands that the DOJ is
currently reviewing its internal guidelines for antitrust review of radio
broadcasting acquisitions.
As part of its increased scrutiny of radio station acquisitions, the
DOJ has stated publicly that it believes that local marketing agreements
("LMAs") and other similar agreements customarily entered into in connection
with radio station transfers prior to the expiration of the waiting period
under the HSR Act could violate the HSR Act.
Risks and Uncertainties -- Concentration of Credit
Financial instruments which potentially subject the Company and
Commodore to concentration of credit risk consist primarily of trade
receivables. The Company's and Commodore's revenue is principally derived from
local broadcast advertisers who are impacted by the local economy.
The Company and Commodore routinely assess the financial strength of
its customers and do not require collateral or other security to support
customer receivables. Credit losses are provided for in the consolidated
financial statements in the form of an allowance for doubtful accounts.
Accounting Periods
Commodore maintained its interim consolidated financial statements
based upon the broadcast month end which always ends on the last Sunday of the
calendar month or quarter. The Company's fiscal year end and fourth quarter
end on December 31.
Fair Value of Financial Instruments
In 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosure about Fair Value of Financial
Instruments," which requires disclosures of fair value information about
financial instruments, whether or not recognized in the balance sheet.
The carrying amount reported in the balance sheets for cash, accounts
receivable, accounts payable and accrued liabilities approximate their fair
value due to the immediate or short-term maturity of such instruments. The
carrying amounts reported for the Existing Credit Facility and Existing Term
Loan Facility approximate fair value due to the debt being priced at floating
rates. The carrying amount reported for the Commodore Notes at December 31,
1996 approximates fair value based on the published market prices for the
publicly traded indebtedness at the date of acquisition (October 16, 1996).
The fair value of the Commodore Notes and associated warrants at December 31,
1996 were $930 per unit and $105 per warrant, respectively based on published
market prices.
F-11
<PAGE> 114
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is provided on the straight-line
method based on the following estimated useful lives:
<TABLE>
<CAPTION>
ESTIMATED LIFE
CLASSIFICATION (YEARS)
-------------- --------------
<S> <C>
Land improvements .......................................... 20
Buildings .................................................. 20
Furniture, fixtures and equipment .......................... 7-10
Broadcasting and technical equipment ....................... 7-10
Towers and antennas ........................................ 20
Music library .............................................. 7
Leasehold improvements ..................................... 10-20
Vehicles ................................................... 3
</TABLE>
Expenditures for maintenance and repairs are charged to operations as
incurred. Expenditures for betterments and major renewals are capitalized and,
therefore, are included in property, plant and equipment.
Property Held Under Capital Leases
The Company and Commodore are the lessees of office equipment under
capital leases expiring in various years through 2004. The assets and
liabilities under capital leases are recorded at the lower of the present value
of the minimum lease payments or the fair value of the asset. The assets are
depreciated over their estimated productive lives of seven to ten years.
Revenue Recognition
The Company and Commodore recognize revenue upon the airing of
advertisements.
Intangible Assets
Intangible assets are being amortized by the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
ESTIMATED LIFE
CLASSIFICATION (YEARS)
-------------- --------------
<S> <C>
FCC licenses and goodwill .................................. 40
Organization expenses ...................................... 5
Network affiliation agreement .............................. 5
Covenant not to compete .................................... 5
Tower site lease ........................................... 3
Contract rights ............................................ 3
Software ................................................... 3
Pre-sold advertising contracts ............................. 1
</TABLE>
Goodwill represents the excess of cost over the fair values of
identifiable tangible and other intangible net assets acquired. Management
continually reviews the appropriateness of the carrying value of goodwill of
its subsidiaries and the related amortization period based on their anticipated
undiscounted cash flows. The Company and
F-12
<PAGE> 115
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Commodore consider operating results, trends and prospects of the Company's and
Commodore's stations, as well as competitive comparisons. The Company and
Commodore also take into consideration recent acquisition patterns within the
broadcast industry, the impact of recently, enacted or potential FCC rules and
regulations and any other events or circumstances which might indicate
potential impairment.
Deferred Charges
Legal fees, bank loan closing costs and other expenses associated with
debt financing are being amortized using the effective interest rate method.
Amortization of debt expense charged to operations and included in interest
expense amounted to $1,691,172 for the period ended December 31, 1996 for the
Company, and $449,905 for the period ended October 16, 1996 and $384,908 and
$219,893 for the years ended December 31, 1995 and 1994, respectively, for
Commodore.
Advertising Costs
The Company and Commodore expense advertising costs related to their radio
station operations as incurred. Advertising expense amounted to $281,085 for
the period ended December 31, 1996 for the Company, and $557,155 for the period
ended October 16, 1996 and $754,489 and $560,818 for the years ended December
31, 1995 and 1994, respectively, for Commodore.
Barter Transactions
The fair value of barter and trade-out transactions is included in
broadcast revenue and sales and promotion expense. Barter revenue is recorded
when advertisements are broadcast and barter expense is recorded when
merchandise or services are received. Barter transactions charged to operations
were as follows:
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------------------------
YEAR ENDED DECEMBER 31,
PERIOD ENDED PERIOD ENDED --------------------------
DECEMBER 31, 1996 OCTOBER 16, 1996 1995 1994
----------------- ---------------- ----------- -----------
<S> <C> | | <C> <C> <C>
Trade sales ............... $ 1,049,739 | | $ 3,204,468 $ 3,238,111 $ 2,473,002
Trade expense ............. (1,003,987) | | (2,981,823) (3,053,811) (2,350,839)
----------- | | ----------- ----------- -----------
Net barter transactions ... $ 45,752 | | $ 222,645 $ 184,300 $ 122,163
=========== | | =========== =========== ===========
</TABLE>
Loss Per Share
Net loss per share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding during each respective
period. Proceeds from the exercise of the dilutive stock options are assumed to
be used to repurchase outstanding shares of the Company's common stock at the
average fair market value during the period.
Recent Pronouncements
In February 1997, the FASB issued FASB Statement No. 128 "Earnings Per
Share ("SFAS No. 128")" which establishes standards for computing and
presenting earnings per share. SFAS No. 128 is effective for fiscal years
beginning after December 15, 1997. Management does not believe the
implementation of SFAS No. 128 will have a material effect on its financial
statements.
In February 1997, the FASB issued FASB Statement No. 129 "Disclosure of
Information About Capital Structure ("SFAS No. 129")" which establishes
disclosure requirements for an entity's capital structure. SFAS No. 129
F-13
<PAGE> 116
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
is effective for fiscal years beginning after December 15, 1997. Management
does not believe the implementation of SFAS No. 129 will have a material effect
on its financial statements.
Financial Statement Presentation
Certain prior year financial statement items of Commodore have been
reclassified to conform to the current year presentation.
2. THE RECAPITALIZATION TRANSACTION
On April 21, 1995, Commodore completed the offering of the Commodore
Notes. The net proceeds of approximately $65.0 million were used to retire
existing senior indebtedness of approximately $36.2 million, fund the purchase
of assets (excluding cash and accounts receivable) and broadcasting license of
radio broadcast station WQOL-FM in Vero Beach, Florida (the "Treasure Coast
Acquisition") for $3.1 million, and repay the Note payable to Michael Hansen
("Hansen Note") and the Note payable to Radio Financial Partners, Inc. ("RFP
Note") for an aggregate amount of $2.4 million. In addition, Commodore used
$8.7 million to redeem its preferred stock, paid $1.9 million in connection
with the long-term incentive compensation of its then President and its then
Chief Operating Officer (see Note 1), paid approximately $4.2 million in
related deferred fees of the offering, and used the balance of $8.5 million for
general corporate purposes. Commodore converted all of its existing common
stock for 486,373 shares of its Class B Common Stock ("Class B") and 119,212
shares (including 85,524 treasury shares) of its Class A Common Stock ("Class
A"). At the time of conversion, Commodore's then President and its then Chief
Operating Officer purchased 27,369 shares and 6,319 shares, respectively, of
Class A from the Chairman. In addition, William A. M. Burden and Company, an
affiliated entity, exercised its option to acquire 27,314 shares of Class A
from the Company. Each share of Class B is entitled to eight votes and each
share of Class A is entitled to one vote. The consolidated financial statements
of Commodore have been retroactively adjusted for this conversion.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consisted of the following:
<TABLE>
<CAPTION>
PREDECESSOR
------------
DECEMBER 31,
----------------------------
1996 | | 1995
------------ | |------------
<S> <C> | |<C>
Land and land improvements ................... $ 2,274,510 | |$ 2,813,139
Buildings .................................... 2,404,538 | | 2,499,399
Furniture, fixtures and equipment ............ 1,846,692 | | 2,188,502
Broadcasting and technical equipment ......... 5,548,233 | | 5,907,905
Towers and antennas .......................... 3,046,783 | | 3,401,300
Music library ................................ 235,237 | | 250,456
Leasehold improvements ....................... 278,614 | | 365,825
Vehicles ..................................... 125,693 | | 147,567
Property held under capital leases ........... 41,399 | | 81,497
------------ | |------------
15,801,699 | | 17,655,590
Less accumulated depreciation | |
and amortization .......................... (173,338)| | (9,575,547)
------------ | |------------
Property, plant and equipment, net ........... $ 15,628,361 | |$ 8,080,043
============ | |============
</TABLE>
Accumulated amortization of property acquired under capital leases was
$21,663 as of December 31, 1996 for the Company and $12,728 as of December 31,
1995 for Commodore. Depreciation as a charge to income amounted to $173,338 for
the period ended December 31, 1996 for the Company, and $779,903 for the period
ended October 16, 1996, $831,656 in 1995 and $768,826 in 1994 for Commodore.
F-14
<PAGE> 117
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. OTHER INTANGIBLE ASSETS
Other intangible assets, at cost, consisted of the following:
<TABLE>
<CAPTION>
PREDECESSOR
-------------
DECEMBER 31,
----------------------------
1996 | | 1995
------------ | |------------
<S> <C> | |<C>
Covenant not to compete ................ $ 1,021,788 | |$ 1,325,000
Deferred acquisition expens ............ 1,569,767 | | 953,441
Pre-sold advertising contrats .......... 311,056 | | 103,642
Network affiliation agreeme ............ 232,738 | | 260,000
Other .................................. 153,400 | | 14,516
------------ | |------------
3,288,749 | | 2,656,599
Less accumulated amortization .......... (110,280)| | (895,293)
------------ | |------------
Other intangible assets, net ........... $ 3,178,469 | |$ 1,761,306
============ | |============
</TABLE>
Amortization of the aforementioned intangible assets included as a charge
to income amounted to $130,569 for the period ended December 31, 1996 for the
Company, and $592,348 for the period ended October 16, 1996, $506,447 for 1995
and $817,087 for 1994 for Commodore. Amortization of FCC licenses and goodwill
amounted to $1,047,768 for the period ended December 31, 1996 for the Company,
and $501,482 for the period ended October 16, 1996, $588,149 for 1995 and
$559,304 for 1994 for Commodore.
5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
PREDECESSOR
-------------
DECEMBER 31,
------------------------------
1996 | | 1995
------------- | |-------------
<S> <C> | |<C>
Former Credit Facility collateralized by capital | |
stock of all subsidiaries, interest at 3.5% over | |
LIBOR, due December 31, 2002 ...................... $ 24,700,000 | |$ --
| |
Commodore Notes, $76,808,000 principal, | |
including unamortized premium of $3,004,277 | |
at December 31, 1996 and unamortized discount | |
of $10,546,661 at December 31, 1995, due 2003 ..... 79,812,277 | | 66,261,339
| |
Former Term Loan Facility ........................... 35,000,000 | | --
------------- | |-------------
Total debt .......................................... 139,512,277 | | 66,261,339
| |
Less current maturities ............................. (3,750,000)| | --
------------- | |-------------
Long-term debt ...................................... $ 135,762,277 | |$ 66,261,339
============= | |=============
</TABLE>
Former Credit Facility
On March 13, 1996, Commodore entered into a Senior Credit Facility with
AT&T Commercial Finance Corporation ("AT&T") pursuant to which AT&T will make
available to Commodore senior secured (i) revolving loans in an amount up to
$30.0 million and (ii) accounts receivable loans in an amount which shall be
the lesser of (a) $5.0 million or (b) 85% of the net book value of the accounts
receivable of Commodore (the "AT&T Senior Credit Facility"). The indebtedness
to AT&T is collateralized by the tangible and intangible assets and the capital
stock of all Commodore's subsidiaries. Interest is payable monthly at a rate of
3.5% over LIBOR (8.9% at September 29, 1996) and principal amortization of the
revolving loans and accounts receivable loans begins June 1, 1998 and November
30, 1997, respectively. At December 31, 1996, Commodore had additional
available borrowings under the revolving and
F-15
<PAGE> 118
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
accounts receivable loans of approximately $9,000,000 and $1,300,000,
respectively. Commodore pays a commitment fee of .25% every six months on the
unused commitment.
Commodore Notes
The Commodore Notes bear cash interest at a rate of 7 1/2% per annum on
the principal amount until May 1, 1998 then at a rate of 13 1/4% per annum
until maturity, with interest payment dates on May 1 and November 1. The
Commodore Notes may be redeemed at the option of Commodore at any time on or
after May 1, 1999 at redemption prices specified in the indenture. The terms of
the Commodore Notes contain various covenants for the benefit of the holders
that, among other things, restrict the ability of Commodore to incur additional
indebtedness, pay dividends and make certain investments. Specified events such
as a failure to make principal or interest payments when due or failure to
observe or perform any covenant creates an event of default (as defined) under
the Commodore Notes. Upon an event of default, the trustee may or upon the
request of 25% of the holders declare the principal and unpaid interest due and
payable. The Commodore Notes, excluding the notes that were held for the
benefit of the former President of Commodore, were issued with detachable
warrants to purchase 75,500 shares of Class A Common Stock at an exercise price
of $.01 per warrant less the exercise price. The warrant holders at the time of
the merger received $140 in cash for each warrant. Commodore estimated the fair
market value of the warrants to be $2,000,000 as of the date of issuance and
allocated this amount out of the net proceeds of the debt offering to paid-in
capital.
Former Term Loan Facility
The Former Term Loan Facility of the Company consists of a term loan
facility in the amount of $30.0 million and a second term loan facility in the
amount of $5.0 million. The Term Loans matured upon consummation of the Osborn
Acquisition (Note 7b). As more fully described in Note 7b, the Company used a
portion of the proceeds of a private placement offering of 12 3/4% Senior
Discount Notes (the "Notes") to repay the balances owed under these term loans
(unaudited). Accordingly, amounts outstanding under the Former Term Loan
Facility at December 31, 1996 have been classified as "long-term" in the
accompanying financial statements.
The weighted average effective interest rate at December 31, 1996 was
11.7%.
Aggregate maturities of long-term debt due within the next five years
ending December 31 are as follows:
<TABLE>
<C> <C>
1997 ................................... $ 3,750,000
1998 ................................... --
1999 ................................... --
2000 ................................... --
Thereafter ............................. 134,156,274
------------
$137,906,274
============
</TABLE>
In connection with the debt restructuring of The Bank of New York loan on
December 28, 1993, Commodore issued the bank a warrant to purchase 4.99% of the
common stock of Commodore, on a fully diluted basis, for $100. The warrant was
exercisable at any time prior to its expiration on December 28, 2003 and
contained a put option under which the bank could require Commodore to purchase
the warrant at any time after January 1, 1997 up until expiration or upon an
initial public offering or a sale of Commodore at a price based upon (1) the
actual proceeds received by Commodore in an initial public offering or sale,
(2) negotiations between the parties, or (3) an independent appraisal. No value
was ascribed to the warrant at the time of issuance. The increase in the fair
value of the warrant in 1994 of $1,000,000 was recorded as a reduction to
retained earnings. Commodore repurchased the warrant in March 1995 for a
negotiated price of $1,000,000.
F-16
<PAGE> 119
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In 1995, Commodore wrote off the balance of the unamortized deferred
financing costs on its retired debt of $443,521. Inasmuch as Commodore had no
current federal taxable income and had fully reserved for its net deferred tax
assets, there was no tax effect attributable to this extraordinary item.
The Former Credit Facility, the Commodore Notes and the Former Term Loan
Facility indentures contain certain restrictive financial covenants, including,
among others, the maintenance of certain financial ratios.
6. PREFERRED STOCK
Capstar Preferred Stock
The board of directors is authorized, without further action by the
Company's stockholders to issue up to 10,000,000 shares of $.01 par value per
share preferred stock in one or more series and to fix, as to such series, the
voting rights, if any, applicable to such series and other such designations,
preferences and special rights as the board of directors may determine,
including dividend, conversion, redemption, and liquidation rights and
preferences. There are no shares of preferred stock outstanding.
Senior Exchangeable Redeemable Preferred Stock
On May 1, 1996, Commodore entered into a Securities Purchase Agreement
with CIBC WG Argosy Merchant Fund 2, LLC ("CIBC Merchant Fund"), pursuant to
which the CIBC Merchant Fund agreed to purchase from Commodore, if and when
requested by Commodore, up to an aggregate liquidation value of $12,500,000 of
Senior Exchangeable Redeemable Preferred Stock, Series A, $.01 par value per
share, of Commodore in such amounts as Commodore requested (the "Preferred
Stock Facility"). In connection with the Stamford Acquisition on May 30, 1996
and the Florida Acquisition on May 31, 1996 (see Note 7a), Commodore issued
5,700 shares and 4,300 shares, respectively, of Preferred Stock for an
aggregate purchase price of $10,000,000. The Preferred Stock accrued cash
dividends at the rate of 8.0% per annum and was redeemed, including accrued
dividends, in connection with the merger on October 16, 1996. In connection
with the Preferred Stock Facility, Commodore issued to the CIBC Merchant Fund a
warrant to purchase 7,550 shares of Commodore's Class A Common Stock, at an
exercise price of $.01 per warrant, which were valued in the aggregate at the
date of issue at $981,500. This warrant was redeemed in connection with the
merger for $140 per share less the exercise price.
8.87% Cumulative Redeemable Preferred Stock
On December 28, 1993, Radio Financial Partners, Inc., formerly a related
entity of Commodore, converted $7.7 million of outstanding debt and accrued
interest into 10,000 shares of Commodore's newly issued 8.87% cumulative
redeemable preferred stock. Commodore redeemed all outstanding shares of the
preferred stock on April 21, 1995; the total liquidation value as of the date
of redemption was $8.7 million which included $942,835 in accumulated
dividends.
7(a) CONSUMMATED ACQUISITIONS
On October 16, 1996, Commodore purchased certain defined assets of radio
stations WKEE-FM and WKEE-AM in Huntington, West Virginia, WZZW-AM in Milton,
West Virginia, WBVB-FM in Coal Grove, Ohio and WIRO-AM in Ironton, Ohio from
Adventure Communications, Inc. for $7.7 million and certain defined assets of
WFXN-FM in Milton, West Virginia and WMLV-FM in Ironton, Ohio for $4.3 million
(collectively, the "Huntington Acquisition"). The transactions were funded with
borrowings from the AT&T Senior Credit Facility and with funds provided from
the Company. Commodore provided programming to these stations under an LMA
effective April 1996 until the purchase date. In addition, Commodore has an
option to purchase WHRD-AM in Huntington, West Virginia and provides
programming services to the station under an LMA arrangement.
F-17
<PAGE> 120
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On May 31, 1996, Commodore purchased certain defined assets of radio
stations WBBE-FM (formerly WKQS-FM), WAVW-FM and WAXE-AM in the Fort
Pierce-Stuart-Vero Beach, Florida market from Media VI for $8.0 million (the
"Florida Acquisition"). The transaction was funded with borrowings from the
AT&T Senior Credit Facility and funds from the Preferred Stock Facility.
Commodore sold advertising time on these stations under a JSA from February
1996 until the purchase date.
On May 30, 1996, Commodore purchased certain defined assets of radio
stations WKHL-FM and WSTC-AM in Stamford, Connecticut from Q Broadcasting, Inc.
for $9.5 million. The transaction was financed with borrowings from the AT&T
Senior Credit Facility and funds from the Preferred Stock Facility.
On March 27, 1996, Commodore purchased (i) certain defined assets of radio
stations WZZN-FM in Mount Kisco, New York, WAXB-FM in Patterson, New York and
WPUT-AM in Brewster, New York from Hudson Valley Growth, L.P. for $5.5 million
and (ii) all of the issued and outstanding common stock of Danbury
Broadcasting, Inc., owner of WRKI-FM, and WINE-AM in Brookfield, Connecticut,
plus certain real property for $10.0 million. The transaction was financed with
Commodore's existing cash and borrowings under the AT&T Senior Credit Facility.
Commodore provided programming to these stations under LMAs from October 1995
until the purchase date.
On June 27, 1995, Commodore purchased the assets (excluding cash and
accounts receivable) and broadcasting license of radio broadcast station
WQOL-FM in Vero Beach, Florida (the "Treasure Coast" Acquisition) for a total
purchase price of $3.0 million.
All of the transactions described above were accounted for under the
purchase method of accounting. The total purchase price of the transactions
described above of approximately $57.5 million has been preliminary allocated
as follows: (1) approximately $6.4 million to property, plant and equipment,
(2) approximately $52.8 million to FCC licenses and goodwill and other
intangible assets and (3) approximately $1.7 million to deferred income taxes.
Unaudited pro forma results of operations for the Company as if the
aforementioned acquisitions and the Commodore Acquisition had been consummated
on January 1, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net revenue ...................................... $ 44,615 $ 42,467
Net loss before extraordinary loss ............... (13,633) (14,366)
Net loss ......................................... (13,633) (14,810)
Net loss before extraordinary loss per share ..... (0.15) (0.15)
Net loss per share ............................... (0.15) (0.16)
</TABLE>
7(b) ACQUISITIONS CONSUMMATED SUBSEQUENT TO DECEMBER 31, 1996 (UNAUDITED)
Space Coast Acquisitions
On April 8, 1997, the Company acquired substantially all of the assets of
City Broadcasting Co. ("City"), EZY Com, Inc. ("EZY") and Roper Broadcasting,
Inc. ("Roper"), (collectively, the "Space Coast Acquisitions"). The purchase
price of the City acquisition was approximately $3.0 million. City owned and
operated two radio stations (one FM and one AM) in the Melbourne, Florida
market. The purchase price of the EZY acquisition was approximately $5.0
million. EZY owned and operated two radio stations (one FM and one AM) in the
Cocoa, Florida market. The purchase price of the Roper acquisition was
approximately $4.0 million. Roper owned and operated one FM radio station in
the Rockledge, Florida market.
F-18
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CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Osborn Acquisition
On February 20, 1997, the Company acquired Osborn Communications
Corporation ("Osborn"). The purchase price of the Osborn Acquisition was
approximately $145.1 million (including $17.4 million in transaction fees and
expenses) payable in cash and common stock.
The purchase price includes $113.0 million for the 18 stations which are
owned and operated or to which services have been provided by the Company since
consummation of the transaction and $25.7 million for the five stations in the
Huntsville and Tuscaloosa, Alabama markets which were pending acquisitions of
Osborn and excludes $11.0 million to be received by the Company upon the
disposition of three stations in the Ft. Myers, Florida market currently under
sale agreements by Osborn.
The acquisitions of the five stations in Huntsville and Tuscaloosa,
Alabama are expected to be completed in March and April 1997 and the Ft. Myers,
Florida dispositions are expected to be completed in May 1997.
On February 20, 1997, the Company completed a private placement of $277.0
million 12 3/4% Senior Discount Notes which mature in 2009. The proceeds of the
offering of $145.0 million, net of $5.3 million of fees and expenses, and
proceeds from a sale of the Company's common stock of approximately $54.8
million to an affiliate of Hicks Muse, and additional sales of equity to
management were used to finance the Osborn purchase price and certain other
acquisitions and repay certain existing indebtedness of Osborn, Commodore and
the Company. Also in February 1997 and in connection with the Osborn
Acquisition, the Company obtained a $50.0 million credit facility which was not
utilized at the time of the acquisition and which the Company intends to
refinance in connection with the Benchmark Acquisition.
7(c) PENDING ACQUISITIONS
Benchmark Acquisition
On December 9, 1996, the Company agreed to acquire directly or indirectly
all of the outstanding partnership interests of the Benchmark Partnerships (the
"Benchmark Acquisition"). The purchase price of the Benchmark Acquisition is
estimated to be approximately $186.4 million (excluding $13.0 million in
transaction fees and expenses). Benchmark owns and operates 26 radio stations
(16 FM and 10 AM), has agreed to acquire two radio stations in the Montgomery,
Alabama market (the "Benchmark Montgomery Acquisition") and has agreed to
acquire substantially all of the assets of WSCQ-FM in the Columbia, South
Carolina market (the "Benchmark Columbia Acquisition"). Those stations are
located in ten markets in the Southeastern United States, including the Dover,
Delaware, Salisbury-Ocean City, Maryland, Montgomery, Alabama, Shreveport,
Louisiana, Jackson, Mississippi, Statesville, North Carolina, Columbia, South
Carolina, Greenville, South Carolina, Roanoke-Lynchburg, Virginia and
Winchester, Virginia markets. The Company anticipates that the Benchmark
Acquisition will be consummated in June 1997.
Under the terms of several acquisition agreements, each dated as of
December 9, 1996 (collectively, the "Benchmark Acquisition Agreements"),
entered into by Benchmark, the Company, certain affiliates of Hicks Muse and
other signatories thereto, Benchmark will become an indirect wholly-owned
subsidiary of the Company through a series of mergers and stock purchases with
acquisition subsidiaries, (each a "Fund III Acquisition Sub"). A Fund III
Acquisition Sub has arranged to borrow up to approximately $62.0 million the
proceeds of which may be loaned to Benchmark to provide funds to close the
Benchmark Montgomery Acquisition and the Benchmark Columbia Acquisition, and to
provide additional working capital to cover other corporate expenses. The
Company has unconditionally guaranteed all of the Fund III Acquisition Subs'
indebtedness under the senior credit agreement. As of December 31, 1996, $12.6
million had been loaned to Benchmark by Fund III Acquisition Subs for
acquisitions, and during January, 1997, $26.1 million was loaned to Benchmark
for acquisitions. Through January 1997, a Fund III
F-19
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CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Acquisition Sub has borrowed $40.5 million under the senior credit agreement.
(Approximately $60.0 million through April 1997 (unaudited).)
The Benchmark Acquisition Agreements may be terminated by Benchmark prior
to consummation of the Benchmark Acquisition under various circumstances,
including a breach of one or more representations, warranties, covenants or
agreements by a Fund III Acquisition Sub, which is in the aggregate has, or
would reasonably be expected to have, a material adverse effect on Benchmark
and its subsidiaries, taken as a whole. If the Benchmark Acquisition is not
consummated due to a breach of one or more representations, warranties,
covenants or agreements in the Benchmark Acquisition Agreements by a Fund III
Acquisition Sub, which in the aggregate has, or would reasonably be expected to
have, a material adverse effect on Benchmark and its subsidiaries, taken as a
whole, then Benchmark will be entitled to liquidated damages in the amount of
$8.2 million as Benchmark's exclusive remedy. The Fund III Acquisition Subs
have secured their obligations to consummate the Benchmark Acquisition by
placing into escrow $410,000 in cash and a letter of credit in the amount of
$6.7 million. An additional $1.0 million in letters of credit may also be
placed in escrow under the terms of the Benchmark Acquisition Agreements.
Benchmark Montgomery Acquisition
On November 4, 1996, Benchmark agreed to acquire substantially all of the
assets of Capital Communications utilized in the operations of Capital
Communications' radio stations in the Montgomery, Alabama market. The purchase
price of the Benchmark Montgomery Acquisition is estimated to be approximately
$18.0 million payable in cash by Benchmark. Capital Communications owns and
operates three FM radio stations in the Montgomery, Alabama market. In January
1997, Benchmark and the Company filed an application with the FCC for approval
of the transfer of control of two of Capital Communications' stations to the
Company. The Company anticipates that the Benchmark Montgomery Acquisition will
be consummated in June 1997. Benchmark has placed $1.0 million in cash in
escrow as security for its obligations under the asset purchase agreement.
Benchmark Columbia Acquisition
On September 20, 1996, Benchmark agreed to acquire all of the issued and
outstanding capital stock of Congaree Broadcasters, Inc. ("Congaree"). The
purchase price is estimated to be approximately $4.1 million, and is payable in
cash by Benchmark. Congaree owns and operates WSCQ-FM in the Columbia, South
Carolina market. The Company anticipates that the Benchmark Columbia
Acquisition will be consummated prior to June of 1997. Benchmark has placed
$100,000 in cash in escrow as security for its obligations under the stock
purchase agreement.
Community Pacific Acquisition
On December 26, 1996, the Company agreed to acquire substantially all of
the assets of Community Pacific (the "Community Pacific Acquisition"). The
purchase price of the Community Pacific Acquisition will equal approximately
$35.0 million. Community Pacific owns and operates 12 radio stations (six FM
and six AM) in four markets located in the Western United States and Iowa,
including Anchorage, Alaska, Modesto and Stockton, California and Des Moines,
Iowa. The Company and Community Pacific entered into an LMA in connection with
Community Pacific's radio stations pursuant to which the Company will provide
certain sales, programming and marketing services for Community Pacific's
stations (unaudited). The Company anticipates that the Community Pacific
Acquisition will be consummated in November 1997.
Under the terms of the acquisition agreement, which was entered into by
Community Acquisition Company, Inc., the acquisition agreement may be
terminated by Community Pacific prior to consummation of the asset purchase
under various circumstances, including a breach of any representation or
warranty, or any other material breach of any covenant or agreement, by
Community Acquisition Company, Inc. If the acquisition agreement is terminated
due to a
F-20
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CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
breach of any representation or warranty, or any material breach of any
covenant or agreement, by Community Acquisition Company, Inc., then Community
Pacific will be entitled to liquidated damages in the amount of $2.6 million as
Community Pacific's exclusive remedy. Community Acquisition Company, Inc. has
secured its obligation to consummate the asset purchase by placing into escrow
a letter of credit in the amount of $2.6 million.
COMCO Acquisition
On February 3, 1997, the Company agreed to acquire substantially all of
the assets of COMCO (the "COMCO Acquisition"). The purchase price of the COMCO
Acquisition will equal approximately $6.7 million. COMCO owns and operates six
radio stations (two AM and four FM) in the Anchorage and Fairbanks, Alaska
markets. The Company anticipates that the COMCO Acquisition will be consummated
in October 1997. COMCO Acquisition Co. has secured its obligation to consummate
the asset purchase by placing into escrow a letter of credit in the amount of
$335,000.
Upon consummation of the Community Pacific Acquisition and the COMCO
Acquisition, the Company will own and operate six radio stations (four FM and
two AM) in the Anchorage, Alaska market, which number exceeds the ownership
limitations under the Telecom Act. Accordingly, the Company intends to obtain
permission from the FCC to consummate both the Community Pacific Acquisition
and the COMCO Acquisition provided that the Company sell radio station KASH-AM
in Anchorage, Alaska within nine months of the date on which the Community
Pacific Acquisition is consummated. The Company will comply with the ownership
limitations of the Telecom Act in the Anchorage, Alaska market once it disposes
of KASH- AM. No assurances can be given that the Company will be able to sell
KASH-AM or that if the Company is able to sell KASH-AM, the Company will not
recognize a loss on the sale.
Madison Acquisition
On February 4, 1997, the Company agreed to acquire substantially all of
the assets of Madison (the "Madison Acquisition"). The purchase price of the
Madison Acquisition will be approximately $38.8 million. Madison owns and
operates six radio stations (four FM and two AM) in Madison, Wisconsin. The
Company anticipates that the Madison Acquisition will be consummated in October
1997.
Under the terms of the acquisition agreement, which was entered into by
Point Madison Acquisition Company, Inc., a subsidiary of the Company ("Madison
Acquisition Co."), the acquisition agreement may be terminated by Madison prior
to consummation of the asset purchase under various circumstances, including a
breach of any representation or warranty, or any material breach of any
covenant or agreement, by Madison Acquisition Co. If the acquisition agreement
is terminated due to a breach of any representation or warranty, or any
material breach of any covenant or agreement, by Madison Acquisition Co., then
Madison will be entitled to liquidated damages in the amount of $3.2 million as
Madison's exclusive remedy. Madison Acquisition Co. has secured its obligation
to consummate the asset purchase by placing into escrow a letter of credit in
the amount of $3.2 million.
Commonwealth Acquisition
In January 1997, the Company agreed to acquire substantially all of the
assets of Commonwealth (the "Commonwealth Acquisition"). The purchase price of
the Commonwealth Acquisition will equal approximately $5.3 million.
Commonwealth owns and operates three radio stations (two FM and one AM) in
Yuma, Arizona. The Company anticipates that the Commonwealth Acquisition will
be consummated in October 1997.
Under the terms of the acquisition agreement, which was entered into by
Pacific Star, the acquisition agreement may be terminated by Commonwealth prior
to consummation of the asset purchase under various circumstances, including a
breach of any representation or warranty, or any material breach of any
covenant or agreement, by Pacific Star. If the acquisition agreement is
terminated due to a breach of any representation or warranty, or any material
breach
F-21
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CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
of any covenant or agreement, by Pacific Star, then Commonwealth will be
entitled to liquidated damages in the amount of $262,500 as Commonwealth's
exclusive remedy. Pacific Star has secured its obligation to consummate the
asset purchase by placing into escrow a letter of credit in the amount of
$262,500.
Cavalier Acquisition
In January 1997, the Company agreed to acquire substantially all of the
assets of Cavalier (the "Cavalier Acquisition"). The enterprise value of the
Cavalier Acquisition will equal approximately $8.3 million. Cavalier owns and
operates five radio stations (four FM and one AM) in the Roanoke/Lynchburg,
Virginia market. The Company anticipates that the Cavalier Acquisition will be
consummated in October 1997.
Under the terms of the acquisition agreement, which was entered into by
Madison Acquisition Co., the acquisition agreement may be terminated by
Cavalier prior to consummation of the asset purchase under various
circumstances, including a breach of any representation or warranty, or any
material breach of any covenant or agreement, by Cavalier Acquisition Co. If
the acquisition agreement is terminated due to a breach of any representation
or warranty, or any material breach of any covenant or agreement, by Cavalier
Acquisition Co., then Cavalier will be entitled to liquidated damages in the
amount of $900,000 as Cavalier's exclusive remedy. Cavalier Acquisition Co. has
secured its obligation to consummate the asset purchase by placing into escrow
a letter of credit in the amount of $900,000.
Emerald City Acquisition
On March 10, 1997, the Company entered into an Asset Purchase Agreement
with Emerald City Radio Partners, L.P. (the "Emerald City Acquisition") to
purchase substantially all of the assets of radio stations WNOK-FM, WMFX-FM and
WOIC-AM located in Columbia, South Carolina. Because of certain multiple
station ownership limitations under the Telecommunications Act of 1996, the
Company has agreed to assign the right to acquire WMFX-FM and WOIC-AM on or
before the date on which the Company acquires WNOK-FM. The purchase price will
equal approximately $14.9 million in cash, of which approximately $9.5 million
has been allocated to WNOK-FM and will be payable by the Company. The Company
anticipates that the Emerald City Acquisition will be consummated in July 1997.
Under the terms of the agreement, which was entered into by WNOK
Acquisition Company, Inc., a subsidiary of the Company ("WNOK Acquisition
Co."), the acquisition agreement may be terminated by Emerald City prior to
consummation of the asset purchase under various circumstances, including a
material breach of any representation, warranty, covenant or agreement by WNOK
Acquisition Co. If the acquisition agreement is terminated due to a material
breach of any representation, warranty, covenant or agreement by WNOK
Acquisition Co., then Emerald City will be entitled to liquidated damages in
the amount of $500,000 as Emerald City's exclusive remedy. WNOK Acquisition Co.
has secured its obligation to consummate the asset purchase by placing into
escrow cash in the amount of $75,000 and has agreed that $425,000 of the loan
described below will be forgiven if Emerald City becomes entitled to liquidated
damages.
In connection with the Emerald City Acquisition, the Company has loaned
Emerald City approximately $13.5 million, the proceeds of which were used by
Emerald City (i) to pay matured indebtedness of Emerald City to Clear Channel
Radio, Inc. in the amount of approximately $13.3 million, including principal
and interest, and (ii) for other business purposes in the amount of
approximately $200,000. The loan matures on the earlier to occur of (i) October
31, 1997, (ii) the closing of the Emerald City Acquisition or (iii) within 75
days after the termination of the acquisition agreement with WNOK Acquisition
Co.
F-22
<PAGE> 125
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
WRIS Acquisition
On April 11, 1997, the Company agreed to acquire substantially all of the
assets of WRIS used or held for use in the operation of station WJLM-FM in
Salem, Virginia (the "WRIS Acquisition"). The purchase price of the WRIS
Acquisition will equal approximately $3.1 million payable in cash. In April
1997, the Company and WRIS will file an application with the FCC for approval
to transfer control of such radio station to the Company. No filing under the
HSR Act is required. The Company anticipates that the WRIS Acquisition will be
consummated in August 1997.
Under the terms of the acquisition agreement, which was entered into by
Capstar Acquisition Company, Inc., a subsidiary of the Company ("Capstar
Acquisition Co."), the acquisition agreement may be terminated by WRIS prior to
consummation of the asset purchase under various circumstances, including a
material breach of any representation, warranty, covenant or agreement by
Capstar Acquisition Co. If the acquisition agreement is terminated due to a
material breach of any representation, warranty, covenant or agreement by
Capstar Acquisition Co., then WRIS will be entitled to liquidated damages in
the amount of $150,000 as WRIS's exclusive remedy. Capstar Acquisition Co. has
secured its obligation to consummate the asset purchase by placing into escrow
a letter of credit in the amount of $150,000.
7(c) LOCAL MARKETING AND JOINT SALES AGREEMENTS
The Company and Commodore have entered into various LMAs and JSAs. While
each agreement is unique in its terms and conditions, generally under an LMA or
JSA the brokering station purchases substantially all of the commercial time
available on the brokered station and provides promotional and sales related
services. Under an LMA, the brokering station may also provide programming; a
JSA does not involve programming. The brokering station pays a fee to the
brokered station for the services provided based upon a flat monthly amount,
and/or an amount contingent on the net revenue or profit as calculated in the
agreement. As the brokering station, Commodore currently has LMAs or JSAs with
WKAP-AM, Allentown, PA, WPAW-FM, Vero Beach, FL and WHRD-AM in Huntington, WV.
Commodore provided programming to and sold advertising time on various stations
that were under contract to purchase under LMAs or JSAs.
8. INCOME TAXES
The Company and Commodore have recorded a provision for income taxes as
follows:
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------------------
YEAR ENDED DECEMBER 31,
PERIOD ENDED PERIOD ENDED -----------------------
DECEMBER 31, 1996 OCTOBER 16, 1996 1995 1994
----------------- ----------------- -------- --------
<S> <C> | | <C> <C> <C>
Current: | |
Federal ........... $ -- | | $ -- $ -- $ 70,400
State and local ... -- | | 133,000 140,634 229,600
Deferred: | |
Federal ........... -- | | -- -- --
State and local ... -- | | -- -- --
-------- | | -------- -------- --------
Total ............... $ -- | | $133,000 $140,634 $300,000
======== | | ======== ======== ========
</TABLE>
The Company did not record a federal tax benefit on the taxable loss for
the period ended December 31, 1996, nor did Commodore record a federal tax
benefit on the taxable loss for the period ended October 16, 1996 or for the
year ended December 31, 1995 since it was not assured that they could realize a
benefit for such losses in the future. During 1994, Commodore utilized
approximately $2.5 million of Federal net operating losses to offset current
taxable income. Since the valuation allowance remained at 100% at the end of
1994, there was no deferred tax effect on 1994 earnings. Commodore recorded a
provision for federal alternative minimum tax in 1994 because net operating
loss carryforwards may be used to offset only 90% of a corporation's
alternative minimum taxable income.
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CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Commodore received Internal Revenue Service approval and changed its tax
method of accounting for Federal Communications Commission ("the FCC") licenses
for the tax year ended December 31, 1995. The aggregate amount of cumulative
amortization that will be deductible ratably over six taxable years for the
Company and Commodore for tax purposes is approximately $12.1 million.
The reconciliation of income tax computed at the U.S. federal statutory
rates to effective income tax expense is as follows:
<TABLE>
<CAPTION>
PREDECESSOR
-----------------------------------------------
YEAR ENDED DECEMBER 31,
PERIOD ENDED PERIOD ENDED --------------------------
DECEMBER 31, 1996 OCTOBER 16, 1996 1995 1994
----------------- ---------------- ----------- -----------
<S> <C> | | <C> <C> <C>
Provision at statutory rate ..... $(1,277,194) | | $(1,184,000) $ (734,695) $ (79,400)
State and local taxes ........... -- | | 133,000 140,634 229,600
Nondeductible expense ........... 8,888 | | 33,800 8,286 36,575
Increase in valuation allowance, | |
net of rate changes ........... 1,268,306 | | 1,150,200 726,409 42,825
Alternative minimum tax ......... -- | | -- -- 70,400
----------- | | ----------- ----------- -----------
Total ........................... $ -- | | $ 133,000 $ 140,634 $ 300,000
=========== | | =========== =========== ===========
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The approximate effect
of temporary differences were as follows:
<TABLE>
<CAPTION>
PREDECESSOR
------------
DECEMBER 31,
-------------------------------
1996 | | 1995
------------ | | ------------
<S> <C> | | <C>
Deferred tax assets: | |
Allowance for bad debts ...................... $ 370,800 | | $ 312,100
Deferred compensation ........................ 126,400 | | 1,244,100
Unamortized discount on Commodore Notes ...... -- | | 959,200
Intangibles .................................. -- | | 290,300
Depreciation ................................. -- | | 76,460
Non-cash stock option compensation ........... 297,600 | | --
Other ........................................ 78,200 | | --
Net operating loss carryforwards .......... 22,789,543 | | 12,405,800
------------ | | ------------
Total deferred tax assets .................... 23,662,543 | | 15,287,960
Deferred tax liabilities: | |
Intangibles .................................. (4,920,900) | | --
Depreciation ................................. (848,080) | | (537,260)
Unamortized premium on Commodore Notes ....... (1,201,711) | | --
Other ........................................ -- | | (4,800)
------------ | | ------------
Total deferred tax liabilities ............ (6,970,691) | | (542,060)
------------ | | ------------
Net deferred tax asset ......................... 16,691,852 | | 14,745,900
Less valuation allowance ....................... (18,723,432) | | (14,745,900)
------------ | | ------------
Net deferred tax liability, net of allowance ... $ (2,031,580) | | $ --
============ | | ============
</TABLE>
The Company and Commodore have provided valuation allowances equivalent to
their net deferred tax assets in 1995, 1994 and 1993 as the historical results
of the Company and Commodore make the realization of taxable income in the
future years uncertain. During 1996, the Company and Commodore have provided
valuation allowances in excess of the net deferred tax asset as certain
temporary differences will not reverse in the net operating loss carryforward
F-24
<PAGE> 127
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
period. As of December 31, 1996, the Company had net operating loss
carryforwards of approximately $54.9 million for federal purposes that expire
in the years 1999 through 2011. Due to the change in control which occurred at
the time the Company acquired Commodore, the utilization of net operating
losses of Commodore incurred through the date of acquisition, approximately
$49.2 million, are limited under Section 382 of the Internal Revenue Code.
Commodore also has available as of December 31, 1996, $36.2 million for state
purposes that expire in the years 1996 to 2011 and $6.1 million of carryforward
deductions related to the change in accounting for FCC licenses that will be
deductible in the tax years 1996 to 2000.
9. COMMITMENTS
Lease Commitments
The principal types of property leased by the Company and its subsidiaries
and Commodore are office space, towers, real estate related to tower sites,
office equipment and transmitting equipment.
Total rent expense was approximately $188,000 for the period ended
December 31, 1996 for the Company, and $383,000 for the period ended October
16, 1996 and $332,000 and $306,400 for the years ended December 31, 1995 and
1994, respectively for Commodore.
The minimum rental commitments of the Company, under all noncancellable
operating leases, are set forth below:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Year ended December 31,:
1997 ................................................... $ 656,044
1998 ................................................... 630,478
1999 ................................................... 556,492
2000 ................................................... 364,302
Thereafter ................................................. 1,003,780
----------
Total minimum lease payments ........................ $3,211,096
==========
</TABLE>
Other Commitments
Commodore entered into a separation agreement with its former President
effective December 31, 1993, under which Commodore agreed to pay him an
aggregate amount of $1.7 million; a portion was paid in cash, and the remainder
of $1.0 million became payable in semi-monthly installments through December
31, 1997. A present value discount of $154,000 was recorded against the total
installment liability of $1.0 million as of December 31, 1993. At December 31,
1995, the current portion under this obligation of $219,816 is included in
accounts payable and accrued expenses and the remainder of $239,275 is
reflected in noncurrent compensation.
10. EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with several executives
of the Company including its President and Chief Executive Officer, its
Executive Vice President and Chief Financial Officer, its Executive Vice
President and General Counsel and the current President of Commodore. The
agreements generally provide for terms of employment, annual salaries, bonuses,
eligibility for option awards and severance benefits.
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CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Effective January 1, 1994, Commodore entered into an agreement with its
then President and Chief Executive Officer under which he would be employed in
that capacity through 1996 and provided for annual salary requirements and
bonuses, and a Long-Term Incentive Payment ("LTIP"). A fair value amount of
$1.8 million was charged to income as long-term incentive compensation in 1994
relating to the LTIP. On April 21, 1995, the then President's employment
agreement was amended and restated. In lieu of the LTIP, Commodore paid the
then President $1.5 million in cash, issued $1.3 million principal ($1.1
million net of discount) of Commodore's Commodore Notes to a trust for his
benefit and agreed to provide $1.5 million in deferred compensation which
accrues interest at a rate of 7% and is payable in 2003. Commodore recorded the
deferred compensation on April 21, 1995 at its calculated net present value of
$921,000. The aggregate effect of the employment agreement restructuring was to
charge $1.8 million to long-term incentive compensation expense during 1995. In
addition, the then President's amended employment agreement extended his date
of employment through April 30, 1998, granted stock options to him to acquire
28,313 shares of Class A Common Stock at an exercise price of $45 per share and
provided for annual bonuses based upon specific operating results of the
Company.
Commodore also amended its then existing employment agreement with its
then Chief Operating Officer on April 21, 1995. The prior employment agreement
provided for a long-term incentive based upon the increase in certain station
values. As of December 31, 1994, $430,000 had been accrued as long-term
incentive compensation. The amended employment agreement provided for a cash
payment of $400,000 on April 21, 1995 and deferred compensation of $346,000
which accrues interest at a rate of 7% and is payable in 2003. Commodore
recorded the deferred compensation on April 21, 1995 at its calculated net
present value of $213,000. The aggregate effect of the employment agreement
restructuring was to charge $188,800 to long-term incentive compensation
expense during 1995. In addition, the amended employment agreement extended his
date of employment through April 30, 1999, granted stock options to acquire
28,313 shares of Class A Common Stock at an exercise price of $45 per share and
provides for annual bonuses based upon specific operating results of Commodore.
As a result of the merger and the change of control effected thereby,
Commodore was obligated to satisfy the existing deferred compensation and
employment agreements with its then President and Chief Executive Officer and
its deferred compensation agreement with its then Chief Operating Officer,
resulting in an additional charge to operations of approximately $1.1 million
which was recorded in the period ended October 16, 1996. Furthermore, all stock
options for the aforementioned officers, as well as for all holders, were
redeemed at $140 per share, less the exercise price of $45 per share at the
time of the merger. Commodore's then President and Chief Executive Officer
resigned his position effective October 16, 1996 as required by the Merger
Agreement.
11. RELATED PARTY TRANSACTIONS
Monitoring and Oversight Agreement
The Company has entered into a monitoring and oversight agreement (the
"Monitoring and Oversight Agreement") with Hicks, Muse & Co. Partners, L.P.
("Hicks Muse Partners"). Pursuant thereto, the Company has agreed to pay to
Hicks Muse Partners an annual fee of $100,000 for ongoing financial oversight
and monitoring services. The annual fee is adjustable upward or downward at the
end of each fiscal year to an amount equal to 0.2% of the budgeted consolidated
annual net sales of the Company for the then-current fiscal year; provided,
that such fee shall at no time be less than $100,000 per year.
The Monitoring and Oversight Agreement makes available on an ongoing basis
the resources of Hicks Muse Partners concerning a variety of financial matters.
The services that have been and will continue to be provided by Hicks Muse
Partners could not otherwise be obtained by the Company without the addition of
personnel or the engagement of outside professional advisors.
F-26
<PAGE> 129
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Financial Advisory Agreement
The Company is a party to a financial advisory agreement (the "Financial
Advisory Agreement") with Hicks Muse Partners. Pursuant to the Financial
Advisory Agreement, Hicks Muse Partners is entitled to receive a fee equal to
1.5% of the transaction value (as defined in the Financial Advisory Agreement)
for each add-on transaction (as defined) in which the Company or any of its
subsidiaries is involved.
Pursuant to the Financial Advisory Agreement, Hicks Muse Partners provides
investment banking, financial advisory and other similar services with respect
to the add-on transactions in which the Company is involved. Such transactions
require additional attention beyond that required to monitor and advise the
Company on an ongoing basis and accordingly the Company pays separate financial
advisory fees with respect to such matters in addition to those paid in
connection with the Monitoring and Oversight Agreement. The services that have
been and will continue to be provided by Hicks Muse Partners could not
otherwise be obtained by the Company without the addition of personnel or the
engagement of outside professional advisors. The Company paid Hicks Muse
Partners a financial advisory fee in the amount of approximately $3.4 million
upon consummation of the Commodore Acquisition.
Registration Rights Agreement (Unaudited)
Frank D. Osborn entered into a registration rights agreement with the
Company upon consummation of the Osborn Acquisition which provides, among other
things, that Mr. Osborn may require the Company to effect a demand registration
of his Common Stock under the Securities Act at any time within 30 days after
the tenth anniversary of the date of the registration rights agreement. Mr.
Osborn's right to demand a registration will terminate upon the first to occur
of a Qualified IPO or a change in control (both as defined in the registration
rights agreement). Accordingly, Mr. Osborn's right to demand a registration
will terminate upon completion of the Offering. If the Offering is not
completed, then after receipt of a demand for registration of Common Stock
pursuant to the registration rights agreement, the Company would have the
option to purchase all of the shares of Common Stock, then held by Mr. Osborn
for a 30-day period, at appraised value (as defined in the registration rights
agreement).
Stockholders Agreements
Affiliate Stockholders Agreement. R. Steven Hicks, five of his children
and Capstar L.P. (the "Affiliate Stockholders") have entered into a
Stockholders Agreement (the "Affiliate Stockholders Agreement") with the
Company and Hicks Muse that provides, among other things, that the Affiliate
Stockholders may require the Company, subject to certain registration volume
limitations, to effect up to three demand registrations of their Common Stock
under the Securities Act at any time after consummation of a Qualified IPO (as
defined in the Affiliate Stockholders Agreement). The Affiliate Stockholders
Agreement also provides that in the event the Company proposes to register any
shares of its Common Stock under the Securities Act, whether or not for its own
account, the Affiliate Stockholders will be entitled, with certain exceptions,
to include their shares of Common Stock in such registration.
The Affiliate Stockholders Agreement also requires the Affiliate
Stockholders, subject to certain conditions, to vote their shares (i) in favor
of the election to the Company's Board of Directors of such individuals as may
be designated by Hicks Muse and its affiliates (including Capstar L.P.) and
(ii) on other matters as the holders of a majority of the voting power of the
outstanding shares of Common Stock vote on such matters. If certain conditions
are met, including Mr. Hicks serving as the President and Chief Executive
Officer of the Company or holding not less than 3.0% of the fully-diluted
Common Stock of the Company, the Affiliate Stockholders Agreement provides that
Mr. Hicks shall be one of such designees to serve on the Company's Board of
Directors.
The Affiliate Stockholders Agreement provides that, in connection with any
transfer of the Company's securities held by Hicks Muse and its affiliates
(which would constitute a "sale" thereof within the meaning of the
F-27
<PAGE> 130
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Securities Act) representing more than 50.0% of the shares of Common Stock then
held by Hicks Muse and its affiliates, Hicks Muse and its affiliates have the
right to require the Affiliate Stockholders to also transfer a portion of their
shares of Common Stock. If Hicks Muse and its affiliates desire to effect a
sale of more than 50.0% of the shares of Common Stock then held by Hicks Muse
and its affiliates, such stockholders may "tag along" and sell a portion of
their shares of Common Stock on the same terms.
Prior to the transfer of any securities subject to the Affiliate
Stockholders Agreement by any stockholder other than an affiliate of Hicks
Muse, Hicks Muse has the right to acquire such securities on the same terms and
conditions as the proposed transfer. If R. Steven Hicks is no longer an
officer, director or employee of the Company or any of its subsidiaries or a
change of control (as defined in the Affiliate Stockholders Agreement) occurs,
the Company has the option to purchase all or any portion of the Company's
securities held by Mr. Hicks and his children. The Affiliate Stockholders
Agreement provides that (i) R. Steven Hicks shall retain the voting rights of
any securities (subject to such agreement) which he transfers, conveys, assigns
or hypothecates to an affiliate or any of his family members and (ii) Mr. Hicks
may not transfer, convey, assign or hypothecate any of his securities (subject
to the Affiliate Stockholders Agreement) to an affiliate or any family member
of Mr. Hicks unless such affiliate or family member joins in the Affiliate
Stockholders Agreement.
Subject to certain exceptions, if the Company proposes to issue or sell
any shares of Common Stock to Hicks Muse or any of its affiliates, Mr. Hicks
has the right to purchase a pro rata share of such shares of Common Stock. Mr.
Hicks has waived his preemptive right to acquire additional shares of Common
Stock in connection with the Hicks Muse Equity Investment. Mr. Hicks is
entitled to receive, for no additional consideration, a warrant to acquire
additional shares of Common Stock (determined as provided in the Affiliate
Stockholders Agreement) if Hicks Muse or any of its affiliates otherwise
acquires additional shares of Common Stock.
Management Stockholders Agreement. Certain employees of the Company and
its subsidiaries have entered into a Stockholders Agreement (the "Management
Stockholders Agreement") with the Company and Hicks Muse that provides, among
other things, that in the event the Company proposes to register any shares of
its Common Stock under the Securities Act, whether or not for its own account,
the stockholders that are parties to the Management Stockholders Agreement will
be entitled, with certain exceptions, to include their shares of Common Stock
in such registration. The Management Stockholders Agreement also requires the
parties thereto to vote their shares in favor of the election to the Company's
Board of Directors of such individuals as may be designated by Hicks Muse and
its affiliates.
The Management Stockholders Agreement provides that, in connection with
any transfer of the Company's securities held by Hicks Muse and its affiliates
(which would constitute a "sale" thereof within the meaning of the Securities
Act) representing more than 50.0% of the shares of Common Stock then held by
Hicks Muse and its affiliates, Hicks Muse and its affiliates have the right to
require the stockholders subject to the Management Stockholders Agreement also
to transfer a portion of their shares of Common Stock. If Hicks Muse and its
affiliates desire to effect a sale of more than 50.0% of the shares of Common
Stock then held by Hicks Muse and its affiliates, such stockholders may "tag
along" and sell a portion of their shares of Common Stock on the same terms.
Prior to the transfer of any securities subject to the Management
Stockholders Agreement by any stockholder other than an affiliate of Hicks
Muse, Hicks Muse has the right to acquire such securities on the same terms and
conditions as the proposed transfer. If at any time a stockholder subject to
the Management Stockholders Agreement is no longer an officer, director or
employee of the Company or any of its subsidiaries or a change of control (as
defined in the Management Stockholders Agreement) of the Company occurs, the
Company has the option to purchase all or any portion of the Company's
securities held by such stockholder.
During the period ended October 16, 1996 and the year ended December 31,
1995, Commodore paid the majority stockholder a salary of approximately
$185,000 and $175,000, respectively. In addition, the majority
F-28
<PAGE> 131
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
stockholder repaid an outstanding loan of $182,988, of which $65,488 was
advanced in the year ended December 31, 1995; the majority stockholder owed
Commodore $117,500 as of December 31, 1994, which was reflected in other
current assets.
On April 10, 1992, Commodore obtained $9.3 million from Radio Financial
Partners ("RFP") in exchange for a subordinated note bearing interest at 7% and
maturing in 1997. On December 28, 1993, RFP agreed to convert a total of
$7,247,000 of the unpaid principal on the subordinated note and $476,000 of
accrued interest into 10,000 shares of Redeemable Preferred Stock (see Note 6).
The remaining principal balance of $2.1 million was converted into a
noninterest-bearing subordinated note with a final maturity of April 10, 1997.
Commodore repaid the outstanding balance of the note and redeemed the preferred
stock on April 21, 1995.
During May 1995, Commodore loaned approximately $250,000 to certain
executive officers as evidenced by 7% promissory notes that mature in 2001,
with all accrued interest and principal due on the maturity date. The total
amount owed Commodore at December 31, 1995 was $261,329, which was included in
noncurrent assets. These loans were repaid in October 1996.
In connection with the debt restructuring described above, on December 28,
1993, Commodore granted a warrant to an affiliate to purchase 4.99% of its
common stock at an exercise price of $100, on a fully diluted basis. The
warrant was exercised during 1995.
The Company is involved in certain transactions in the normal course of
operations with GulfStar Communications, Inc., an affiliated entity. At
December 31, 1996, the Company owed GulfStar Communications, Inc. approximately
$277,000 and owed Hicks Muse approximately $260,000 for certain costs paid on
behalf of the Company.
12. STOCK OPTION AND WARRANT AGREEMENTS
The Company's 1996 Stock Option Plan (the "Stock Option Plan") gives
certain individuals and key employees of the Company and any parent corporation
or subsidiary corporation thereof (such parent and subsidiary corporations are
referred to as "Related Entities") who are responsible for the continued growth
of the Company an opportunity to acquire a proprietary interest in the Company,
and thus to create in such persons an increased interest in and a greater
concern for the welfare of the Company and any Related Entities. The Board of
Directors has authorized issuance of options to acquire up to 9,000,000 shares
of common stock, and 9,000,000 shares of common stock have been reserved for
issuance. Through December 31, 1996, the Board of Directors had authorized
grants of stock options with respect to 4,100,000 shares of common stock under
the Stock Option Plan, and had reserved 4,100,000 shares of common stock for
issuance under the Plan.
In connection with employment agreements executed with current key
employees and to be executed with certain future key employees upon the
consummation of certain pending acquisitions (see Note 10), the Company has
committed to grant stock options for the purchase of 4,127,400 common shares at
$1.10 per share. These stock options generally will vest with respect to 20% of
the shares of the first anniversary of the grant, and 1/60th of the shares
monthly thereafter. The maximum term of options granted is ten years.
Subsequent to December 31, 1996, grants of stock options for 795,880
shares of common stock have terminated.
On April 21, 1995, Commodore adopted a stock option plan (the "Plan")
which provided for the granting of incentive stock options and nonqualified
stock options to executives and key employees. On October 16, 1996, all
outstanding options were redeemed at $140 per share less their exercise price
of $45 per option.
F-29
<PAGE> 132
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes the transactions of the Stock Option Plan
and the Plan for the periods ended December 31, 1996 and October 16, 1996, and
the year ended December 31, 1995:
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------
DECEMBER 31, OCTOBER 16, DECEMBER 31,
1996 1996 1995
------------ ------------ ------------
<S> <C> | | <C> <C>
Outstanding options, beginning of period ...... -- | | 96,670 --
Granted ....................................... 3,737,430 | | -- 96,670
Canceled or expired ........................... -- | | -- --
Exercised ..................................... -- | | (96,670) --
------------ | | ------------ ------------
Outstanding options, end of year .............. 3,737,430 | | -- 96,670
============ | | ============ ============
Average price of options exercised ............ $ -- | | $ 45 $ --
Weighted average exercise price, end of period | |
and weighted average fair market value at | |
date of grant ............................... 1.00 | | -- 45
Options exercisable, end of period ............ -- | | -- 96,670
Options available for future grant ............ 362,570 | | -- 35,455
Weighted average remaining contractual life ... ten years | |
Range of exercise prices ...................... $1.00-$1.00 | |
</TABLE>
The Company and Commodore apply Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees , and related interpretations, in
accounting for their stock option plans. As options are generally issued at an
exercise price which approximates the fair market value of the Company's common
stock at the date of grant, no compensation expense has been recognized for the
plans. Had compensation cost for the plans been determined based upon the fair
value at the grant date for awards under the plans consistent with the
methodology prescribed under Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation, Commodore's net loss would have
decreased by approximately $11.5 million and increased by approximately
$176,225, for the period ended October 16, 1996 and for the year ended December
31, 1995, respectively, using the minimum valuation method option-pricing model
with the following assumptions: dividend yield of 0.0%, risk-free interest rate
of 6.93% and an expected life of four years. The Company's net loss would have
decreased by approximately $600,000 for the period from October 16, 1996
through December 31, 1996 using the minimum valuation method option-pricing
model with the following assumptions: dividend yield of 0.0%, risk free
interest rate of 6.0%, expected volatility of 0.0% and an expected life of ten
years. Accordingly, on a pro forma basis, the Company's net loss and net loss
per share would have been $3.2 million and $0.03, respectively, for the period
ended December 31, 1996.
The Company's 1996 Stock Purchase Plan (the "Stock Purchase Plan") gives
certain key employees of the Company who are expected to contribute materially
to the success of the Company an opportunity to acquire a proprietary interest
in the Company, and thus to retain such persons and create in such persons an
increased interest in and a greater concern for the welfare of the Company. The
Company has reserved for issuance 3,155,000 shares of common stock under the
Stock Purchase Plan. To date, grants of stock purchase rights with respect to
1,155,000 shares of common stock have been made under the Stock Purchase Plan,
all of which have been exercised.
On October 16, 1996, the Company issued a warrant (the "Warrant") to R.
Steven Hicks. Pursuant to the terms of the Warrant, Mr. Hicks is entitled to
purchase 7,440,000 shares of common stock of the Company at any time or from
time to time and, upon the fulfillment of a certain triggering event, may
purchase an additional 1,860,000 shares of Common Stock. The exercise price of
the Warrant is equal to a per share price of $1.00, representing the fair
market value of the date of grant, as increased by an annual rate of interest
equal to 8.0% per year commencing as of October 16, 1996. The term "triggering
event" means the date upon which distributions equal to an internal rate of
return of at least 30.0%, calculated in accordance with generally accepted
financial practice, on the initial investment of Capstar
F-30
<PAGE> 133
CAPSTAR BROADCASTING PARTNERS, INC. AND
SUBSIDIARIES AND ITS PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
L.P. of $90.0 million in the Company (which investment was made on October 16,
1996) have been made to Hicks Muse and its affiliates and its and their
respective officers, directors and employees (and members of their respective
families (other than Mr. Hicks) and trusts for the primary benefit of those
family members). The Warrant will terminate on October 16, 2006. The Warrant
and the Common Stock issuable thereunder are subject to the Affiliate
Stockholders Agreement. The Company recorded non-cash compensation expense of
approximately $744,000 in the period ended December 31, 1996 in connection with
the estimated increase in value of the underlying common stock since the
issuance date of the warrant.
Under the terms of the Affiliate Stockholders Agreement, the Company will
issue a new warrant (the "New Warrant") to Mr. Hicks upon completion of the
Hicks Muse Equity Investment. Pursuant to the terms of the New Warrant, Mr.
Hicks will be entitled to purchase 2,042,550 shares of Common Stock at any time
or from time to time and, upon the fulfillment of the triggering event, may
purchase an additional 510,630 shares of Common Stock. If an affiliate of the
underwriter of the private placement of 12 3/4% Senior Discount Notes purchases
shares of common stock that would otherwise be purchased by HM Fund III and its
affiliates, a proportionately lesser number of shares of Common Stock will be
purchasable under the New Warrant. The exercise price of the New Warrant will
be equal to a per share price of $1.10 per share as increased by an annual rate
of interest equal to 8.0% per year. The New Warrant will terminate ten years
from the date of grant.
13. DEFINED CONTRIBUTION PLAN
During 1995, Commodore established a 401(K) Plan for the benefit of all
eligible employees. Eligible participants under this plan are defined as all
full-time employees with one year of service. All eligible participants may
elect to contribute a portion of their compensation to the plan subject to
Internal Revenue Service limitations. Commodore may make discretionary matching
contributions to the plan, subject to board approval; no contributions were
made during the period ended October 16, 1996 and for the period ended December
31, 1996.
14. LEGAL PROCEEDINGS
Commodore is involved in various legal proceedings from time to time in
the normal course of business. In management's opinion, the litigation in which
Commodore is currently involved, individually and in the aggregate, is not
material to Commodore's financial condition or results of operations.
15. SUBSEQUENT EVENT (UNAUDITED)
The Company plans to file a registration statement under the Securities
Act of 1933 and intends to initiate a public offering of its common stock (the
"Offering") which is expected to generate gross proceeds of $100.0 million. The
consummation of the Offering is not conditioned on the consummation of any or
all of the pending acquisitions of the Company.
F-31
<PAGE> 134
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Osborn Communications Corporation
We have audited the accompanying consolidated balance sheets of Osborn
Communications Corporation as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. 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 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 consolidated financial position
of Osborn Communications Corporation at December 31, 1996 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, 1996, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 3, 1997
F-32
<PAGE> 135
OSBORN COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................ $ 2,944,205 $ 12,994,779
Accounts receivable, less allowance for doubtful
accounts of $499,800 in 1996
and $518,157 in 1995 ............................... 5,505,351 5,759,562
Inventory ............................................ 1,095,157 889,942
Prepaid expenses and other current assets ............ 1,018,701 1,525,308
------------ ------------
Total current assets ................................... 10,563,414 21,169,591
Investment in affiliated companies ..................... 512,088 524,084
Property, plant and equipment, at cost, less accumulated
depreciation of $16,162,605 in 1996 and
$18,624,021 in 1995 ................................. 13,711,683 15,358,070
Intangible assets, net of accumulated amortization
of $15,743,477 in 1996 and $15,238,193 in 1995 ...... 31,743,083 40,463,595
Other noncurrent assets ................................ 925,000 118,753
------------ ------------
Total assets ........................................... $ 57,455,268 $ 77,634,093
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ................ $ 4,809,264 $ 4,509,292
Accrued wages and sales commissions .................. 434,986 434,309
Accrued interest payable ............................. 46,173 459,114
Accrued income taxes ................................. 1,492,114 825,712
Current portion of long-term debt .................... 320,000 2,718,000
------------ ------------
Total current liabilities .............................. 7,102,537 8,946,427
Long-term debt ......................................... 13,880,000 44,482,000
Deferred income taxes .................................. 3,061,298 2,275,711
Other noncurrent liabilities ........................... 1,501,279 432,916
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01 per share; authorized
5,000,000 shares, none issued and outstanding ..... -- --
Common stock, par value $.01 per share; authorized
7,425,000 shares, issued and outstanding shares:
5,547,497 and 5,537,497, respectively, in 1996;
5,286,347 and 5,276,347, respectively, in 1995 ... 55,376 52,764
Non-voting common stock, par value $.01 per share;
authorized 75,000 shares, none issued
and outstanding .................................. -- --
Additional paid-in capital ............................. 40,869,408 39,694,601
Accumulated deficit .................................... (9,014,630) (18,250,326)
------------ ------------
Total stockholders' equity ............................. 31,910,154 21,497,039
------------ ------------
Total liabilities and stockholders' equity ............. $ 57,455,268 $ 77,634,093
============ ============
</TABLE>
See accompanying notes.
F-33
<PAGE> 136
OSBORN COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net revenues ................................... $ 37,215,048 $ 39,505,193 $ 34,982,110
Operating expenses:
Selling, technical and program ................ 9,656,347 11,785,471 9,487,815
Direct programmed music and entertainment ..... 12,426,740 10,489,513 9,807,495
General and administrative .................... 6,740,352 7,526,897 6,611,035
Depreciation and amortization ................. 4,756,325 5,782,404 5,285,280
Corporate expenses ............................ 1,849,820 1,705,850 2,475,675
Total operating expenses ................... 35,429,584 37,290,135 33,667,300
------------ ------------ ------------
Operating income ............................... 1,785,464 2,215,058 1,314,810
Other income (expense) ......................... (291,163) 2,314,508 2,246,450
Interest expense ............................... 2,201,616 5,212,999 4,385,827
Equity in results of affiliated company ........ -- (11,829) --
Other gains, including gains
on sales of stations ......................... 12,321,760 8,094,993 --
------------ ------------ ------------
Income (loss) before income taxes
and extraordinary item ....................... 11,614,445 7,399,731 (824,567)
Provision for income taxes ..................... 2,378,749 775,982 289,220
------------ ------------ ------------
Income (loss) before extraordinary item ........ 9,235,696 6,623,749 (1,113,787)
Extraordinary item:
Loss on debt extinguishment ................... -- (3,921,061) (436,329)
------------ ------------ ------------
Net income (loss) .............................. $ 9,235,696 $ 2,702,688 $ (1,550,116)
============ ============ ============
Primary earnings per common share:
Income (loss) before extraordinary item ....... $ 1.65 $ 1.23 $ (0.21)
Loss on extinguishment of debt ................ -- (0.73) (0.08)
------------ ------------ ------------
Net income (loss) per common share ............. $ 1.65 $ 0.50 $ (0.29)
============ ============ ============
Fully diluted earnings per common share:
Income (loss) before extraordinary item ....... $ 1.62 $ 1 .22 $ (0.21)
Loss on extinguishment of debt ................ -- (0.72) (0.08)
============ ============ ============
Net income (loss) per common share ............. $ 1.62 $ 0.50 $ (0.29)
------------ ------------ ------------
Weighted average common shares outstanding:
Primary shares ................................ 5,598,237 5,388,001 5,376,715
============ ============ ============
Fully diluted shares .......................... 5,687,927 5,459,353 5,376,715
============ ============ ============
</TABLE>
See accompanying notes.
F-34
<PAGE> 137
OSBORN COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
VOTING NON-VOTING ADDITIONAL
------------------------ ------------------- -----------
PAR PAR PAID-IN ACCUMULATED
SHARES VALUE SHARES VALUE CAPITAL DEFICIT
---------- ---------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 .... 10,752,181 107,523 -- -- $ 38,453,555 $(19,402,898)
Exercise of stock options ..... 1,500 15 -- -- 5,984 --
Issuance of stock warrant ..... -- -- -- -- 1,774,837 --
Effect of 1-for-2 reverse
stock split ................. (5,376,091) (53,762) -- -- 53,762 --
Purchase and retirement of
treasury stock .............. (17,843) (178) -- -- (106,880) --
Net loss ...................... -- -- -- -- -- (1,550,116)
---------- ---------- -------- -------- ------------ ------------
Balance at December 31, 1994 ... 5,359,747 53,598 -- -- 40,181,258 (20,953,014)
Purchase and retirement of
treasury stock .............. (107,059) (1,071) -- -- (641,283) --
Exercise of stock options ..... 23,659 237 -- -- 154,626 --
Net income .................... -- -- -- -- -- 2,702,688
---------- ---------- -------- -------- ------------ ------------
Balance at December 31, 1995 .... 5,276,347 52,764 -- -- 39,694,601 (18,250,326)
Exercise of stock options ..... 173,667 1,737 -- -- 732,182 --
Issuance of common stock ...... 132,500 1,325 -- -- 1,106,175 --
Acquisition and retirement
of treasury stock ........... (45,017) (450) -- -- (663,550) --
Net income .................... -- -- -- -- -- 9,235,696
---------- ---------- -------- -------- ------------ ------------
Balance at December 31, 1996 .... 5,537,497 $ 55,376 -- -- $ 40,869,408 $ (9,014,630)
========== ========== ======== ======== ============ ============
</TABLE>
See accompanying notes.
F-35
<PAGE> 138
OSBORN COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ............................................. $ 9,235,696 $ 2,702,688 (1,550,116)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization ............................... 4,756,325 5,782,404 5,285,280
Other gains (losses), including gains on sales of stations .. (12,321,760) (8,094,993) --
Deferred income taxes ....................................... 785,587 240,664 175,000
Transaction costs for proposed merger ....................... 479,754 -- --
Loss on extinguishment of debt .............................. -- 3,921,061 436,329
Write-off of registration statement costs ................... -- -- 397,583
Non-cash interest expense ................................... 244,363 332,284 210,421
Equity in results of affiliated company ..................... -- 11,829 --
Distributions from affiliated companies ..................... (62,500) (1,942,731) --
Changes in current assets and current liabilities:
Decrease (increase) in accounts receivable ................ 254,211 (323,770) (2,165,123)
(Increase) decrease in inventory .......................... (205,215) 190,705 (214,241)
Decrease (increase) in prepaid expenses and other
current assets .......................................... 506,607 (742,764) (177,499)
Acquisition deposit held in escrow ........................ -- 180,000 --
Increase in distribution receivable ....................... -- -- (2,264,552)
Increase in accounts payable and accrued expenses ......... 299,972 721,764 1,069,534
(Decrease) increase in accrued wages and
sales commissions ...................................... 677 129,528 (96,287)
Increase (decrease) in accrued interest payable ........... (412,941) (1,485,673) 1,632,742
Increase in accrued income taxes .......................... 666,402 290,223 15,009
------------ ------------ ------------
Total adjustments ............................................. (5,008,518) (789,469) 4,304,196
------------ ------------ ------------
Net cash provided by operating activities ..................... 4,227,178 1,913,219 2,754,080
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Distributions from affiliated companies ....................... 62,500 4,207,283 --
Payments for business acquisitions ............................ (13,605,591) -- (21,825,094)
Net proceeds from sale of stations ............................ 34,687,928 10,000,000 --
Accrued transaction costs ..................................... (479,754) (1,411,981) --
Net proceeds from sale of other assets ........................ 580,653 -- --
Proceeds from note receivable ................................. -- 1,620,455 329,545
Capital expenditures .......................................... (1,707,351) (1,326,492) (942,771)
Acquisition deposit held in escrow ............................ (925,000) (180,000) --
Reclassification of other noncurrent assets ................... 118,753 -- --
Expenditures for intangible assets ............................ -- (524,863) --
------------ ------------ ------------
Net cash provided by (used in) investing activities .......... 18,732,138 12,384,402 (22,438,320)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt ...................... -- 44,500,000 48,460,982
Proceeds from issuance of stock warrant ....................... -- -- 1,774,837
Debt issuance costs ........................................... (79,807) (1,183,824) (1,887,965)
Registration statement costs .................................. -- -- (228,587)
Proceeds from exercise of stock options ....................... 69,917 154,863 6,000
Purchase and retirement of treasury stock ..................... -- (642,354) (107,058)
Prepayment penalty on debt retirement ......................... -- (500,000) --
Principal payments on long-term debt and notes payable ........ (33,000,000) (50,000,000) (23,286,671)
------------ ------------ ------------
Net cash (used in) provided by financing activities .......... (33,009,890) (7,671,315) 24,731,538
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents .......... (10,050,574) 6,626,306 5,047,298
Cash and cash equivalents at beginning of period ............. 12,994,779 6,368,473 1,321,175
------------ ------------ ------------
Cash and cash equivalents at end of period .................... $ 2,944,205 $ 12,994,779 $ 6,368,473
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest ........................................ $ 2,370,194 $ 6,366,388 $ 2,542,664
============ ============ ============
Cash paid for income taxes .................................... $ 926,760 $ 245,095 $ 99,211
============ ============ ============
</TABLE>
See accompanying notes.
F-36
<PAGE> 139
OSBORN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. NATURE OF BUSINESS AND ORGANIZATION
Osborn Communications Corporation ("Osborn") is engaged in the operation
of radio stations, programmed music, cable television and other communications
properties throughout the United States.
2. PLAN OF MERGER
On July 23, 1996, Osborn entered into an agreement and plan of merger with
a subsidiary of Capstar Broadcasting Partners, Inc. ("the Company") whereby the
Company will acquire all of Osborn's common stock for $15.375 per share. A
majority of the holders of the Osborn's common stock voted to approve the
merger in December 1996 and the Federal Communications Commission ("FCC")
approved the transfer of Osborn's broadcast licenses to the Company in January
1997. The merger is expected to be completed in February 1997.
Concurrently with the execution of the merger agreement and as security
for liquidated damages that may be payable by the Company to Osborn for the
Company's failure to consummate the merger, the Company has deposited in an
escrow account an irrevocable letter of credit in favor of Osborn for the sum
of $5.0 million. If Osborn terminates the merger agreement by reason of
receiving an alternative proposal which is deemed more favorable to Osborn's
stockholders, Osborn must pay a termination fee of $3,750,000 to the Company.
3. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Osborn and its subsidiaries. All material intercompany items and transactions
have been eliminated. Investments in affiliated companies are accounted for
using the equity method. Certain prior years' amounts have been reclassified to
conform with the current year's presentation.
Depreciation
Property, plant and equipment are recorded at cost and depreciated using
the straight-line method over the estimated useful lives of the assets, as
follows:
<TABLE>
<S> <C>
Buildings ....................................... 10-39 years
Furniture and fixtures .......................... 5-7 years
Broadcasting equipment .......................... 3-19 years
Transportation equipment ........................ 2-5 years
</TABLE>
Expenditures for maintenance and repairs are charged to operations as
incurred.
Intangible Assets
Intangible assets include $2.6 million and $2.5 million in 1996 and 1995,
respectively, for agreements not to compete relating to certain transactions
described in Note 4, and $3.4 million in 1996 and 1995 assigned to Muzak
customer contracts acquired in 1990 and 1986, which are being amortized over
their estimated useful lives. Deferred financing costs of $1.3 million and $1.2
million in 1996 and 1995, respectively, are being amortized over the term of
the related debt on a straight-line basis, which approximates the interest
method. The remainder in the amount of $40.2 million and $48.6 million in 1996
and 1995, respectively, represents the excess of acquisition cost over the
amounts assigned to other assets acquired in Osborn's acquisitions, and is
being amortized on a straight-line basis principally over a 40-year period.
F-37
<PAGE> 140
OSBORN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
It is Osborn's policy to account for goodwill and all other intangible
assets at the lower of amortized cost or estimated realizable value. As part of
an ongoing review of the valuation and amortization of intangible assets of
Osborn and its subsidiaries, management assesses the carrying value of the
intangible assets, if facts and circumstances suggest that there may be
impairment. If this review indicates that the intangibles will not be
recoverable as determined by a non-discounted cash flow analysis of the
operating assets over the remaining amortization period, the carrying value of
the intangible assets would be reduced to estimated realizable value.
During 1996, Osborn adopted SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which
established standards for the recognition and measurement of impairment losses
on long-lived assets, certain identifiable intangible assets, and goodwill
(see Note 5).
Barter Transactions
Revenue from barter transactions (advertising provided in exchange for
goods and services) is recognized as income when advertisements are broadcast,
and merchandise or services received are charged to expense (or capitalized as
appropriate) when received or used.
Revenue
Broadcast revenue is presented net of advertising commissions of
approximately $1.3 million, $2.1 million and $1.7 million for the years ended
December 31, 1996, 1995 and 1994, respectively.
Per Share Data
Primary earnings per common share for 1996 and 1995 is based on the net
income for the year divided by the weighted average number of common and common
equivalent shares. Common stock equivalents consist of stock options and
warrants (see Notes 12 and 13). Shares issuable upon the exercise of all common
stock equivalents and other potentially dilutive securities are not included in
the computations for 1994 since their effect is not dilutive.
Cash Equivalents
Cash equivalents consist of short-term, highly liquid investments which
are readily convertible into cash and have an original maturity of three months
or less when purchased.
Inventory
Inventories, consisting of merchandise for Osborn's entertainment
properties, sound equipment held for resale by Osborn's Muzak franchises and
equipment held for resale by Osborn's healthcare cable business, are valued at
the lower of cost or market using the first-in, first-out method.
Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires Osborn 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 revenue and expenses during the reported
period. Actual results may differ from those estimates.
4. ACQUISITIONS/DISPOSITIONS/PENDING TRANSACTIONS
At December 31, 1996, Osborn owned and operated ten FM and six AM radio
stations, four programmed music and sound equipment distributorships, a
hospital cable television company and certain entertainment properties.
F-38
<PAGE> 141
OSBORN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. ACQUISITIONS/DISPOSITIONS/PENDING TRANSACTIONS -- (CONTINUED)
1996
In March 1996, Osborn acquired substantially all the assets of radio
station WRIR-FM (formerly WHLX-FM), Wheeling, West Virginia, for $0.8 million
plus transaction costs. In June 1996, Osborn acquired substantially all the
assets of radio stations WBBD-AM/WKWK-FM (formerly WKWK-AM/FM), Wheeling, West
Virginia, for $2.7 million plus transaction costs. Osborn programmed
WBBD-AM/WKWK-FM pursuant to a local marketing agreement ("LMA") from March 1996
through the closing of the acquisition. In October 1996, Osborn acquired
substantially all the assets of radio station WEGW-FM, Wheeling, West Virginia,
for $0.8 million. Osborn already owned radio stations WWVA-AM/WOVK-FM in
Wheeling, West Virginia.
In April 1996, Osborn acquired substantially all the assets of radio
stations WKII-AM/WFSN-FM (formerly WKII-AM/WEEJ-FM). Port Charlotte, Florida,
for $2.85 million plus transaction costs. Upon completion of the relocation of
WFSN-FM's broadcast antenna to Osborn's Pine Island, Florida tower in order to
better serve the Port Charlotte/Ft. Myers market, additional consideration of
$750,000 will be paid. The additional consideration is included in other
noncurrent liabilities in the consolidated balance sheet at December 31, 1996.
The additional consideration was paid in January 1997. Pending the closing of
the acquisition, the stations were programmed by Osborn pursuant to an LMA
since September 1995. Osborn already owns radio station WOLZ-FM, Ft. Myers, and
has a 50% non-voting ownership interest in radio station WDRR-FM, San Carlos
Park/Ft. Myers. Osborn plans to dispose of radio stations WOLZ-FM/WFSN-FM/
WKII-AM in 1997 (see Pending Transactions below).
In May 1996, Osborn acquired substantially all the assets of radio
stations KNAX-FM/KRBT-FM, Fresno, California. Consideration for the acquisition
consisted of $6.0 million plus 120,000 shares of Osborn's common stock. Pending
the closing of the acquisition, the stations were programmed by Osborn since
January 1996 pursuant to an LMA. In December 1996, the Company sold
substantially all the assets of radio stations KNAX-FM/ KRBT-FM for $11.0
million, resulting in a pre-tax gain of approximately $3.5 million. Pending the
closing of the transaction, the purchaser managed the stations pursuant to an
LMA since August 1, 1996.
In January 1996, Osborn sold substantially all the assets of radio station
WWRD-FM, Jacksonville, Florida/Brunswick, Georgia, for $2.5 million, resulting
in a pre-tax gain of approximately $0.8 million. Pending the closing of the
disposition, the station was programmed by the purchaser pursuant to an LMA.
In February 1996, Osborn sold substantially all the assets of radio
stations WNDR-AM/WNTQ-FM, Syracuse, New York, for $12.5 million, resulting in a
pre-tax gain of approximately $6.0 million. Pending the closing of the
disposition, the stations were programmed by the purchaser pursuant to an LMA.
In June 1996, Osborn sold substantially all the assets of radio station
WFXK-FM, Raleigh/Tarboro, North Carolina, for $5.9 million, resulting in a
pre-tax gain of approximately $2.2 million. Pending the closing of the
transaction, the purchaser programmed the station pursuant to an LMA.
In June 1996, Osborn sold substantially all the assets of radio station
WAYV-FM, Atlantic City, New Jersey, for $3.1 million, resulting in a pre-tax
gain of approximately $0.2 million. Pending the closing of the transaction, the
purchaser programmed the station pursuant to an LMA since March 1996.
In June 1996, Osborn sold substantially all the assets of radio station
WFKS-FM, Daytona Beach/Palatka, Florida, for $4.0 million, resulting in a
pre-tax gain of approximately $0.8 million. Pending the closing of the
transaction, the purchaser programmed the station pursuant to an LMA.
The net cash proceeds from each of the dispositions were used principally
to repay long-term debt and fund transaction costs.
F-39
<PAGE> 142
OSBORN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. ACQUISITIONS/DISPOSITIONS/PENDING TRANSACTIONS -- (CONTINUED)
All of the acquisitions have been accounted for using the purchase method
of accounting. Accordingly, the purchase price of each acquisition has been
allocated to the assets based upon their fair values at the date of
acquisition. The results of operations of the properties acquired are included
in Osborn's consolidated results of operations from the respective dates of
acquisition and until the date of disposition for properties disposed.
1995
In December 1995, Osborn entered into an option agreement with Allbritton
Communications Company for the sale of television station WJSU-TV, Anniston,
Alabama, and an associated 10-year LMA. In consideration for the option, Osborn
received a nonrefundable cash payment of $10.0 million. Because the cash
proceeds from the option are nonrefundable, Osborn accounted for the economic
substance of the transaction as if a sale of substantially all the assets of
the station had occurred. Accordingly, a gain of approximately $8.1 million was
recorded. In addition, upon the exercise of the option and the necessary FCC
consent, Osborn will receive an additional cash payment of $2.0 million. Upon
the grant of the necessary regulatory approvals to relocate the station's
broadcast transmitter to maximize broadcast coverage of the facility, Osborn
could have received additional cash payments of up to $7.0 million. In January
1997, the regulatory approvals were granted for the relocation of the station's
broadcast transmitter, and a cash payment of approximately $5.3 million was
paid to Osborn. An additional payment relating to the transmitter relocation of
approximately $1.4 million will be payable upon exercise of the option.
1994
In June 1994, Osborn acquired substantially all the assets of three FM
radio stations and one AM radio station for $20.0 million plus transaction
costs. The acquisition included radio stations WWNC-AM/WKSF-FM, Asheville,
North Carolina; WOLZ-FM, Ft. Myers, Florida; and WFKS-FM, Daytona Beach,
Florida. In August 1994, Osborn acquired substantially all the assets of radio
stations WAAX-AM/WQEN-FM, Gadsden, Alabama, (the "Gadsden Acquisition") for
$1.75 million plus transaction costs. Prior to the grant of the waiver of the
FCC's cross-ownership regulations, the Gadsden acquisition was accounted for
using the equity method of accounting. Accordingly, prior year financial
statements have been reclassified to reflect the consolidation of the Gadsden
radio stations.
In March 1994, Osborn, through a wholly-owned subsidiary, acquired radio
station WAYV-FM, Atlantic City, New Jersey, for consideration of approximately
$2.5 million.
Pending Transactions
In January 1997, Osborn acquired substantially all the assets of radio
station WYNU-FM, Jackson/Milan, Tennessee for $3.6 million plus transaction
costs. Osborn already owns one FM and one AM radio station in the market.
In November 1996, Osborn agreed to acquire substantially all the assets of
radio station WTXT-FM, Tuscaloosa/Fayette, Alabama from Tuscaloosa Broadcasting
Company, Inc. for approximately $5.8 million, subject to FCC approval. The
transaction is expected to close in February 1997. In December 1996, Osborn
agreed to acquire substantially all the assets of radio stations WACT-AM/FM,
Tuscaloosa, Alabama from Taylor Communications Corporation for $1.0 million,
subject to FCC approval. Pending the closing of the transaction, which is
expected in the first quarter of 1997, Osborn is managing the stations pursuant
to an LMA.
In November 1996, Osborn agreed to acquire the stock of Dixie
Broadcasting, Inc. and Radio WBHP, Inc., the owners of radio stations
WDRM-FM/WHOS-AM/WBHP-AM, Huntsville, Alabama. Consideration for the acquisition
consists of (i) $23.0 million; (ii) a three year consulting agreement valued at
$2.5 million; and (iii) a $1.5 million earn-out based on future operating
results. The transaction, which is subject to FCC approval, is expected to
close in 1997.
F-40
<PAGE> 143
OSBORN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. ACQUISITIONS/DISPOSITIONS/PENDING TRANSACTIONS -- (CONTINUED)
In December 1996, Osborn agreed to sell substantially all the assets of
WOLZ-FM, WFSN-FM and WKII-AM, Fort Myers/Port Charlotte, Florida for
approximately $11.0 million to Clear Channel Radio, Inc., subject to FCC
approval. Pending the closing of the transaction, which is expected in 1997,
the stations are being managed by the Purchaser pursuant to a LMA starting in
January 1997.
Other Investments
In 1989, Osborn acquired, $620,000, a 50% non-voting ownership interest
(without control) in a corporation that owns and operates radio station
WDRR-FM, San Carlos Park, Florida. The station became operational in September
1995. Osborn's net investment is included in investment in affiliated companies
on the consolidated balance sheet.
In 1989, Osborn acquired a 32% ownership interest in Northstar Television
Group, Inc. ("Northstar") for $329,000. From Northstar's inception through May
1994, Osborn managed Northstar's four television stations for an annual fee of
up to $250,000, plus reimbursement of out-of-pocket expenses and allocated
overhead costs. In 1994, as a result of a proposed restructuring of Northstar,
Osborn agreed, as payment for prior services rendered, to receive an immediate
payment of $250,000, another payment of $250,000 within two years, and the
retention of an economic interest. Osborn's management agreement terminated
following the restructuring. In 1995, three of Northstar's four television
stations were sold and Osborn received a distribution of $1.6 million,
classified as other income in the consolidated statement of operations, plus
accrued management fees of $250,000.
In 1987, Osborn acquired 25% of the stock of Fairmont Communications
Corporation ("Fairmont") for $500,000. Fairmont owned seven radio stations in
four large and medium sized markets. In August 1992, Fairmont filed for
protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. In
September 1993, Fairmont emerged from Chapter 11 upon approval by the
bankruptcy court of a plan of reorganization (the "Plan"). The Plan provided
for the sale of Fairmont's assets, distribution of the proceeds in accordance
with the Plan, and subsequent liquidation of Fairmont. All of Fairmont's
stations were sold by the second quarter of 1994. Osborn will continue to
manage Fairmont pursuant to a management agreement which expires upon the
liquidation of Fairmont, which is expected in 1997. For managing Fairmont,
Osborn receives an annual fee of $125,000, plus reimbursement of out-of-pocket
expenses and allocated overhead costs. In 1994, Osborn received additional
management fees of $728,000 related to the sale of Fairmont's stations. Osborn
also earned distributions of $400,000 and $2.3 million in 1995 and 1994,
respectively, classified as other income and distribution receivable in the
consolidated financial statements, determined by the amount realized by
Fairmont from sales of its assets.
5. OSBORN HEALTHCARE
Osborn Healthcare, a division of Osborn Entertainment Enterprises
Corporation, continued to experience operating losses through the second
quarter of 1996. Consistent with Osborn's previously stated intention to
evaluate options to increase shareholder value, management has reviewed the
strategic direction and long-term prospects of the Osborn Healthcare operations
and has restructured the operations. Osborn plans to focus resources on only
the more profitable product lines. In conjunction with these plans, Osborn has
combined the Osborn Healthcare operations and Osborn's programmed music
operations, terminating certain employees of the Osborn Healthcare operations,
and consolidating certain overhead. In the second quarter of 1996, Osborn
accrued costs of approximately $300,000, principally severance costs, in
connection with the consolidation of operations. In addition, Osborn has
reduced goodwill by approximately $900,000 to reflect the anticipated
discounted cash flow from the remaining healthcare operations. The charges,
totaling $1.2 million, are included in other gains (losses), including gains on
sales of stations in the consolidated statement of operations.
F-41
<PAGE> 144
OSBORN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net revenues ....................................... $ 36,131,000 $ 32,667,000
Income (loss) before extraordinary item ............ 633,000 (808,000)
Net income (loss) .................................. 633,000 (4,729,000)
Net income (loss) per share ........................ $ 0.11 $ (0.87)
</TABLE>
The unaudited pro forma information for the years ended December 31, 1996
and 1995 assumes that the acquisitions and dispositions described in Note 4,
excluding pending transactions, had occurred on January 1, 1995. The gains on
sales of stations and the loss from Osborn Healthcare's restructuring in 1996
and the distributions from Northstar Television Group in 1995 are excluded from
the pro forma information because of their nonrecurring nature. The pro forma
information is not necessarily indicative either of the results of operations
that would have occurred had these transactions been made on the date
indicated, or of future results of operations.
Net assets of properties to be disposed in Ft. Myers aggregated $7.5
million at December 31, 1996, consisting of current assets of $500,000, plant
and equipment of $2.0 million, and net intangible assets of $5.0 million.
7. LONG-TERM DEBT
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Note payable to KeyBank National Association,
at the prime rate plus 0.5%; interest payable
quarterly; quarterly commitment reductions
from December 31, 1996 through December 31, 2001(a) ... $ 200,000 $ 14,500,000
Note payable to KeyBank National Association, at
LIBOR plus 1.75%; principal due in quarterly
installments from December 31, 1996
through December 31, 2001(a) .......................... 14,000,000 30,000,000
Term loan payable to National Westminster
Bank, net of unamortized debt
discount of $700,000; interest payable
quarterly at LIBOR plus 2.5%;
principal due in quarterly installments
in varying amounts from June 1996
through March 2000(b) ................................. -- 2,700,000
------------ ------------
14,200,000 47,200,000
Less current portion .................................... 320,000 2,718,000
------------ ------------
$ 13,880,000 $ 44,482,000
============ ============
</TABLE>
- --------------
(A) In August 1995, Osborn entered into a credit facility of $56.0 million
with KeyBank National Association (the "Credit Facility"). The Credit
Facility consists of a $46.0 million revolving credit facility and a $10.0
million facility which may be used for acquisitions. The initial drawdown
of $44.5 million, along with Osborn's internally generated funds, was used
to repay existing loans totaling $50.0 million and pay transaction costs.
The Credit Facility contains covenants which require, among other things,
that Osborn and its subsidiaries (excluding Atlantic City Broadcasting
Corp.) maintain certain financial levels, principally with respect to
EBITDA (earnings before interest, income tax, depreciation and
amortization) and leverage ratios, and limit the amount of capital
expenditures. The Credit Facility also restricts the payment of cash
dividends. The Credit Facility is collateralized by pledges of the
tangible and intangible assets of Osborn and its subsidiaries, as well as
the stock of those subsidiaries. At December 31, 1996, Osborn has
additional availability under the revolving credit facility of $14.1
million. Effective December 31, 1996 the outstanding balance under the
acquisition facility will convert to a term loan. Under the current terms
of the Credit Facility, no additional
F-42
<PAGE> 145
OSBORN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT -- (CONTINUED)
amounts under the acquisition facility may be borrowed after December 31,
1996 unless the terms are modified. Osborn pays an annual commitment fee
of 0.5% of the unused commitment.
(B) The term loan contained covenants with respect to Osborn's wholly-owned
subsidiary, Atlantic City Broadcasting Corp., which, among other things,
restricted cash distributions to Osborn and limited the amount of annual
capital expenditures. The loan was collateralized by pledges of the
tangible and intangible assets and stock of Atlantic City Broadcasting
Corp. ("Atlantic City"), and were otherwise nonrecourse to Osborn and its
other assets. In June 1996, the Company sold substantially all the assets
of Atlantic City. The net proceeds were used primarily to repay long-term
debt and fund transaction costs.
At December 31, 1996, the aggregate amounts of long-term debt due during
the next five years are as follows:
<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
Year:
1997 ................................................. $ 320,000
1998 ................................................. 640,000
1999 ................................................. 640,000
2000 ................................................. 800,000
2001 ................................................. 11,800,000
</TABLE>
The fair value of the debt approximates net book value.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Land ........................................... $ 3,303,266 $ 4,256,414
Buildings ...................................... 4,304,159 4,168,839
Equipment ...................................... 22,266,863 25,556,838
------------ ------------
29,874,288 33,982,091
------------ ------------
Less accumulated depreciation .................. (16,162,605) (18,624,021)
------------
$ 13,711,683 $ 15,358,070
============ ============
</TABLE>
At December 31, 1996, all property, plant and equipment is pledged as
collateral for the debt disclosed in Note 7.
9. INCOME TAXES
At December 31, 1996, Osborn has consolidated net operating loss
carryforwards for income tax purposes of $20.6 million that expire in years
2006 through 2010. Of the total net operating loss carryforwards, $11.0 million
may be used only to offset future income of Osborn's subsidiary, Osborn
Entertainment Enterprises Corporation.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of Osborn's deferred tax assets and liabilities are as follows:
F-43
<PAGE> 146
OSBORN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards ............. $ 8,237,540 $ 13,577,873
Other ........................................ 971,542 713,951
------------ ------------
9,209,082 14,291,824
Valuation allowance ............................ (5,940,696) (9,088,722)
------------ ------------
3,268,386 5,203,102
Deferred tax liabilities:
Depreciation and amortization ................ 2,865,184 4,014,313
Sale of station .............................. 3,289,500 3,289,500
Other ........................................ 175,000 175,000
------------ ------------
6,329,684 7,478,813
------------ ------------
Net deferred tax liabilities ................... $ 3,061,298 $ 2,275,711
============ ============
</TABLE>
The provision for income taxes for 1996 consists of federal taxes of
$269,000, state and local taxes of $1,324,000 and deferred federal, state and
local taxes of $786,000. The provision for income taxes for 1995 and 1994
consists entirely of state and local taxes, of which $535,000 and $114,000,
respectively, is current and $241,000 and $175,000, respectively, is deferred.
The reconciliation of income tax computed at the U.S. federal statutory
tax rate to income tax expense is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Amount computed using statutory rate ............ $4,065,056 $1,217,532 $ (428,705)
State and local taxes, net of federal benefit ... 860,748 504,388 190,885
Net operating losses (utilized) generated ....... (2,673,429) (1,228,507) 234,539
Nondeductible expenses .......................... 126,374 282,569 292,501
---------- ---------- ----------
$2,378,749 $ 775,982 $ 289,220
========== ========== ==========
</TABLE>
10. COMMITMENTS
Osborn leases office and broadcast tower space, vehicles and office
equipment. Rental expense amounted to $1,113,000, $994,000 and $768,000 for the
years ended December 31, 1996, 1995 and 1994, respectively.
The minimum aggregate annual rentals under noncancellable operating leases
are payable as follows:
<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
Year:
1997 ................................................... $ 1,038,000
1998 ................................................... 752,000
1999 ................................................... 532,000
2000 ................................................... 305,000
2001 ................................................... 244,000
Thereafter ............................................. 2,693,000
-----------
$ 5,564,000
===========
</TABLE>
F-44
<PAGE> 147
OSBORN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. EMPLOYEE BENEFIT PLANS
Osborn sponsors a profit sharing plan which qualifies under Section 401(k)
of the Internal Revenue Code (the "IRC"). The Plan is available to all
full-time employees with at least one year of employment with Osborn. All
eligible employees may elect to contribute a portion of their compensation to
the profit sharing plan, subject to IRC limitations. Effective January 1, 1996,
the Plan provides for employer contributions based upon an employee's salary.
In December 1994, Osborn adopted a non-qualified deferred compensation plan
available to certain management employees.
12. STOCK OPTION PLAN
Osborn's Incentive Stock Option Plan (the "Plan") provides for the
granting to officers and key employees of incentive and non-qualified stock
options to purchase Osborn's voting common stock as defined under current tax
laws. Incentive stock options are exercisable at a price equal to the fair
market value, as defined, on the date of grant, for a maximum 10-year period
from the date of grant. Non-qualified stock options may be granted at an
exercise price equal to at least 85% of the fair market value on the date of
grant, for a maximum 11-year period from the date of grant. The exercise prices
of all options granted in 1994 through 1996 were at fair market value at the
date of grant.
The following table summarizes the Plan's transactions for the years ended
December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Outstanding options, beginning of year ........... 447,341 417,000 382,750
Granted .......................................... 52,000 66,500 108,250
Cancelled or expired ............................. (8,299) (12,500) (72,500)
Exercised ........................................ (173,667) (23,659) (1,500)
-------- -------- --------
Outstanding options, end of year ................. 317,375 447,341 417,000
======== ======== ========
Weighted average price of options granted ........ $ 10.10 $ 6.76 $ 6.26
Weighted average price of options canceled
or expired ..................................... $ 6.46 $ 7.00 $ 6.61
Weighted average price of options exercised ...... $ 4.23 $ 6.55 $ 4.00
Weighted average exercise price, end of year ..... $ 8.55 $ 6.66 $ 6.64
Options exercisable, end of year ................. 205,125 283,921 280,083
Options available for future grant ............... 35,299 79,000 133,000
</TABLE>
At December 31, 1996, the range of exercise prices for outstanding options
was $4.00 through $14.40 These outstanding options have a remaining contractual
life of five years.
Osborn applies Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations in accounting for its
Plan. Had compensation cost for the Plan been determined based upon the fair
value at the grant date for awards under the Plan consistent with the
methodology prescribed under Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation, Osborn's net income and earnings
per share would have been reduced by approximately $144,000, or $0.03 per
share, and $46,000, or $0.01 per share for the years ended December 31, 1996
and 1995, respectively. The fair value of the options granted during the years
ended December 31, 1996 and 1995 is estimated as $102,000 and $114,000,
respectively, on the date of grant using the Black-Scholes option-pricing model
with the following assumptions: dividend yield of 0.0%, volatility of 40.7%,
risk-free interest rate of 6.5%, assumed forfeiture rate of 0.0%, and an
expected life of 1 to 2 years. The assumptions used assume that the proposed
merger as described in Note 2 is consummated in the first quarter of 1997.
F-45
<PAGE> 148
OSBORN COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. STOCKHOLDERS' EQUITY
During 1996, approximately 174,000 shares of common stock were issued
pursuant to the exercise of stock options. Approximately 45,000 existing shares
were retired to fund the exercise of certain of these options.
In January 1995, Osborn paid $642,000 to repurchase and subsequently
retired 107,059 unregistered shares of its common stock which were held by an
institution. In December 1994, Osborn paid $107,000 to repurchase and
subsequently retired 17,843 shares of its common stock at $6.00 per share.
In June 1994, Osborn entered into two credit agreements totaling $50.0
million with Citicorp Mezzanine Investment Fund ("CMIF"). As partial
consideration for making the loans, CMIF received a warrant to purchase
1,014,193 shares (after giving effect to the reverse stock split described
below) of Osborn's common stock at $7.00 per share. The warrant is exercisable
for a 10-year period. Under the terms of the warrant agreement, in the event
that the CMIF loans were repaid by December 31, 1995, purchase rights with
respect to 676,162 warrant shares will be canceled. The loans were repaid in
August 1995 and, accordingly, the purchase rights with respect to 676,162
warrant shares were canceled.
In July 1994, Osborn effected a 1-for-2 reverse stock split for
shareholders of record on that date. Cash was paid in lieu of fractional
shares. All per share amounts in the consolidated statement of operations
reflect the reverse stock split.
14. SUBSEQUENT EVENT (UNAUDITED)
On February 20, 1997, Capstar Broadcasting Partners, Inc. acquired all of
Osborn's common stock and Osborn was merged with a subsidiary of the Company.
F-46
<PAGE> 149
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Benchmark Communications
Radio Limited Partnership:
We have audited the accompanying combined balance sheets of Benchmark
Communications Radio Limited Partnership (as identified in Note 1)
(collectively "Benchmark") as of December 31, 1996 and 1995 and the related
combined statements of operations, changes in partners' equity (deficit), and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of Benchmark'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 audits 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 combined financial statements referred to above
present fairly, in all material respects, the combined financial position of
Benchmark as of December 31, 1996 and 1995 and the combined results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
February 8, 1997
F-47
<PAGE> 150
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash ................................................ $ 11,029,177 $ 825,403
Escrow deposit ...................................... 150,000 --
Accounts receivable, net of allowance for
doubtful accounts of $324,719 and
$280,366, respectively ............................ 4,731,405 4,016,421
Due from related entities ........................... 23,753 10,884
Deferred acquisition costs .......................... 375,882 --
Prepaid expenses and other current assets ........... 244,784 354,211
------------ ------------
Total current assets .............................. 16,555,001 5,206,919
Property and equipment, net ........................... 13,721,546 14,156,177
Investment in limited partnership ..................... 66,331 82,721
Intangible assets, net ................................ 43,788,173 30,204,762
------------ ------------
Total assets ...................................... $ 74,131,051 $ 49,650,579
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses ............... $ 2,900,204 $ 1,645,018
Due to related entities ............................. 2,865,164 65,345
Current portion of long-term debt ................... 14,219,155 12,846,733
Obligations under capital leases, current portion ... 78,984 114,451
------------ ------------
Total current liabilities ......................... 20,063,507 14,671,547
Long-term debt ........................................ 29,841,341 14,127,693
Obligations under capital leases, net
of current portion ................................ 78,820 220,058
------------ ------------
Total liabilities ................................... 49,983,668 29,019,298
------------ ------------
Commitments (Note 8)
Partners' capital ..................................... 24,147,383 20,631,281
------------ ------------
Total liabilities and partners' capital ............. $ 74,131,051 $ 49,650,579
============ ============
</TABLE>
The accompanying notes are an integral
part of the combined financial statements.
F-48
<PAGE> 151
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Gross broadcast revenue ................................. $ 29,697,028 $ 25,198,304 $ 17,621,955
Less agency commissions ................................. 2,441,800 2,051,455 1,449,843
------------ ------------ ------------
Net revenue ......................................... 27,255,228 23,146,849 16,172,112
------------ ------------ ------------
Operating expenses:
Programming, technical and news ..................... 6,760,363 5,210,641 3,804,695
Sales and promotion ................................. 9,233,843 8,245,763 5,787,235
General and administrative .......................... 5,257,968 4,823,394 3,383,768
Depreciation and amortization ....................... 5,320,258 5,005,245 4,149,542
Corporate expenses .................................. 1,513,438 1,271,455 569,480
------------ ------------ ------------
28,085,870 24,556,498 17,694,720
------------ ------------ ------------
Loss from operations ........................... (830,642) (1,409,649) (1,522,608)
Other income (expense):
Interest expense .................................... (3,384,388) (2,519,578) (1,799,169)
Gain on sale of broadcasting properties (Note 6b) ... 9,612,496 -- 1,437,817
Other, net .......................................... 678,636 (414,561) 96,920
------------ ------------ ------------
Net income (loss) ................................... $ 6,076,102 $ (4,343,788) $ (1,787,040)
============ ============ ============
</TABLE>
The accompanying notes are an integral part
of the combined financial statements.
F-49
<PAGE> 152
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CHANGES
IN PARTNERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1994 ................. $ (1,879,470) $ 13,165,680 $ 11,286,210
Capital contributions from partners ... (48,191) 9,163,878 9,115,687
Capital distributions to partners ..... (255,000) -- (255,000)
Net income (loss) ..................... 233,554 (2,020,594) (1,787,040)
------------ ------------ ------------
Balance, December 31, 1994 ............... (1,949,107) 20,308,964 18,359,857
Capital contributions from partners ... 961,516 6,253,441 7,214,957
Capital distributions to partners ..... (599,745) -- (599,745)
Net income (loss) ..................... (300,171) (4,043,617) (4,343,788)
------------ ------------ ------------
Balance, December 31, 1995 ............... (1,887,507) 22,518,788 20,631,281
Capital contributions from partners ... 800,000 -- 800,000
Capital distributions to partners ..... (1,260,000) (2,100,000) (3,360,000)
Net income (loss) ..................... 2,137,845 3,938,257 6,076,102
------------ ------------ ------------
Balance, December 31, 1996 ............... $ (209,662) $ 24,357,045 $ 24,147,383
============ ============ ============
</TABLE>
The accompanying notes are an integral
part of the combined financial statements.
F-50
<PAGE> 153
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ...................................... $ 6,076,102 $ (4,343,788) $ (1,787,040)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization .......................... 5,320,258 5,005,245 4,149,542
Provision for doubtful accounts ........................ 332,487 280,760 342,038
Loss from investment in limited partnership ............ 16,490 7,381 7,914
Gain on sale of broadcast properties and equipment ..... (9,612,496) (4,766) (1,437,817)
Change in barter receivable/payable, net ............... (83,433) 197,335 35,795
Changes in assets and liabilities, net of
the effects of acquired broadcasting properties:
Accounts receivable .................................. (996,735) (1,528,818) (569,941)
Due from/due to related entities, net ................ 2,786,950 (332,505) 167,622
Prepaid expenses and other current assets ............ (109,427) (277,703) 42,261
Accounts payable and accrued expenses ................ 1,375,292 635,184 (227,408)
------------ ------------ ------------
Net cash flows provided by (used in) operating
activities ...................................... 5,105,488 (361,675) 722,966
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment .................... (1,133,074) (1,140,417) (542,749)
Purchases of broadcasting properties ................... (22,225,278) (16,535,198) (5,189,233)
Net proceeds from sales of broadcasting properties ..... 14,123,152 -- 4,866,629
Capital contribution to limited partnerships ........... -- -- 3,900,000
------------ ------------ ------------
Net cash flows provided by (used in) investing
activities ...................................... (9,235,200) (17,675,615) 3,034,647
------------ ------------ ------------
Cash flows from financing activities:
Repayments of notes payable and capital leases ......... (6,903,389) (9,341,629) (5,363,989)
Proceeds from borrowing under notes payable and
promissory notes ..................................... 23,846,875 15,652,627 1,755,000
Distributions to partners .............................. (3,360,000) (599,745) (255,000)
Capital contributions for acquisition of broadcasting
properties ........................................... 800,000 7,393,804 5,700,000
Cash paid for syndication costs ........................ -- (178,847) (584,313)
Borrowings under line of credit ........................ 647,075 215,535 --
Repayments under line of credit ........................ (697,075) -- --
Proceeds from sale leaseback transaction ............... -- -- 141,000
Proceeds from assumption of capital lease obligation ... -- -- 28,000
------------ ------------ ------------
Net cash flows provided by financing activities .... 14,333,486 13,141,745 1,420,698
------------ ------------ ------------
Net increase (decrease) in cash .......................... 10,203,774 (4,895,545) 5,178,311
Cash, at beginning of year ............................... 825,403 5,720,948 542,637
------------ ------------ ------------
Cash, at end of year ..................................... $ 11,029,177 $ 825,403 $ 5,720,948
============ ============ ============
Supplementary information:
Cash paid for interest ................................. $ 3,459,331 $ 2,473,568 $ 1,363,052
Noncash activities:
Asset additions under capital lease obligations ........ 15,882 16,936 211,371
Assumption of note payable in connection with fund
merger ............................................... -- 500,000 --
</TABLE>
The accompanying notes are an integral
part of the combined financial statements.
F-51
<PAGE> 154
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
(DECEMBER 31, 1996, 1995 AND 1994)
1. ORGANIZATION AND BASIS OF PRESENTATION:
The accompanying financial statements include the combined radio station
holdings of Benchmark Communications Radio Limited Partnership (BCRLP), and
Benchmark Radio Acquisition Fund I Limited Partnership (BRAF I), Benchmark
Radio Acquisition Fund IV Limited Partnership (BRAF IV), Benchmark Radio
Acquisition Fund VII Limited Partnership (BRAF VII), and Benchmark Radio
Acquisition Fund VIII Limited Partnership (BRAF VIII) (collectively,
Benchmark). BCRLP is a Maryland limited partnership formed on June 1, 1991 to
invest in and manage radio stations and serves as the general partner for the
four funds listed above, as well as other funds not included in these combined
financial statements. Benchmark serves certain radio markets in Delaware,
Maryland, South Carolina, Virginia, Louisiana, Mississippi and Alabama.
All significant intercompany accounts and transactions have been
eliminated.
Benchmark Radio Acquisition Fund I Limited Partnership
BRAF I is a Maryland limited partnership formed on May 16, 1990, and
operates radio stations WDOV-AM, WDSD-FM and WSRV-FM.
Benchmark Radio Acquisition Fund IV Limited Partnership
BRAF IV is a Maryland limited partnership formed on December 10, 1992, to
operate radio stations and its 99.99999% owned subsidiary, Benchmark Radio
Acquisition Fund V Limited Partnership (BRAF V) (together, the Fund IV
Partnership). BRAF IV is the general partner in BRAF V and BCRLP is the limited
partner. The Fund IV Partnership operates radio stations WOSC-FM, WWFG-FM,
WCOS-AM/FM, WHKZ-FM, WVOC-AM, and KRMD-AM/FM.
Benchmark Radio Acquisition Fund VII Limited Partnership
BRAF VII is a Maryland limited partnership formed on June 20, 1994, and
operates WESC-AM/FM, WFNQ-FM and WJMZ-FM.
Benchmark Radio Acquisition Fund VIII Limited Partnership
BRAF VIII is a Maryland limited partnership formed on November 15, 1994,
and operates WUSQ-FM, WNTW-AM, WYYD-FM, WROV-AM/FM and WFQX-FM.
On January 1, 1995, Benchmark Radio Acquisition Fund II Limited
Partnership (BRAF II), which owned WUSQ-FM and WNTW-AM in Winchester, Virginia,
and Benchmark Radio Acquisition Fund VI Limited Partnership (BRAF VI), which
owned WFQX-FM in Front Royal, Virginia, were merged into BRAF VIII. The limited
partners of BRAF II and BRAF VI collectively received approximately 33 units,
of the total of 73 units, in BRAF VIII. The merger has been accounted for in a
manner similar to a pooling of interests, whereby the net assets of the merged
partnerships are recorded at their carrying amounts at the time of the merger.
F-52
<PAGE> 155
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REVENUE RECOGNITION
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the programs and commercial announcements are
broadcast.
BARTER TRANSACTIONS
Barter transactions represent advertising time exchanged for promotional
items, advertising, supplies, equipment, and services. Barter revenue is
recorded at the fair value of the goods or services received and is recognized
in income when the advertisements are broadcast. Goods or services are charged
to expense when received or used. Advertising time owed and goods or services
due Benchmark are included in accounts payable and accounts receivable,
respectively.
INVESTMENT IN LIMITED PARTNERSHIP
Investment in limited partnership (representing BRAF Fund III which is not
included in these combined financial statements) is accounted for using the
equity method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation is determined using the straight-line method
based upon the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings ........................................... 39
Building improvements ............................... 13-39
Broadcast equipment ................................. 5-25
Furniture, fixtures and equipment ................... 5-10
</TABLE>
Leasehold improvements are amortized over the shorter of their useful
lives or the terms of the related leases. Costs of repairs and maintenance are
charged to operations as incurred.
INTANGIBLE ASSETS
Intangible assets are stated at cost, less accumulated amortization.
Amortization is determined using the straight-line method based upon the
estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Licenses and authorization costs ...... 25
Organization costs .................... 5
Deferred financing costs .............. Life of respective loan
Noncompete agreements ................. 5
Goodwill .............................. 25
Other ................................. 1-5
</TABLE>
Benchmark evaluates intangible assets for potential impairment by
analyzing the operating results, trends and prospects of the business, as well
as comparing them to their competitors. Benchmark also takes into consideration
recent acquisition patterns within the broadcast industry as well as the impact
of recently enacted or potential Federal
F-53
<PAGE> 156
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Communications Commission (the FCC) rules and regulations and any other events
or circumstances which might indicate potential impairment.
ADVERTISING COSTS
Benchmark incurs various marketing and promotional costs to add and
maintain listenership. These costs are expensed as incurred or deferred and
amortized over the interim periods which they benefit and totaled approximately
$1.6 million, $1.6 million and $1.2 million for the years ended December 31,
1996, 1995 and 1994, respectively.
CONCENTRATION OF CREDIT RISK
Benchmark's revenue and accounts receivable primarily relate to
advertising of products and services within the radio stations' broadcast
areas. Benchmark's management performs ongoing credit evaluations of the
customers' financial condition and, generally, requires no collateral from
their customers. Credit losses have been within management's expectations and
adequate allowances for any uncollectible trade receivables are maintained.
INCOME TAXES
Benchmark is comprised of limited partnerships which are exempt from
federal and state income taxes. Accordingly, no provision for income taxes has
been made in the accompanying financial statements as all items of tax
attributes pass through pro rata to each partner in accordance with the
partnership agreements.
3. UNCERTAINTIES AND 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 the
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.
On February 8, 1996, the President signed into law the Telecommunications
Act of 1996. Among other things, this legislation requires the FCC to relax its
numerical restrictions on local ownership and affords renewal applicants
significant new protections from competing applications for their broadcast
licenses. The ultimate effect of this legislation on the competitive
environment is currently undeterminable.
4. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Land ........................................... $ 1,489,647 $ 1,532,116
Tower, building and improvements ............... 5,588,771 5,357,989
Broadcast equipment ............................ 9,936,338 10,087,239
Office furniture and fixtures .................. 1,137,222 1,245,332
Equipment under capital leases ................. 321,638 293,174
Vehicles ....................................... 281,305 310,742
Computer equipment ............................. 603,496 516,604
------------ ------------
19,358,417 19,343,196
Less accumulated depreciation .................. (5,636,871) (5,187,019)
------------ ------------
$ 13,721,546 $ 14,156,177
============ ============
</TABLE>
F-54
<PAGE> 157
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation expense for the years ended December 31, 1996, 1995 and 1994
was $2,409,696, $2,227,478 and $1,680,039, respectively.
5. INTANGIBLE ASSETS:
Intangible assets at December 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Licenses and authorization costs ............... $ 42,423,027 $ 28,335,031
Organization costs ............................. 2,801,440 2,339,639
Deferred financing costs ....................... 688,971 460,610
Noncompete agreements .......................... 4,685,668 4,785,669
Goodwill ....................................... 2,430,590 2,258,490
Other .......................................... 1,254,282 1,536,518
------------ ------------
54,283,978 39,715,957
Less accumulated amortization .................. (10,495,805) (9,511,195)
------------ ------------
$ 43,788,173 $ 30,204,762
============ ============
</TABLE>
Amortization expense for the years ended December 31, 1996, 1995 and 1994
was $2,910,562, $2,777,767 and $2,469,503, respectively.
6a. ACQUISITIONS OF BROADCASTING PROPERTIES:
On January 19, 1995, BRAF VIII purchased substantially all the assets of
WYYD-FM for approximately $8.5 million, including acquisition costs and an
agreement by the seller not to compete with the station. The acquisition has
been accounted for as a purchase and, accordingly, the results of operations
associated with the acquired assets have been included in the accompanying
statements from the date of acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired:
Property and equipment ..................................... $1,059
Goodwill and other intangibles ............................. 7,441
------
Purchase price ............................................... $8,500
======
</TABLE>
On February 10, 1995, BRAF IV purchased substantially all of the assets of
WVOC-AM for approximately $2.5 million including acquisition costs and an
agreement by the seller not to compete with the station. The acquisition has
been accounted for as a purchase and, accordingly, the results of operations
associated with the acquired assets have been included in the accompanying
statements from the date of acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired:
Property and equipment ..................................... $1,006
Goodwill and other intangibles ............................. 1,494
------
Purchase price ............................................... $2,500
======
</TABLE>
F-55
<PAGE> 158
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
On March 1, 1995, BRAF VII purchased substantially all the assets of
WESC-AM/FM for approximately $8.1 million, including acquisition costs and an
agreement by the seller not to compete with the station. The acquisition has
been accounted for as a purchase and, accordingly, the results of operations
associated with the acquired assets have been included in the accompanying
statements from the date of acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired:
Property and equipment ..................................... $3,447
Goodwill and other intangibles ............................. 4,653
------
Purchase price ............................................... $8,100
======
</TABLE>
On January 1, 1996, BRAF VIII purchased substantially all the assets of
WROV-AM/FM for approximately $5.8 million, including acquisition costs and an
agreement by the seller not to compete with the stations. The acquisition has
been accounted for as a purchase and, accordingly, the results of operations
associated with the acquired assets have been included in the accompanying
statements from the date of acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired:
Property and equipment ..................................... $1,388
Goodwill and other intangibles ............................. 4,412
------
Purchase price ............................................... $5,800
======
</TABLE>
On November 27, 1996, BRAF IV purchased substantially all the assets of
KRMD-AM/FM in Shreveport, Louisiana (Shreveport) for approximately $7.5
million, including acquisition costs and an agreement by the seller not to
compete with the stations. The acquisition has been accounted for as a purchase
and, accordingly, the results of operations associated with the acquired assets
have been included in the accompanying statement from the date of the
acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired:
Property and equipment ..................................... $1,330
Goodwill and other intangibles ............................. 6,170
------
Purchase price ............................................... $7,500
======
</TABLE>
On December 9, 1996, BRAF VII purchased substantially all the assets of
WJMZ-FM in Greenville, South Carolina (Greenville) for approximately $7.5
million, including acquisition costs and an agreement by the seller not to
compete with the station. The acquisition has been accounted for as a purchase
and, accordingly, the results of operations associated with the acquired assets
have been included in the accompanying statements from the date of the
acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired:
Property and equipment ..................................... $ 903
Goodwill and other intangibles ............................. 6,597
------
Purchase price ............................................... $7,500
======
</TABLE>
F-56
<PAGE> 159
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following summarizes the unaudited combined historical and pro forma
data for the years ended December 31, 1996 and 1995, as though Benchmark's
acquisitions of WYYD-FM, WVOC-AM, WESC-AM/FM, WROV-AM/FM, KRMD-AM/FM and
WJMZ-FM, had occurred as of January 1, 1995 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------------- -----------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenue ................ $ 27,255 $ 30,002 $ 23,147 $ 30,615
Net income (loss) .......... $ 6,076 $ 7,334 $ (4,344) $ (3,352)
</TABLE>
6b. RADIO BROADCASTING DISPOSITIONS:
During 1994, Benchmark sold substantially all of the assets of WZNY-FM and
WXFQ-FM/WGUS-AM for $3,600,000 and $1,284,700, respectively, and had recorded
gains of $1,316,741 and $121,076, respectively.
In October 1996, BRAF IV sold substantially all of the assets of WLTY-FM,
WTAR-AM and WKOC-FM for $14.1 million, net of closing costs of approximately
$500,000. Benchmark received cash proceeds from the sale and, in November 1996,
acquired the assets of KRMD-AM/FM valued at $7.5 million. BRAF IV recorded a
gain of $9.6 million.
7. DEBT:
Debt at December 31, 1996 and 1995 consists of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
BRAF I:
Term note, maximum principal amount of $4,700,000;
interest at bank's prime plus applicable margin
ranging from 1/2% to 1 1/2% (9.75% at December
31, 1996 and 1995), due in full on December 31, 2002 ............. $ 4,249,986 $ 2,269,761
BRAF IV:
Revolving line of credit, maximum principal amount
of $13,500,000; interest at LIBOR plus 2% - 2 3/4%
(8.2% at December 31, 1996 and 7.4% at December 31,
1995), due in full on June 30, 1997 .............................. 11,900,039 10,600,038
Subordinated promissory note, maximum principal amount
of $500,000; interest at 10% per annum due
quarterly; due in full on October 23, 1996 ....................... -- 437,500
Notes payable for vehicles ......................................... 12,361 30,594
Subordinated promissory note, maximum principal amount
of $1,200,000; interest at 8.25% per annum due monthly;
due in full in October 1996; personally guaranteed by
the general partners of BCRLP .................................... -- 1,200,000
BRAF VII:
Bank debt; interest at 8.4% per annum due monthly; due
in full on June 1, 1999; paid in full on December 9, 1996 ........ -- 3,325,998
Line of credit agreement, maximum principal amount of
$200,000; interest at bank's prime plus 2% (8.25% at
December 31, 1995); due in full on January 1, 1997; paid
in full on December 9, 1996 ...................................... -- 50,000
Note payable to Fund III Acquisition Sub. (See Note 12),
maximum principal amount of $12,600,000, interest due
monthly at prime plus 1% (9.25% at December 31, 1996)
due in full on March 9, 1998 ..................................... 12,600,000 --
BRAF VIII:
Revolving line of credit, maximum principal amount of
$14,500,000; interest at bank's prime rate plus applicable
margin ranging from 1/4% to 1/2% (8.63% at December 31,
1996 and 8.75% at December 31, 1995) per annum due monthly;
due in full in December 2002 ..................................... 13,198,441 8,325,000
Subordinated promissory note, maximum principal amount of
$500,000; interest at 8% per annum payable monthly; due in
full on August 31, 1997 .......................................... 425,000 475,000
Subordinated promissory note, maximum principal amount of
$1,500,000; interest at bank's prime plus 1% (8.9% at
December 31, 1996 and 9.25% at December 31, 1995); due in
full on January 1, 2001 .......................................... 1,500,000 --
Notes payable for vehicles ......................................... 14,134 --
BCRLP:
Note payable, maximum principal amount of $75,000; interest
at 7% per annum due monthly; due in full on demand;
guaranteed jointly and severally by certain general and
limited partners of BCRLP ........................................ 75,000 75,000
Note payable, maximum principal amount of $37,500 assumed
from an affiliated entity; due in full on demand (See Note 10) ... 20,000 20,000
Revolving line of credit, maximum principal amount of
$250,000; interest at bank's prime rate (8.25% at
December 31, 1996 and 8.5% at December 31, 1995); due
in full on demand ................................................ 65,535 165,535
----------- -----------
44,060,496 26,974,426
Less: Current portion ............................................ 14,219,155 12,846,733
----------- -----------
$29,841,341 $14,127,693
=========== ===========
</TABLE>
F-57
<PAGE> 160
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Borrowings were primarily used to finance the acquisition of additional
stations and are collateralized by substantially all of Benchmark's assets.
The various agreements impose restrictive covenants on Benchmark with
respect to, among other things, the maintenance of certain financial ratios and
limits on capital expenditures, new indebtedness, investments and disposition
of assets. Benchmark was in compliance with all such financial covenants or had
obtained waivers for any items of noncompliance as of December 31, 1996.
At December 31, 1996 the aggregate amounts of debt due during the next
five years are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 ............................................. $14,219,155
1998 ............................................. 14,767,925
1999 ............................................. 2,766,704
2000 ............................................. 3,217,662
2001 ............................................. 5,421,900
2002 and thereafter .............................. 3,667,150
-----------
$44,060,496
===========
</TABLE>
8. LEASES AND OTHER COMMITMENTS:
Effective May 22, 1992, BRAF I entered into a participation agreement with
the General Manager of WDSD-FM, WDOV-AM and WSRV-FM which provides for the
General Manager to receive a portion (based upon certain vesting criteria) of
the "Net Sales Proceeds," as defined, in the event that the stations are sold
or a percentage of adjusted cash flow (as defined in the agreement) in the
event that the General Manager ceases to be employed by BRAF I. At December 31,
1996, Benchmark had recorded an expense of $140,000 related to this
participation agreement due to the agreement dated December 9, 1996 to sell the
stations. See Note 12.
Benchmark leases certain transmitting tower facilities, vehicles, and
office space under various operating leases.
Future minimum lease payments (which reflect leases having noncancelable
lease terms in excess of one year) are as follows for the year ended December
31:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- ----------
<C> <C> <C>
1997 ....................................................... $ 100,821 $ 346,575
1998 ....................................................... 69,316 276,964
1999 ....................................................... 10,156 204,000
2000 ....................................................... 7,090 155,212
2001 ....................................................... -- 53,195
Thereafter ................................................. -- 97,171
---------- ----------
Total ................................................. 187,383 $1,133,117
==========
Less amount representing interest .......................... (29,579)
----------
Present value of minimum lease payments .................... 157,804
Less current portion ....................................... (78,984)
----------
Obligations under capital leases, net of current portion ... $ 78,820
==========
</TABLE>
Rental expense under operating leases for the years ended December 31,
1996, 1995 and 1994 was approximately $365,000, $414,000 and $366,000,
respectively.
F-58
<PAGE> 161
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
9. PROFIT SHARING PLAN:
The employees of Benchmark are included in a 401(k) profit sharing plan
(the "Plan"). All full-time employees of Benchmark who have attained the age of
21 years are eligible for participation in the Plan after one year and one
thousand hours of service. The Plan allows the employees to defer up to 16% of
their compensation through a salary reduction arrangement. Benchmark makes a
matching contribution equal to 25% of the employees' salary reduction. In
addition, Benchmark may make a discretionary contribution to the Plan.
Participation in the Plan is subject to a five year vesting schedule. During
the years ended December 31, 1996, 1995 and 1994, Benchmark's combined expense
related to the Plan was approximately $85,900, $70,700 and $40,300,
respectively.
10. RELATED PARTY TRANSACTIONS:
The various entities defined in Note 1 are involved in certain
transactions with each other related to sharing of services and purchasing.
These transactions are settled on a current basis through adjustments to
partners' equity accounts.
In February 1996, BRAF VII borrowed $1,500,000 from a limited partner to
finance the escrow deposit for the acquisition of WJMZ-FM (Greenville). The
note was paid in full on December 9, 1996. In connection with such debt,
interest expense of $287,436 was recorded for the year ended December 31, 1996.
As of July 1, 1992, BCRLP assumed $37,500 of a note payable to limited
partners in Benchmark made by an affiliated entity. Interest expense related to
this note was immaterial for the years ended December 31, 1996, 1995 and 1994,
respectively.
11. LITIGATION:
Benchmark is the plaintiff or the defendant in several legal actions, the
probable outcomes of which are not considered material, either individually or
in the aggregate.
12. PENDING SALE OF BENCHMARK AND OTHER TRANSACTIONS (UNAUDITED):
On December 9, 1996, Benchmark agreed to be acquired by Capstar
Broadcasting Partners, Inc. (the Company), a Delaware corporation, through an
acquisition affiliate, Fund III Acquisition Sub. The sale is subject to
regulatory approval. The purchase price is estimated to be approximately $173.4
million and is subject to adjustment. No adjustments have been made to the
combined financial statements to reflect the pending sale, except as described
in Note 8 relating to the participation agreement.
Benchmark and certain other related entities (BRAF IX, BRAF X and BRAF XI)
under common control of the Benchmark General Partners also have agreed to
acquire two radio stations in the Montgomery, Alabama market (the "Benchmark
Montgomery Acquisition") for an aggregate cash price of approximately $17.0 to
$18.0 million and Fund IV has agreed to acquire substantially all of the assets
of WSCQ-FM in the Columbia, South Carolina market (the "Benchmark Columbia
Acquisition") for an aggregate cash price of approximately $4.1 million.
F-59
<PAGE> 162
BENCHMARK COMMUNICATIONS RADIO LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1996, BRAF IX entered into an agreement to acquire substantially
all the assets and certain liabilities of WFMX-FM and WSIC-AM in Statesville,
North Carolina (Statesville) for an aggregate cash price of approximately $9.6
million. Liabilities assumed were limited to certain ongoing contractual rights
and obligations. The acquisition was completed in January 1997.
In September, 1996, BRAF X entered into an agreement to acquire
substantially all the assets and certain liabilities of WJMI-FM, WKXI-AM/FM and
WOAD-FM in Jackson, Mississippi (Jackson) for an aggregate cash price of
approximately $15.0 million. Liabilities assumed were limited to certain
ongoing contractual rights and obligations. The acquisition was completed in
December 1996.
As part of the acquisition of Benchmark by the Company and Fund III
Acquisition Sub, BRAF VII, (along with certain other partnerships not included
in these combined financial statements, specifically referred to as BRAF IX,
BRAF X and BRAF XI) entered into separate senior credit agreements with Fund
III Acquisition Sub. Under these agreements, BRAF VII, BRAF IX, BRAF X and BRAF
XI can collectively borrow up to approximately $60.0 million. Approximately
$60.0 million has been loaned to BRAF VII , BRAF IX and BRAF X, net of
expenses, of which approximately $12.6 million as of December 31, 1996 has been
loaned to BRAF VII, to consummate the acquisition of substantially all of the
assets of WJMZ-FM (Greenville) and to refinance debt, and, during January 1997,
the remainder has been borrowed by BRAF IX, BRAF X, and BRAF XI to consummate
the acquisitions of Statesville, Jackson, and Montgomery and for working
capital purposes.
F-60
<PAGE> 163
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Capstar Broadcasting Partners, Inc.:
We have audited the accompanying balance sheet of Midcontinent
Broadcasting Co. of Wisconsin, Inc. (the "Company") as of December 31, 1996,
and the related statements of income and retained earnings, 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 financial statements referred to above present fairly,
in all material respects, the financial position of Midcontinent Broadcasting
Co. of Wisconsin, Inc. as of December 31, 1996, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
February 3, 1997
F-61
<PAGE> 164
MIDCONTINENT BROADCASTING CO. OF WISCONSIN, INC.
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash ........................................................... $ 78,996
Accounts receivable, net of $34,143 allowance for
doubtful accounts ........................................... 718,133
Prepaid expenses and other assets .............................. 17,088
----------
Total current assets ........................................ 814,217
Property and equipment, net ....................................... 686,433
Intangible assets, net ............................................ 3,031,048
Other ............................................................. 101,085
----------
Total assets ................................................ $4,632,783
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable ............................................... $ 25,226
Accounts payable, related party ................................ 7,083
Accrued expenses ............................................... 119,274
----------
Total current liabilities ................................... 151,583
Due to Parent ..................................................... 1,369,004
Stockholder's equity:
Common stock, no par value, 2,500 shares authorized,
2,000 shares issued and outstanding ......................... 200,000
Retained earnings .............................................. 2,912,196
----------
Total stockholder's equity .................................. 3,112,196
----------
Total liabilities and stockholder's equity .................. $4,632,783
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-62
<PAGE> 165
MIDCONTINENT BROADCASTING CO. OF WISCONSIN, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Broadcasting revenue:
Gross revenue .................................................. $3,876,324
Less agency commissions ........................................ 430,031
----------
Net broadcasting revenue .................................... 3,446,293
Operating expenses:
Programming, technical and news ................................ 988,406
Sales, advertising and promotion ............................... 1,221,541
General and administrative ..................................... 345,283
Depreciation and amortization .................................. 405,091
----------
2,960,321
----------
Operating income ............................................ 485,972
Other income:
Rental income .................................................. 47,207
Other .......................................................... 21,952
----------
69,159
----------
Income before income taxes .................................. 555,131
Provision for income taxes ........................................ 188,745
----------
Net income .................................................. 366,386
Retained earnings:
Beginning of year .............................................. 2,545,810
----------
End of year .................................................... $2,912,196
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-63
<PAGE> 166
MIDCONTINENT BROADCASTING CO. OF WISCONSIN, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income ..................................................... $ 366,386
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................... 405,091
Changes in operating assets and liabilities:
Accounts receivable ...................................... (240,785)
Prepaid expenses and other assets ........................ 17,838
Accounts payable ......................................... (56,069)
Accrued expenses ......................................... (72,929)
---------
Net cash provided by operating activities .............. 419,532
---------
Cash flows from investing activities:
Purchases of property and equipment ............................ (66,893)
Madison Radio Group related costs .............................. (101,085)
Other .......................................................... (15,182)
---------
Net cash used in investing activities .................. (183,160)
---------
Cash flows from financing activities:
Due to Parent .................................................. (251,932)
---------
Net cash used in financing activities .................... (251,932)
---------
Net decrease in cash ..................................... (15,560)
Cash, beginning of year ........................................... 94,556
---------
Cash, end of year ................................................. $ 78,996
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE> 167
MIDCONTINENT BROADCASTING CO. OF WISCONSIN, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Organization and Basis of Presentation: Midcontinent Broadcasting Co.
of Wisconsin, Inc. (the "Company") is a wholly-owned subsidiary of Midcontinent
Broadcasting Co., which in turn is wholly-owned by Midcontinent Media, Inc.
(the "Parent"). The Company owns and operates radio stations WZEE-FM, WTSO-AM
and WMLI-FM (the "Stations") serving the Madison, Wisconsin area.
The Company's financial statements have been prepared in accordance with
generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses for the period presented. They also affect
the disclosures of contingencies. Actual results could differ from those
estimates.
On February 8, 1996, the President signed into law the Telecommunications
Act of 1996. Among other things, this legislation requires the Federal
Communications Commission (the "FCC") to relax its numerical restrictions on
local ownership and affords renewal applicants significant new protections from
competing applications for the broadcast licenses. The ultimate effect of this
legislation on the competitive environment is currently undeterminable.
b. Property and Equipment: Property and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using accelerated and
straight-line methods over the estimated useful lives of the assets as follows:
buildings and improvements 5-39 years, tower and antennae 3-15 years, equipment
5-15 years, and other 3-10 years. Expenditures for repairs are expensed while
major additions are capitalized. Upon sale or disposal, the asset cost and
accumulated depreciation are removed and any gain or loss is recognized in
earnings.
c. Intangible Assets: Intangible assets are stated at cost and amortized
on a straight-line basis over their estimated useful lives, as follows:
FCC broadcast licenses -- 15 years. Accumulated amortization as of
December 31, 1996 was $190,903.
Goodwill -- Goodwill acquired prior to November 1, 1970 ($374,223) is not
being amortized. Goodwill arising from acquisitions subsequent to November 1,
1970 is being amortized over 40 years. Accumulated amortization as of December
31, 1996 was $88,098.
Other -- Five years. Accumulated amortization at December 31, 1996 was
$7,048.
On an ongoing basis, management evaluates the recoverability of the net
carrying value of intangible assets by reference to the Company's undiscounted
anticipated future cash flows.
d. Barter Transactions: The Company exchanges advertising airtime for
goods and services, as is customary in the broadcast industry. In accordance
with Statement of Financial Accounting Standards No. 63, "Financial Reporting
by Broadcasters", revenue is recognized as the advertising is broadcast at the
estimated fair market value of goods or services received or to be received.
The value of the goods and services received in barter transactions is charged
to expense when received or used. Barter revenues and expenses were
approximately $45,000 and $53,000, respectively, for 1996.
e. Revenue Recognition: Revenue from the sale of air-time is recognized at
the time the related program or advertisement is broadcast.
f. Concentration of Risk: The Stations operate within the Madison,
Wisconsin geographic area. They extend credit to their various customers in the
form of accounts receivable. The Company performs ongoing credit
F-65
<PAGE> 168
MIDCONTINENT BROADCASTING CO. OF WISCONSIN, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
evaluations of its customers and maintains an allowance for doubtful accounts
based on factors surrounding the credit risk of specific customers, historical
trends and other information.
g. Income Taxes: The Company files a consolidated federal income tax
return with the Parent, which provides for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes", which requires the liability method of accounting for deferred
income taxes. The consolidated provision for income taxes is allocated among
the members of the consolidated group based upon each member's pre-tax earnings
compared to the consolidated pre-tax earnings. The liability for income taxes
is included in Due to Parent in the accompanying balance sheet. At December 31,
1996, there was no provision for deferred income taxes, as temporary
differences between tax and financial reporting bases of assets and liabilities
are immaterial.
2. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Land ......................................................... $ 27,013
Buildings and improvements ................................... 520,077
Tower and antennae ........................................... 567,569
Equipment .................................................... 1,249,975
Other ........................................................ 66,262
----------
2,430,896
Less accumulated depreciation ................................ 1,744,463
----------
$ 686,433
==========
</TABLE>
Depreciation expense was $211,319 in 1996.
3. INTANGIBLE ASSETS:
Intangible assets consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
FCC broadcast licenses ....................................... $2,749,000
Goodwill ..................................................... 532,523
Other intangibles ............................................ 35,574
----------
3,317,097
Less accumulated amortization ................................ 286,049
----------
$3,031,048
==========
</TABLE>
4. ACCRUED EXPENSES:
Accrued expenses consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Salaries, wages and benefits ................................... $ 45,149
Property taxes ................................................. 38,367
Music license fees ............................................. 11,478
Professional fees .............................................. 9,300
Other .......................................................... 14,980
--------
$119,274
========
</TABLE>
F-66
<PAGE> 169
MIDCONTINENT BROADCASTING CO. OF WISCONSIN, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES:
The provision for income taxes for 1996 consists of the following:
<TABLE>
<S> <C>
Currently payable
Federal ...................................................... $144,190
State ........................................................ 44,555
--------
$188,745
========
</TABLE>
The following reconciles the statutory federal income tax rate with the
effective income tax rate:
<TABLE>
<S> <C>
Statutory federal income tax rate ................................ 34.0%
State income tax, net ............................................ 5.3
Effect of tax sharing arrangement among consolidated group ....... (5.3)
----
Effective income tax rate ........................................ 34.0%
====
</TABLE>
6. EMPLOYEE BENEFIT PLAN:
The Company, along with other affiliated companies, participates in a
profit sharing plan for substantially all full-time employees who have at least
one year of service and have attained age 21. Company contributions, which are
based on a percentage of the compensation paid to eligible employees,
approximated $32,000 for 1996.
The Company is not obligated to provide any postretirement medical and
life insurance benefits or any other postretirement benefits to employees.
7. SUBSEQUENT EVENT:
On January 2, 1997, the Company exchanged its broadcasting and real estate
assets of stations WZEE-FM, WMLI-FM and WTSO-AM and $400,000 cash for a 50%
partnership interest in Madison Radio Group (a general partnership).
Simultaneously, Point Communications Limited Partnership ("Point"), a company
that also owns and operates radio stations serving the Madison, Wisconsin area,
exchanged its broadcasting and real estate assets of stations WMAD-FM, WIBA-FM
and WIBA-AM and $400,000 cash, subject to its long-term debt, for the remaining
50% partnership interest in Madison Radio Group, and $3,500,000 cash (which was
financed by Madison Radio Group borrowings). During 1996, the Company incurred
$101,085 of costs directly related to its investment in Madison Radio Group,
which are included in other assets on the accompanying balance sheet.
In February 1997, Madison Radio Group entered into an agreement to sell
substantially all the assets of its stations to Capstar Broadcasting Partners,
Inc., a radio investment group. The closing of this transaction, which is
subject to various conditions and approvals as defined in the agreement, is
expected to occur in the fourth quarter of 1997.
F-67
<PAGE> 170
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Point Communications Limited Partnership:
We have audited the accompanying balance sheet of Point Communications
Limited Partnership (the "Partnership") as of December 31, 1996, and the
related statement of operations, partners' equity and cash flows for the year
then ended. These financial statements are the responsibility of the
Partnership'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 financial statements referred to above present fairly,
in all material respects, the financial position of Point Communications
Limited Partnership as of December 31, 1996, and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
February 3, 1997
F-68
<PAGE> 171
POINT COMMUNICATIONS LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents ..................................... $ 260,670
Certificate of deposit ........................................ 93,441
Accounts receivable, net of $65,000
allowance for doubtful accounts ............................. 1,309,154
Accounts receivable, related party ............................ 59,320
Prepaid expenses .............................................. 43,064
-----------
Total current assets ....................................... 1,765,649
Property and equipment, net ...................................... 2,339,617
Intangible assets, net ........................................... 10,060,913
Other ............................................................ 103,097
-----------
Total assets ............................................... $14,269,276
===========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Current portion of long-term debt ............................. $ 912,500
Accounts payable .............................................. 204,645
Accounts payable, related party ............................... 15,765
Accrued expenses .............................................. 135,156
Trade payable, net ............................................ 25,311
-----------
Total current liabilities .................................. 1,293,377
Long-term debt ................................................... 8,625,000
Partners' equity ................................................. 4,350,899
-----------
Total liabilities and partners' equity ..................... $14,269,276
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-69
<PAGE> 172
POINT COMMUNICATIONS LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Broadcasting revenue:
Gross revenue ................................................ $ 6,235,475
Less agency commissions ...................................... 634,833
-----------
Net broadcasting revenue .................................. 5,600,642
Operating expenses:
Sales and promotion .......................................... 1,276,030
Programming, engineering and news ............................ 1,467,136
General and administrative ................................... 685,926
Depreciation and amortization ................................ 1,538,196
Management fees and other expenses ........................... 178,749
-----------
5,146,037
-----------
Operating income .......................................... 454,605
Other income (expense):
Interest expense ............................................. (1,071,241)
Interest income .............................................. 7,916
-----------
(1,063,325)
-----------
Net loss .................................................. $ (608,720)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-70
<PAGE> 173
POINT COMMUNICATIONS LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
Partners' equity, January 1, 1996 ..... $ 50,484 $4,909,135 $4,959,619
Net loss for 1996 ..................... (6,195) (602,525) (608,720)
---------- ---------- ----------
Partners' equity, December 31, 1996 ... $ 44,289 $4,306,610 $4,350,899
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-71
<PAGE> 174
POINT COMMUNICATIONS LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss ...................................................... $ (608,720)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization .............................. 1,538,196
Changes in operating assets and liabilities:
Accounts receivable ..................................... (293,368)
Prepaid expenses ........................................ 3,648
Accounts payable and accrued expenses ................... 90,615
Trade payable, net ...................................... 19,584
----------
Net cash provided by operating activities ............. 749,955
----------
Cash flows from investing activities:
Madison Radio Group related costs ............................. (103,097)
Advances to related party ..................................... (32,082)
Purchases of property and equipment ........................... (80,058)
Other ......................................................... (5,510)
----------
Net cash used in investing activities ................... (220,747)
----------
Cash flows from financing activities:
Principal payments on term loan ............................... (462,500)
----------
Net cash used in financing activities ................... (462,500)
----------
Net increase in cash and cash equivalents ............... 66,708
Cash and cash equivalents, beginning of year ..................... 193,962
----------
Cash and cash equivalents, end of year ........................... $ 260,670
==========
Supplemental disclosure of cash flow information:
Cash paid for interest ........................................ $ 985,801
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-72
<PAGE> 175
POINT COMMUNICATIONS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. ORGANIZATION AND BASIS OF PRESENTATION: Point Communications Limited
Partnership (the "Partnership") was formed to acquire, own and operate radio
stations WIBA-AM, WIBA-FM, WMAD-AM and WMAD-FM (the "Stations") servicing the
Madison, Wisconsin area. The general partner of Point Communications L.P. is a
corporation wholly-owned by the president of the radio stations. Included in
management fees and other expenses in the Statement of Operations are
management fees paid to the general partner and other costs related to the
general partner's activities.
The Partnership's financial statements have been prepared in accordance
with generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses for the period presented. They also affect
the disclosures of contingencies. Actual results could differ from those
estimates.
On February 8, 1996, the President signed into law the Telecommunications
Act of 1996. Among other things, this legislation requires the Federal
Communications Commission (the "FCC") to relax its numerical restrictions on
local ownership and affords renewal applicants significant new protections from
competing applications for the broadcast licenses. The ultimate effect of this
legislation on the competitive environment is currently undeterminable.
b. CASH EQUIVALENTS: For purposes of the Statement of Cash Flows, the
Partnership considers all highly liquid, short-term investments purchased with
original maturities of three months or less to be cash equivalents.
c. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, as follows: buildings and
improvements 15-39 years, tower and antennae 5-15 years, equipment 5-7 years,
and other 3-5 years. Expenditures for repairs are expensed while major
additions are capitalized. Upon sale or disposal, the asset cost and
accumulated depreciation are removed and any gain or loss is recognized in
earnings.
d. INTANGIBLE ASSETS: Intangible assets are stated at cost and
amortized on a straight-line basis over their estimated useful lives, as
follows:
FCC broadcast licenses -- 15 years. Accumulated amortization as of
December 31, 1996 was $848,533.
Other intangibles -- 15 years. Accumulated amortization as of December 31,
1996 was $82,089.
Goodwill -- 15 years. Accumulated amortization as of December 31, 1996 was
$25,721.
Deferred financing costs -- loan term. Accumulated amortization as of
December 31, 1996 was $67,933.
Organization cost -- 5 years. Accumulated amortization as of December 31,
1996 was $26,033.
On an ongoing basis, management evaluates the recoverability of the net
carrying value of intangible assets by reference to the Partnership's
undiscounted anticipated future cash flows.
e. BARTER TRANSACTIONS: The Partnership exchanges advertising airtime for
goods and services, as is customary in the broadcast industry. In accordance
with Statement of Financial Accounting Standards No. 63, "Financial Reporting
by Broadcasters", revenue is recognized as the advertising is broadcast at the
estimated fair market value of goods or services received or to be received.
The value of the goods and services received in barter transactions is charged
to expense when received or used. Barter revenues and expenses approximated
$214,000 for 1996.
F-73
<PAGE> 176
POINT COMMUNICATIONS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
f. REVENUE RECOGNITION: Revenue from the sale of air-time is recognized at
the time the related program or advertisement is broadcast.
g. CONCENTRATION OF RISK: The Stations operate within the Madison,
Wisconsin geographic area. They extend credit to their various customers in the
form of accounts receivable. The Partnership performs ongoing credit
evaluations of its customers and maintains an allowance for doubtful accounts
based on factors surrounding the credit risk of specific customers, historical
trends and other information.
h. ALLOCATIONS AND DISTRIBUTIONS: The profits and losses of the
Partnership are being allocated among the partners, and cash flow from
operations or cash from capital transactions, if any, will be distributed to
the partners in accordance with the terms of the partnership agreement.
i. INCOME TAXES: No provision for federal or state income taxes has been
provided as the partners report their pro rata share of the partnership profits
or losses on their individual tax returns.
2. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Land and improvements ........................................ $ 283,200
Buildings .................................................... 725,720
Tower and antennae ........................................... 986,770
Equipment .................................................... 703,640
Other ........................................................ 148,983
----------
2,848,313
Less accumulated depreciation ................................ 508,696
----------
$2,339,617
==========
</TABLE>
Depreciation expense was $383,010 in 1996.
3. INTANGIBLE ASSETS:
Intangible assets consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
FCC broadcast licenses ...................................... $ 9,546,000
Other intangibles ........................................... 911,544
Goodwill .................................................... 301,306
Deferred financing costs .................................... 254,749
Organization costs .......................................... 97,623
-----------
11,111,222
Less accumulated amortization ............................... 1,050,309
-----------
$10,060,913
===========
</TABLE>
F-74
<PAGE> 177
POINT COMMUNICATIONS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG-TERM DEBT:
Long-term debt consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Term loan payable in quarterly installments of
$212,500 to $400,000, with a balloon payment
of remaining balance due August 1, 2000, bearing
interest at the bank's reference rate plus 2.5%
(reference rate was 8.25% at December 31, 1996) ............ $9,537,500
Less current portion ......................................... 912,500
----------
$8,625,000
==========
</TABLE>
The term loan is subject to certain restrictive financial covenants,
including the maintenance of minimum broadcast operating cash flow amounts, and
limitations on additional indebtedness, capital expenditures, lease agreements,
investments and distributions to partners.
The term loan is collateralized by substantially all assets of the
Partnership.
The carrying amount reported for long-term debt approximates fair value
since the underlying instrument bears interest at a variable rate that reprices
frequently.
The aggregate scheduled maturities of debt in subsequent years is as
follows:
<TABLE>
<S> <C>
1997 ................................................. $ 912,500
1998 ................................................. 1,125,000
1999 ................................................. 2,100,000
2000 ................................................. 5,400,000
-----------
$ 9,537,500
===========
</TABLE>
5. OPERATING LEASES:
The Partnership leases vehicles, office equipment, office space and a
tower site under operating leases with future minimum rental payments as
follows:
<TABLE>
<S> <C>
1997 ................................................. $ 87,004
1998 ................................................. 67,512
1999 ................................................. 67,512
2000 ................................................. 67,512
2001 ................................................. 38,705
Thereafter ........................................... 331,000
-----------
$ 659,245
===========
</TABLE>
Rental expense charged to operations was $84,382 for 1996.
6. LETTER OF CREDIT:
At December 31, 1996, the Partnership had a letter of credit outstanding
for $90,000. The letter of credit can be drawn upon if the Partnership fails to
make payments due under the terms and conditions of a network agreement which
expires in May 1997. The Partnership has pledged a certificate of deposit as
collateral for the letter of credit.
F-75
<PAGE> 178
POINT COMMUNICATIONS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. SUBSEQUENT EVENTS:
On January 2, 1997, the Partnership exchanged its broadcasting and real
estate assets of stations WMAD-FM, WIBA-FM and WIBA-AM and $400,000 cash,
subject to its long-term debt, for a 50% partnership interest in Madison Radio
Group (a general partnership), and $3,500,000 cash (which was financed by
Madison Radio Group borrowings). Simultaneously, Midcontinent Broadcasting Co.
of Wisconsin, Inc. ("Midcontinent"), a company that also owns and operates
radio stations serving the Madison, Wisconsin area, exchanged its broadcasting
and real estate assets of stations WZEE- FM, WMLI-FM and WTSO-AM and $400,000
cash for the remaining 50% partnership interest in Madison Radio Group. During
1996, the Partnership incurred $103,097 of costs directly related to its
investment in Madison Radio Group, which are included in other assets on the
accompanying balance sheet. Also, on January 2, 1997, the Partnership
contributed the assets of its WMAD-AM station with a net book value of
approximately $230,000 to an educational institution and received $85,000 cash.
On February 4, 1997, Madison Radio Group entered into an agreement to sell
substantially all the assets of its stations to Capstar Broadcasting Partners,
Inc., a radio investment group. The closing of the transaction, which is
subject to various conditions and approvals as defined in the agreement, is
expected to occur in the fourth quarter of 1997.
F-76
<PAGE> 179
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
Community Pacific Broadcasting Company L.P.:
We have audited the accompanying balance sheet of Community Pacific
Broadcasting Company L.P. (the "Partnership") as of December 31, 1996, and the
related statements of operations, partners' equity and cash flows for the year
then ended. These financial statements are the responsibility of the
Partnership'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 financial statements referred to above present fairly,
in all material respects, the financial position of Community Pacific
Broadcasting Company L.P. as of December 31, 1996, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Jose, California
February 13, 1997
F-77
<PAGE> 180
COMMUNITY PACIFIC BROADCASTING COMPANY L.P.
(A DELAWARE LIMITED PARTNERSHIP)
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash .......................................................... $ 38,532
Accounts receivable, net of allowance
for doubtful accounts of $70,525 ............................ 1,708,213
Prepaid expenses and other current assets ..................... 97,239
-----------
Total current assets ....................................... 1,843,984
Property and equipment, net ...................................... 3,843,508
Intangible assets, net ........................................... 12,817,337
Other assets ..................................................... 125,453
-----------
Total assets ............................................... $18,630,282
===========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable .............................................. $ 237,996
Accrued liabilities ........................................... 483,065
Current portion of long-term debt ............................. 1,175,125
-----------
Total current liabilities .................................. 1,896,186
Long-term debt, net of current portion ........................... 8,696,875
-----------
Total liabilities .......................................... 10,593,061
-----------
Commitments (Note 9)
Partners' equity ................................................. 8,037,221
-----------
Total liabilities and partners' equity ..................... $18,630,282
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-78
<PAGE> 181
COMMUNITY PACIFIC BROADCASTING COMPANY L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Revenue:
Broadcasting revenue ........................................ $ 12,318,547
Less agency commissions ..................................... 1,119,613
------------
Net revenue .............................................. 11,198,934
------------
Station operating expenses:
Programming and technical expense ........................... 3,935,571
Selling and promotion expense ............................... 2,981,563
General and administrative expense .......................... 1,998,698
------------
Total station operating expense .......................... 8,915,832
------------
Station operating income ................................. 2,283,102
Corporate expenses ............................................. 760,150
------------
Operating income before depreciation and amortization .... 1,522,952
Depreciation and amortization .................................. 1,416,077
------------
Operating income ......................................... 106,875
Other expense, net ............................................. (8,438)
Loss on disposal of assets ..................................... (10,611)
Interest expense ............................................... (933,315)
------------
Net loss ................................................. $ (845,489)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-79
<PAGE> 182
COMMUNITY PACIFIC BROADCASTING COMPANY L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
TOTAL
GENERAL LIMITED PARTNERS'
PARTNER PARTNERS TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Balances as of January 1, 1996 .......... $ 272,872 $ 7,583,322 $ 7,856,194
Capital contributions from partners ... 20,000 3,058,916 3,078,916
Capital distributions to partners ..... (800) (2,051,600) (2,052,400)
Net loss .............................. (176,474) (669,015) (845,489)
----------- ----------- -----------
Balances as of December 31, 1996 ........ $ 115,598 $ 7,921,623 $ 8,037,221
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-80
<PAGE> 183
COMMUNITY PACIFIC BROADCASTING COMPANY L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss ...................................................... $ (845,489)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization .............................. 1,416,077
Loss on sale of fixed assets ............................... 10,611
Changes in operating assets and liabilities:
Accounts receivable, net ................................ 116,834
Prepaid expenses and other current assets ............... 41,643
Accounts payable ........................................ (345,207)
Accrued liabilities ..................................... (108,490)
----------
Net cash provided by operating activities ............. 285,979
----------
Cash flows from investing activities:
Purchase of property and equipment, net of acquisition ........ (408,731)
Proceeds from sale of fixed assets ............................ 3,500
Intangible assets, net of acquisition ......................... (103,635)
Increase in other assets ...................................... (17,919)
Cash used in acquisition ...................................... (450,000)
----------
Net cash used in investing activities ...................... (976,785)
----------
Cash flows from financing activities:
Proceeds from notes payable ................................... 1,408,000
Repayment of notes payable .................................... (1,650,000)
Capital contributions from partners ........................... 3,092,954
Capital distributions to partners ............................. (2,209,658)
----------
Net cash provided by financing activities .................. 641,296
----------
Net decrease in cash ............................................. (49,510)
Cash, beginning of year .......................................... 88,042
----------
Cash, end of year ................................................ $ 38,532
==========
Supplemental disclosure of cash flow information:
Interest paid ................................................. $ 991,233
==========
Supplemental disclosure of noncash activities:
Revenue related to barter transactions ........................ $2,171,006
==========
Advances from partners converted into equity .................. $ 427,046
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-81
<PAGE> 184
COMMUNITY PACIFIC BROADCASTING COMPANY L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Community Pacific Broadcasting Company L.P. (the Partnership), a Delaware
limited partnership, was formed April 1, 1992 and operates AM and FM radio
broadcasting stations in the following communities as of December 31, 1996:
o Modesto, California -- KFIV-AM, KJSN-FM, KVFX-FM and KJAX-AM
o Anchorage, Alaska -- KASH-AM, KASH-FM, KENI-AM and KBFX-FM
o Des Moines, Iowa -- KGGO-FM, KDMI-AM, and KHKI-FM
2. USE OF ESTIMATES AND UNCERTAINTIES:
The Partnership's financial statements have been prepared in accordance
with generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses for the period presented. They also affect
the disclosures of contingencies. Actual results could differ from those
estimates.
On February 8, 1996, the President signed into law the Telecommunications
Act of 1996. Among other things, this legislation requires the Federal
Communications Commission (the "FCC") to relax its numerical restrictions on
local ownership and affords renewal applicants significant new protections from
competing applications for the broadcast licenses. The ultimate effect of this
legislation on the competitive environment is currently undeterminable.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the estimated useful
life of the assets as follows:
<TABLE>
<S> <C>
Tower and antennae .................... 7-20 years
Broadcast equipment ................... 7 to 10 years
Building .............................. 30 years
Furniture and fixtures ................ 7 to 10 years
Automobiles ........................... 3-5 years
Leasehold improvements ................ Shorter of the life of the asset or the lease
</TABLE>
When items are retired or sold, the cost and accumulated depreciation are
removed and any gain or loss is included in income.
F-82
<PAGE> 185
COMMUNITY PACIFIC BROADCASTING COMPANY L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Intangible Assets:
Intangible assets are stated at cost, less accumulated amortization.
Amortization is determined using the straight-line method based upon the
estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
FCC licenses and goodwill 20
Organization costs 5
Noncompetition agreements 5
Other 2-5
</TABLE>
On an ongoing basis, management evaluates the recoverability of the net
carrying value of intangible assets by reference to the Company's undiscounted
anticipated future cash flows.
Revenue:
Revenue is recognized when advertisements are broadcast.
Barter Transactions:
The Partnership trades or barters commercial air time for syndicated radio
shows and for goods and services used for promotional, sales and other business
activities. These exchanges are recorded at the fair market value of the radio
shows or the goods or services received or the value of the advertising time
provided, whichever is more clearly determinable. Revenue from barter
transactions is recognized as income when advertisements are broadcast, and
radio shows are charged to expense when broadcast, and goods or services are
charged to expense or capitalized when used or received. Barter revenue totaled
$2,171,006 for the year ended December 31, 1996.
Advertising Costs:
The Partnership incurs various marketing and promotional costs to add and
maintain listenership. These costs are expensed as incurred and totaled
approximately $1,007,626 for the year ended December 31, 1996.
Concentration of Credit Risk:
The Partnership's revenue and accounts receivable primarily relate to
advertising of products and services within the radio stations' broadcast
areas. The Partnership's management perform ongoing credit evaluations of the
customers' financial condition and, generally, require no collateral from their
customers. The Partnership maintains an allowance for doubtful accounts and
past credit losses have been within management's expectations.
Income Taxes:
No provision has been made for income taxes since the Partnership is not a
taxable entity. Partners report their share of the Partnership's income on
their respective tax returns.
F-83
<PAGE> 186
COMMUNITY PACIFIC BROADCASTING COMPANY L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT:
At December 31, 1996, property and equipment consist of the following:
<TABLE>
<S> <C>
Land and improvements ........................................ $ 131,130
Buildings .................................................... 400,603
Tower and antenna systems .................................... 952,025
Broadcast and transmitter equipment .......................... 2,644,931
Furniture and fixtures ....................................... 878,730
Leasehold improvements ....................................... 93,038
----------
5,100,457
Less accumulated depreciation ................................ 1,256,949
----------
$3,843,508
==========
</TABLE>
Depreciation expense was $473,380 in 1996.
5. INTANGIBLE ASSETS:
At December 31, 1996, intangible assets consist of the following:
<TABLE>
<S> <C>
FCC licenses and goodwill ................................... $15,451,996
Organization costs .......................................... 103,511
Noncompetition agreements ................................... 117,500
Other ....................................................... 26,100
-----------
15,699,107
Less accumulated amortization ............................... 2,881,770
-----------
$12,817,337
===========
</TABLE>
Amortization expense was $942,697 in 1996.
6. LONG-TERM DEBT:
In January 1995, the Partnership entered into a variable rate loan
agreement with a bank whereby the Partnership could borrow up to $11,500,000.
Borrowings under this agreement bear interest at a rate based on the London
Interbank Offered Rate (LIBOR) or the bank's prime rate plus the applicable
margin, which ranges from 1.50% to 2.75% for LIBOR and prime depending on
ratios of debt to operating cash flow. The interest rate is approximately 8.75%
as of December 31, 1996 and $9,872,000 is outstanding under this agreement. The
Partnership pays a commitment fee of 0.5% per annum on the unused portion of
the loan commitment and paid a onetime facility fee of $115,000 in January
1995, which is being amortized over the term of the loan agreement.
The credit facility agreement contains certain financial and operational
covenants and other restrictions with which the Partnership must comply, which
include limitations on incurrence of additional indebtedness, partner
distributions and redemptions.
Borrowings under this agreement are collateralized by substantially all
assets of the Partnership.
The carrying amount reported for long-term debt approximates fair value
since the underlying instrument bears interest at a variable rate that reprices
frequently.
F-84
<PAGE> 187
COMMUNITY PACIFIC BROADCASTING COMPANY L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Total annual maturities of long-term debt, excluding mandatory
prepayments, are as follows:
<TABLE>
<S> <C>
1997 .................................................. $ 1,175,125
1998 .................................................. 1,653,125
1999 .................................................. 1,725,000
2000 .................................................. 2,156,250
2001 .................................................. 2,515,625
Thereafter ............................................ 646,875
-----------
$ 9,872,000
===========
</TABLE>
7. PARTNERS' EQUITY:
Under the amended and restated agreement of limited partnership dated
December 1, 1995, the general partner is authorized to manage the activities of
the Partnership. No management fee is to be paid, although the general partner
is reimbursed for expenses incurred. Extraordinary actions, as defined, require
the approval of the holders of a majority of the voting partner units (general
partner plus Classes B and C limited partner units).
Losses and profits are allocated among the partners in accordance with the
partnership agreement.
For tax purposes, any gain, loss, income or deductions with respect to
property contributed to the Partnership are subject to the special allocation
rules of Section 704 of the Internal Revenue Code.
In December 1995, the Partnership issued warrants to purchase 76,868 units
of Class C stock at $0.75 per unit. In July 1996, the Partnership issued
warrants to purchase 11,647 units of Class C stock at $0.825 per unit. The
warrants expire five years after the date of issuance.
8. EMPLOYEE BENEFIT PLAN:
The Company maintains a salary deferral 401(k) Plan (the Plan) that allows
eligible employees, at their discretion, to make pretax contributions to the
Plan. The Partnership may make discretionary contributions to the Plan. No
amounts have been accrued or paid for such discretionary contributions in
respect of the year ended December 31, 1996.
9. COMMITMENTS:
The Partnership rents certain facilities and equipment under noncancelable
operating leases. Minimum annual payments under these leases as of December 31,
1996 are as follows:
<TABLE>
<S> <C>
1997 .............................................. $ 323,670
1998 .............................................. 269,566
1999 .............................................. 245,175
2000 .............................................. 204,547
2001 .............................................. 151,938
Thereafter ........................................ 220,388
-----------
Total $ 1,415,284
===========
</TABLE>
Rent expense was approximately $362,685 for the year ended December 31,
1996.
F-85
<PAGE> 188
COMMUNITY PACIFIC BROADCASTING COMPANY L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Partnership has entered into several royalty agreements in order to
broadcast music. Most of these contracts require payments based upon related
advertising revenue.
10. ACQUISITION:
In April 1996, the Partnership acquired substantially all the assets of
KJAX-AM in Stockton, California, for $450,000 plus acquisition costs of
$64,757. The purchase price has been allocated $100,000 to property and
equipment, $325,000 to FCC licenses and goodwill and $25,000 to other
intangibles.
The acquisition has been accounted for as an asset purchase. The purchase
price has been allocated to the assets acquired based on their estimated fair
market value at the date of the acquisition.
Accordingly, the accompanying financial statements include the results of
operations of the acquired entity from the date of acquisition. Had the
acquisition occurred January 1, 1996 the Partnership's results of operations
for the year ended December 31, 1996 would not have been materially different.
11. PENDING SALE OF PARTNERSHIP:
On December 26, 1996, the Partnership agreed to be acquired by Capstar
Broadcasting Partners, Inc., a Delaware corporation, through an acquisition
affiliate, Community Acquisition Company, Inc. The sale is subject to
regulatory approval. The purchase price is estimated to be approximately $35.0
million and is subject to adjustment. No adjustments have been made to the
financial statements to reflect the pending sale.
F-86
<PAGE> 189
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Q Broadcasting, Inc.
Stamford, Connecticut
We have audited the accompanying statements of operations and deficit and
cash flows of Q Broadcasting, Inc. for each of the three years in the period
ended September 30, 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 that our audits provide a reasonable basis
for our opinion.
In our opinion, these financial statements referred to above present
fairly, in all material respects, the results of Q Broadcasting, Inc.'s
operations and its cash flows for each of the three years in the period ended
September 30, 1995, in conformity with generally accepted accounting
principles.
Holtz Rubenstein & Co., LLP Certified
Public Accountants
Melville, New York
February 12, 1996
F-87
<PAGE> 190
Q BROADCASTING, INC.
STATEMENTS OF OPERATIONS AND DEFICIT
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE .................................. $ 2,508,867 $ 2,267,625 $ 1,511,181
Less: Commissions and fees ............ 222,411 193,342 127,866
------------ ------------ ------------
2,286,456 2,074,283 1,383,315
------------ ------------ ------------
EXPENSES:
Broadcast and production (Note 8) ..... 786,377 742,018 715,511
Selling and promotion ................. 1,500,873 880,429 844,004
General and administrative (Note 8) ... 823,312 703,908 764,768
Depreciation and amortization ......... 447,602 538,600 637,397
------------ ------------ ------------
3,558,164 2,864,955 2,961,680
------------ ------------ ------------
LOSS FROM OPERATIONS ..................... (1,271,708) (790,672) (1,578,365)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (Note 9) ............. (493,578) (438,647) (257,732)
Other, net ............................ 153,871 51,805 13,705
------------ ------------ ------------
(339,707) (386,842) (244,027)
------------ ------------ ------------
NET LOSS ................................. (1,611,415) (1,177,514) (1,822,392)
DEFICIT, beginning of period ............. (3,217,713) (2,040,199) (217,807)
------------ ------------ ------------
DEFICIT, end of period ................... $ (4,829,128) $ (3,217,713) $ (2,040,199)
============ ============ ============
</TABLE>
See notes to financial statements.
F-88
<PAGE> 191
Q BROADCASTING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................ $(1,611,415) $(1,177,514) $(1,822,392)
----------- ----------- -----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ....................... 447,602 538,600 637,397
Provision for doubtful accounts ..................... 29,702 75,655 25,150
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable ............................. 111,743 (444,619) (9,557)
Prepaid expenses and other current assets ....... 337 (196) (690)
Other assets .................................... 17,963 (25,309) (3,853)
(Decrease) increase in liabilities:
Accounts payable ................................ 54,530 14,456 (22,712)
Accrued expenses ................................ 46,165 12,009 (31,444)
----------- ----------- -----------
Total adjustments ................................... 708,042 170,596 594,291
----------- ----------- -----------
Net cash used in operating activities ............... (903,373) (1,006,918) (1,228,101)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .................. (73,381) (23,118) (91,532)
----------- ----------- -----------
Net cash used in investing activities ............. (73,381) (23,118) (91,532)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayment of note payable ................. -- -- (327,719)
Repayment of capital lease obligations .............. (8,692) (9,823) (8,585)
Loans from stockholders ............................. 967,397 1,111,592 1,632,185
Loans to related parties ............................ (37,447) (35,433) --
----------- ----------- -----------
Net cash provided by financing activities ......... 921,258 1,066,336 1,295,881
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents ... (55,496) 36,300 (23,752)
Cash and cash equivalents at beginning of period ....... 56,327 20,027 43,779
----------- ----------- -----------
Cash and cash equivalents at end of period ............. $ 831 $ 56,327 $ 20,027
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-89
<PAGE> 192
Q BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
1. DESCRIPTION OF ORGANIZATION AND BUSINESS:
Q Broadcasting, Inc. ("Q Broadcasting") owns and operates two radio
broadcast stations in Stamford, Connecticut. These stations, WSTC-AM and
WKHL-FM, principally serve the Stamford metropolitan area.
2. BASIS OF PRESENTATION:
The financial statements have been prepared on a going concern basis which
contemplates continuity of operations and realization of assets and liquidation
of liabilities in the ordinary course of business. Q Broadcasting's ability to
continue as a going concern is dependent upon the continued financial support
of its shareholders.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Revenue recognition
Broadcasting revenue is recognized when commercials are aired. Barter
transactions are recorded at the estimated fair value of the merchandise or
services received.
b. Depreciation
Q Broadcasting provides for depreciation using the declining balance
method over the estimated useful lives of the fixed assets as follows:
<TABLE>
<S> <C>
Broadcast and other equipment ......................... 5 years
Tower and antenna systems ............................. 7 years
Transmitter equipment ................................. 7 years
Furniture and fixtures ................................ 7 years
</TABLE>
c. Amortization
Q Broadcasting provides for amortization using the straight-line method
over the estimated useful lives of the intangible assets as follows:
<TABLE>
<S> <C>
Broadcast license ..................................... 25 years
Transmitter lease ..................................... 23 years
Covenant not to compete ............................... 3 years
Organizational costs .................................. 5 years
</TABLE>
d. Income taxes
The shareholders of Q Broadcasting elected to be taxed as a "Small
Business Corporation," for federal and state income tax purposes pursuant to
the Internal Revenue Code. As a result of this election, the income of Q
Broadcasting will be taxed directly to the individual shareholders.
Accordingly, no provision for taxes is included in the financial statements of
Q Broadcasting.
F-90
<PAGE> 193
Q BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
e. Statement of cash flows
For purposes of the statement of cash flows, Q Broadcasting considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
f. Advertising
Q Broadcasting charges to expense, advertising costs as incurred.
Advertising costs amounted to $112,226, $41,405 and $227,094 for the years
ended September 30, 1995, 1994 and 1993, respectively.
4. DUE FROM RELATED PARTIES:
Q Broadcasting advanced funds on behalf of three related entities.
Approximately $54,200 and $16,800 for two entities 100% owned by Q
Broadcasting's owners as of September 30, 1995 and 1994, respectively and
approximately $18,700 to an entity which Q Broadcasting's owners have a
minority interest as of September 30, 1995 and 1994.
5. PROPERTY AND EQUIPMENT:
Property and equipment, at cost, is summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Broadcast and office equipment .................. $ 586,269 $ 583,853
Tower and antenna systems ....................... 268,000 268,000
Transmitter equipment ........................... 75,000 75,000
Furniture and fixtures .......................... 300,484 229,519
---------- ----------
1,229,753 1,156,372
Less accumulated depreciation ................... 822,461 633,347
---------- ----------
$ 407,292 $ 523,025
========== ==========
</TABLE>
Included in furniture and fixtures was $41,975 related to assets recorded
under capital leases; the related amount included in accumulated depreciation
is $28,707 and $19,095 as of September 30, 1995 and 1994.
6. INTANGIBLES:
Intangibles, at cost, is summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Organizational costs ............................ $ 97,917 $ 97,917
Covenant not to compete ......................... 450,000 450,000
Broadcast license ............................... 1,000,000 1,000,000
Transmitter lease ............................... 1,700,000 1,700,000
---------- ----------
3,247,917 3,247,917
Less accumulated amortization ................... 872,722 614,234
---------- ----------
$2,375,195 $2,633,683
========== ==========
</TABLE>
F-91
<PAGE> 194
Q BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. CAPITAL LEASE OBLIGATIONS:
Included in property and equipment are assets recorded under capital
leases. The future minimum lease payments for these capital leases and the
present value of the net minimum lease payments as of September 30, 1995 are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR
<S> <C>
1996 .......................................................... $ 6,826
1997 .......................................................... 4,168
-------
Minimum lease payments .......................................... 10,994
Less amount representing interest ............................... 830
-------
Present value of net minimum lease payments ..................... $10,164
=======
</TABLE>
8. COMMITMENTS:
Q Broadcasting leases studio and office space and a transmitter tower site
under operating leases expiring in September 1999 and December 2017,
respectively. Rent expense for these leases was approximately $211,000,
$186,000 and $179,000 for the years ended September 30, 1995, 1994 and 1993,
respectively.
Minimum rental commitments for the remaining terms of the operating leases
are as follows:
<TABLE>
<CAPTION>
Year Ending September 30,
<S> <C>
1996 ....................................................... $ 212,685
1997 ....................................................... 213,180
1998 ....................................................... 213,180
1999 ....................................................... 213,180
2000 ....................................................... 21,780
Thereafter ................................................... 430,939
</TABLE>
9. NOTE PAYABLE -- STOCKHOLDERS:
In connection with advances made by its stockholders for the acquisition
of assets and working capital, Q Broadcasting has issued an 8% demand note
payable to its stockholders. The stockholders have agreed not to demand payment
until a date subsequent to October 1, 1996. Interest expense for the years
ended September 30, 1995, 1994 and 1993 was $492,397, $435,895 and $238,187,
respectively.
10. SUBSEQUENT EVENT:
Q Broadcasting sold substantially all of its operating assets to Commodore
on May 30, 1996.
11. SUPPLEMENTARY INFORMATION -- STATEMENT OF CASH FLOWS:
Barter transactions resulted in sales and related expenses of $315,900,
$314,500 and $306,600 for the years ending September 30, 1995, 1994 and 1993,
respectively.
Cash paid during the years ended September 30, 1995, 1994 and 1993 for
interest was $493,578, $438,648 and $261,018, respectively.
F-92
<PAGE> 195
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Danbury Broadcasting Inc.
We have audited the accompanying statement of operations and accumulated
deficit and cash flows of Danbury Broadcasting, Inc. for the year ended June
30, 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 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 financial statements referred to above present fairly,
in all material respects, the results of Danbury Broadcasting, Inc.'s
operations and its cash flows for the year ended June 30, 1995 in conformity
with generally accepted accounting principles.
Paneth, Haber & Zimmerman LLP
New York, NY
August 18, 1995
F-93
<PAGE> 196
DANBURY BROADCASTING INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1995
-------------
<S> <C>
REVENUE
Broadcasting revenue ......................................... $ 3,451,684
Less agency commissions ...................................... 311,768
-----------
Net Revenue ............................................... 3,139,916
-----------
EXPENSES
Programming .................................................. 502,299
Technical .................................................... 106,475
Selling ...................................................... 865,381
General and Administrative ................................... 903,627
Interest Expense ............................................. 347,578
Depreciation ................................................. 197,197
Amortization ................................................. 236,213
-----------
Total Expenses ............................................ 3,158,770
-----------
NET LOSS ........................................................ (18,854)
ACCUMULATED DEFICIT
Beginning of year ............................................ (681,947)
Preferred stock dividends .................................... (55,000)
-----------
End of year ............................................... $ (755,801)
===========
</TABLE>
See notes to financial statements.
F-94
<PAGE> 197
DANBURY BROADCASTING INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1995
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ..................................................... $ (18,854)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization ............................. 433,410
Change in:
Accounts receivable ....................................... (78,637)
Due from related party .................................... 24,663
Prepaid expenses and other current assets ................. (20,147)
Other assets .............................................. (2,749)
Accounts payable .......................................... (42,801)
Accrued expenses .......................................... (71,465)
-----------
Net Cash Provided by Operating Activities............... 223,420
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Advances from affiliate ...................................... (6,100)
Purchases of property and equipment .......................... (34,521)
-----------
Net Cash Used in Investing Activities ................... (40,621)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Deferred financing costs ..................................... (211,110)
Proceeds of notes payable .................................... 3,404,106
Repayments of notes payable .................................. (3,263,384)
Preferred stock dividends .................................... (27,500)
-----------
Net Cash Used in Financing Activities ........................... (97,888)
-----------
NET INCREASE IN CASH ............................................ 84,911
CASH
Beginning of year ............................................ 92,716
-----------
End of year .................................................. $ 177,627
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest Paid ................................................ $ 434,894
Income Taxes Paid ............................................ --
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Broadcast equipment acquired through trade-out transactions .. $ 2,400
Broadcast equipment and property exchanged for
favorable tower lease (Note 7) ............................. $ 190,248
Unpaid accrual of redeemable preferred stock dividends ....... $ 41,250
</TABLE>
See notes to financial statements.
F-95
<PAGE> 198
DANBURY BROADCASTING INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Danbury Broadcasting Inc. ("Danbury"), a Connecticut corporation, operates
radio stations WRKI-FM and WINE-AM in Danbury, Connecticut. Its revenues are
derived from advertisers consisting primarily of local businesses. Credit is
extended to its advertisers in the normal course of business.
Depreciation and Amortization
Depreciation of property and equipment is computed over the estimated
useful lives of the respective assets using the straight-line method. Estimated
useful lives range from 5 to 20 years. Expenditures for repairs and maintenance
are charged to operations as incurred.
Goodwill, which is included in intangible assets, represents the cost of
acquired assets in excess of values ascribed to the net identified assets and
is being amortized using the straight-line method over 40 years. Costs incurred
in obtaining long-term financing were capitalized and are included in
intangible assets. They are being amortized using the straight-line method
(that does not differ materially from the interest rate method) over the term
of the related debt.
A covenant not to compete, which restricts the seller and the previous
owner from competing with Danbury in the Greater Danbury, Connecticut area for
a period of four years, is included in intangible assets. This covenant is
being amortized on a straight-line basis over its four year life.
The stations' broadcast license is being amortized using the straight-line
method over 25 years.
A favorable lease for broadcast tower rental is being amortized using the
straight-line method over its 30 year term.
Non-Monetary Transactions
Barter transactions represent the exchange of unsold advertising time for
merchandise or services. Barter transactions are reported at the estimated fair
value of the product or service received. Revenue is recognized when
commercials are broadcast and merchandise or services obtained are reported
when received or used. For merchandise or services received prior to the
broadcast of the commercial, a liability is provided; conversely, a receivable
is established when the commercial is broadcast prior to the receipt of the
merchandise or services.
Income Taxes
Danbury has adopted Statement of Financial Accounting Standards 109 ("SFAS
109") and recognizes deferred tax assets and liabilities for temporary
differences between amounts recorded for financial statement and tax purposes.
F-96
<PAGE> 199
DANBURY BROADCASTING INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1995
2. BARTER TRANSACTIONS
The accompanying financial statements include the following barter
transactions:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1995
-------------
<S> <C>
Barter revenue ................................................. $271,253
========
Barter expenditures ............................................ $182,821
========
</TABLE>
3. REDEEMABLE PREFERRED STOCK
The Series A cumulative preferred stock carries a liquidation preference
of $1,000 per share and a par value of $100 per share. Danbury may redeem the
shares at this price, plus accrued but unpaid dividends, at any time through
June 30, 1997. At the earlier of that date, or an event of default (as defined)
the holder can require Danbury to redeem the shares in full, with accrued but
unpaid dividends out of funds "legally available". An event of default occurred
during the year ended June 30, 1995 in that Danbury did not pay the full
dividend. This gives the holders of the shares the right to demand redemption.
The Series A cumulative preferred stock provides for an annual dividend of
$110 per share. Dividends of $55,000 were declared on the preferred stock and
$13,750 was paid for the year ended June 30, 1995.
4. LEASES
During 1995, Danbury leased space on a transmitting tower under a five
year lease renewable in five (5) year terms at Danbury's option from a related
party (Note 7). Automobiles under operating leases expire in various years
through 1998.
Rent expense on the above, for the year ended June 30, 1995 was $46,500.
5. INCOME TAXES
Danbury has a net operating loss carryforward of approximately $284,000
which can be carried forward to the years 2008 and 2009 to offset taxable
income resulting in a deferred tax asset of $118,000. Other temporary
differences resulting from differences between book and tax amortization and
depreciation result in a deferred tax asset of approximately $81,000 at June
30, 1995. Total deferred tax assets of approximately $199,000 at June 30, 1995
have been completely offset by a valuation allowance. The valuation allowance
decreased by $25,000 during the year ended June 30, 1995.
F-97
<PAGE> 200
DANBURY BROADCASTING INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1995
Income tax benefit for the year ended June 30, 1995 differs from the
expected statutory rate for the following reasons:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Federal, at statutory rates ................................... $ (6,500)
State, net of Federal benefit ................................. (1,500)
Nondeductible expenses ........................................ 10,000
Taxable gain on asset transfer ................................ 23,000
--------
25,000
Change in deferred tax asset valuation allowance .............. (25,000)
--------
Tax provision ................................................. $ --
========
</TABLE>
6. RETIREMENT PLAN
Employees of Danbury may participate in profit sharing/401(k) savings plan
and may elect to make contributions pursuant to a salary reduction agreement
upon meeting length of service and age requirements. Danbury can elect to make
discretionary contributions to the profit sharing plan but has not done so for
the year. Danbury has matched 20% of individual 401(k) contributions during the
year ended June 30, 1995. Danbury's cost amounted to approximately $4,500.
7. RELATED PARTY TRANSACTIONS
During the year ended June 30, 1995, Danbury exchanged its tower and
associated real property with a book value of $190,000 for a favorable lease
with a Partnership formed to improve and rent the tower to Danbury and others.
The Partnership has committed to the financing of tower improvements which will
improve the broadcast signal. Danbury's lease for placement of its antenna on
the tower at the optimal site is at below market rates. Danbury and the
Partnership are related through common control. The favorable lease has been
valued at $190,000, the book value of the property exchanged.
F-98
<PAGE> 201
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Adventure Communications -- Huntington
(Division of Adventure Communications, Inc.)
We have audited the accompanying balance sheet of Adventure
Communications-Huntington (Division of Adventure Communications, Inc.) as of
December 31, 1995, and the related statements of operations, division's
deficit, and cash flows for the year 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 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 financial statements referred to above present fairly,
in all material respects, the financial position of Adventure
Communications-Huntington (Division of Adventure Communications, Inc.) as of
December 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Brown, Edwards & Company, LLP
Bluefield, West Virginia
May 1, 1996
F-99
<PAGE> 202
ADVENTURE COMMUNICATIONS -- HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
<S> <C>
CURRENT ASSETS
Cash ......................................................... $ 105,926
Accounts receivable, less allowance for doubtful
accounts of $66,000 on December 31, 1995 (Note 7) .......... 647,986
Prepaid assets ............................................... 1,325
Other receivables ............................................ 43,120
Deferred income taxes (Note 5) ............................... 26,400
-----------
Total current assets ...................................... 824,757
-----------
PROPERTY AND EQUIPMENT, NET (Notes 3 and 7) ..................... 1,225,957
-----------
INTANGIBLES, NET (Note 4) ....................................... 135,140
-----------
$ 2,185,854
===========
LIABILITIES AND DIVISION'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses ........................ $ 177,321
Inter-divisional transaction payable (Note 6) ................ 2,282,170
-----------
Total current liabilities ................................. 2,459,491
-----------
Commitment (Note 7) ............................................. --
DIVISION'S DEFICIT .............................................. (273,637)
-----------
$ 2,185,854
===========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
F-100
<PAGE> 203
ADVENTURE COMMUNICATIONS -- HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Advertising revenue ............................................. $ 3,352,771
Agency commissions .............................................. (187,292)
-----------
Net revenue ............................................... 3,165,479
Other operating revenue ......................................... 36,225
-----------
Total revenue ............................................. 3,201,704
-----------
Operating expenses (Note 6):
Station operating expenses ................................... 2,118,139
Corporate expenses ........................................... 572,980
Depreciation ................................................. 230,600
Amortization ................................................. 13,587
-----------
2,935,306
-----------
Operating income .......................................... 266,398
Interest income ................................................. 7,273
-----------
Income before taxes ....................................... 273,671
Provision for income taxes (Note 5) ............................. (75,640)
-----------
Net income ................................................... $ 198,031
===========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
F-101
<PAGE> 204
ADVENTURE COMMUNICATIONS -- HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
STATEMENT OF DIVISION'S DEFICIT
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Balance, January 1, 1995 .......................................... $(471,668)
1995 net income ................................................ 198,031
---------
Balance, December 31, 1995 ........................................ $(273,637)
=========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
F-102
<PAGE> 205
ADVENTURE COMMUNICATIONS -- HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income ................................................... $ 198,031
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................. 244,187
Deferred income taxes ..................................... (26,400)
Changes in current assets and liabilities:
(Increase) decrease in:
Accounts receivable ....................................... (112,955)
Prepaid expenses and other receivables .................... 4,027
Increase in:
Accounts payable and accrued expenses ...................... 28,473
-----------
Net cash provided by operating activities ................ 335,363
-----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment ........................... (366,455)
Purchase of intangible assets ................................ (89,000)
-----------
Net cash used in investing activities .................... (455,455)
-----------
CASH FLOW FROM FINANCING ACTIVITIES
Increase in inter-divisional payable ......................... 975,018
Repayment of inter-divisional payable ........................ (1,020,000)
-----------
Net cash used in financing activities .................... (44,982)
-----------
Decrease in cash ......................................... (165,074)
CASH
Beginning .................................................... 271,000
-----------
Ending ....................................................... $ 105,926
===========
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS
Barter revenue ............................................... $ 233,219
===========
Barter expense ............................................... $ 163,100
===========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
F-103
<PAGE> 206
ADVENTURE COMMUNICATIONS -- HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Nature of business:
Adventure Communications -- Huntington (the "Division") is a division of
Adventure Communications, Inc. ("Adventure"). Adventure's principal business is
the operation of AM and FM radio broadcasting stations in the areas of
Bluefield and Huntington, West Virginia; Statesville, North Carolina; and
Hilton Head, South Carolina. The Division operates WKEE-AM and FM, WBVB-FM,
WZZW-AM and WIRO-AM (the Stations).
Adventure also has joint operating and marketing agreements with other
radio stations located in the Huntington area. Under these agreements,
Adventure is responsible for various promotional and marketing activities of
the Stations. Revenue and expenses resulting from these agreements are included
in the Division's operations.
On April 8, 1996, Adventure entered into an asset purchase agreement to
sell substantially all the assets relating to the operations of the Stations
(Note 11).
Revenue recognition:
Advertising revenue is recognized in the accounting period which
corresponds with the broadcast of the advertisement. Barter revenue is reported
when advertisements are broadcast and barter merchandise or services received
are expensed when used. Barter transactions are valued at the market value of
the broadcast time which approximates the market value of the product or
services received.
Property and equipment:
Property and equipment are recorded at cost and are depreciated over their
estimated useful lives using straight-line and accelerated methods.
Valuation of receivables:
The Division provides for bad debts under the reserve method which charges
current operations for estimated uncollectibles based upon the Division's
collection experience and an evaluation of the receivables at year end.
Intangible assets:
Acquisition costs (non-compete covenants and goodwill) in excess of the
net tangible assets of acquired radio stations are amortized on a straight-line
basis over periods of up to 15 years, and are included in the financial
statements at cost less accumulated amortization.
Income taxes:
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
related primarily to the allowance for doubtful accounts which is not
deductible for income tax return purposes until the accounts are written off as
uncollectible. The deferred tax asset represents the future tax return
deduction.
Effective January 1, 1995, Adventure revoked its S Corporation election
and became a taxable entity. Previously, its income and losses were included in
the personal tax returns of the stockholders, and Adventure did not record an
income tax provision or benefit.
F-104
<PAGE> 207
ADVENTURE COMMUNICATIONS HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Statement of cash flows:
Separate disclosures have not been made for cash paid for interest and
income taxes because these amounts are included in inter-divisional
transactions with Adventure.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
NOTE 2. ACQUISITIONS
In June 1995, Adventure purchased selected assets of an AM radio station
in Ironton, Ohio. The acquisition was accounted for by the purchase method, and
the statement of income includes the results of operations of this station from
the date of acquisition.
<TABLE>
<S> <C>
Property and equipment ..................................... $211,000
Intangibles ................................................ 89,000
--------
$300,000
--------
</TABLE>
Pro forma results of operations from this acquisition were not material to
the Division's operations. Therefore, such information has not been presented.
NOTE 3. PROPERTY AND EQUIPMENT
Major classes of property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
<S> <C>
Land and improvements ........................................ $ 60,000
Buildings and improvements ................................... 550,557
Broadcasting equipment ....................................... 1,735,498
Furniture and fixtures ....................................... 124,756
Transportation equipment ..................................... 22,280
Computer and office equipment ................................ 187,416
----------
2,680,507
Less accumulated depreciation ................................ 1,454,550
----------
$1,225,957
==========
</TABLE>
F-105
<PAGE> 208
ADVENTURE COMMUNICATIONS HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
NOTE 4. INTANGIBLES
Intangibles are stated at cost, net of amortization and consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
<S> <C>
Non-compete covenant ........................................... $ 20,000
Goodwill ....................................................... 163,317
License fees ................................................... 30,000
--------
213,317
Less accumulated amortization .................................. 78,177
--------
$135,140
========
</TABLE>
NOTE 5. INCOME TAXES
The provision for income taxes consists of the following components:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Current expense .............................................. $(102,040)
Deferred ..................................................... 26,400
---------
Provision for income taxes ................................ $ (75,640)
=========
</TABLE>
Income tax expense differs from the statutory federal rate of 34% as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Tax expense .................................................. $(109,468)
Non-deductible items ......................................... (4,172)
Change in tax status ......................................... 38,000
---------
Provision for income taxes ................................ $ (75,640)
=========
</TABLE>
As discussed in Note 1, Adventure changed its tax status from nontaxable
to taxable effective for 1995. Accordingly, the deferred tax asset of
approximately $38,000 at the date that the termination election became
effective has been recorded through a charge to the tax provision for 1995.
NOTE 6. INTER-DIVISIONAL TRANSACTIONS
Adventure has allocated to the Division various expenses it incurred for
corporate services, overhead and interest costs. The amounts included in
corporate services and overhead allocations are comprised mainly of corporate
office salaries, related payroll taxes and employee benefits, professional fees
and administrative expenses. These costs have been allocated based on revenues
of the Division compared to total revenues of Adventure. Management believes
the amounts allocated to the Division have been computed and charged to the
Division on a reasonable basis.
F-106
<PAGE> 209
ADVENTURE COMMUNICATIONS HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
The Division is obligated to Adventure for monies received from Adventure
for the original purchase of the Stations as well as the allocated expenses
mentioned above. The Division, in return, transfers cash to Adventure that is
in excess of its operating needs. These transactions are conducted on an
interest free basis. The inter-divisional payable is analyzed below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Balance, beginning ......................................... $ 2,327,152
Allocations of corporate costs to the Division ............. 675,018
Purchase of Stations ....................................... 300,000
Cash transfers ............................................. (1,020,000)
-----------
Balance, ending ............................................ $ 2,282,170
===========
</TABLE>
NOTE 7. COMMITMENT
Adventure is obligated for long-term debt of approximately $6,900,000 for
which substantially all assets of Adventure (including the Division) are
pledged as collateral. At December 31, 1995, the book value of total assets of
Adventure exceeds the long-term debt. Approximately $3,700,000 of the debt is
also secured by a $4,000,000 life insurance policy on the majority stockholder
of Adventure.
A note payable to the majority stockholder of Adventure of $2,400,000 is
included in the $6,900,000 debt referred to above.
NOTE 8. EMPLOYEE BENEFIT PLANS
Adventure has a contributory profit sharing plan covering all full time
employees with one or more years of service. The plan provides for annual
employer contributions on a discretionary basis as determined by the Board of
Directors. No contributions were made to the plan in 1995.
Adventure also has a 401(k) retirement plan, whereby participants may
contribute a percentage of their compensation.
Adventure's matching contribution percentage (which is determined annually
by Adventure) is limited to 10% of the participant's compensation for each plan
year. The Division's contribution was approximately $8,200 for the year ended
December 31, 1995.
NOTE 9. OPERATING LEASES
The Division leases certain transmission towers and automobiles under
non-cancelable lease agreements. These leases have been classified as operating
leases; and accordingly, all rents are charged to operations as incurred.
The following is a schedule by years of future minimum rental payments
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of December 31, 1995:
F-107
<PAGE> 210
ADVENTURE COMMUNICATIONS HUNTINGTON
(DIVISION OF ADVENTURE COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
<S> <C>
1996 ................................................... $15,630
1997 ................................................... 8,500
1998 ................................................... 2,400
1999 ................................................... 2,400
2000 ................................................... 2,400
-------
Total minimum payments required ........................ $31,330
=======
</TABLE>
Lease expense was approximately $15,630 for 1995.
NOTE 10. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the inter-divisional payable approximates fair
value. It is included in the financial statements as a current liability due to
the pending sales discussed in Note 11. The inter-divisional payable will be
satisfied by the proceeds of the sale. In the financial statements of
Adventure, all inter-divisional payables/receivables are eliminated.
NOTE 11. SUBSEQUENT EVENT
On April 8, 1996, Adventure entered into an asset purchase agreement to
sell substantially all the assets relating to the operations of the Stations
for $7,765,000. The sale of the Station is contingent on FCC consent. The buyer
will purchase all of the assets for the Stations, free and clear of any
liabilities, mortgages, liens, pledges, conditions or encumbrances except for
the Stations' cash, rights to refunds or deposits which relate to the period
prior to closing and accounts receivable. Also at closing, $475,000 of the
sales price will be deposited with the indemnification escrow agent. The
indemnification period will be for a period of two (2) years following the
closing. The indemnification by seller and buyer shall be for any losses,
liabilities or damages resulting from untrue representations, breach of
warranty or non-fulfillment of covenants, liabilities not expressly assumed by
buyer, liabilities resulting from operations prior to the closing date for the
buyer or liabilities resulting from operation after the closing date for the
seller.
F-108
<PAGE> 211
ANNEX A TO PROSPECTUS
The following table hereto sets forth the market, FCC license
classification and frequency of each of the Company's stations (including those
with which the Company has or will have a JSA or LMA), assuming the
consummation of the Pending Acquisitions, and the date on which each station's
FCC license expires.
<TABLE>
<CAPTION>
EXPIRATION
FCC DATE OF
MARKET(1) STATION(2) CLASS FREQUENCY LICENSE
- --------- ---------- ----- --------- -------
<S> <C> <C> <C> <C>
NORTHEAST REGION
Allentown-Bethlehem, PA
WAEB-AM B 790 kHz 08-01-98
WAEB-FM B 104.1 MHz 08-01-98
WZZO-FM B 95.1 MHz 08-01-98
WKAP-AM(3) B 1470 kHz 08-01-98
Melbourne-Titusville-Cocoa, FL
WMMB-AM C 1240 kHz 02-01-04
WGGD-FM A 95.1 MHz 02-01-04
WMYM-AM B 1350 kHz 02-01-04
WLRQ-FM C2 99.3 MHz 02-01-04
WHKR-FM C2 102.7 MHz 02-01-04
Fairfield County, CT
WNLK-AM B 1350 kHz 04-01-98
WEFX-FM A 95.9 MHz 04-01-98
WSTC-AM C 1400 kHz 04-01-98
WKHL-FM A 96.7 MHz 04-01-98
WINE-AM D 940 kHz 04-01-98
WRKI-FM B 95.1 MHz 04-01-98
Ft. Pierce-Stuart-Vero Beach, FL
WZZR-FM C2 92.7 MHz 02-01-04
WQOL-FM C2 103.7 MHz 02-01-04
WPAW-FM(3) C2 99.7 MHz 02-01-04
WBBE-FM C3 94.7 MHz 02-01-04
WAVW-FM A 101.7 MHz 02-01-04
WAXE-AM D 1370 kHz 02-01-04
Huntington, WV-Ashland, KY
WTCR-AM B 1420 kHz 10-01-03
WTCR-FM B 103.3 MHz 10-01-03
WIRO-AM C 1230 kHz 10-01-04
WHRD-AM(3) D 1470 kHz 10-01-03
WZZW-AM D 1600 kHz 10-01-03
WKEE-AM D 800 kHz 10-01-03
WKEE-FM A 100.5 MHz 10-01-03
WAMX-FM A 106.3 MHz 10-01-03
WFXN-FM A 107.1 MHz 10-01-04
WBVB-FM A 97.1 MHz 10-01-04
Salisbury-Ocean City, MD
WWFG-FM B 99.9 MHz 10-01-03
WOSC-FM B1 95.9 MHz 08-01-98
Dover, DE
WDSD-FM B 94.7 MHz 08-01-98
WSRV-FM A 92.9 MHz 08-01-98
WDOV-AM B 1410 kHz 08-01-98
Wilmington, DE
WJBR-AM D 1290 kHz 08-01-98
WJBR-FM B 99.5 MHz 08-01-98
</TABLE>
A-1
<PAGE> 212
<TABLE>
<CAPTION>
EXPIRATION
FCC DATE OF
MARKET(1) STATION(2) CLASS FREQUENCY LICENSE
- --------- ---------- ----- --------- -------
<S> <C> <C> <C> <C>
Westchester-Putnam Counties, NY
WFAS-AM C 1230 kHz 06-01-98
WPUT-AM D 1510 kHz 06-01-98
WFAS-FM A 103.9 MHz 06-01-98
WZZN-FM A 106.3 MHz 06-01-98
WAXB-FM A 105.5 MHz 06-01-98
SOUTHEAST REGION
Greenville, SC
WJMZ-FM C 107.3 MHz 12-01-03
WESC-FM C 92.5 MHz 12-01-03
WESC-AM D 660 kHz 12-01-03
WFNQ-FM C 93.3 MHz 12-01-03
Columbia, SC
WCOS-FM C1 97.5 MHz 12-01-03
WHKZ-FM A 96.7 MHz 12-01-03
WVOC-AM B 560 kHz 12-01-03
WSCQ-FM A 100.1 MHz 12-01-03
WCOS-AM C 1400 kHz 12-01-03
WNOK-FM C 104.7 MHz 12-01-03
Huntsville, AL
WDRM-FM C1 102.1 MHz 04-01-04
WHOS-AM D 800 kHz 04-01-04
WBHP-AM C 1230 kHz 04-01-04
Jackson, MS
WJMI-FM C 99.7 MHz 06-01-04
WOAD-AM C 1300 kHz 06-01-04
WKXI-AM B 1400 kHz 06-01-04
WKXI-FM C1 107.5 MHz 06-01-04
Shreveport, LA
KRMD-FM C 101.1 MHz 06-01-04
KRMD-AM C 1340 kHz 06-01-04
Montgomery, AL
WZHT-FM C 105.7 MHz 04-01-04
WMCZ-FM A 97.1 MHz 04-01-04
WDHT-FM C1 104.3 MHz *
EXPIRATION
FCC DATE OF
MARKET(1) STATION(2) CLASS FREQUENCY LICENSE
- --------- ---------- ----- --------- -------
<S> <C> <C> <C> <C>
Asheville, NC
WWNC-AM B 570 kHz 12-01-03
WKSF-FM C 99.9 MHz 12-01-03
Tuscaloosa, AL
WACT-AM D 1420 kHz 04-01-04
WACT-FM A 105.5 MHz 04-01-04
WTXT-FM C1 98.1 MHz 04-01-04
Wheeling, WV
WWVA-AM A 1170 kHz 10-01-03
WOVK-FM B 98.7 MHz 10-01-03
WKWK-FM B 97.3 MHz 10-01-03
WBBD-AM D 1400 kHz 10-01-03
WRIR-FM B1 105.5 MHz 10-01-03
WEGW-FM B 107.5 MHz 10-01-03
WEEL-FM(3) A 95.7 MHz 10-01-04
</TABLE>
A-2
<PAGE> 213
<TABLE>
<CAPTION>
EXPIRATION
FCC DATE OF
MARKET(1) STATION(2) CLASS FREQUENCY LICENSE
- --------- ---------- ----- --------- -------
<S> <C> <C> <C> <C>
Winchester, VA
WUSQ-FM B 102.5 MHz 10-01-03
WFQX-FM A 99.3 MHz 10-01-03
WNTW-AM B 610 kHz 10-01-03
Jackson, TN
WTJS-AM B 1390 kHz 08-01-04
WTNV-FM C1 104.1 MHz 08-01-04
WYNU-FM C 92.3 MHz 08-01-04
Roanoke, VA
WROV-AM C 1240 kHz 10-01-03
WROV-FM C1 96.3 MHz 10-01-03
WRDJ-FM C3 104.9 MHz *
WJJS-FM A 106.1 MHz 10-01-03
WJLM-FM A 93.5 MHz 10-01-03
Lynchburg, VA
WLDJ-FM B 102.7 MHz 10-01-03
WJJX-FM A 101.7 MHz 10-01-03
WJJS-AM B 1320 kHz 10-01-03
WYYD-FM C1 107.9 MHz 10-01-03
Statesville, NC
WFMX-FM C 105.7 MHz 12-01-03
WSIC-AM C 1400 kHz 12-01-03
Gadsden, AL
WAAX-AM B 570 kHz 04-01-04
WQEN-FM C 103.7 MHz 04-01-04
WEST REGION
Stockton, CA
KVFX-FM(3) A 96.7 MHz 12-01-97
KJAX-AM(3) B 1280 kHz 12-01-97
Des Moines, IA
KHKI-FM(3) C1 97.3 MHz 02-01-05
KGGO-FM(3) C 94.9 MHz 02-01-05
KDMI-AM(3) B 1460 kHz 02-01-05
Madison, WI
WIBA-AM B 1310 kHz 12-01-04
WIBA-FM B 101.5 MHz 12-01-04
WMAD-FM A 92.1 MHz 12-01-04
WTSO-AM B 1070 kHz 12-01-04
WZEE-FM B 104.1 MHz 12-01-04
WMLI-FM B1 96.3 MHz 12-01-04
Modesto, CA
KJSN-FM(3) A 102.3 MHz 12-01-97
KFIV-AM(3) B 1360 kHz 12-01-97
Anchorage, AK
KBFX-FM(3) C3 100.5 MHz 02-01-98
KENI-AM(3) B 550 kHz 02-01-98
KYAK-AM A 650 kHz 02-01-98
KGOT-FM C2 101.3 MHz 02-01-98
KYMG-FM C1 98.9 MHz 02-01-98
KASH-FM(3) C1 107.5 MHz 02-01-98
Fairbanks, AK
KIAK-FM C 102.5 MHz 02-01-98
KIAK-AM B 970 kHz 02-01-98
KAKQ-FM C2 101.1 MHz 02-01-98
Yuma, AZ
KYJT-FM A 100.9 MHz 10-01-97
KTTI-FM C 95.1 MHz 10-01-97
KBLU-AM B 560 kHz 10-01-97
</TABLE>
- ------------
* Not licensed -- Construction Permit only.
A-3
<PAGE> 214
(1) Actual city of license may be different from metropolitan market served.
Market may be different from market definition used under FCC multiple
ownership rules.
(2) The table does not include (i) station WING-FM in Dayton, Ohio, which is
owned by the Company and for which an unrelated third party, who has an
option to purchase such station, currently provides certain sales,
programming and marketing services pursuant to an LMA, (ii) station
WDRR-FM in Ft. Myers, Florida, in which the Company owns a 50% nonvoting
interest and which the Company intends to sell or (iii) station KASH-AM in
Anchorage, Alaska, which the Company will own upon consummation of the
Community Pacific Acquisition, but expects to sell subsequent thereto to
remain in compliance with the station ownership limitations under the
Communications Act. See "Acquisitions."
(3) The Company provides certain sales and marketing services to stations
WKAP-AM in Allentown, Pennsylvania, WPAW-FM in Ft. Pierce-Stuart-Vero
Beach, Florida and WEEL-FM in Wheeling, West Virginia, pursuant to JSAs.
The Company provides certain sales, programming and marketing services to
station WHRD-AM in Huntington, West Virginia, and pending consummation of
the Community Pacific Acquisition, to stations KFIV-AM and KJSN-FM in
Modesto, California, KVFX-FM and KJAX-FM in Stockton, California, KASH-
FM, KENI-AM and KBFX-FM in Anchorage, Alaska, and KDMI-AM, KHKI-FM and
KGGO-FM in Des Moines, Iowa, pursuant to LMAs.
A-4
<PAGE> 215
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE SUCH DATE.
---------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary ............................................... 3
Summary Historical Financial Data ................................ 10
Summary Pro Forma Financial Data ................................. 11
Risk Factors ..................................................... 12
Use of Proceeds .................................................. 19
Dividend Policy .................................................. 19
Dilution ......................................................... 20
Capitalization ................................................... 21
Pro Forma Financial Information .................................. 23
Selected Historical Financial Data ............................... 38
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ................................................. 39
Business ......................................................... 45
The Pending Acquisitions ......................................... 65
Management ....................................................... 68
Security Ownership of Certain
Beneficial Owners ............................................. 79
Certain Transactions ............................................. 80
Description of Capital Stock ..................................... 83
Shares Eligible for Future Sale .................................. 86
Description of Indebtedness ...................................... 88
Underwriting ..................................................... 93
Notice to Canadian Residents ..................................... 95
Legal Matters .................................................... 96
Experts .......................................................... 96
Available Information ............................................ 97
Glossary of Certain Terms and Market and
Industry Data ................................................. 97
Index to Financial Statements .................................... F-1
Annex A -- Table of Additional Station
Information ................................................... A-1
</TABLE>
LOGO
CAPSTAR BROADCASTING
PARTNERS, INC.
SHARES
CLASS A
COMMON STOCK
($.01 par value)
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
ALEX. BROWN & SONS
INCORPORATED
BT SECURITIES CORPORATION
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
UNTIL ____, 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, 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 UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
================================================================================
<PAGE> 216
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses payable by Capstar Broadcasting Partners, Inc.
(the "Registrant" or the "Company") in connection with the registration of the
securities offered hereby, other than underwriting discounts and commissions,
are as follows:
<TABLE>
<S> <C>
SEC Registration fee ....................................... $ 30,303
NASD filing fee ............................................ 10,500
Exchange/trading system application fee .................... *
Accounting fees and expenses ............................... *
Legal fees and expenses .................................... *
Blue Sky fees and expenses (including fees of counsel) ..... *
Transfer agent and registrar fees .......................... *
Printing and engraving expenses ............................ *
Miscellaneous .............................................. *
--------
Total ............................................. $ *
========
</TABLE>
- ----------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Restated Certificate of Incorporation (the
"Certificate of Incorporation") provides that no director of the Registrant
will be personally liable to the Registrant or any of its stockholders for
monetary damages arising from the director's breach of fiduciary duty as a
director. However, this does not apply with respect to any action in which the
director would be liable under Section 174 of Title 8 of the General
Corporation Law of Delaware nor does it apply with respect to any liability in
which the director (i) breached his duty of loyalty to the Registrant; (ii) did
not act in good faith or, in failing to act, did not act in good faith; (iii)
acted in a manner involving intentional misconduct or a knowing violation of
law or, in failing to act, shall have acted in a manner involving intentional
misconduct or a knowing violation of law; or (iv) derived an improper personal
benefit.
The Certificate of Incorporation and By-laws provide that the
Registrant will indemnify its officers and directors and former officers and
directors against any expenses, judgments or settlement payments sustained or
paid by such persons as a result of having acted as an officer or director of
the Registrant, or, at the request of the Registrant, as an officer, director,
agent or employee of another business entity. The Certificate of Incorporation
and By-laws further provide that the Registrant may, by action of its Board of
Directors, provide indemnification to employees and agents of the Registrant,
individually or as a group, with the same scope and effect as the
indemnification of directors and officers.
The Registrant has entered into indemnification agreements with each
of its directors and executive officers under which the Registrant has agreed
to indemnify the director or officer to the fullest extent permitted by law and
to advance expenses, if the director or officer becomes a party to or witness
or other participant in any threatened, pending or completed action, suit or
proceeding (a "Claim") by reason of any occurrence related to the fact that the
person is or was a director, officer, employee, agent or fiduciary of the
Registrant or a subsidiary of the Registrant or another entity at the
Registrant's request (an "Indemnifiable Event"), unless a reviewing party
(either outside counsel or a committee appointed by the Board of Directors)
determines that the person would not be entitled to indemnification under
applicable law. In addition, if a change in control or a potential change in
control of the Registrant occurs and if the person indemnified so requests, the
Registrant will establish a trust for the benefit of the indemnitee and fund
the trust in an amount sufficient to satisfy all expenses reasonably
anticipated at the time of the request to be incurred in connection with any
Claim relating to an Indemnifiable Event. The reviewing party will determine
the amount deposited
II-1
<PAGE> 217
in the trust. An indemnitee's rights under the indemnification agreement are
not exclusive of any other rights under the Registrant's Restated Certificate
of Incorporation or By-laws or applicable law.
Under Section 145 of the General Corporation Law of Delaware, every
Delaware corporation has the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (other than an action by or in the right
of the corporation) by reason of the fact that the person is or was a director,
officer, employee or agent of any corporation, partnership, joint venture,
trust or other enterprise, against any and all expenses, judgments, fines and
amounts paid in settlement and reasonably incurred in connection with such
action, suit or proceeding. The power to indemnify applies only if the person
acted in good faith and in a manner the person reasonably believed to be in the
best interest, or not opposed to the best interest, of the corporation and with
respect to any criminal action or proceeding, had no reasonable cause to
believe the person's conduct was unlawful.
The power to indemnify applies to actions brought by or in the right
of the corporation as well, but only to the extent of defense and settlement
expenses and not to any satisfaction of a judgment or settlement of the claim
itself, and with the further limitation that in such actions no indemnification
may be made in the event of any adjudication of negligence or misconduct unless
the court, in its discretion, believes that in light of all the circumstances
indemnification should apply.
To the extent any person referred to in the two immediately preceding
paragraphs is successful in the defense of the actions referred to therein,
that person is entitled to indemnification under Section 145 of the General
Corporation Law of Delaware as previously described.
The form of Underwriting Agreement included as Exhibit 1 provides for
indemnification of the Registrant and certain controlling persons under certain
circumstances, including indemnification for liabilities under the Securities
Act of 1933 (the "Securities Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following information relates to all securities issued or sold by
the Registrant since inception and not registered under the Securities Act.
Unless otherwise specified, each of the transactions described below
was conducted in reliance upon the exemption from registration provided in
Section 4(2) of the Securities Act and the rules and regulations promulgated
thereunder. Furthermore, each of the certificates representing the
Registrant's securities issued in connection with such transactions contains a
restrictive legend, as appropriate, requiring each person acquiring such
securities from the Registrant to furnish investment representations to the
Registrant and stating that no underwriters participated in such transactions.
In addition, the transactions described below give effect to the
reclassification of the Registrant's common stock, par value $.01 per share, as
Class A Common Stock, par value $.01 per share (the "Class A Common Stock").
On October 16, 1996, the Registrant sold 90,000,000 shares of Class A
Common Stock to Capstar Broadcasting Partners, L.P. and 3,000,000 shares of
Class A Common Stock to R. Steven Hicks for an aggregate purchase price of
$93,000,000.
On November 26, 1996, in reliance upon the exemption from registration
provided in Section 3(b) of the Securities Act and Rule 701 promulgated
thereunder, the Registrant granted stock purchase rights to purchase an
aggregate of 1,155,000 shares of Class A Common Stock to key employees, which
stock purchase rights were subsequently exercised in full for an aggregate
purchase price of $1,155,000, at which time all 1,155,000 shares of Class A
Common Stock were issued to the holders of the stock purchase rights.
On January 27, 1997, the Registrant sold (i) 100,000 shares of Class A
Common Stock to R. Steven Hicks for an aggregate purchase price of $100,000 and
(ii) 500,000 shares of Class A Common Stock to William S. Banowsky, Jr. for an
aggregate purchase price of $500,000.
II-2
<PAGE> 218
On February 20, 1997, the Registrant sold (i) 31,634,527 shares of
Class A Common Stock to Capstar Broadcasting Partners, L.P. for an aggregate
purchase price of $34,797,980, (ii) 363,636 shares of Class A Common Stock to
Claude C. Turner for an aggregate purchase price of $400,000, (iii) 363,636
shares of Class A Common Stock to David J. Benjamin, III for an aggregate
purchase price of $400,000, (iv) in connection with the Registrant's
acquisition of Osborn Communications Corporation, 1,636,361 shares of Class A
Common Stock to Frank D. Osborn in exchange for shares of common stock of
Osborn Communications Corporation held of record by Mr. Osborn having a deemed
value of $1,800,000 and (v) 18,181,818 shares of Class B Common Stock, par
value $.01 per share, to Capstar BT Partners, L.P. for an aggregate purchase
price of $20,000,000.
On April 10, 1997, the Registrant sold 2,727,272 shares of Class A
Common Stock to Capstar Boston Partners, L.L.C. for an aggregate purchase price
of $3,000,000.
On ____ 1997, the Registrant sold 1,538,461 shares of Class A
Common Stock to Joseph L. Mathias, IV in connection with the Registrant's
acquisition of Benchmark Communications Radio Limited Partnership, L.P. and
certain of its subsidiary partnerships (collectively, "Benchmark") in exchange
for part of Mr. Mathias's ownership interest in Benchmark having a deemed value
of $2,000,000. Also in connection with the Registrant's acquisition of
Benchmark, the Registrant sold 750,000 shares of Class A Common Stock to HM
Fund III for consideration having a deemed value of $750,000 in the aggregate.
Since inception, the Registrant has granted options to purchase an
aggregate of 7,864,830 shares of Class A Common Stock to officers and key
employees, of which options to purchase 795,880 shares of Class A Common Stock
have terminated. None of the remaining options are currently exercisable.
These transactions did not involve a public offering.
Since inception, the Registrant has issued warrants to purchase an
aggregate of 11,853,182 shares of Class A Common Stock to R. Steven Hicks, of
which 9,482,546 shares of Class A Common Stock are currently purchasable under
the terms of the warrants.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
1.1 Form of Underwriting Agreement.+
2.1.1 Agreement and Plan of Merger, dated June 21, 1996, by and among CMI
Acquisition Company, Inc., Commodore Media, Inc. ("Commodore") and the
stockholders and other signatories thereto. (1)
2.1.2 First Amendment to Agreement and Plan of Merger, dated as of September
3, 1996. (2)
2.1.3 Second Amendment to Agreement and Plan of Merger, dated as of October
16, 1996. (2)
3.1 Certificate of Incorporation of the Company.+
3.2 By-Laws of the Company.+
4.1 Form of Stock Certificate of Class A Common Stock, par value $0.01 per
share, of the Company.+
4.2 Indenture, dated February 20, 1997, between the Company and U.S. Trust
Company of Texas, N.A, governing the Company's outstanding 12 3/4%
Senior Discount Notes due 2009.*
4.3.1 Indenture, dated as of April 21, 1995, among Commodore, IBJ Schroder
Bank & Trust Company, as Trustee, and the Guarantors named therein,
governing Commodore's Senior Subordinated Notes (the "Commodore
Indenture"). (3)
4.3.2 Amendment No. 1 to Commodore Indenture. (3)
II-3
<PAGE> 219
4.3.3 Amendment No. 2 to Commodore Indenture. (4)
4.3.4 Amendment No. 3 to Commodore Indenture. (4)
4.3.5 Amendment No. 4 to Commodore Indenture. (5)
4.3.6 Amendment No. 5 to Commodore Indenture. (6)
4.3.7 Amendment No. 6 to Commodore Indenture.*
5.1 Opinion of Vinson & Elkins L.L.P.+
10.1.1 Agreement and Plan of Merger, dated as of December 9, 1996, by and
among Benchmark Communications Radio Limited Partnership, Benchmark
Acquisition, Inc., Benchmark Radio Acquisition Fund I Limited
Partnership, Benchmark Radio Acquisition Fund IV Limited Partnership,
Benchmark Radio Acquisition Fund VII Limited Partnership, Benchmark
Radio Acquisition Fund VIII Limited Partnership, Joe L. Mathis IV,
Bruce R. Spector, the Company and BCR Holding, Inc. ("Benchmark Merger
Agreement").+
10.1.2 Letter Agreement amending Benchmark Merger Agreement, dated January 9,
1997, by and among Benchmark Communications Radio Limited Partnership,
Benchmark Acquisition, Inc. and the other signatories listed therein.+
10.1.3 Letter Agreement amending Benchmark Merger Agreement, dated January
31, 1997, by and among Benchmark Communications Radio Limited
Partnership, Benchmark Acquisition, Inc., BCR Holding, Inc., the
Company, and the other signatories listed therein.+
10.1.4 Letter Agreement amending Benchmark Merger Agreement, dated April
[__], 1997, by and among Benchmark Communications Radio Limited
Partnership, Benchmark Acquisition, Inc., BCR Holding, Inc., and the
Company.+
10.2 Asset Purchase Agreement, dated as of January 27, 1997, by and among
Point Communications Limited Partnership, Midcontinent Broadcasting
Co. of Wisconsin, Inc., Madison Radio Group and Point Madison
Acquisition Company, Inc.+
10.3 Asset Purchase Agreement, dated as of December 26, 1996, between
Community Pacific Broadcasting Company L.P. and Community Acquisition
Company, Inc.+
10.4 Registration Rights Agreement, dated February 20, 1997, between the
Company and BT Securities Corporation.*
10.5 Credit Agreement, dated February 20, 1997, among Commodore, as
borrower, the Company, as guarantor, various banks, and Bankers Trust
Company, as administrative agent.(7)
10.6 New Credit Facility.+
10.7 Financial Advisory Agreement, dated as of October 16, 1996, between
the Company and Hicks, Muse & Co. Partners, L.P. ("HMCo").*
10.8 Monitoring and Oversight Agreement, dated as of October 16, 1996,
between the Company and HMCo.*
10.9 Form of Indemnification Agreement between the Company and each of its
directors and officers.+
10.10 Employment Agreement, dated February 14, 1997, between the Company and
R. Steven Hicks.*
10.11 Employment Agreement, dated [______], 1997, between the Company and
Paul D. Stone.+
II-4
<PAGE> 220
10.12 Employment Agreement, dated [_______], 1997, between the Company and
William S. Banowsky, Jr.+
10.13 Amended and Restated Employment Agreement, dated October 16, 1996,
between Commodore, the Company and James T. Shea, Jr.*
10.14 Employment Agreement, dated January 27, 1997, between Pacific Star
Communications, Inc. and Claude C. Turner (also known as Dex Allen).*
10.15.1 Employment Agreement dated July 1, 1994, between Osborn Communications
Corporation ("Osborn") and Frank D. Osborn. (8)
10.15.2 Amendment No. 1, dated July 1, 1996, to the employment agreement dated
July 1, 1994 between Osborn and Frank D. Osborn. (9)
10.15.3 Amendment No. 2, dated July 23, 1996, to the employment agreement
dated July 1, 1994 between Osborn and Frank D. Osborn. (9)
10.16 Employment Agreement, dated February 20, 1997, between Osborn and
Frank D. Osborn.(6)
10.17 Form of Employment Agreement to be entered into between Pacific Star
Communications, Inc. and David T. Benjamin, III.+
10.18.1 1996 Stock Option Plan of the Company, dated October 16, 1996.*
10.18.2 First Amendment to the Capstar Broadcasting Partners, Inc. 1996 Stock
Option Plan, dated February 13, 1997.*
10.19.1 Form of Incentive Stock Option Agreement.+
10.19.2 Form of Non-Qualified Stock Option Agreement.+
10.20.1 1996 Stock Purchase Plan of the Company, dated November 26, 1996.*
10.20.2 First Amendment to the Company's 1996 Stock Purchase Plan, dated
January 27, 1997.*
10.21.1 Stockholders Agreement, dated October 16, 1996, among the Registrant,
Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), R. Steven Hicks
and the security holders listed therein.*
10.21.2 First Amendment and Supplement to Stockholders Agreement, dated
January 27, 1997, by and among the Company, the securityholders listed
therein and Hicks Muse.*
10.22.1 Stockholders Agreement, dated November 26, 1996, among the Company,
the securityholders listed therein and Hicks Muse.*
10.22.2 First Amendment to Stockholders Agreement, dated January 27, 1997, by
and among the Company and the securityholders listed therein.*
10.23.1 Stock Pledge, Security Agreement and Power of Attorney, dated February
20, 1997, executed by Claude C. Turner in favor of the Company.*
10.23.2 9% Promissory Note, dated February 20, 1997, executed by Claude C.
Turner in favor of the Company in the principal sum of $200,000.*
10.24.1 9% Promissory Note, dated February 20, 1997, executed by David J.
Benjamin, III in favor of the Company in the principal sum of
$396,363.64.*
10.24.2 Stock Pledge, Security Agreement and Power of Attorney, dated February
20, 1997, executed by David J. Benjamin, III in favor of the Company.*
10.25 Mandatory Buyback Agreement, dated February 20, 1997, between David J.
Benjamin, III and the Company*
II-5
<PAGE> 221
10.26 Registration Rights Agreement, dated February 20, 1997, between the
Registrant and Frank D. Osborn.*
10.27 Warrant, dated October 16, 1996, issued to R. Steven Hicks.*
10.28 Warrant, dated February 20, 1997, issued to R. Steven Hicks.*
11.1 Statement Re: Computation of Per Share Earnings.*
11.2 Statement Re: Computation of Pro Forma Per Share Earnings for
Recapitalization.*
11.3 Statement Re: Computation of Pro Forma Per Share Earnings.+
21.1 List of Subsidiaries.*
23.1 Consent of Vinson & Elkins L.L.P. (included in their opinion filed as
Exhibit 5 hereto).+
23.2 Consent of Coopers & Lybrand L.L.P. - Capstar Broadcasting Partners,
Inc.*
23.3 Consent of Ernst & Young LLP. *
23.4 Consent of Coopers & Lybrand L.L.P. - Benchmark Communications Radio
Limited Partnership*
23.5 Consent of Coopers & Lybrand L.L.P. - Midcontinent Broadcasting Co.*
23.6 Consent of Coopers & Lybrand L.L.P. - Point Communications Limited
Partnership*
23.7 Consent of Coopers & Lybrand L.L.P. - Community Pacific Broadcasing
Company L.P.*
23.8 Consent of Holtz Rubenstein & Co., LLP.*
23.9 Consent of Paneth, Haber & Zimmerman, LLP.*
23.10 Consent of Brown, Edward & Co., LLP.*
24.1 Powers of Attorney (included on the signature page of this
Registration Statement).*
27.1 Financial Data Schedule.*
- --------------------------
+ To be filed by amendment.
* Filed herewith.
(1) Incorporated by reference to Commodore's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, File No. 33-92732.
(2) Incorporated by reference to Commodore's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, File No. 33-92732.
(3) Incorporated by reference to Commodore's Registration Statement on Form
S-4 (File No. 33-92732), dated July 26, 1995.
(4) Incorporated by reference to Commodore's Annual Report on Form 10-K for
the year ended December 31, 1995, File No. 33-92732.
(5) Incorporated by reference to Commodore's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, File No. 33-92732.
(6) Incorporated by reference to Commodore's Annual Report on Form 10-K for
the year ended December 31, 1996, File No. 33-92732.
(7) Incorporated by reference to Commodore's Current Report on Form 8-K dated
February 20, 1997, File No. 33-92732.
(8) Incorporated by reference to Osborn's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, File No. 0-16841.
II-6
<PAGE> 222
(9) Incorporated by reference to Osborn's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, File No. 0- 16841.
(b) Financial Statement Schedules:
The following financial statement schedules are included in this
Registration Statement:
Reports of Independent Accountants
I -- Condensed Financial Information of Registrant
II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, 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 Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act 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, 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.
Insofar as indemnification for liabilities arising under the
Securities 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
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than 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 Securities Act and will be governed
by the final adjudication of such issue.
II-7
<PAGE> 223
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Austin, State of Texas, on the 14th day of April, 1997.
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ R. Steven Hicks
----------------------------------
R. Steven Hicks, Chairman of the Board
KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors and
officers of Capstar Broadcasting Partners, Inc., a Delaware corporation, which
is filing a Registration Statement on Form S-1 with the Securities and Exchange
Commission, Washington, D.C. 20549 under the provisions of the Securities Act
of 1933 (the "Securities Act") hereby constitute and appoint R. Steven Hicks
and William S. Banowsky, Jr., and each of them, the individual's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the person and in his or her name, place and stead, in any
and all capacities, to sign such Registration Statement and any or all
amendments, including post-effective amendments, to the Registration Statement,
including a Prospectus or an amended Prospectus therein and any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act, and all other documents in connection
therewith to be filed with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact as agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<Caption
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ R. Steven Hicks Chairman of the Board, President and April 14, 1997
- ---------------------------- Chief Executive Officer (Principal
R. Steven Hicks Executive Officer)
/s/ Paul D. Stone Executive Vice President and Chief April 14, 1997
- ---------------------------- Financial Officer (Principal Financial and
Paul D. Stone Accounting Officer)
/s/ Eric C. Neuman Executive Vice President and Director April 14, 1997
- ----------------------------
Eric C. Neuman
/s/ Thomas O. Hicks Director April 14, 1997
- ----------------------------
Thomas O. Hicks
/s/ Lawrence D. Stuart, Jr. Director April 14, 1997
- -----------------------------
Lawrence D. Stuart, Jr.
</TABLE>
<PAGE> 224
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Capstar Broadcasting Partners, Inc.
In connection with our audit of the consolidated financial statements of
Capstar Broadcasting Partners, Inc. and Subsidiaries as of December 31, 1996
and for the period from October 11, 1996 ("inception") to December 31, 1996,
which financial statements are included in the Prospectus, we have also audited
the financial statement schedules of Capstar Broadcasting Partners, Inc. and
Subsidiaries listed in Item 16(b) herein.
In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
/s/ COOPERS & LYBRAND
Austin, Texas
February 14, 1997
<PAGE> 225
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Capstar Broadcasting Partners, Inc.
We have audited the consolidated balance sheet of Commodore Media, Inc. and
Subsidiaries, the Predecessor Company of Capstar Broadcasting Partners, Inc.,
as of December 31, 1995, and for the period from January 1, 1996 to October 16,
1996 and for the years ended December 31, 1995 and 1994, and have issued our
report thereon dated February 10, 1997 (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedule listed in
Item 16(b) of this Registration Statement. This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
February 10, 1997
New York, New York
<PAGE> 226
CAPSTAR BROADCASTING PARTNERS, INC.
PARENT COMPANY CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
December 31,
1996
------------
<S> <C>
Current assets:
Cash and short-term investments $ 660,167
Accounts receivable 425
------------
Total current assets 660,592
Property, plant and equipment 1,365,306
FCC licenses and goodwill, net of accumulated amortization 139,498,885
Deferred charges 1,800,234
Deposits and other assets 178,000
Investment in subsidiary (4,830,124)
------------
Total assets $138,672,893
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 786,817
Accrued interest 850,208
Due to affiliate 536,738
------------
Total current liabilities 2,173,763
Long-term debt 45,025,003
Deferred income taxes 331,580
------------
Total liabilities 47,530,346
------------
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
none issued and outstanding --
Class A common stock, $.01 par value, 200,000,000 shares
authorized, 94,155,000 shares issued and outstanding 941,550
Additional paid-in capital 93,957,450
Accumulated deficit (3,756,453)
------------
Total stockholders' equity 91,142,547
------------
Total liabilities and stockholders' equity $138,672,893
============
</TABLE>
See accompanying notes.
S-2
<PAGE> 227
CAPSTAR BROADCASTING PARTNERS, INC.
PARENT COMPANY CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Period ended
December 31,
1996
------------
<S> <C>
Corporate expenses $ 223,227
Interest expense 2,421,380
Depreciation and amortization 296,332
Equity in losses of subsidiary 71,514
Other expense 744,000
-----------
Net loss $(3,756,453)
===========
Net loss per share $ (0.04)
===========
Weighted average number of shares outstanding 93,691,842
===========
</TABLE>
See accompanying notes.
S-3
<PAGE> 228
CAPSTAR BROADCASTING PARTNERS, INC.
PARENT COMPANY CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
-------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at inception (October
11, 1996).................... $ - $ - $ - $ -
Issuance of common stock in
connection with Commodore
Acquisition.................. 932,750 92,342,250 - 93,275,000
Issuance of warrants........... - 744,000 - 744,000
Issuance of common stock....... 8,800 871,200 - 880,000
Net loss for the period........ - - (3,756,453) (3,756,453)
-------- ----------- ----------- -----------
Balance at December 31, 1996... $941,550 $93,957,450 ($3,756,453) $91,142,547
======== =========== =========== ===========
</TABLE>
See accompanying notes.
S-4
<PAGE> 229
CAPSTAR BROADCASTING PARTNERS, INC.
PARENT COMPANY CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Period ended
December 31,
1996
-------------
<S> <C>
Cash flows from operating activities:
Net loss: $ (3,756,453)
-------------
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 296,332
Noncash compensation 744,000
Noncash interest 1,571,072
Equity in losses of subsidiary 71,514
Changes in assets and liabilities:
Increase in accounts receivable (425)
Increase in accounts payable and accrued expenses 786,817
Increase in accrued interest 850,208
Increase in due to affiliate 536,738
-------------
Total adjustments 4,856,256
-------------
Net cash provided by operating activities 1,099,803
Cash flows from investing activities:
Purchase of property, plant and equipment (356,205)
Acquisition of Commodore (125,569,125)
Deferred acquisition costs incurred (785,431)
Deposits on pending acquisitions and other (178,000)
-------------
Net cash used in investing activities (126,888,761)
Cash flows from financing activities:
Proceeds from issuance of common stock 94,155,000
Proceeds from issuance of long-term debt 35,000,000
Payment of financing related costs (2,705,875)
-------------
Net cash provided by financing activities 126,449,125
-------------
Net increase in cash and short-term cash investments 660,167
Cash and short-term cash investments at beginning of
the period --
-------------
Cash and short-term cash investments at end of
the period $ 660,167
=============
</TABLE>
See accompany notes.
S-5
<PAGE> 230
CAPSTAR BROADCASTING PARTNERS, INC.
NOTES TO PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
1. General
The accompanying condensed financial statements of Capstar Broadcasting
Partners, Inc. (the "Company") should be read in conjunction with the
consolidated financial statements of Capstar Broadcasting Partners, Inc. and
Subsidiaries and its Predecessors included elsewhere in this prospectus and
have been prepared using the equity method of accounting for an investment in
subsidiary.
2. Other
See notes 5, 6, 7, 11, 12, and 15 to the consolidated financial
statements of Capstar Broadcasting Partners, Inc. and Subsidiaries and its
Predecessor for a description of capital stock, long-term obligations,
guarantees, and contingencies of the Company. The ability of the Company's
subsidiaries to transfer funds to the Company in the form of cash dividends is
restricted pursuant to the terms of certain debt agreements entered into by the
Company's subsidiary, Commodore Media, Inc.
S-6
<PAGE> 231
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES AND ITS PREDECESSOR
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
-----------------------------
Balance Charged to Deductions Balance
at Beginning Costs and Charged to Direct at End
Description of Period Expenses(1) Other Accounts(2) Write-offs of Period
----------- ----------- ----------- ----------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
PREDECESSOR:
Allowance for doubtful accounts 12/31/94.... 453,782 468,155 -- (389,706) 532,231
Allowance for doubtful accounts 12/31/95.... 532,231 556,137 -- (388,032) 700,336
Allowance for doubtful accounts 10/16/96.... 700,336 488,320 -- (326,379) 862,277
CAPSTAR:
Allowance for doubtful accounts 12/31/96.... 862,277 104,838 -- (129,034) 838,081
</TABLE>
<PAGE> 232
INDEX TO EXHIBITS
(a) . . . . . . . Exhibits
1.1 Form of Underwriting Agreement.+
2.1.1 Agreement and Plan of Merger, dated June 21, 1996, by and among CMI
Acquisition Company, Inc., Commodore Media, Inc. ("Commodore") and the
stockholders and other signatories thereto.(1)
2.1.2 First Amendment to Agreement and Plan of Merger, dated as of September
3, 1996.(2)
2.1.3 Second Amendment to Agreement and Plan of Merger, dated as of October
16, 1996.(2)
3.1 Certificate of Incorporation of the Company.+
3.2 By-Laws of the Company.+
4.1 Form of Stock Certificate of Class A Common Stock, par value $0.01 per
share, of the Company.+
4.2 Indenture, dated February 20, 1997, between the Company and U.S. Trust
Company of Texas, N.A, governing the Company's outstanding 12 3/4%
Senior Discount Notes due 2009.*
4.3.1 Indenture, dated as of April 21, 1995, among Commodore, IBJ Schroder
Bank & Trust Company, as Trustee, and the Guarantors named therein,
governing Commodore's Senior Subordinated Notes (the "Commodore
Indenture").(3)
4.3.2 Amendment No. 1 to Commodore Indenture.(3)
4.3.3 Amendment No. 2 to Commodore Indenture.(4)
4.3.4 Amendment No. 3 to Commodore Indenture.(4)
4.3.5 Amendment No. 4 to Commodore Indenture.(5)
4.3.6 Amendment No. 5 to Commodore Indenture.(6)
4.3.7 Amendment No. 6 to Commodore Indenture.*
5.1 Opinion of Vinson & Elkins L.L.P.+
10.1.1 Agreement and Plan of Merger, dated as of December 9, 1996, by and
among Benchmark Communications Radio Limited Partnership, Benchmark
Acquisition, Inc., Benchmark Radio Acquisition Fund I Limited
Partnership, Benchmark Radio Acquisition Fund IV Limited Partnership,
Benchmark Radio Acquisition Fund VII Limited Partnership, Benchmark
Radio Acquisition Fund VIII Limited Partnership, Joe L. Mathis IV,
Bruce R. Spector, the Company and BCR Holding, Inc. ("Benchmark Merger
Agreement").+
10.1.2 Letter Agreement amending Benchmark Merger Agreement, dated January 9,
1997, by and among Benchmark Communications Radio Limited Partnership,
Benchmark Acquisition, Inc. and the other signatories listed therein.+
10.1.3 Letter Agreement amending Benchmark Merger Agreement, dated January
31, 1997, by and among Benchmark Communications Radio Limited
Partnership, Benchmark Acquisition, Inc., BCR Holding, Inc., the
Company, and the other signatories listed therein.+
10.1.4 Letter Agreement amending Benchmark Merger Agreement, dated April
[__], 1997, by and among Benchmark Communications Radio Limited
Partnership, Benchmark Acquisition, Inc., BCR Holding, Inc., and the
Company.+
<PAGE> 233
10.2 Asset Purchase Agreement, dated as of January 27, 1997, by and among
Point Communications Limited Partnership, Midcontinent Broadcasting
Co. of Wisconsin, Inc., Madison Radio Group and Point Madison
Acquisition Company, Inc.+
10.3 Asset Purchase Agreement, dated as of December 26, 1996, between
Community Pacific Broadcasting Company L.P. and Community Acquisition
Company, Inc.+
10.4 Registration Rights Agreement, dated February 20, 1997, between the
Company and BT Securities Corporation.*
10.5 Credit Agreement, dated February 20, 1997, among Commodore, as
borrower, the Company, as guarantor, various banks, and Bankers Trust
Company, as administrative agent.(7)
10.6 New Credit Facility.+
10.7 Financial Advisory Agreement, dated as of October 16, 1996, between
the Company and Hicks, Muse & Co. Partners, L.P. ("HMCo").*
10.8 Monitoring and Oversight Agreement, dated as of October 16, 1996,
between the Company and HMCo.*
10.9 Form of Indemnification Agreement between the Company and each of its
directors and officers.+
10.10 Employment Agreement, dated February 14, 1997, between the Company and
R. Steven Hicks.*
10.11 Employment Agreement, dated [______], 1997, between the Company and
Paul D. Stone.+
10.12 Employment Agreement, dated [_______], 1997, between the Company and
William S. Banowsky, Jr.+
10.13 Amended and Restated Employment Agreement, dated October 16, 1996,
between Commodore, the Company and James T. Shea, Jr.*
10.14 Employment Agreement, dated January 27, 1997, between Pacific Star
Communications, Inc. and Claude C. Turner (also known as Dex Allen).*
10.15.1 Employment Agreement dated July 1, 1994, between Osborn Communications
Corporation ("Osborn") and Frank D. Osborn.(8)
10.15.2 Amendment No. 1, dated July 1, 1996, to the employment agreement dated
July 1, 1994 between Osborn and Frank D. Osborn.(9)
10.15.3 Amendment No. 2, dated July 23, 1996, to the employment agreement
dated July 1, 1994 between Osborn and Frank D. Osborn.(9)
10.16 Employment Agreement, dated February 20, 1997, between Osborn and
Frank D. Osborn.(6)
10.17 Form of Employment Agreement to be entered into between Pacific Star
Communications, Inc. and David T. Benjamin, III.+
10.18.1 1996 Stock Option Plan of the Company, dated October 16, 1996.*
10.18.2 First Amendment to the Capstar Broadcasting Partners, Inc. 1996 Stock
Option Plan, dated February 13, 1997.*
10.19.1 Form of Incentive Stock Option Agreement.+
10.19.2 Form of Non-Qualified Stock Option Agreement.+
10.20.1 1996 Stock Purchase Plan of the Company, dated November 26, 1996.*
<PAGE> 234
10.20.2 First Amendment to the Company's 1996 Stock Purchase Plan, dated
January 27, 1997.*
10.21.1 Stockholders Agreement, dated October 16, 1996, among the Registrant,
Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), R. Steven Hicks
and the security holders listed therein.*
10.21.2 First Amendment and Supplement to Stockholders Agreement, dated
January 27, 1997, by and among the Company, the securityholders
listed therein and Hicks Muse.*
10.22.1 Stockholders Agreement, dated November 26, 1996, among the Company,
the securityholders listed therein and Hicks Muse.*
10.22.2 First Amendment to Stockholders Agreement, dated January 27, 1997, by
and among the Company and the securityholders listed therein.*
10.23.1 Stock Pledge, Security Agreement and Power of Attorney, dated February
20, 1997, executed by Claude C. Turner in favor of the Company.*
10.23.2 9% Promissory Note, dated February 20, 1997, executed by Claude C.
Turner in favor of the Company in the principal sum of $200,000.*
10.24.1 9% Promissory Note, dated February 20, 1997, executed by David J.
Benjamin, III in favor of the Company in the principal sum of
$396,363.64.*
10.24.2 Stock Pledge, Security Agreement and Power of Attorney, dated February
20, 1997, executed by David J. Benjamin, III in favor of the Company.*
10.25 Mandatory Buyback Agreement, dated February 20, 1997, between David J.
Benjamin, III and the Company*
10.26 Registration Rights Agreement, dated February 20, 1997, between the
Registrant and Frank D. Osborn.*
10.27 Warrant, dated October 16, 1996, issued to R. Steven Hicks.*
10.28 Warrant, dated February 20, 1997, issued to R. Steven Hicks.*
11.1 Statement Re: Computation of Per Share Earnings.*
11.2 Statement Re: Computation of Pro Forma Per Share Earnings for
Recapitalization.*
11.3 Statement Re: Computation of Pro Forma Per Share Earnings.+
21.1 List of Subsidiaries.*
23.1 Consent of Vinson & Elkins L.L.P. (included in their opinion filed as
Exhibit 5 hereto).+
23.2 Consent of Coopers & Lybrand L.L.P. - Capstar Broadcasting Partners,
Inc.*
23.3 Consent of Ernst & Young LLP.*
23.4 Consent of Coopers & Lybrand L.L.P. - Benchmark Communications Radio
Limited Partnership*
23.5 Consent of Coopers & Lybrand L.L.P. - Midcontinent Broadcasting Co.*
23.6 Consent of Coopers & Lybrand L.L.P. - Point Communications Limited
Partnership*
23.7 Consent of Coopers & Lybrand L.L.P. - Community Pacific Broadcasting
Company L.P.*
23.8 Consent of Holtz Rubenstein & Co., LLP.*
23.9 Consent of Paneth, Haber & Zimmerman, LLP.*
23.10 Consent of Brown, Edward & Co., LLP.*
24.1 Powers of Attorney (included on the signature page of this
Registration Statement).*
<PAGE> 235
27.1 Financial Data Schedule.*
- ---------------------------
+ To be filed by amendment.
* Filed herewith.
(1) Incorporated by reference to Commodore's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, File No. 33-92732.
(2) Incorporated by reference to Commodore's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, File No. 33-92732.
(3) Incorporated by reference to Commodore's Registration Statement on Form
S-4 (File No. 33-92732), dated July 26, 1995.
(4) Incorporated by reference to Commodore's Annual Report on Form 10-K for
the year ended December 31, 1995, File No. 33-92732.
(5) Incorporated by reference to Commodore's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, File No. 33-92732.
(6) Incorporated by reference to Commodore's Annual Report on Form 10-K for
the year ended December 31, 1996, File No. 33-92732.
(7) Incorporated by reference to Commodore's Current Report on Form 8-K dated
February 20, 1997, File No. 33-92732.
(8) Incorporated by reference to Osborn's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, File No. 0-16841.
(9) Incorporated by reference to Osborn's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, File No. 0- 16841.
<PAGE> 1
EXHIBIT 4.2
________________________________________________________________________________
________________________________________________________________________________
INDENTURE
Dated as of February 20, 1997
Between
CAPSTAR BROADCASTING PARTNERS, INC., as Issuer,
and
U.S. TRUST COMPANY OF TEXAS, N.A., as Trustee
____________________
$277,000,000
12 3/4% Senior Discount Notes due 2009, Series A
12 3/4% Senior Discount Notes due 2009, Series B
________________________________________________________________________________
________________________________________________________________________________
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
------- ---------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . 7.08; 7.10
(b) . . . . . . . . . . . . . . . . . . . . 7.08; 7.10;
10.02
(c) . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . 10.03
(c) . . . . . . . . . . . . . . . . . . . . 10.03
313(a) . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . 7.06; 10.02
(d) . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . 4.07; 4.09;
10.02
(b) . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . 10.04
(c)(2) . . . . . . . . . . . . . . . . . . 10.04
(c)(3) . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . 10.05
(f) . . . . . . . . . . . . . . . . . . . . N.A
315(a) . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . 7.05; 10.02
(c) . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . N.A.
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
(b) . . . . . . . . . . . . . . . . . . . . 6.07
317(a)(1) . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . 10.01
(c) . . . . . . . . . . . . . . . . . . . . 10.01
</TABLE>
______________________
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Incorporation by Reference of TIA . . . . . . . . . . . . . 17
Section 1.03 Rules of Construction . . . . . . . . . . . . . . . . . . . 17
ARTICLE TWO
THE SECURITIES
Section 2.01 Form and Dating . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.02 Execution and Authentication . . . . . . . . . . . . . . . . 18
Section 2.03 Registrar and Paying Agent . . . . . . . . . . . . . . . . . 19
Section 2.04 Paying Agent To Hold Assets in Trust . . . . . . . . . . . . 20
Section 2.05 Securityholder Lists . . . . . . . . . . . . . . . . . . . . 20
Section 2.06 Transfer and Exchange . . . . . . . . . . . . . . . . . . . 20
Section 2.07 Replacement Securities . . . . . . . . . . . . . . . . . . . 21
Section 2.08 Outstanding Securities . . . . . . . . . . . . . . . . . . . 21
Section 2.09 Treasury Securities . . . . . . . . . . . . . . . . . . . . 22
Section 2.10 Temporary Securities . . . . . . . . . . . . . . . . . . . . 22
Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . 23
Section 2.13 CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.14 Deposit of Moneys . . . . . . . . . . . . . . . . . . . . . 23
Section 2.15 Book-Entry Provisions for Global
Securities . . . . . . . . . . . . . . . . . . . . . 23
Section 2.16 Registration of Transfers and
Exchanges . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.17 Designation . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
-i-
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 3.02 Selection of Securities To Be
Redeemed . . . . . . . . . . . . . . . . . . . . . 30
Section 3.03 Notice of Redemption . . . . . . . . . . . . . . . . . . . 30
Section 3.04 Effect of Notice of Redemption . . . . . . . . . . . . . . . 31
Section 3.05 Deposit of Redemption Price . . . . . . . . . . . . . . . . 31
Section 3.06 Securities Redeemed in Part . . . . . . . . . . . . . . . 32
ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Securities . . . . . . . . . . . . . . . . . . . 32
Section 4.02 Maintenance of Office or Agency . . . . . . . . . . . . . . 32
Section 4.03 Limitation on Restricted Payments . . . . . . . . . . . . . 32
Section 4.04 Corporate Existence . . . . . . . . . . . . . . . . . . . . 36
Section 4.05 Payment of Taxes and Other Claims . . . . . . . . . . . . . 36
Section 4.06 Maintenance of Properties and
Insurance . . . . . . . . . . . . . . . . . . . . . 37
Section 4.07 Compliance Certificate; Notice of
Default . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.08 Compliance with Laws . . . . . . . . . . . . . . . . . . . . 38
Section 4.09 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.10 Waiver of Stay, Extension or Usury
Laws . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.11 Limitation on Transactions with
Affiliates . . . . . . . . . . . . . . . . . . . . 39
Section 4.12 Limitation on Incurrence of
Additional Indebtedness and
Issuance of Preferred Stock of
Subsidiaries . . . . . . . . . . . . . . . . . . . 40
Section 4.13 Limitation on Dividend and Other
Payment Restrictions Affecting
Subsidiaries . . . . . . . . . . . . . . . . . . . 40
Section 4.14 Change of Control . . . . . . . . . . . . . . . . . . . . . 41
Section 4.15 Limitation on Asset Sales . . . . . . . . . . . . . . . . . 43
Section 4.16 Limitation on Asset Swaps . . . . . . . . . . . . . . . . . 44
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Merger, Consolidation and Sale of Assets . . . . . . . . . . 45
</TABLE>
-ii-
<PAGE> 6
<TABLE>
<S> <C> <C>
Section 5.02 Successor Corporation Substituted . . . . . . . . . . . . . 46
ARTICLE SIX
DEFAULT AND REMEDIES
Section 6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . 46
Section 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.04 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . 49
Section 6.05 Control by Majority . . . . . . . . . . . . . . . . . . . . 49
Section 6.06 Limitation on Suits . . . . . . . . . . . . . . . . . . . . 49
Section 6.07 Rights of Holders To Receive
Payment . . . . . . . . . . . . . . . . . . . . . 50
Section 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . . . . 50
Section 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . . . . 50
Section 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . . 51
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . 52
Section 7.02 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . 53
Section 7.03 Individual Rights of Trustee . . . . . . . . . . . . . . . . 54
Section 7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . 54
Section 7.05 Notice of Default . . . . . . . . . . . . . . . . . . . . . 55
Section 7.06 Reports by Trustee to Holders . . . . . . . . . . . . . . . 55
Section 7.07 Compensation and Indemnity . . . . . . . . . . . . . . . . . 55
Section 7.08 Replacement of Trustee . . . . . . . . . . . . . . . . . . . 56
Section 7.09 Successor Trustee by Merger, Etc. . . . . . . . . . . . . . 57
Section 7.10 Eligibility; Disqualification . . . . . . . . . . . . . . . 58
Section 7.11 Preferential Collection of Claims
Against the Company . . . . . . . . . . . . . . . . 58
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01 Termination of the Company's Obligations . . . . . . . . . . 58
</TABLE>
-iii-
<PAGE> 7
<TABLE>
<S> <C> <C>
Section 8.02 Acknowledgment of Discharge by
Trustee . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.03 Application of Trust Money . . . . . . . . . . . . . . . . . 61
Section 8.04 Repayment to the Company . . . . . . . . . . . . . . . . . . 61
Section 8.05 Reinstatement 61
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01 Without Consent of Holders . . . . . . . . . . . . . . . . . 62
Section 9.02 With Consent of Holders . . . . . . . . . . . . . . . . . . 62
Section 9.03 Compliance with TIA . . . . . . . . . . . . . . . . . . . . 64
Section 9.04 Revocation and Effect of Consents . . . . . . . . . . . . . 64
Section 9.05 Notation on or Exchange of
Securities . . . . . . . . . . . . . . . . . . . . 65
Section 9.06 Trustee To Sign Amendments, Etc. . . . . . . . . . . . . . . 65
ARTICLE TEN
MISCELLANEOUS
Section 10.01 TIA Controls . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.03 Communications by Holders with Other
Holders . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.04 Certificate and Opinion as to
Conditions Precedent . . . . . . . . . . . . . . . 67
Section 10.05 Statements Required in Certificate or
Opinion . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.06 Rules by Trustee, Paying Agent,
Registrar . . . . . . . . . . . . . . . . . . . . . 68
Section 10.07 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.08 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.09 No Adverse Interpretation of Other
Agreements . . . . . . . . . . . . . . . . . . . . 68
Section 10.10 No Recourse Against Others . . . . . . . . . . . . . . . . . 68
Section 10.11 Successors . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.12 Duplicate Originals . . . . . . . . . . . . . . . . . . . . 69
Section 10.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
-iv-
<PAGE> 8
<TABLE>
<S> <C>
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
</TABLE>
Exhibit A - Form of Series A Security
Exhibit B - Form of Series B Security
Exhibit C - Form of Legend for Global Securities
Exhibit D - Transfer Certificate
Exhibit E - Transferee Certificate for
Institutional Accredited Investors
Note: This Table of Contents shall not, for any purpose, be deemed to
be part of the Indenture.
-v-
<PAGE> 9
INDENTURE, dated as of February 20, 1997, between Capstar
Broadcasting Partners, Inc., a Delaware corporation (the "Company"), and U.S.
Trust Company of Texas, N.A., a national banking association, as trustee (the
"Trustee").
The Company has duly authorized the creation of an issue of 12
3/4% Senior Discount Notes due 2009, Series A, and 12 3/4% Senior Discount
Notes due 2009, Series B, to be issued in exchange for the 12 3/4% Senior
Discount Notes due 2009, Series A, pursuant to a registration rights agreement
and, to provide therefor, the Company has duly authorized the execution and
delivery of this Indenture. All things necessary to make the Securities, when
duly issued and executed by the Company and authenticated and delivered
hereunder, the valid and binding obligations of the Company and to make this
Indenture a valid and binding agreement of the Company, have been done.
Each party hereto agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's 12
3/4% Senior Discount Notes due 2009 (the "Securities"):
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"Acceleration Notice" has the meaning provided in Section 6.02.
"Accreted Value" means, as of any date of determination, the sum
of (i) the initial offering price of each Security and (ii) the portion of the
excess of the principal amount at maturity of each Security over such initial
offering price that shall have been amortized through such date, such amount to
be so amortized on a daily basis and compounded semi-annually on each February
1 and August 1 at the rate of 12 3/4% per annum from the date of issuance of
the Securities through the date of determination; provided, that the Accreted
Value of the Securities shall be 100% from February 1, 2002 to maturity of the
Securities.
"Acquired Indebtedness" means Indebtedness of a Person or any of
its Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and not incurred by such Person in
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connection with, or in anticipation or contemplation of, such Person becoming a
Subsidiary of the Company or such acquisition, merger or consolidation.
"Affiliate" means a Person who, directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Company. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities,
by contract or otherwise.
"Affiliate Transaction" has the meaning provided in Section 4.11.
"Agent" means any Registrar, Paying Agent or Co-Registrar.
"Asset Acquisition" means (i) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or shall be consolidated or merged
with the Company or any Subsidiary of the Company or (ii) the acquisition by
the Company or any Subsidiary of the Company of assets of any Person comprising
a division or line of business of such Person.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Subsidiaries (excluding any Sale and Leaseback
Transaction or any pledge of assets or stock by the Company or any of its
Subsidiaries) to any Person other than the Company or a Wholly Owned Subsidiary
of the Company of (i) any Capital Stock of any Subsidiary of the Company or
(ii) any other property or assets of the Company or any Subsidiary of the
Company other than in the ordinary course of business; provided, however, that
for purposes of Section 4.15, Asset Sales shall not include (a) a transaction
or series of related transactions in which the Company or its Subsidiaries
receive aggregate consideration of less than $500,000, (b) transactions
permitted under Section 4.16 or (c) transactions covered by Section 5.01.
"Asset Swap" means the execution of a definitive agreement,
subject only to the Federal Communications Commission's approval, if
applicable, and other customary closing conditions, that the Company in good
faith believes will be satisfied, for a substantially concurrent purchase and
sale, or exchange, of Productive Assets between the Company or any of its
Subsidiaries and another Person or group of affiliated Persons; provided that
any amendment to or waiver of any closing condition that individually or in the
aggregate is material to the Asset Swap shall be deemed to be a new Asset Swap.
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"Bankruptcy Law" means Title 11, United States Code or any
similar federal, state or foreign law for the relief of debtors.
"Board of Directors" means, with respect to any Person, the Board
of Directors (or any other equivalent governing body) of such Person or any
committee of the Board of Directors of such Person duly authorized, with
respect to any particular matter, to exercise the power of the Board of
Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person.
"Business Day" means a day that is not a Legal Holiday.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated) of capital stock of such Person and (ii) with respect to
any Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the
obligation of such Person to pay rent or other amounts under a lease to which
such Person is a party that is required to be classified and accounted for as a
capital lease obligation under GAAP, and for purposes of this definition, the
amount of such obligation at any date shall be the capitalized amount of such
obligation at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc.; (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Corporation or at least P-1 from Moody's
Investors Service, Inc.; (iv) certificates of deposit or bankers' acceptances
maturing within one year from the date of acquisition thereof issued by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of not
less than $200,000,000; (v) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the
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qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group") (whether or not
otherwise in compliance with the provisions of this Indenture), other than to
Hicks Muse, any of its Affiliates (excluding Chancellor Broadcasting Company),
officers and directors or R. Steven Hicks (the "Permitted Holders"); or (ii) a
majority of the Board of Directors of the Company shall consist of Persons who
are not Continuing Directors; or (iii) the acquisition by any Person or Group
(other than the Permitted Holders) of the power, directly or indirectly, to
vote or direct the voting of securities having more than 50% of the ordinary
voting power for the election of directors of the Company.
"Change of Control Date" has the meaning provided in Section
4.14.
"Change of Control Offer" has the meaning provided in Section
4.14.
"Change of Control Payment Date" has the meaning provided in
Section 4.14.
"Change of Control Redemption" has the meaning specified in the
form of Security.
"Commission" means the Securities and Exchange Commission.
"Commodity Agreement" means any commodity futures contract,
commodity option or other similar agreement or arrangement entered into by the
Company or any of its Subsidiaries designed to protect the Company or any of
its Subsidiaries against fluctuations in the price of commodities actually used
in the ordinary course of business of the Company and its Subsidiaries.
"Commodore" means Commodore Media, Inc., a Delaware corporation
and a wholly owned subsidiary of the Company.
"Commodore Indenture" means the indenture dated as of April 21,
1995 by and among Commodore, as Issuer, the Subsidiaries of Commodore named
therein, as Guarantors, and IBJ Schroder Bank & Trust Company, as Trustee, as
in effect on the Issue Date.
<PAGE> 13
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"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor and also includes for the purposes of any provision contained herein
and required by the TIA any other obligor on the Securities.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii)
to the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary or
non-recurring gains or losses), (B) Consolidated Interest Expense and (C)
Consolidated Non-Cash Charges, all as determined on a consolidated basis for
such Person and its Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" means, with respect to any Person
for any period, without duplication, the sum of (i) the interest expense of
such Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Interest Swap
Obligations (including any amortization of discounts), (c) the interest portion
of any deferred payment obligation, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit, bankers' acceptance
financing or similar facilities and (e) all accrued interest and (ii) the
interest component of Capitalized Lease Obligations paid or accrued by such
Person and its Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period,
the aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP; provided
that there shall be excluded therefrom, without duplication, (a) gains and
losses from Asset Sales (without regard to the $500,000 limitation set forth in
the definition thereof) or abandonments or reserves relating thereto and the
related tax effects, (b) items classified as extraordinary or nonrecurring
gains and losses, and the related tax effects according to GAAP, (c) the net
income (or loss) of any Person acquired in a pooling of interests transaction
accrued prior to the date it becomes a Subsidiary of such first referred to
Person or is merged or consolidated with it or any of its Subsidiaries, (d) the
net income of any Subsidiary to the extent that the declaration of dividends or
similar distributions by that Subsidiary of that income is restricted by
contract, operation of law or otherwise, (e) the net income of any Person,
other than a Subsidiary, except to the extent of the lesser of (x) dividends or
distributions paid to such first referred to Person or its Subsidiary by such
Person and (y) the net income of such Person (but in no event less than zero),
and the net loss of such Person shall be included only to the extent of the
aggregate Investment of the first referred to Person or a
<PAGE> 14
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consolidated Subsidiary of such Person and (f) any non-cash expenses
attributable to grants or exercises of employee stock options.
"Consolidated Non-Cash Charges" means, with respect to any Person
for any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries (excluding any such charges
constituting an extraordinary or nonrecurring item) reducing Consolidated Net
Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
"Continuing Director" means, as of the date of determination, any
Person who (i) was a member of the Board of Directors of the Company on the
Issue Date, (ii) was nominated for election or elected to the Board of
Directors of the Company with the affirmative vote of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election or (iii) is a representative of a Permitted Holder.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any of its Subsidiaries against fluctuations in currency
values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is,
or with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Default Amount" means, (i) as of any date prior to February 1,
2002, the Accreted Value of all outstanding Securities (plus any applicable
premium thereon) as of such date and (ii) as of any date on or after February
1, 2002, 100% of the principal amount at maturity of all outstanding Securities
(plus any applicable premium thereon), plus accrued and unpaid interest, if
any, thereon.
"Depository" means, with respect to the Securities issued in the
form of one or more Global Securities, The Depository Trust Company or another
Person designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"Discharged" has the meaning provided in Section 8.01.
"Disqualified Capital Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the
<PAGE> 15
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happening of any event, matures (excluding any maturity as the result of an
optional redemption by the issuer thereof) or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is redeemable at the
sole option of the holder thereof (except, in each case, upon the occurrence of
a Change of Control), in whole or in part, on or prior to the final maturity
date of the Securities.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the Commission
thereunder.
"Financial Monitoring and Oversight Agreements" means,
collectively, the Monitoring and Oversight Agreement between the Company and
Hicks, Muse & Co. Partners, L.P., as in effect on the Issue Date, and the
Financial Advisory Agreement between the Company and Hicks, Muse & Co.
Partners, L.P., as in effect on the Issue Date.
"Funds" shall have the meaning provided in Section 8.01.
"GAAP" means generally accepted accounting principles as in
effect in the United States of America as of the Issue Date.
"Global Security" means a security evidencing all or a portion of
the Securities issued to the Depository or its nominee in accordance with
Section 2.01 and bearing the legend set forth in Exhibit C.
"Hicks Muse" means Hicks, Muse, Tate & Furst Incorporated, a
Delaware corporation.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Indebtedness" means with respect to any Person, without
duplication, any liability of such Person (i) for borrowed money, (ii)
evidenced by bonds, debentures, notes or other similar instruments, (iii)
constituting Capitalized Lease Obligations, (iv) incurred or assumed as the
deferred purchase price of property, or pursuant to conditional sale
obligations and title retention agreements (but excluding trade accounts
payable arising in the ordinary course of business), (v) for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) for Indebtedness of others guaranteed by such Person, (vii)
for Interest Swap Obligations, Commodity Agreements and Currency Agreements and
(viii) for Indebtedness of any other Person of the type referred to in clauses
(i) through (vii)
<PAGE> 16
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which is secured by any Lien on any property or asset of such first referred to
Person, the amount of such Indebtedness being deemed to be the lesser of the
value of such property or asset or the amount of the Indebtedness so secured.
The amount of Indebtedness of any Person at any date shall be the outstanding
principal amount of all unconditional obligations described above, as such
amount would be reflected on a balance sheet prepared in accordance with GAAP,
and the maximum liability at such date of such Person for any contingent
obligations described above.
"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Securities.
"Interest Swap Obligations" means the obligations of any Person
under any interest rate protection agreement, interest rate future, interest
rate option, interest rate swap, interest rate cap or other interest rate hedge
or arrangement.
"Investment" means (i) any transfer or delivery of cash, stock or
other property of value in exchange for Indebtedness, stock or other security
or ownership interest in any Person by way of loan, advance, capital
contribution, guarantee or otherwise and (ii) an investment deemed to have been
made by the Company at the time any entity which was a Subsidiary of the
Company ceases to be such a Subsidiary in an amount equal to the value of the
loans and advances made, and any remaining ownership interest in, such entity
immediately following such entity ceasing to be a Subsidiary of the Company.
The amount of any non-cash Investment shall be the fair market value of such
Investment, as determined conclusively in good faith by management of the
Company unless the fair market value of such Investment exceeds $1,000,000, in
which case the fair market value shall be determined conclusively in good faith
by the Board of Directors of the Company at the time such Investment is made.
"Issue Date" means the date of original issuance of the
Securities.
"Legal Holiday" has the meaning provided in Section 10.07.
"Leverage Ratio" shall mean the ratio of (i) the aggregate
outstanding amount of Indebtedness of the Company and its Subsidiaries as of
the date of calculation on a consolidated basis in accordance with GAAP plus
the aggregate liquidation preference of all outstanding Preferred Stock of the
Company's Subsidiaries on such date less the Accreted Value of the Securities
on such date to (ii) the Consolidated EBITDA of the Company for the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
determination.
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For purposes of this definition, the aggregate outstanding
principal amount of Indebtedness of the Company and its Subsidiaries and the
aggregate liquidation preference of all outstanding Preferred Stock of the
Company's Subsidiaries for which such calculation is made shall be determined
on a pro forma basis as if the Indebtedness and Preferred Stock giving rise to
the need to perform such calculation had been incurred and issued and the
proceeds therefrom had been applied, and all other transactions in respect of
which such Indebtedness is being incurred or Preferred Stock is being issued
had occurred, on the last day of the Four Quarter Period. In addition to the
foregoing, for purposes of this definition, "Consolidated EBITDA" shall be
calculated on a pro forma basis after giving effect to (i) the incurrence of
the Indebtedness of such Person and its Subsidiaries and the issuance of the
Preferred Stock of such Subsidiaries (and the application of the proceeds
therefrom) giving rise to the need to make such calculation and any incurrence
(and the application of the proceeds therefrom) or repayment of other
Indebtedness, other than the incurrence or repayment of Indebtedness pursuant
to working capital facilities, at any time subsequent to the beginning of the
Four Quarter Period and on or prior to the date of determination, as if such
incurrence (and the application of the proceeds thereof), or the repayment, as
the case may be, occurred on the first day of the Four Quarter Period, (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of
such Person or one of its Subsidiaries (including any Person who becomes a
Subsidiary as a result of such Asset Acquisition) incurring, assuming or
otherwise becoming liable for Indebtedness or such Person's Subsidiaries
issuing Preferred Stock) at any time on or subsequent to the first day of the
Four Quarter Period and on or prior to the date of determination, as if such
Asset Sale or Asset Acquisition (including the incurrence, assumption or
liability for any such Indebtedness and the issuance of such Preferred Stock
and also including any Consolidated EBITDA associated with such Asset
Acquisition) occurred on the first day of the Four Quarter Period and (iii)
cost savings resulting from employee terminations, facilities consolidations
and closings, standardization of employee benefits and compensation practices,
consolidation of property, casualty and other insurance coverage and policies,
standardization of sales representation commissions and other contract rates,
and reductions in taxes other than income taxes (collectively, "Cost Savings
Measures"), which cost savings the Company reasonably believes in good faith
would have been achieved during the Four Quarter Period as a result of such
Asset Acquisitions (regardless of whether such cost savings could then be
reflected in pro forma financial statements under GAAP, Regulation S-X
promulgated by the Commission or any other regulation or policy of the
Commission), provided that both (A) such cost savings and Cost Savings Measures
were identified and such cost savings were quantified in an officer's
certificate delivered to the Trustee at the time of the consummation of the
Asset Acquisition and such officer's certificate states that such officer
believes in good faith that actions will be commenced or initiated within 90
days of such Asset Acquisition to effect such Cost Savings Measures and (B)
with respect to each Asset Acquisition completed prior to the 90th day
preceding such date of determination, actions were commenced or initiated by
the Company within 90 days of such Asset Acquisition to effect the
<PAGE> 18
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Cost Savings Measures identified in such officer's certificate (regardless,
however, of whether the corresponding cost savings have been achieved).
Furthermore, in calculating "Consolidated Interest Expense" for purposes of the
calculation of "Consolidated EBITDA," (i) interest on Indebtedness determined
on a fluctuating basis as of the date of determination (including Indebtedness
actually incurred on the date of the transaction giving rise to the need to
calculate the Leverage Ratio) and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness as in effect on the date of
determination and (ii) notwithstanding (i) above, interest determined on a
fluctuating basis, to the extent such interest is covered by Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Major Asset Sale" means an Asset Sale or series of related
Assets Sales involving assets with a fair market value in excess of
$25,000,000.
"Maturity Date" means February 1, 2009.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents (including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents) received by the Company or any of its Subsidiaries from such Asset
Sale net of (i) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions, recording fees, title insurance premiums,
appraisers fees and costs reasonably incurred in preparation of any asset or
property for sale), (ii) taxes paid or reasonably estimated to be payable
(calculated based on the combined state, federal and foreign statutory tax
rates applicable to the Company or the Subsidiary engaged in such Asset Sale)
and (iii) repayment of Indebtedness secured by assets subject to such Asset
Sale; provided that if the instrument or agreement governing such Asset Sale
requires the transferor to maintain a portion of the purchase price in escrow
(whether as a reserve for adjustment of the purchase price or otherwise) or to
indemnify the transferee for specified liabilities in a maximum specified
amount, the portion of the cash or Cash Equivalents that is actually placed in
escrow or segregated and set aside by the transferor for such indemnification
obligation shall not be deemed to be Net Cash Proceeds until the escrow
terminates or the transferor ceases to segregate and set aside such funds, in
whole or in part, and then only to the extent of the proceeds released from
escrow to the transferor or that are no longer segregated and set aside by the
transferor.
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"Net Proceeds Offer" has the meaning provided in Section 4.15.
"New Credit Facility" means the credit agreement to be entered
into among the Company, Commodore, Bankers Trust Company, as agent and the
lenders parties thereto from time to time, as the same may be amended,
supplemented or otherwise modified from time to time and (ii) any renewal,
extension, refunding, restructuring, replacement or refinancing thereof
(whether with the original agent and lenders or another agent or agents or
other lenders and whether provided under the original New Credit Facility or
any other credit agreement).
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing, or otherwise relating
to, any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Controller, or the Secretary of
such Person, or any other officer designated by the Board of Directors serving
in a similar capacity.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such Person and otherwise complying with
the requirements of Sections 10.04 and 10.05, as they relate to the making of
an Officers' Certificate.
"Opinion of Counsel" means a written opinion from legal counsel
who is reasonably acceptable to the Trustee complying with the requirements of
Sections 10.04 and 10.05, as they relate to the giving of an Opinion of
Counsel.
"Paying Agent" has the meaning provided in Section 2.03, except
that, during the continuance of a Default or Event of Default and for the
purposes of Articles Three and Eight and Sections 4.14 and 4.15, the Paying
Agent shall not be the Company or any Affiliate of the Company.
"Permitted Indebtedness" means, without duplication, (i)
Indebtedness outstanding on the Issue Date; (ii) Indebtedness of the Company or
a Subsidiary incurred pursuant to the New Credit Facility in an aggregate
principal amount at any time outstanding not to exceed the sum of the aggregate
commitments pursuant to the New Credit Facility as in effect on the Issue Date;
(iii) Indebtedness evidenced by or arising under the Securities and the
Indenture; (iv) Interest Swap Obligations; provided that such Interest Swap
Obligations are entered into to protect the Company from fluctuations in
interest rates of its Indebtedness; (v) additional Indebtedness of the Company
or any of its Subsidiaries not to exceed $10,000,000
<PAGE> 20
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in principal amount outstanding at any time (which amount may, but need not, be
incurred under the New Credit Facility); (vi) Refinancing Indebtedness; (vii)
Indebtedness owed by the Company to any Wholly Owned Subsidiary or by any
Subsidiary of the Company to the Company or any Wholly Owned Subsidiary of the
Company; (viii) guarantees by Subsidiaries of any Indebtedness permitted to be
incurred pursuant to the Indenture; (ix) Indebtedness in respect of performance
bonds, bankers' acceptances and surety or appeal bonds provided by the Company
or any of its Subsidiaries to their customers in the ordinary course of their
business; (x) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Subsidiaries pursuant to such
agreements, in each case incurred in connection with the disposition of any
business assets or Subsidiaries of the Company (other than guarantees of
Indebtedness or other obligations incurred by any Person acquiring all or any
portion of such business assets or Subsidiaries of the Company for the purpose
of financing such acquisition) in a principal amount not to exceed the gross
proceeds actually received by the Company or any of its Subsidiaries in
connection with such disposition; provided, however, that the principal amount
of any Indebtedness incurred pursuant to this clause (x), when taken together
with all Indebtedness incurred pursuant to this clause (x) and then
outstanding, shall not exceed $7,500,000; and (xi) Indebtedness represented by
Capitalized Lease Obligations, mortgage financings or purchase money
obligations, in each case incurred for the purpose of financing all or any part
of the purchase price or cost of construction or improvement of property used
in a related business or incurred to refinance any such purchase price or cost
of construction or improvement, in each case incurred no later than 365 days
after the date of such acquisition or the date of completion of such
construction or improvement; provided, however, that the principal amount of
any Indebtedness incurred pursuant to this clause (xi) shall not exceed
$3,000,000 at any time outstanding.
"Permitted Investments" means (i) Investments by the Company or
any Subsidiary of the Company to acquire the stock or assets of any Person (or
Acquired Indebtedness acquired in connection with a transaction in which such
Person becomes a Subsidiary of the Company) engaged in the broadcast business
or businesses reasonably related thereto; provided that if any such Investment
or series of related Investments involves an Investment by the Company in
excess of $5,000,000, the Company is able, at the time of such Investment and
immediately after giving effect thereto, to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section
4.12 hereof, (ii) Investments received by the Company or its Subsidiaries as
consideration for a sale of assets, (iii) Investments by the Company or any
Wholly Owned Subsidiary of the Company in any Wholly Owned Subsidiary of the
Company (whether existing on the Issue Date or created thereafter) or any
Person that after such Investments, and as a result thereof, becomes a Wholly
Owned Subsidiary of the Company and Investments in the Company by any Wholly
Owned Subsidiary of the Company, (iv) cash and Cash Equivalents, (v)
Investments in securities of trade
<PAGE> 21
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creditors, wholesalers or customers received pursuant to any plan of
reorganization or similar arrangement, (vi) loans or advances to employees of
the Company or any Subsidiary thereof for purposes of purchasing the Company's
Capital Stock and other loans and advances to employees made in the ordinary
course of business consistent with past practices of the Company or such
Subsidiary, and (vii) additional Investments in an aggregate amount not to
exceed $1,000,000 at any time outstanding.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"principal" of any Indebtedness (including the Securities) means
the principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Placement Legend" means the legend initially set forth
on the Securities in the form set forth on Exhibit A.
"Proceeds Purchase Date" shall have the meaning provided in
Section 4.15.
"Productive Assets" means assets of a kind used or usable by the
Company and its Subsidiaries in broadcast business or businesses reasonably
related thereto, and specifically includes assets acquired through Asset
Acquisitions.
"pro forma" means, unless otherwise provided herein, with respect
to any calculation made or required to be made pursuant to the terms of this
Indenture, a calculation in accordance with Article 11 of Regulation S-X
promulgated under the Securities Act.
"Public Equity Offering" means an underwritten public offering of
Capital Stock (other than Disqualified Capital Stock) of the Company, pursuant
to an effective registration statement filed with the Commission in accordance
with the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
<PAGE> 22
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"Redemption Date" means, with respect to any Securities, the
Maturity Date of such Security or the earlier date on which such Security is to
be redeemed by the Company pursuant to the terms of the Securities.
"Redemption Price" shall have the meaning provided in Section
3.03.
"Refinancing Indebtedness" means any refinancing by the Company
or any of its Subsidiaries of Indebtedness of the Company or any of its
Subsidiaries incurred in accordance with Section 4.12 hereof (other than
pursuant to clause (iii)) that does not (i) result in an increase in the
aggregate principal amount of Indebtedness (such principal amount to include,
for purposes of this definition, any premiums, penalties or accrued interest
paid with the proceeds of the Refinancing Indebtedness) of such Person or (ii)
create Indebtedness with (A) a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness being refinanced
or (B) a final maturity earlier than the final maturity of the Indebtedness
being refinanced.
"Registrar" has the meaning provided in Section 2.03.
"Representative" means the indenture trustee or other trustee,
agent or representative in respect of any Senior Debt; provided that if, and
for so long as, any Senior Debt lacks such a representative, then the
Representative for such Senior Debt shall at all times constitute the holders
of a majority in outstanding principal amount of such Senior Debt.
"Restricted Payment" means (i) the declaration or payment of any
dividend or the making of any other distribution (other than dividends or
distributions payable in Qualified Capital Stock or in options, rights or
warrants to acquire Qualified Capital Stock) on shares of the Company's Capital
Stock, (ii) the purchase, redemption, retirement or other acquisition for value
of any Capital Stock of the Company, or any warrants, rights or options to
acquire shares of Capital Stock of the Company, other than through the exchange
of such Capital Stock or any warrants, rights or options to acquire shares of
any class of such Capital Stock for Qualified Capital Stock or warrants, rights
or options to acquire Qualified Capital Stock, (iii) the making of any
principal payment on, or the purchase, defeasance, redemption, prepayment,
decrease or other acquisition or retirement for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, of, any
Indebtedness of the Company or its Subsidiaries that is subordinated or junior
in right of payment to the Securities or (iv) the making of any Investment
(other than a Permitted Investment).
"Restricted Security" has the meaning assigned to such term in
Rule 144(a)(3) under the Securities Act.
<PAGE> 23
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"Securities" means the Company's 12 3/4% Senior Discount Notes
due 2009, as amended or supplemented from time to time in accordance with the
terms hereof, that are issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Senior Debt" means any Indebtedness of the Company (including
any interest accruing subsequent to the filing of a petition of bankruptcy at
the rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law), whether outstanding on
the Issue Date or thereafter created, incurred or assumed, unless, in the case
of any particular Indebtedness, the instrument creating or evidencing the same
or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be pari passu in right of payment to the Securities.
Without limiting the generality of the foregoing, "Senior Debt" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, and all monetary obligations of every nature under, (w)
the New Credit Facility, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit,
fees, expenses and indemnities and (x) all Interest Swap Obligations.
Notwithstanding the foregoing, Senior Debt shall not include any of the
following amounts (whether or not constituting Indebtedness as defined herein):
(i) any Indebtedness of the Company to a Subsidiary of the Company; (ii)
Indebtedness and other amounts owing to trade creditors incurred in connection
with obtaining goods, materials or services; (iii) Indebtedness represented by
Disqualified Capital Stock; and (iv) any liability for federal, state, local or
other taxes owed or owing by the Company.
"Significant Subsidiary" means for any Person each Subsidiary of
such Person which (i) for the most recent fiscal year of such Person accounted
for more than 5% of the consolidated net income of such Person or (ii) as at
the end of such fiscal year, was the owner of more than 5% of the consolidated
assets of such Person.
"Subsidiary," with respect to any Person, means (i) any
corporation of which the outstanding Capital Stock having at least a majority
of the votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or indirectly,
owned by such Person. Notwithstanding anything in the Indenture to the
contrary, all references to the Company and its consolidated Subsidiaries or to
financial information prepared on a consolidated basis in
<PAGE> 24
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accordance with GAAP shall be deemed to include the Company and its
Subsidiaries as to which financial statements are prepared on a consolidated
basis in accordance with GAAP and to financial information prepared on such a
consolidated basis. Notwithstanding anything herein to the contrary, an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes
hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date on which this Indenture is
qualified under the TIA, except as otherwise provided in Section 9.03.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer its corporate trust matters or,
in the case of a successor trustee, an officer assigned to the department,
division or group performing the corporate trust work of such successor.
"Unrestricted Subsidiary" means a Subsidiary of the Company
created after the Issue Date and so designated by a resolution adopted by the
Board of Directors of the Company, provided that (a) neither the Company nor
any of its other Subsidiaries (other than Unrestricted Subsidiaries) (1)
provides any credit support for any Indebtedness of such Subsidiary (including
any undertaking, agreement or instrument evidencing such Indebtedness) or (2)
is directly or indirectly liable for any Indebtedness of such Subsidiary and
(b) at the time of designation of such Subsidiary, such Subsidiary has no
property or assets (other than de minimis assets resulting from the initial
capitalization of such Subsidiary). The Board of Directors may designate any
Unrestricted Subsidiary to be a Subsidiary; provided, however, that immediately
after giving effect to such designation (x) the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
Section 4.12 hereof and (y) no Default or Event of Default shall have occurred
or be continuing. Any designation pursuant to this definition by the Board of
Directors of the Company shall be evidenced to the Trustee by the filing with
the Trustee of a certified copy of the resolution of the Company's Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"U.S. Government Obligations" has the meaning provided in Section
8.01.
"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
<PAGE> 25
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"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of
such Person of which all the outstanding voting securities (other than
directors' qualifying shares) which normally have the right to vote in the
election of directors are owned by such Person or any Wholly Owned Subsidiary
of such Person.
SECTION 1.02 Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03 Rules of Construction.
Unless the context otherwise requires:
<PAGE> 26
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(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP as in effect on the Issue Date;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular; and
(5) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section
or other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01 Form and Dating.
The Securities and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The exchange
securities and the Trustee's certificate of authentication relating thereto
shall be substantially in the form of Exhibit B hereto. The Securities may
have notations, legends or endorsements required by law, stock exchange rule or
usage. The Company shall approve the form of the Securities and any notation,
legend or endorsement thereon. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to
the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
SECTION 2.02 Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall
sign, or one Officer shall sign and one Officer or an Assistant Secretary (each
of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Securities for the Company by manual or
facsimile signature.
<PAGE> 27
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If an Officer or Assistant Secretary whose signature is on a
Security was an Officer or Assistant Secretary at the time of such execution
but no longer holds that office or position at the time the Trustee
authenticates the Security, the Security shall nevertheless be valid.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue in
the aggregate principal amount at maturity of up to $277,000,000 upon receipt
of a written order of the Company in the form of an Officers' Certificate.
Such Officers' Certificate shall specify the amount of Securities to be
authenticated and the date on which the Securities are to be authenticated.
The aggregate principal amount at maturity of Securities outstanding at any
time may not exceed $277,000,000 except as provided in Section 2.07. Upon the
written order of the Company in the form of an Officers' Certificate, the
Trustee shall authenticate Securities in substitution of Securities originally
issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless otherwise
provided in the appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
and Affiliates of the Company.
The Securities shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03 Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New
York), where (a) Securities may be presented or surrendered for registration of
transfer or for exchange ("Registrar"), (b) Securities may be presented or
surrendered for payment ("Paying Agent") and (c) notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company, upon notice to the Trustee, may have one or more co-
Registrars and one or more additional paying agents reasonably acceptable to
the Trustee. The term "Paying Agent" includes any additional paying agent.
The Company may change the Paying Agent or Registrar without notice to any
Holder.
<PAGE> 28
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The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee, in advance, of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall
act as such.
The Company initially appoints the Trustee as Registrar and
Paying Agent until such time as the Trustee has resigned or a successor has
been appointed.
SECTION 2.04 Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of the Holders or the Trustee all assets held by the Paying Agent for
the payment of principal of, or interest on, the Securities (whether such
assets have been distributed to it by the Company or any other obligor on the
Securities), and shall notify the Trustee of any default by the Company (or any
other obligor on the Securities) in making any such payment. The Company at
any time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any payment Default, upon written request to a Paying
Agent, require such Paying Agent to distribute all assets held by it to the
Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent and the completion of any accounting required to be made
hereunder, the Paying Agent shall have no further liability for such assets.
SECTION 2.05 Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders and shall otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee five (5)
Business Days before each Interest Payment Date and at such other times as the
Trustee may request in writing a list as of the applicable Record Date and in
such form as the Trustee may reasonably require of the names and addresses of
the Holders, which list may be conclusively relied upon by the Trustee.
SECTION 2.06 Transfer and Exchange.
Subject to Section 2.15, when Securities are presented to the
Registrar or a co-Registrar with a request to register the transfer of such
Securities or to exchange such Securities for an equal principal amount of
Securities of other authorized denominations, the Registrar or co-Registrar
shall register the transfer or make the exchange as requested if its
requirements for
<PAGE> 29
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such transaction are met; provided, however, that the Securities surrendered
for transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing. To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Securities at the
Registrar's or co-Registrar's written request. No service charge shall be made
for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith. The Registrar or co-Registrar shall
not be required to register the transfer of or exchange of any Security (i)
during a period beginning at the opening of business 15 days before the
mailing of a notice of redemption pursuant to Section 3.03 of Securities and
ending at the close of business on the day of such mailing and (ii) selected
for redemption in whole or in part pursuant to Article Three, except the
unredeemed portion of any Security being redeemed in part.
SECTION 2.07 Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements are met. If required by the
Trustee or the Company, such Holder must provide an indemnity bond or other
indemnity, sufficient in the judgment of the Company and the Trustee, to
protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Security is replaced. The Company may charge such Holder for
its reasonable, out-of-pocket expenses in replacing a Security, including
reasonable fees and expenses of counsel. Every replacement Security shall
constitute an additional obligation of the Company.
SECTION 2.08 Outstanding Securities.
Securities outstanding at any time are all the Securities that
have been authenticated by the Trustee except those cancelled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant to
Section 2.07.
<PAGE> 30
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If the principal amount at maturity of any Security is paid in
accordance with the provisions of Section 4.01, such Security shall cease to be
outstanding and interest thereon shall cease to accrue.
If on a Redemption Date or the Maturity Date the Paying Agent
holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of
the principal, premium and interest due on the Securities payable on that date
and is not prohibited from paying such money to the Holders thereof pursuant to
the terms of this Indenture, then on and after that date such Securities cease
to be outstanding and interest on them ceases to accrue.
SECTION 2.09 Treasury Securities.
In determining whether the Holders of the required principal
amount at maturity of Securities have concurred in any direction, waiver,
consent or notice, Securities owned by the Company or an Affiliate shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which the Trustee knows are so
owned shall be so considered. The Company shall notify the Trustee, in
writing, when it or any of its Affiliates repurchases or otherwise acquires
Securities, of the aggregate principal amount at maturity of such Securities so
repurchased or otherwise acquired.
SECTION 2.10 Temporary Securities.
Until definitive Securities are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Securities upon
receipt of a written order of the Company in the form of an Officers'
Certificate. The Officers' Certificate shall specify the amount of temporary
Securities to be authenticated and the date on which the temporary Securities
are to be authenticated. Temporary Securities shall be substantially in the
form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay,
the Company shall prepare and execute, and the Trustee shall authenticate upon
receipt of a written order of the Company pursuant to Section 2.02, definitive
Securities in exchange for temporary Securities.
SECTION 2.11 Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying
Agent, and no one else, shall cancel and, at the written direction of the
Company, shall dispose and deliver evidence of disposal of all Securities
surrendered for
<PAGE> 31
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transfer, exchange, payment or cancellation. Subject to Section 2.07, the
Company may not issue new Securities to replace Securities that the Company has
paid or delivered to the Trustee for cancellation. If the Company shall
acquire any of the Securities, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Securities
unless and until the same are surrendered to the Trustee for cancellation
pursuant to this Section 2.11.
SECTION 2.12 Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, it shall pay the defaulted interest, plus (to the extent lawful)
any interest payable on the defaulted interest to the Persons who are Holders
on a subsequent special record date, which date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest
or the next succeeding Business Day if such date is not a Business Day. At
least 15 days before the subsequent special record date, the Company shall mail
to each Holder, with a copy to the Trustee, a notice that states the subsequent
special record date, the payment date and the amount of defaulted interest, and
interest payable on such defaulted interest, if any, to be paid.
SECTION 2.13 CUSIP Numbers.
The Company in issuing the Securities may use one or more "CUSIP"
numbers, and if so, the Trustee shall use the CUSIP numbers in notices of
redemption or exchange as a convenience to Holders; provided that no
representation is hereby deemed to be made by the Trustee as to the correctness
or accuracy of the CUSIP numbers printed in the notice or on the Securities,
and that reliance may be placed only on the other identification numbers
printed on the Securities.
SECTION 2.14 Deposit of Moneys.
Prior to 11:00 a.m. New York City time on each Interest Payment
Date and Maturity Date, the Company shall have deposited with the Paying Agent
in immediately available funds money sufficient to make cash payments, if any,
due on such Interest Payment Date or Maturity Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date or Maturity Date, as the case may be.
SECTION 2.15 Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in
the name of the Depository or the nominee of such Depository, (ii) be delivered
to the Trustee as custodian for such Depository and (iii) bear legends as set
forth in Exhibit C.
<PAGE> 32
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Members of, or participants in, the Depository ("Participants")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository, or the Trustee as its custodian, or
under the Global Security, and the Depository may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner
of the Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent
of the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and Participants, the operation of customary practices governing
the exercise of the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to
transfers in whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in the Global Securities
may be transferred or exchanged for physical securities in accordance with the
rules and procedures of the Depository and the provisions of Section 2.16. In
addition, physical securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for any Global Security and a successor Depository is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depository to issue physical securities.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall upon
written instructions from the Company authenticate and deliver, to each
beneficial owner identified by the Depository in exchange for its beneficial
interest in the Global Securities, an equal aggregate principal amount of
physical securities of authorized denominations.
(d) Any physical security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to
paragraph (b) of this Section 2.15 shall, except as otherwise provided by
Section 2.16, bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Participants and Persons that may
hold interests through Participants, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
<PAGE> 33
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SECTION 2.16 Registration of Transfers and Exchanges.
(a) Transfer and Exchange of physical securities. When
physical securities are presented to the Registrar or co-Registrar with a
request:
(i) to register the transfer of the physical securities; or
(ii) to exchange such physical securities for an equal number
of physical securities of other authorized denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; provided, however, that the
physical securities presented or surrendered for registration of transfer or
exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or co-
Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(II) in the case of physical securities the offer and sale of
which have not been registered under the Securities Act, such physical
securities shall be accompanied, in the sole discretion of the Company,
by the following additional information and documents, as applicable:
(A) if such physical security is being delivered to the
Registrar or co-Registrar by a Holder for registration in
the name of such Holder, without transfer, a certification
from such Holder to that effect (substantially in the form
of Exhibit D hereto); or
(B) if such physical security is being transferred to a
Qualified Institutional Buyer in accordance with Rule
144A, a certification from such Holder to that effect
(substantially in the form of Exhibit D hereto); or
(C) if such physical security is being transferred to an
Institutional Accredited Investor, delivery of a
certification from the Holder to that effect
(substantially in the form of Exhibit D hereto) and a
Transferee Certificate for Institutional Accredited
Investors substantially in the form of Exhibit E hereto;
or
(D) if such physical security is being transferred in reliance
on Rule 144 under the Securities Act, delivery of a
certification from the Holder to that effect
(substantially in the form of Exhibit D hereto) and an
Opinion of Counsel
<PAGE> 34
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reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act; or
(E) if such physical security is being transferred in reliance
on another exemption from the registration requirements of
the Securities Act, a certification from the Holder to
that effect (substantially in the form of Exhibit D
hereto) and an Opinion of Counsel reasonably acceptable to
the Company to the effect that such transfer is in
compliance with the Securities Act.
(b) Restrictions on Transfer of a physical security for a
Beneficial Interest in a Global Security. A physical security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the
Registrar or co-Registrar of a physical security, duly endorsed or accompanied
by appropriate instruments of transfer, in form satisfactory to the Registrar
or co-Registrar, together with:
(A) certification, substantially in the form of Exhibit D
hereto, that such physical security is being transferred
to a Qualified Institutional Buyer; and
(B) written instructions directing the Registrar or co-
Registrar to make, or to direct the Depository to make, an
endorsement on the applicable Global Security to reflect
an increase in the aggregate amount of the Securities
represented by the Global Security,
then the Registrar or co-Registrar shall cancel such physical security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar
or co-Registrar, the aggregate principal amount at maturity of Securities
represented by the applicable Global Security to be increased accordingly. If
no Global Security representing Securities held by Qualified Institutional
Buyers is then outstanding, the Company shall issue and the Trustee shall, upon
written instructions from the Company in accordance with Section 2.02,
authenticate such a Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depository in accordance with this Indenture (including
the restrictions on transfer set forth herein) and the procedures of the
Depository therefor. Upon receipt by the Registrar or co-Registrar of written
instructions, or such other instruction as is customary for the Depository,
from the Depository or its nominee requesting the registration of transfer of
an interest in a physical security held by a
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Qualified Institutional Buyer to another type of Global Security or physical
security, as the case may be, together with the applicable Global Securities or
physical securities (or, if the applicable type of Global Security required to
represent the interest as requested to be transferred is not then outstanding,
only the Global Security representing the interest being transferred), the
Registrar or co-Registrar shall cancel such Global Securities (or physical
securities) and the Company shall issue and the Trustee shall, upon written
instructions from the Company in accordance with Section 2.02, authenticate new
Global Securities or physical securities of the types so cancelled (or the type
so cancelled and applicable type required to represent the interest as
requested to be transferred) reflecting the applicable increase and decrease of
the principal amount of Securities represented by such types of Global
Securities or physical securities, giving effect to such transfer. If the
applicable type of Global Security or physical security required to represent
the interest as requested to be transferred is not outstanding at the time of
such request, the Company shall issue and the Trustee shall, upon written
instructions from the Company in accordance with Section 2.02, authenticate a
new Global Security or physical security of such type in principal amount equal
to the principal amount of the interest requested to be transferred.
(d) Transfer of a Beneficial Interest in a Global Security for
a physical security.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial
interest for a physical security. Upon receipt by the
Registrar or co-Registrar of written instructions, or such
other form of instructions as is customary for the
Depository, from the Depository or its nominee on behalf
of any Person having a beneficial interest in a Global
Security and upon receipt by the Trustee of a written
order or such other form of instructions as is customary
for the Depository or the Person designated by the
Depository as having such a beneficial interest containing
registration instructions and, in the case of any such
transfer or exchange of a beneficial interest in
Securities the offer and sale of which have not been
registered under the Securities Act, the following
additional information and documents:
(A) if such beneficial interest is being transferred to
the Person designated by the Depository as being
the beneficial owner, a certification from such
Person to that effect (substantially in the form of
Exhibit D hereto); or
(B) if such beneficial interest is being transferred to
a Qualified Institutional Buyer in accordance with
Rule l44A, a certification to that effect
(substantially in the form of Exhibit D hereto); or
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(C) if such beneficial interest is being transferred to
an Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the
form of Exhibit D hereto) and a Certificate for
Institutional Accredited Investors substantially in
the form of Exhibit E hereto; or
(D) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and
an Opinion of Counsel reasonably satisfactory to
the Company to the effect that such transfer is in
compliance with the Securities Act; or
(E) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of
Exhibit D hereto) and an Opinion of Counsel
reasonably satisfactory to the Company to the
effect that such transfer is in compliance with the
Securities Act,
then the Registrar or co-Registrar will cause, in accordance with
the standing instructions and procedures existing between the
Depository and the Registrar or co-Registrar, the aggregate
principal amount of the applicable Global Security to be reduced
and, following such reduction, the Company will execute and, upon
receipt of an authentication order in the form of an Officers'
Certificate in accordance with Section 2.02, the Trustee will
authenticate and deliver to the transferee a physical security.
(ii) Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.16(d)
shall be registered in such names and in such authorized
denominations as the Depository, pursuant to instructions from
its direct or indirect participants or otherwise, shall instruct
the Registrar or co- Registrar in writing. The Registrar or co-
Registrar shall deliver such physical securities to the Persons
in whose names such physical securities are so registered.
(e) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provisions of this Indenture, a Global
Security may not be transferred as a whole except by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository or by the Depository or any such nominee
to a successor Depository or a nominee of such successor Depository.
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(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar or co-Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend unless, and the
Trustee is hereby authorized to deliver Securities without the Private
Placement Legend if (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act or (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act.
(g) General. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Security
only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.15 or this Section
2.16. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.
SECTION 2.17 Designation.
The Indebtedness evidenced by the Securities is hereby
irrevocably designated as "senior indebtedness" or such other term denoting
seniority for the purposes of any future Indebtedness of the Company that the
Company makes subordinate to any senior indebtedness or such other term
denoting seniority.
ARTICLE THREE
REDEMPTION
SECTION 3.01 Notices to Trustee.
If the Company elects to redeem Securities pursuant to paragraph
5 of the Securities, it shall notify the Trustee and the Paying Agent in
writing of the Redemption Date and the principal amount at maturity of the
Securities to be redeemed and whether it wants the Trustee to give notice of
redemption to the Holders (at the Company's expense). Such notice
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must be given at least 60 days prior to the Redemption Date (unless a shorter
notice shall be satisfactory to the Trustee), but shall not be given more than
90 days before the Redemption Date. Any such notice may be cancelled at any
time prior to notice of such redemption being mailed to any Holder and shall
thereby be void and of no effect.
SECTION 3.02 Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed at any
time, the Trustee shall select the Securities to be redeemed in compliance with
the requirements of the principal national securities exchange, if any, on
which the Securities being redeemed are listed, or, in the absence of such
requirements or if the Securities are not listed on a national securities
exchange, on a pro rata basis.
The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Securities selected for redemption and, in the
case of any Security selected for partial redemption, the principal amount at
maturity thereof to be redeemed. Securities in denominations of $1,000 or less
may be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal amount at
maturity of Securities that have denominations larger than $1,000. Provisions
of this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
SECTION 3.03 Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail or cause to be mailed a notice of redemption by
first class mail to each Holder at its registered address whose Securities are
to be redeemed, with a copy to the Trustee. At the Company's request, the
Trustee shall give the notice of redemption in the Company's name and at the
Company's expense. Each notice for redemption shall identify the Securities to
be redeemed and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of accrued interest,
if any, to be paid (the "Redemption Price");
(3) the paragraph of the Securities pursuant to which the
Securities are being redeemed;
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(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price;
(6) that, unless the Company defaults in making the redemption
payment, the Accreted Value shall cease to accrete and interest, if any,
on Securities called for redemption shall cease to accrue on and after
the Redemption Date, and the only remaining right of the Holders of such
Securities is to receive payment of the Redemption Price upon surrender
to the Paying Agent of the Securities redeemed;
(7) if any Security is being redeemed in part, the portion of
the principal amount at maturity of such Security to be redeemed and
that, after the Redemption Date, and upon surrender of such Security, a
new Security or Securities in the aggregate principal amount at maturity
equal to the unredeemed portion thereof will be issued; and
(8) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount at maturity of
Securities to be redeemed and the aggregate principal amount at maturity
of Securities to be outstanding after such partial redemption.
SECTION 3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section
3.03, Securities called for redemption become due and payable on the Redemption
Date and at the Redemption Price. Upon surrender to the Trustee or Paying
Agent, such Securities called for redemption shall be paid at the Redemption
Price.
SECTION 3.05 Deposit of Redemption Price.
On or before the Redemption Date, the Company shall deposit with
the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price of
all Securities to be redeemed on that date. The Paying Agent shall promptly
return to the Company any U.S. Legal Tender so deposited that is not required
for that purpose, except with respect to monies owed as obligations to the
Trustee pursuant to Article Seven.
If the Company complies with the preceding paragraph, then,
unless the Company defaults in the payment of such Redemption Price, accretion
or interest, as the case may be, on the Securities to be redeemed will cease to
accrue on and after the applicable Redemption Date, whether or not such
Securities are presented for payment.
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SECTION 3.06 Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the
Trustee shall authenticate for the Holder a new Security or Securities equal in
principal amount at maturity to the unredeemed portion of the Security
surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01 Payment of Securities.
The Company shall pay the Accreted Value of and interest on the
Securities on the dates and in the manner provided in the Securities. An
installment of principal of or interest on the Securities shall be considered
paid on the date it is due if the Trustee or Paying Agent holds on that date
U.S. Legal Tender designated for and sufficient to pay the installment.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law,
deduct or withhold income or other similar taxes imposed by the United States
of America from principal, premium or interest payments hereunder.
SECTION 4.02 Maintenance of Office or Agency.
The Company shall maintain the office or agency required under
Section 2.03. The Company shall give prior notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 10.02.
SECTION 4.03 Limitation on Restricted Payments.
Neither the Company nor any of its Subsidiaries will, directly or
indirectly, make any Restricted Payment if at the time of such Restricted
Payment and immediately after giving effect thereto:
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(i) a Default or an Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Restricted
Payment; or
(ii) the Company is not able to incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.12
hereof; or
(iii) the aggregate amount of Restricted Payments made subsequent to
the Issue Date (the amount expended for such purposes, if other than in
cash, being the fair market value of such property as determined by the
Board of Directors of the Company in good faith) exceeds the sum of:
(A) (x) 100% of the aggregate Consolidated EBITDA of
the Company (or, in the event such Consolidated EBITDA shall be a
deficit, minus 100% of such deficit) accrued subsequent to the
Issue Date to the most recent date for which financial
information is available to the Company, taken as one accounting
period; less (y) 1.4 times Consolidated Interest Expense for the
same period, plus
(B) 100% of the aggregate net proceeds, including the
fair market value of property other than cash as determined by
the Board of Directors of the Company in good faith, received by
the Company from any Person (other than a Subsidiary of the
Company) from the issuance and sale on or subsequent to the Issue
Date of Qualified Capital Stock of the Company (excluding (i) any
net proceeds from issuances and sales financed directly or
indirectly using funds borrowed from the Company or any
Subsidiary of the Company, until and to the extent such borrowing
is repaid, but including the proceeds from the issuance and sale
of any securities convertible into or exchangeable for Qualified
Capital Stock to the extent such securities are so converted or
exchanged and including any additional proceeds received by the
Company upon such conversion or exchange and (ii) any net
proceeds received from issuances and sales that are used to
consummate a transaction described in clauses (2) and (3) of
paragraph (B) below), plus
(C) without duplication of any amount included in
clause (iii)(B) above, 100% of the aggregate net proceeds,
including the fair market value of property other than cash
(valued as provided in clause (iii)(B) above), received by the
Company as a capital contribution on or after the Issue Date,
plus
(D) the amount equal to the net reduction in
Investments (other than Permitted Investments) made by the
Company or any of its Subsidiaries in any Person resulting from
(i) repurchases or redemptions of such Investments by such
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Person, proceeds realized upon the sale of such Investment to an
unaffiliated purchaser and repayments of loans or advances or
other transfers of assets by such Person to the Company or any
Subsidiary of the Company or (ii) the redesignation of
Unrestricted Subsidiaries as Subsidiaries (valued in each case as
provided in the definition of "Investment") not to exceed, in the
case of any Subsidiary, the amount of Investments previously made
by the Company or any Subsidiary in such Unrestricted Subsidiary,
which amount was included in the calculation of Restricted
Payments; provided, however, that no amount shall be included
under this clause (D) to the extent it is already included in
Consolidated EBITDA, plus
(E) the aggregate net cash proceeds received by a
Person in consideration for the issuance of such Person's Capital
Stock (other than Disqualified Capital Stock) that are held by
such Person at the time such Person is merged with and into the
Company in accordance with Section 5.01 subsequent to the Issue
Date; provided, however, that concurrently with or immediately
following such merger the Company uses an amount equal to such
net cash proceeds to redeem or repurchase the Company's Capital
Stock, plus
(F) $2,500,000.
Notwithstanding the foregoing, these provisions will not
prohibit:
(1) the payment of any dividend or the making of any
distribution within 60 days after the date of its declaration if such
dividend or distribution would have been permitted on the date of
declaration;
(2) the purchase, redemption or other acquisition or
retirement of any Capital Stock of the Company or any warrants, options
or other rights to acquire shares of any class of such Capital Stock
either (x) solely in exchange for shares of Qualified Capital Stock or
other rights to acquire Qualified Capital Stock or (y) through the
application of the net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of shares of Qualified
Capital Stock or warrants, options or other rights to acquire Qualified
Capital Stock or (z) in the case of Disqualified Capital Stock, solely
in exchange for, or through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of
the Company) of, Disqualified Capital Stock that has a redemption date
no earlier than, and requires the payment of current dividends or
distributions in cash no earlier than, in each case, the Disqualified
Capital Stock being purchased, redeemed or otherwise acquired or
retired;
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(3) the acquisition of Indebtedness of the Company that is
subordinate or junior in right of payment to the Securities either (x)
solely in exchange for shares of Qualified Capital Stock (or warrants,
options or other rights to acquire Qualified Capital Stock), for shares
of Disqualified Capital Stock that have a redemption date no earlier
than, and require the payment of current dividends or distributions in
cash no earlier than, in each case, the maturity date and interest
payments dates, respectively, of the Indebtedness being acquired, or for
Indebtedness of the Company that is subordinate or junior in right of
payment to the Securities, at least to the extent that the Indebtedness
being acquired is subordinated to the Securities and has a Weighted
Average Life to Maturity no less than that of the Indebtedness being
acquired or (y) through the application of the net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of
the Company) of shares of Qualified Capital Stock (or warrants, options
or other rights to acquire Qualified Capital Stock), shares of
Disqualified Capital Stock that have a redemption date no earlier than,
and require the payment of current dividends or distributions in cash no
earlier than, in each case, the maturity date and interest payments
dates, respectively, of the Indebtedness being refinanced, or
Indebtedness of the Company that is subordinate or junior in right of
payment to the Securities at least to the extent that the Indebtedness
being acquired is subordinated to the Securities and has a Weighted
Average Life to Maturity no less than that of the Indebtedness being
refinanced;
(4) payments by the Company to repurchase Capital Stock or
other securities from employees of the Company in an aggregate amount
not to exceed $5,000,000;
(5) payments to enable the Company to redeem or repurchase
stock purchase or similar rights in an aggregate amount not to exceed
$500,000;
(6) payments, not to exceed $100,000 in the aggregate, to
enable the Company to make cash payments to holders of its Capital Stock
in lieu of the issuance of fractional shares of its Capital Stock;
(7) payments made pursuant to any merger, consolidation or
sale of assets effected in accordance with Section 5.01; provided,
however, that no such payment may be made pursuant to this clause (7)
unless, after giving effect to such transaction (and the incurrence of
any Indebtedness in connection therewith and the use of the proceeds
thereof), the Company would be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with
Section 4.12 such that after incurring that $1.00 of additional
Indebtedness, the Leverage Ratio would be less than 6.0 to 1; and
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(8) the payments of dividends on the Company's Common Stock
after an initial public offering of Common Stock in an annual amount not
to exceed 6.0% of the gross proceeds (before deducting underwriting
discounts and commissions and other fees and expenses of the offering)
received by the Company from shares of Common Stock sold for the account
of the Company (and not for the account of any stockholder) in such
initial public offering;
provided, however, that in the case of clauses (3), (4), (5), (6), (7) and (8),
no Event of Default shall have occurred or be continuing at the time of such
payment or as a result thereof. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date, amounts expended
pursuant to clauses (1), (4), (5), (6), (7) and (8) shall be included in such
calculation.
SECTION 4.04 Corporate Existence.
Except as otherwise permitted by Article Five, the Company shall
do or cause to be done all things reasonably necessary to preserve and keep in
full force and effect its corporate or other existence and the corporate or
other existence of each of its Significant Subsidiaries in accordance with the
respective organizational documents of each such Significant Subsidiary and the
material rights (charter and statutory) and franchises of the Company and each
such Significant Subsidiary; provided, however, that the Company shall not be
required to preserve, with respect to itself, any material right or franchise
and, with respect to any of its Significant Subsidiaries, any such existence,
material right or franchise, if the Board of Directors of the Company or such
Significant Subsidiary, as the case may be, shall determine that the
preservation thereof is no longer reasonably necessary or desirable in the
conduct of the business of the Company or any such Significant Subsidiary.
SECTION 4.05 Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon it or any of
its Subsidiaries or properties of it or any of its Subsidiaries and (ii) all
material lawful claims for labor, materials, supplies and services that, if
unpaid, might by law become a Lien upon the property of it or any of its
Subsidiaries; provided, however, that there shall not be required to be paid or
discharged any such tax, assessment or charge, the amount, applicability or
validity of which is being contested in good faith by appropriate proceedings
and for which adequate provision has been made or where the failure to effect
such payment or discharge is not adverse in any material respect to the
Holders.
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SECTION 4.06 Maintenance of Properties and Insurance.
(a) The Company shall, and shall cause each of its
Subsidiaries to, maintain its material properties in normal condition (subject
to ordinary wear and tear) and make all reasonably necessary repairs, renewals
or replacements thereto as in the judgment of the Company may be reasonably
necessary to the conduct of the business of the Company and its Subsidiaries;
provided, however, that nothing in this Section 4.06 shall prevent the Company
or any of its Subsidiaries from discontinuing the operation and maintenance of
any of its properties, if such properties are, in the reasonable and good faith
judgment of the Board of Directors of the Company or the Subsidiary, as the
case may be, no longer reasonably necessary in the conduct of their respective
businesses.
(b) The Company shall provide or cause to be provided, for
itself and each of its Subsidiaries, insurance (including appropriate self-
insurance) against loss or damage of the kinds that, in the reasonable, good
faith opinion of the Company, are reasonably adequate and appropriate for the
conduct of the business of the Company and such Subsidiaries.
SECTION 4.07 Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of the Company's fiscal year, an officers' certificate (signed by
the principal executive officer, principal financial officer or principal
accounting officer) stating that a review of its activities and the activities
of its Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing officers with a view to determining whether it has
kept, observed, performed and fulfilled its obligations under this Indenture
and further stating, as to each such officer signing such certificate, that to
the best of his knowledge the Company during such preceding fiscal year has
kept, observed, performed and fulfilled each and every such obligation and no
Default or Event of Default occurred during such year and at the date of such
certificate there is no Default or Event of Default that has occurred and is
continuing or, if such signers do know of such Default or Event of Default, the
certificate shall describe the Default or Event of Default and its status with
particularity. The Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year end.
(b) The annual financial statements delivered to the Trustee
pursuant to Section 4.09 shall be accompanied by a written report of the
Company's independent accountants that in conducting their audit of the
financial statements which are a part of such annual report or such annual
financial statements nothing has come to their attention that would lead them
to believe that the Company has violated any provisions of Article Four, Five
or Six insofar as they relate to accounting matters or, if any such violation
has occurred, specifying the nature and
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period of existence thereof, it being understood that such accountants shall
not be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) So long as any of the Securities are outstanding (i) if
any Default or Event of Default has occurred and is continuing or (ii) if any
Holder seeks to exercise any remedy hereunder with respect to a claimed Default
under this Indenture or the Securities, the Company shall promptly deliver to
the Trustee by registered or certified mail or by telegram, telex or facsimile
transmission followed by hard copy by registered or certified mail an Officers'
Certificate specifying such event, notice or other action.
SECTION 4.08 Compliance with Laws.
The Company shall comply, and shall cause each of its
Subsidiaries to comply, with all applicable statutes, rules, regulations,
orders and restrictions of the United States of America, all states and
municipalities thereof, and of any governmental department, commission, board,
regulatory authority, bureau, agency and instrumentality of the foregoing, in
respect of the conduct of their respective businesses and the ownership of
their respective properties, except for such noncompliances as are not in the
aggregate reasonably likely to have a material adverse effect on the financial
condition or results of operations of the Company and its Subsidiaries taken as
a whole.
SECTION 4.09 Reports.
So long as any of the Securities are outstanding, the Company
will provide to the holders of Securities and file with the Commission copies
of the annual reports and of the information, documents, and other reports that
the Company would have been required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act regardless of whether the Company is
then obligated to file such reports.
SECTION 4.10 Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of, premium or interest on the Securities
as contemplated herein, wherever enacted, now or at any time hereafter in
force, or which may affect the obligations or the performance of this
Indenture; and (to the extent that it may lawfully do so) the Company hereby
expressly waives all benefit or advantage of any such law, and covenants that
it will not hinder, delay or impede the execution of any power herein
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granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 4.11 Limitations on Transactions with Affiliates.
Neither the Company nor any of its Subsidiaries will, directly or
indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with or for the benefit of any of its Affiliates
(other than transactions between the Company and a Wholly Owned Subsidiary of
the Company or among Wholly Owned Subsidiaries of the Company) (an "Affiliate
Transaction"), other than Affiliate Transactions on terms that are no less
favorable than those that might reasonably have been obtained in a comparable
transaction on an arm's-length basis from a Person that is not an Affiliate;
provided, however, that for a transaction or series of related transactions
involving value of $1,000,000 or more, such determination will be made in good
faith by a majority of the members of the Board of Directors of the Company and
by a majority of the disinterested members of the Board of Directors of the
Company, if any; provided, further, that for a transaction or series of related
transactions involving value of $5,000,000 or more, the Board of Directors of
the Company has received an opinion from a nationally recognized investment
banking firm that such Affiliate Transaction is fair, from a financial point of
view, to the Company or such Subsidiary. The foregoing restrictions will not
apply to (1) reasonable and customary directors' fees, indemnification and
similar arrangements and payments thereunder, (2) any obligations of the
Company under the Financial Monitoring and Oversight Agreements (provided that
each amendment of any of the foregoing agreements shall be subject to the
limitations of this covenant) or any employment agreement, noncompetition or
confidentiality with any officer of the Company, (3) reasonable and customary
investment banking, financial advisory, commercial banking and similar fees and
expenses paid to BT Securities Corporation and its Affiliates, (4) any
Restricted Payment permitted to be made pursuant to Section 4.03, (5) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors of the
Company, (6) loans or advances to employees in the ordinary course of business
of the Company or any of its Subsidiaries consistent with past practices, (7)
payments made in connection with the Osborn Acquisition, the Osborn Add-on
Acquisitions, the Osborn Ft. Myers Disposition and the Pending Acquisitions,
including fees to Hicks Muse as all such terms are defined in that certain
Offering Memorandum dated February 14, 1997 relating to the Securities, and (8)
the issuance of Capital Stock of the Company (other than Disqualified Capital
Stock).
<PAGE> 48
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SECTION 4.12 Limitation on Incurrence of Additional
Indebtedness and Issuance of Preferred
Stock of Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable, contingently or otherwise, with
respect to (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness) and the Company's Subsidiaries will not issue any Preferred
Stock; provided, however, that the Company and its Subsidiaries may incur
Indebtedness and the Company's Subsidiaries may issue shares of Preferred Stock
if, in either case, the Company's Leverage Ratio at the time of incurrence of
such Indebtedness or the issuance of such Preferred Stock, as the case may be,
after giving pro forma effect to such incurrence or issuance as of such date
and to the use of proceeds therefrom is less than 7.0 to 1.
SECTION 4.13 Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.
Neither the Company nor any of its Subsidiaries will, directly or
indirectly, create or otherwise cause to permit to exist or become effective,
by operation of the charter of such Subsidiary or by reason of any agreement,
instrument, judgement, decree, rule, order, statute or governmental regulation,
any encumbrance or restriction on the ability of any Subsidiary to (a) pay
dividends or make any other distributions on its Capital Stock; (b) make loans
or advances or pay any Indebtedness or other obligation owed to the Company or
any of its Subsidiaries; or (c) transfer any of its property or assets to the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law, (2) this Indenture, (3) customary
non-assignment provisions of any lease governing a leasehold interest of the
Company or any Subsidiary, (4) any instrument governing Acquired Indebtedness,
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired, (5) agreements existing on the Issue Date
(including the New Credit Facility and the Commodore Indenture) as such
agreements are from time to time in effect; provided, however, that any
amendments or modifications of such agreements that affect the encumbrances or
restrictions of the types subject to this Section 4.13 shall not result in such
encumbrances or restrictions being less favorable to the Company in any
material respect, as determined in good faith by the Board of Directors of the
Company, than the provisions as in effect before giving effect to the
respective amendment or modification, (6) any restriction with respect to such
a Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of such
Subsidiary pending the closing of such sale or disposition, (7) an agreement
effecting a refinancing, replacement or substitution of Indebtedness issued,
assumed or incurred pursuant to an agreement referred to in clause (2),
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(4) or (5) above; provided, however, that the provisions relating to such
encumbrance or restriction contained in any such refinancing, replacement or
substitution agreement are not less favorable to the Company in any material
respect as determined in good faith by the Board of Directors of the Company
than the provisions relating to such encumbrance or restriction contained in
agreements referred to in such clause (2), (4) or (5) above, (8) any agreement
evidencing Indebtedness permitted under this Indenture; provided, however, that
the provisions relating to such encumbrance or restriction contained in such
agreement are not less favorable to the Company in any material respect as
determined in good faith by the Board of Directors of the Company than the
provisions relating to such encumbrance or restriction contained in this
Indenture, or (9) restrictions on the transfer of assets subject to any Lien
imposed by the holder of such Lien.
SECTION 4.14 Change of Control.
(a) In the event of a Change of Control, each Holder will have
the right to require the Company to purchase all or a portion of such Holder's
Securities pursuant to the offer described in paragraph (b) below (the "Change
of Control Offer"), at a purchase price equal to (i) 101% of the Accreted Value
thereof on the Change of Control Payment Date if the Change of Control Payment
Date is on or before February 1, 2002 and (ii) 101% of the principal amount at
maturity thereof, plus, without duplication, accrued and unpaid interest, if
any, to the Change of Control Payment Date if such Change of Control Payment
Date is after February 1, 2002. Prior to the mailing of the notice referred to
below, but in any event within 30 days following the date on which the Company
becomes aware that a Change of Control has occurred, the Company covenants that
if the purchase of the Securities would violate or constitute a default under
any other Indebtedness of the Company, then the Company shall, to the extent
needed to permit such purchase of Securities, either (i) repay all such
Indebtedness and terminate all commitments outstanding thereunder or (ii)
obtain the requisite consents, if any, under such Indebtedness required to
permit the purchase of the Securities as provided below. The Company will
first comply with the covenant in the preceding sentence before it will be
required to make the Change of Control Offer or purchase the Securities
pursuant to the provisions described below.
(b) Within 30 days following the date on which the Company
becomes aware that a Change of Control has occurred (the "Change of Control
Date"), the Company shall send, by first class mail, postage prepaid, a notice
to each Holder of Securities, which notice shall govern the terms of the Change
of Control Offer. The notice to the Holders shall contain all instructions and
materials necessary to enable such Holders to tender Securities pursuant to the
Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.14 and that all Securities validly tendered and
not withdrawn will be accepted for payment;
(2) the purchase price (including the amount of accrued
interest, if any) and the purchase date (which shall be no
earlier than 30 days nor later than 45 days
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from the date such notice is mailed, other than as may be
required by law) (the "Change of Control Payment Date");
(3) that any Security not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment
therefor, any Security accepted for payment pursuant to the
Change of Control Offer shall cease to accrete or accrue
interest, as the case may be, after the Change of Control Payment
Date;
(5) that Holders electing to have a Security purchased
pursuant to a Change of Control Offer will be required to
surrender the Security, properly endorsed for transfer together
with such customary documents as the Company reasonably may
request, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day prior
to the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than five Business Days
prior to the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Securities the Holder
delivered for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased;
(7) that Holders whose Securities are purchased only in part
will be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered; and
(8) the circumstances and relevant facts regarding such Change
of Control.
(c) On or before the Change of Control Payment Date, the
Company shall (i) accept for payment Securities or portions thereof (in
integral multiples of $1,000) validly tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient
to pay the purchase price of all Securities so tendered and (iii) deliver to
the Trustee Securities so accepted together with an Officers' Certificate
stating the Securities or portions thereof being purchased by the Company. The
Paying Agent shall promptly mail to the Holders of Securities so accepted
payment in an amount equal to the purchase price out of the funds deposited
with the Paying Agent in accordance with the preceding sentence. The Trustee
shall promptly authenticate and mail to such Holders new Securities equal in
principal amount to any unpurchased portion of the Securities surrendered.
Upon the payment of the purchase price
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for the Securities accepted for purchase, the Trustee shall return the
Securities purchased to the Company for cancellation. Any amounts remaining
after the purchase of Securities pursuant to a Change of Control Offer shall be
returned within three Business Days by the Trustee to the Company.
(d) The Company will comply with the requirements of Rule 14e-
1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the purchase of the Securities pursuant to a Change of Control Offer. To
the extent the provisions of any such rule conflict with the provisions of this
Indenture relating to a Change of Control Offer, the Company shall comply with
the provisions of such rule and be deemed not to have breached its obligations
relating to such Change of Control Offer by virtue thereof.
(e) Paragraphs (a)-(d) of this Section 4.14 notwithstanding,
the Company shall not be required to make a Change of Control Offer if,
instead, the Company elects to effect a Change of Control Redemption in
compliance with the requirements listed on the Securities in Exhibit A and
Exhibit B hereof.
SECTION 4.15. Limitation on Asset Sales.
(a) Neither the Company nor any of its Subsidiaries will
consummate an Asset Sale unless (i) the Company or the applicable Subsidiary,
as the case may be, receives consideration at the time of such Asset Sale at
least equal to the fair market value of the assets sold or otherwise disposed
of (as determined in good faith by management of the Company or, if such Asset
Sale involves consideration in excess of $2,500,000, by the Board of Directors
of the Company, as evidenced by a board resolution), (ii) at least 75% of the
consideration received by the Company or such Subsidiary, as the case may be,
from such Asset Sale is in cash or Cash Equivalents (other than in the case
where the Company is exchanging all or substantially all the assets of one or
more broadcast businesses operated by the Company (including by way of the
transfer of capital stock) for all or substantially all the assets (including
by way of the transfer of capital stock) constituting one or more broadcast
businesses operated by another Person, in which event the foregoing requirement
with respect to the receipt of cash or Cash Equivalents shall not apply) and is
received at the time of such disposition and (iii) upon the consummation of an
Asset Sale, the Company applies, or causes such Subsidiary to apply, such Net
Cash Proceeds within 180 days of receipt thereof, either (A) to repay any
Senior Debt of the Company or any Indebtedness of a Subsidiary of the Company
(and, to the extent such Senior Debt relates to principal under a revolving
credit or similar facility, to obtain a corresponding reduction in the
commitments thereunder), (B) to reinvest, or to be contractually committed to
reinvest pursuant to a binding agreement, in Productive Assets and, in the
latter case, to have so reinvested within 360 days of the date of receipt of
such Net Cash Proceeds or (C) to purchase Securities tendered
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to the Company for purchase at a price equal to 100% of the Accreted Value
thereof plus accrued interest thereon, if any, to the date of purchase pursuant
to an offer to purchase made by the Company as set forth below (a "Net Proceeds
Offer"); provided, however, that the Company may defer making a Net Proceeds
Offer until the aggregate Net Cash Proceeds from Asset Sales not otherwise
applied in accordance with this Section 4.15 equal or exceed $5,000,000.
(b) Subject to the deferral right set forth in the final
proviso of paragraph (a), each notice of a Net Proceeds Offer will be mailed,
by first class mail, to Holders of Securities not more than 180 days after the
relevant Asset Sale or, in the event the Company or a Subsidiary has entered
into a binding agreement as provided in (B) above, within 180 days following
the termination of such agreement but in no event later than 360 days after the
relevant Asset Sale. Such notice will specify, among other things, the purchase
date (which will be no earlier than 30 days nor later than 45 days from the
date such notice is mailed, except as otherwise required by law) and will
otherwise comply with the procedures set forth in this Indenture. Upon
receiving notice of the Net Proceeds Offer, holders of Securities may elect to
tender their Securities in whole or in part in integral multiples of $1,000.
To the extent holders properly tender Securities in an amount exceeding the Net
Proceeds Offer, Securities of tendering holders will be repurchased on a pro
rata basis (based upon the principal amount at maturity tendered. To the
extent that the aggregate principal amount at maturity of Securities tendered
pursuant to any Net Proceeds Offer is less than the amount of Net Cash Proceeds
subject to such Net Proceeds Offer, the Company may use any remaining portion
of such Net Cash Proceeds not required to fund the repurchase of tendered
Securities for any purposes otherwise permitted by this Indenture. Upon the
consummation of any Net Proceeds Offer, the amount of Net Cash Proceeds subject
to any future Net Proceeds Offer from the Asset Sales giving rise to such Net
Cash Proceeds shall be deemed to be zero.
The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act to the extent applicable in connection with the repurchase of
Securities pursuant to a Net Proceeds Offer.
SECTION 4.16. Limitation on Asset Swaps.
The Company will not, and will not permit any Subsidiary to,
engage in any Asset Swaps, unless: (i) at the time of entering into such Asset
Swap and immediately after giving effect to such Asset Swap, no Default or
Event of Default shall have occurred or be continuing or would occur as a
consequence thereof, (ii) in the event such Asset Swap involves an aggregate
amount in excess of $1,000,000, the terms of such Asset Swap have been approved
by a majority of the members of the Board of Directors of the Company and (iii)
in the event such Asset Swap involves an aggregate amount in excess of
$5,000,000, the Company has received a written opinion from an independent
investment banking firm of nationally recognized standing that
<PAGE> 53
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such Asset Swap is fair to the Company or such Subsidiary, as the case may be,
from a financial point of view.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01 Merger, Consolidation and Sale of Assets.
(a) The Company shall not, in a single transaction or through
a series of related transactions, consolidate with or merge with or into, or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, another Person or adopt a plan of
liquidation, unless:
(1) either (A) the Company is the surviving or continuing
Person or (B) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person that
acquires by conveyance, transfer or lease the properties and assets of
the Company substantially as an entirety or in the case of a plan of
liquidation, the Person to which assets of the Company have been
transferred, shall be a corporation, partnership or trust organized and
existing under the laws of the United States or any State thereof or the
District of Columbia and such surviving or transferee Person shall
expressly assume all the obligations of the Company under the Securities
and this Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee;
(2) immediately after giving effect to such transaction and
the use of the proceeds therefrom (on a pro forma basis, including
giving effect to any Indebtedness incurred or anticipated to be incurred
in connection with such transaction), the Company (in the case of clause
(A) of the foregoing clause (1)) or the surviving or transferee Person
(in the case of clause (B) of the foregoing clause (1)) shall be able to
incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with Section 4.12;
(3) immediately after giving effect to such transactions no
Default or Event of Default shall have occurred and be continuing; and
(4) the Company has delivered to the Trustee prior to the
consummation of the proposed transaction an Officers' Certificate and
Opinion of Counsel, each stating that
<PAGE> 54
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such consolidation, merger or transfer complies with this Indenture and
that all conditions precedent in this Indenture relating to such
transaction have been satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties and assets of one
or more Subsidiaries, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company. Notwithstanding the foregoing clauses (2) and (3), (a) any
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company and (b) the Company may merge
with a corporate Affiliate thereof incorporated solely for the purpose of
reincorporating the Company in another jurisdiction in the United States to
realize tax or other benefits.
SECTION 5.02 Successor Corporation Substituted.
Upon any consolidation or merger, or any transfer of assets in
accordance with Section 5.01, the successor Person formed by such consolidation
or into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein. When a successor corporation
assumes all of the obligations of the Company hereunder and under the
Securities and agrees to be bound hereby and thereby, the predecessor shall be
released from such obligations.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01 Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on the
Securities when the same becomes due and payable and the Default
continues for a period of 30 days; or
(2) the Company defaults in the payment of the Accreted Value
or premium, if any, of any Securities when the same becomes due and
payable, at maturity, upon redemption or otherwise; or
<PAGE> 55
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(3) the Company fails to observe or perform any other covenant
or agreement contained in the Securities or this Indenture and the
Default continues for a period of 30 days after the Company receives
written notice thereof specifying such Default from the Trustee or the
Holders of at least 25% in aggregate principal amount at maturity of the
outstanding Securities; or
(4) there shall be a failure to pay at the final stated
maturity (giving effect to any extensions thereof) the principal amount
of any Indebtedness of the Company or any Subsidiary of the Company, or
the acceleration of the final stated maturity (giving effect to any
extensions thereof) of any such Indebtedness, if the aggregate principal
amount of such Indebtedness, together with the aggregate principal
amount of any other such Indebtedness in default for failure to pay
principal at the final stated maturity (giving effect to any extensions
thereof) or which has been accelerated, aggregates $5,000,000 or more at
any time, in each case after a 10-day period during which such default
shall not have been cured or such acceleration rescinded; or
(5) one or more judgments in an aggregate amount in excess of
$5,000,000 (which are not covered by insurance as to which the insurer
has not disclaimed coverage) shall have been rendered against the
Company or any of its Significant Subsidiaries and such judgments remain
undischarged or unstayed for a period of 60 days after such judgment or
judgments become final and non-appealable; or
(6) the Company or any Significant Subsidiary (A) commences a
voluntary case or proceeding under any Bankruptcy Law with respect to
itself, (B) consents to the entry of a judgment, decree or order for
relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (C) consents to the appointment of a custodian of it or
for substantially all of its property, (D) consents to or acquiesces in
the institution of a bankruptcy or an insolvency proceeding against it
or (E) makes a general assignment for the benefit of its creditors; or
(7) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under any Bankruptcy
Law, which shall (A) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Company or any Significant Subsidiary, (B) appoint a custodian of the
Company or any Significant Subsidiary or for substantially all of its
property or (C) order the winding-up or liquidation of its affairs; and
such judgment, decree or order shall remain unstayed and in effect for a
period of 60 consecutive days.
<PAGE> 56
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SECTION 6.02 Acceleration.
If an Event of Default (other than an Event of Default specified
in Section 6.01(6) or (7) with respect to the Company) occurs and is continuing
and has not been waived pursuant to Section 6.04, the Trustee may, and the
Trustee upon the request of Holders of 25% in principal amount at maturity of
the outstanding Securities shall, or the Holders of at least 25% in aggregate
principal amount at maturity of the Securities then outstanding may, declare
the Default Amount to be due and payable by notice in writing to the Company
and the Trustee specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice"), and the same (i) shall
become immediately due and payable or (ii) if there are any amounts outstanding
under the New Credit Facility, shall become due and payable upon the first to
occur of an acceleration under the New Credit Facility or five Business Days
after receipt by the Company and the Representative under the New Credit
Facility of such Acceleration Notice (unless all Events of Default specified in
such Acceleration Notice have been cured or waived). If an Event of Default
specified in Section 6.01(6) or (7) with respect to the Company occurs and is
continuing with respect to the Company, then the Default Amount shall ipso
facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Securityholder. At any time after
a declaration of acceleration with respect to the Securities, the Holders of a
majority in principal amount at maturity of the Securities then outstanding (by
notice to the Trustee) may rescind and cancel a declaration of acceleration and
its consequences if (i) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction, (ii) all existing Events of
Default have been cured or waived, except non-payment of the Default Amount and
any accrued interest on the Securities that has become due solely by such
declaration of acceleration, (iii) to the extent the payment of such interest
is lawful, interest (at the same rate as specified in the Securities) on
overdue installments of interest and overdue payments of Accreted Value and
premium, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of a
Default or Event of Default of the type described in Sections 6.01(6) and (7),
the Trustee shall have received an Officers' Certificate and an Opinion of
Counsel that such Default or Event of Default has been cured or waived and the
Trustee shall be entitled to conclusively rely upon such Officers' Certificate
and Opinion of Counsel. No such rescission shall affect any subsequent Default
or impair any right consequent thereto.
SECTION 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, premium or interest, if any, on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
<PAGE> 57
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The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. No
remedy is exclusive of any other remedy. All available remedies are cumulative
to the extent permitted by law.
SECTION 6.04 Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of a majority in
principal amount of the outstanding Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences, except a
Default in the payment of the Accreted Value of or interest on any Security as
specified in clauses (1) and (2) of Section 6.01.
SECTION 6.05 Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal
amount at maturity of the outstanding Securities may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on it, including, without
limitation, any remedies provided for in Section 6.03. Subject to Section
7.01, however, the Trustee may, in its discretion, refuse to follow any
direction that conflicts with any law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of another Securityholder,
or that may involve the Trustee in personal liability; provided that the
Trustee may take any other action deemed proper by the Trustee, in its
discretion, that is not inconsistent with such direction.
SECTION 6.06 Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee notice of a continuing
Event of Default;
(2) Holders of at least 25% in principal amount at maturity of
the outstanding Securities make a written request to the Trustee to
pursue the remedy;
(3) such Holders offer to the Trustee indemnity or security
against any loss, liability or expense to be incurred in compliance with
such request which is reasonably satisfactory to the Trustee;
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(4) the Trustee does not comply with the request within 45
days after receipt of the request and the offer of satisfactory
indemnity or security; and
(5) during such 45-day period the Holders of a majority in
principal amount of the outstanding Securities do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
such other Securityholder.
SECTION 6.07 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right
of any Holder to receive payment of principal of, premium and interest on a
Security, on or after the respective due dates expressed in such Security, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
SECTION 6.08 Collection Suit by Trustee.
If an Event of Default in payment of principal or interest
specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Securities for the whole amount
of principal and accrued interest remaining unpaid, together with interest on
overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest at the rate set forth in the
Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relating to the Company or
any other obligor upon the Securities, any of their respective creditors or any
of their respective property, and shall be entitled and empowered to collect
and receive any monies or other property payable or deliverable on any such
claims and to distribute the same, and any custodian in any such judicial
proceedings is hereby authorized by each Securityholder to make such payments
to the Trustee and, in the event that the Trustee shall consent to the making
of
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such payments directly to the Securityholders, to pay to the Trustee any amount
due to it for the reasonable compensation, expenses, taxes, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07. The Company's payment obligations under this
Section 6.09 shall be secured in accordance with the provisions of Section
7.07. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article Six,
it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Sections 6.09 and 7.07;
Second: if the Holders are forced to proceed against the Company
directly without the Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the Securities
for Accreted Value or principal, premium and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Securities for principal and interest, respectively; and
Fourth: to the Company or any other obligor on the Securities,
as their interests may appear, or as a court of competent jurisdiction
may direct.
The Trustee, upon prior notice to the Company, may fix a record
date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a
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suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by
a Holder or Holders of more than 10% in principal amount at maturity of the
outstanding Securities.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01 Duties of Trustee.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
thereof as a prudent Person would exercise or use under the circumstances in
the conduct of its own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture or the TIA and no duties,
covenants, responsibilities or obligations shall be implied in this
Indenture that are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates (including
Officers' Certificates) or opinions (including Opinions of Counsel)
furnished to the Trustee and conforming to the requirements of this
Indenture. However, as to any certificates or opinions which are
required by any provision of this Indenture to be delivered or provided
to the Trustee, the Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of this
Indenture.
(c) Notwithstanding anything to the contrary herein contained,
the Trustee may not be relieved from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
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(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.01.
(f) The Trustee shall not be liable for interest on any money
or assets received by it except as the Trustee may agree with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
(g) In the absence of bad faith, negligence or wilful
misconduct on the part of the Trustee, the Trustee shall not be responsible for
the application of any money by any Paying Agent other than the Trustee.
SECTION 7.02 Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in
acting or refraining from acting upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or an
Opinion of Counsel, which shall conform to Sections 10.04 and 10.05.
The Trustee shall not be liable for and shall be fully protected in
respect of any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
or attorney appointed with due care.
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(d) The Trustee shall not be liable for any action that it
takes or omits to take in good faith that it reasonably believes to be
authorized or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate
(including any Officers' Certificate), statement, instrument, opinion
(including any Opinion of Counsel), notice, request, direction, consent,
order, bond, debenture, or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit and, if the Trustee shall determine
to make such further inquiry or investigation, it shall be entitled,
upon reasonable notice to the Company, to examine the books, records,
and premises of the Company, personally or by agent or attorney.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders of the Securities pursuant to
the provisions of this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred by it in compliance with
such request, order or direction.
(g) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization
and protection from liability with respect to any action taken, omitted
or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
SECTION 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company, any
Subsidiary or Unrestricted Subsidiary, or their respective Affiliates, with the
same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee must comply with Sections 7.10 and
7.11.
SECTION 7.04 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Securities, and it shall not be accountable
for the Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in this Indenture or the
Securities other than the Trustee's certificate of authentication.
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SECTION 7.05 Notice of Default.
If a Default or an Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to each Securityholder
notice of the uncured Default or Event of Default within 60 days after such
Default or Event of Default occurs. Except in the case of a Default or an
Event of Default in payment of Accreted Value or principal of, premium or
interest on, any Security, including an accelerated payment and the failure to
make payment on the Change of Control Payment Date pursuant to a Change of
Control Offer or on the Proceeds Purchase Date pursuant to a Net Proceeds Offer
and, except in the case of a failure to comply with Article Five, the Trustee
may withhold the notice if and so long as its Board of Directors, the executive
committee of its Board of Directors or a committee of its directors and/or
Trust Officers in good faith determines that withholding the notice is in the
interest of the Security holders. The Trustee shall not be deemed to have
knowledge of a Default or Event of Default other than (i) any Event of Default
occurring pursuant to Section 6.01(1), 6.01(2) or 4.01; or (ii) any Default or
Event of Default of which a Trust Officer shall have received written
notification or obtained actual knowledge.
SECTION 7.06 Reports by Trustee to Holders.
Within 60 days after each February 1 of each year beginning with
February 1, 1998, the Trustee shall, to the extent that any of the events
described in TIA Section 313(a) occurred within the previous twelve months, but
not otherwise, mail to each Securityholder a brief report dated as of such date
that complies with TIA Section 313(a). The Trustee also shall comply with TIA
Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the SEC and each
stock exchange, if any, on which the Securities are listed.
The Company shall promptly notify the Trustee if the Securities
become listed on any stock exchange and the Trustee shall comply with TIA
Section 313(d).
SECTION 7.07 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation as may be agreed upon by the Company and the Trustee. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses, disbursements and advances
incurred or made by it in connection with the performance of its duties and the
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discharge of its obligations under this Indenture. Such expenses shall include
the reasonable fees and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents,
employees, officers, stockholders and directors for, and hold them harmless
against, any loss, liability or expense incurred by them except for such
actions to the extent caused by any negligence, bad faith or willful misconduct
on their part, arising out of or in connection with the acceptance or
administration of this trust including the reasonable costs and expenses of
defending themselves against any claim or liability in connection with the
exercise or performance of any of their rights, powers or duties hereunder.
The Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. The Company shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel; provided that the Company will not be required to pay such fees and
expenses if it assumes the Trustee's defense and there is no conflict of
interest between the Company and the Trustee in connection with such defense as
reasonably determined by the Trustee. The Company need not pay for any
settlement made without its written consent. The Company need not reimburse
any expense or indemnify against any loss or liability to the extent incurred
by the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a lien prior to the Securities on all assets or money
held or collected by the Trustee, in its capacity as Trustee, except assets or
money held in trust to pay principal of or interest on particular Securities.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(6) or (7) occurs, such expenses and
the compensation for such services shall be paid to the extent allowed under
any Bankruptcy Law.
SECTION 7.08 Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing at
least 10 days in advance. The Holders of a majority in principal amount at
maturity of the outstanding Securities may remove the Trustee by so notifying
the Company and the Trustee and may appoint a successor Trustee with the
Company's consent. A resignation or removal of the Trustee and appointment of
a successor Trustee shall become effective only with the successor Trustee's
acceptance of appointment as provided in this Section. The Company may remove
the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
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(2) the Trustee is adjudged bankrupt or insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. Within one year
after the successor Trustee takes office, the Holders of a majority in
principal amount at maturity of the Securities may appoint a successor Trustee
to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Promptly after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Securityholder.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company
or the Holders of at least 10% in principal amount at maturity of the
outstanding Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09 Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided that such
corporation shall be otherwise qualified and eligible under this Article Seven.
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SECTION 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1) and 310(a)(2). The Trustee (or in the
case of a corporation included in a bank holding company system, the related
bank holding company) shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition. In addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of such bank holding
company, shall meet the capital requirements of TIA Section 310(a)(2). The
Trustee shall comply with TIA Section 310(b); provided, however, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities, or certificates of interest or
participation in other securities, of the Company are outstanding, if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
The provisions of TIA Section 310 shall apply to the Company and any other
obligor of the Securities.
SECTION 7.11 Preferential Collection of
Claims Against the Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein. The provisions of TIA Section 311 shall apply to the Company and any
other obligor of the Securities.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01 Termination of the Company's Obligations.
This Indenture shall cease to be of further effect and the
obligations of the Company under the Securities and this Indenture shall
terminate (except that the obligations under Sections 7.07, 8.04 and 8.05 shall
survive the effect of this Article Eight) when all outstanding Securities
theretofore authenticated and issued have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it hereunder.
In addition, at the Company's option, either (a) the Company
shall be deemed to have been Discharged from any and all obligations with
respect to the Securities ("legal
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defeasance") after the applicable conditions set forth below have been
satisfied or (b) the Company shall cease to be under any obligation to comply
with any term, provision or condition set forth in Article Four (except that
the Company's obligations under Sections 4.01 and 4.02 shall survive) and
Section 5.01 ("covenant defeasance") after the applicable conditions set forth
below have been satisfied:
(1) The Company shall have deposited or caused to be deposited
irrevocably with the Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of the Securities U.S. Legal Tender or U.S. Government
Obligations or a combination thereof that, through the payment of
interest thereon and Accreted Value or principal amounts in respect
thereof in accordance with their terms, will be sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay all amounts of Accreted Value of and interest on the
Securities on the dates such installments of interest or Accreted Value
or principal amounts are due in accordance with the terms of such
Securities, as well as the Trustee's fees and expenses; provided that no
deposits made pursuant to this Section 8.01(1) shall cause the Trustee
to have a conflicting interest as defined in and for purposes of the
TIA; and provided, further, that, as confirmed by an Opinion of Counsel,
no such deposit shall result in the Company, the Trustee or the trust
becoming or being deemed to be an "investment company" under the
Investment Company Act of 1940;
(2) No Event of Default or Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit after giving effect to such deposit;
(3) The Company shall have delivered to the Trustee an Opinion
of Counsel, subject to certain qualifications, to the effect that (i)
the Funds will not be subject to any rights of any other holders of
Indebtedness of the Company, and (ii) the Funds so deposited will not be
subject to avoidance under applicable Bankruptcy Law;
(4) The Company shall have paid or duly provided for payment
of all amounts then due to the Trustee pursuant to Section 7.07;
(5) No such deposit will result in a Default under this
Indenture or a breach or violation of, or constitute a default under,
any other instrument or agreement (including, without limitation, the
New Credit Facility) to which the Company or any of its Subsidiaries is
a party or by which it or its property is bound;
(6) Subject to the satisfaction of the conditions set forth in
paragraphs (1) through (5) above, (a) the Company shall be deemed to
have completed legal defeasance if the Company
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shall have delivered to the Trustee an Opinion of Counsel confirming
that (i) the Company has received from, or there has been published by,
the Internal Revenue Service, a ruling, or (ii) since the date of this
Indenture there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the Securities will not
recognize income, gain or loss for federal income tax purposes as a
result of such legal defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such legal defeasance had not occurred and
(b) the Company shall be deemed to have completed covenant defeasance if
the Company shall have delivered to the Trustee an Opinion of Counsel
reasonably acceptable to the Trustee confirming that the Holders of the
Securities will not recognize income, gain or loss for federal income
tax purposes as a result of such covenant defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had
not occurred; and
(7) An Officers' Certificate and an Opinion of Counsel to the
effect that all conditions precedent to the defeasance have been
complied with.
Notwithstanding the foregoing, the Opinion of Counsel required by
subparagraph 7 above need not be delivered if all Securities not theretofore
delivered to the Trustee for cancellation (i) have become due and payable, (ii)
will become due and payable on the Maturity Date within one year, or (iii) are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company.
"Discharged" means that the Company shall be deemed to have paid
and discharged the entire indebtedness represented by, and obligations under,
the Securities and to have satisfied all the obligations under this Indenture
relating to the Securities (and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging the same upon compliance by the
Company with the provisions of this Section), except (i) the rights of the
Holders of Securities to receive, from the trust fund described in clause (1)
above, payment of the principal of and the interest on such Securities when
such payments are due, (ii) the Company's obligations with respect to the
Securities under Sections 2.03 through 2.07, 7.07 and 7.08 and (iii) the
rights, powers, trusts, duties and immunities of the Trustee hereunder.
"Funds" means the aggregate amount of U.S. Legal Tender and/or
U.S. Government Obligations deposited with the Trustee pursuant to this Article
Eight.
"U.S. Government Obligations" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of
which the full faith and credit of the United States of America is pledged.
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SECTION 8.02. Acknowledgment of Discharge by Trustee.
Subject to Section 8.05, after (i) the conditions of Section
8.01, have been satisfied and (ii) the Company has delivered to the Trustee an
Opinion of Counsel, stating that all conditions precedent referred to in clause
(i) above relating to the satisfaction and discharge of this Indenture have
been complied with, the Trustee upon written request of the Company shall
acknowledge in writing the discharge of the Company's obligations under this
Indenture except for those surviving obligations specified in this Article
Eight.
SECTION 8.03. Application of Trust Money.
The Trustee shall hold in trust Funds deposited with it pursuant
to Section 8.01. It shall apply the Funds through the Paying Agent and in
accordance with this Indenture to the payment of Accreted Value or principal
amounts and accrued and unpaid interest on the Securities.
SECTION 8.04. Repayment to the Company.
The Trustee and the Paying Agent shall promptly pay to the
Company any Funds held by them for the payment of Accreted Value or principal
amounts or interest that remains unclaimed for one year; provided, however,
that the Trustee or such Paying Agent may, at the expense of the Company, cause
to be published once in a newspaper of general circulation in the City of New
York or mailed to each Holder, notice that such Funds remain unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication or mailing, any unclaimed balance of such Funds
then remaining will be repaid to the Company. After payment to the Company,
Holders entitled to the Funds must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another Person
and all liability of the Trustee and Paying Agent with respect to such Funds
shall cease.
SECTION 8.05. Reinstatement.
If the Trustee or Paying Agent is unable to apply any Funds by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.01 until such time as the Trustee or Paying Agent is
permitted to apply all such Funds in accordance with Section 8.01; provided,
however, that if the Company has made any payment of interest or Accreted Value
of any Securities because of the
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reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from Funds held by
the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01 Without Consent of Holders.
The Company, when authorized by a Board Resolution, and the
Trustee, together, may amend or supplement this Indenture or the Securities
without notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency; provided
that such amendment or supplement does not adversely affect the rights
of any Holder in any material respect;
(2) to comply with Article Five;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(4) to comply with requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA; or
(5) to make any other change that does not adversely affect in
any material respect the rights of any Securityholders hereunder;
provided that the Company has delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02 With Consent of Holders.
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder
or Holders of at least a majority in principal amount at maturity of the
outstanding Securities may amend or supplement this Indenture or the
Securities, without notice to any other Securityholders. Subject to Sections
6.04 and 6.07, the Holder or Holders of a majority in aggregate principal
amount at maturity of the
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outstanding Securities may waive compliance by the Company with any provision
of this Indenture or the Securities without notice to any other Securityholder.
No amendment, supplement or waiver, including a waiver pursuant to Section
6.04, shall, directly or indirectly, without the consent of each Holder of each
Security affected thereby:
(1) reduce the amount of Securities whose Holders must consent
to an amendment;
(2) reduce the rate of or change the time for payment of
interest, including defaulted interest, on any Securities or amend the
rate of accretion or amend the definition of Accreted Value;
(3) reduce the Accreted Value of or change the fixed maturity
of any Securities, or change the date on which any Securities may be
subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor;
(4) make any Securities payable in money other than that
stated in the Securities and this Indenture;
(5) make any change in provisions of this Indenture protecting
the right of each Holder of a Security to receive payment of principal
of, premium and interest on such Security on or after the due date
thereof or to bring suit to enforce such payment or permitting Holders
of a majority in principal amount at maturity of Securities to waive
Defaults or Events of Default; or
(6) after the Company's obligation to purchase the Securities
arises under Section 4.14 or 4.15, amend, modify or change the
obligation of the Company to consummate a Change of Control Offer or a
Net Proceeds Offer or waive any default in the performance thereof or
modify any of the provisions or definitions with respect to any such
offers.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective (as provided in Section 9.04), the Company shall mail to the
Holders affected thereby a notice briefly describing the amendment, supplement
or waiver. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
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SECTION 9.03 Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 9.04 Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the consenting Holder's Security, even if notation of the consent
is not made on any Security. Subject to the following paragraph, any such
Holder or subsequent Holder may revoke the consent as to his Security or
portion of his Security by notice to the Trustee or the Company received before
the date on which the Trustee receives an Officers' Certificate certifying that
the Holders of the requisite principal amount at maturity of Securities have
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver (at which time such amendment, supplement or waiver shall
become effective).
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver, which record date shall be at least 30 days
prior to the first solicitation of such consent. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 120
days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder, unless it makes a change described in any of
clauses (1) through (6) of Section 9.02, in which case, the amendment,
supplement or waiver shall bind only each Holder of a Security who has
consented to it and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security;
provided that any such waiver shall not impair or affect the right of any
Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates without
the consent of such Holder.
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SECTION 9.05 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security
about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Security
shall issue and the Trustee shall authenticate a new Security that reflects the
changed terms.
SECTION 9.06 Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to and adopted in accordance with this Article Nine;
provided that the Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own rights, duties
or immunities under this Indenture. The Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel and an
Officers' Certificate each stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture. Such Opinion of Counsel shall not be an expense
of the Trustee.
SECTION TEN
MISCELLANEOUS
SECTION 10.01 TIA Controls.
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
SECTION 10.02 Notices.
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telex, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
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if to the Company:
Capstar Broadcasting Partners, Inc.
600 Congress Avenue
Suite 1400
Austin, TX 78701
Attention: Chief Financial Officer
with a copy to:
Vinson & Elkins L.L.P.
2001 Ross Avenue
Suite 3700
Dallas, Texas 75201
Attention: Michael D. Wortley and
Jeffrey A. Chapman
if to the Trustee:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue
Suite 2700
Dallas, Texas 75201
Attention: Corporate Trust Department
The Company and the Trustee by written notice to each other may
designate additional or different addresses for notices. Any notice or
communication to the Company or the Trustee shall be deemed to have been given
or made as of the date so delivered if personally delivered; when answered
back, if telexed; when receipt is acknowledged, if faxed; and five (5) calendar
days after mailing if sent by registered or certified mail, postage prepaid
(except that a notice of change of address shall not be deemed to have been
given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be
mailed to him by first class mail or other equivalent means at his address as
it appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
<PAGE> 75
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SECTION 10.03 Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b)
with other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and any other Person
shall have the protection of TIA Section 312(c).
SECTION 10.04 Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action have
been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company,
if any, provided for in this Indenture relating to the proposed action
have been complied with.
SECTION 10.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.07, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is reasonably necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been complied with.
<PAGE> 76
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SECTION 10.06 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Securityholders.
The Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 10.07 Legal Holidays.
A "Legal Holiday" used with respect to a particular place of
payment is a Saturday, a Sunday or a day on which banking institutions in New
York, New York, Dallas, Texas or at such place of payment are not required to
be open. If a payment date is a Legal Holiday at such place, payment may be
made at such place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
SECTION 10.08 Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS.
SECTION 10.09 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.10 No Recourse Against Others.
A past, present or future director, officer, employee,
stockholder or incorporator, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creations. Each Securityholder by accepting a Security
waives and releases all such liability. Such waiver and release are part of
the consideration for the issuance of the Securities.
<PAGE> 77
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SECTION 10.11 Successors.
All agreements of the Company in this Indenture and the
Securities shall bind its successors. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 10.12 Duplicate Originals.
All parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together shall represent
the same agreement.
SECTION 10.13 Severability.
In case any one or more of the provisions in this Indenture or in
the Securities shall be held invalid, illegal or unenforceable, in any respect
for any reason, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
<PAGE> 78
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, and their respective corporate seals to be hereunto
affixed and attested, all as of the date first written above.
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
-------------------------------
Name: William S. Banowsky, Jr.
Title:
U.S. TRUST COMPANY OF
TEXAS, N.A., as Trustee
By: /s/ GERARD GANEY
------------------------------
Name: Gerard Ganey
Title:
<PAGE> 79
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EXHIBIT A
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT
TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION
WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE TRANSFER AGENT'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
<PAGE> 80
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CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE
CASE OF THE FOREGOING CAUSE (E), A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE ISSUER AND THE TRANSFER AGENT, THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
<PAGE> 81
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CAPSTAR BROADCASTING PARTNERS, INC.
The Security is issued with original issue discount for purposes
of Section 1271 et seq. of the Internal Revenue Code. For each $1,000 of
principal amount of this Security, the issue price is $542.54 and the amount of
original issue discount is $457.46. The issue date of this Security is
February 20, 1997 and the yield to maturity is 12 3/4%.
12 3/4% Senior Discount Note due 2009, Series A
No. $
CAPSTAR BROADCASTING PARTNERS, INC., a Delaware corporation (the
"Company"), for value received, promises to pay to CEDE & CO. or registered
assigns, the principal sum of Dollars, on February
1, 2009.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
CAPSTAR BROADCASTING PARTNERS, INC.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
<PAGE> 82
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Trustee's Certificate of Authentication
This is one of the 12 3/4% Senior Discount Notes due 2009
referred to in the within-mentioned Indenture.
Dated:
U.S. TRUST COMPANY OF
TEXAS, N.A., as Trustee
By:
---------------------------------
Authorized Signatory
<PAGE> 83
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(REVERSE OF SECURITY)
12 3/4% Senior Discount Note due 2009
1. Interest. CAPSTAR BROADCASTING PARTNERS, INC., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above. The Company will pay
interest semi-annually in arrears on each February 1 and August 1 (each an
"Interest Payment Date") and at stated maturity, commencing August 1, 2002.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The principal of this Security shall not bear or accrue interest
until February 1, 2002, except in the case of a default in payment of principal
and/or premium, if any, upon acceleration, redemption or purchase and, in such
case, the overdue principal and any overdue premium shall bear interest at the
rate of 12 3/4% per annum (compounded semiannually on each February 15 and
August 15) (to the extent that the payment of such interest shall be legally
enforceable), from the dates such amounts are due until they are paid or duly
provided for. To the extent, but only to the extent, interest on amounts in
default constituting original issue discount prior to February 1, 2002 is not
permitted by law, original issue discount shall continue to accrete until paid
or duly provided for. On or after February 1, 2002, interest on overdue
principal and premium, if any, and, to the extent permitted by law, on overdue
installments of interest will accrue, until the principal and premium, if any,
is paid or duly provided for, at the rate of 12 3/4% per annum. Interest on
any overdue principal or premium shall be payable on demand.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Securities are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal, premium and interest in money of the United States
that at the time of payment is legal tender for payment of public and private
debts ("U.S. Legal Tender"). However, the Company may pay principal, premium
and interest by its check payable in such U.S. Legal Tender. The Company may
deliver any such interest payment to the Paying Agent or to a Holder at the
Holder's registered address.
3. Paying Agent and Registrar. Initially, U.S. Trust Company
of Texas, N.A. (the "Trustee") will act as Paying Agent and Registrar. The
Company may change any Paying
<PAGE> 84
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Agent, Registrar or co-Registrar without notice to the Holders. The Company or
any of its Subsidiaries may, subject to certain exceptions, act as Registrar or
co-Registrar.
4. Indenture. The Company issued the Securities under an
Indenture, dated as of February 20, 1997 (the "Indenture"), between the Company
and the Trustee. This Security is one of a duly authorized issue of Securities
of the Company designated as its 12 3/4% Senior Discount Notes due 2009 (the
"Securities"), limited (except as otherwise provided in the Indenture) in
aggregate principal amount at maturity to $277,000,000, which may be issued
under the Indenture. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are general unsecured obligations of the Company.
5. Optional Redemption. (a) The Securities will be
redeemable, at the Company's option, in whole at any time or in part from time
to time, on and after February 1, 2002, at the following redemption prices
(expressed as percentages of Accreted Value thereof on the applicable
redemption date) if redeemed during the twelve-month period commencing on
February 1 of the year set forth below, plus, in each case, accrued and unpaid
interest, if any, thereon to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.375%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.313%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.250%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.188%
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.125%
2007 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
(b) In addition, prior to February 1, 2001, the Company may, at
its option, use the net cash proceeds of one or more Public Equity Offerings or
Major Asset Sales to redeem up to 25% of the principal amount at maturity of
the Securities at a redemption price of 112.75% of the Accreted Value thereof
at the redemption date of the Securities so redeemed; provided, however, that
after any such redemption, at least 75% in aggregate principal amount at
maturity of Securities would remain outstanding immediately after giving effect
to such redemption. Any such redemption will be required to occur on or prior
to the date that is one year after the receipt
<PAGE> 85
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by the Company of the proceeds of a Public Equity Offering or Major Asset Sale.
The Company shall effect such redemption on a pro rata basis.
(c) In addition, prior to February 1, 2002, upon the
occurrence of a Change of Control, the Company will have the option to redeem
the Securities in whole but not in part (a "Change of Control Redemption") at a
redemption price equal to 100% of the Accreted Value thereof at the redemption
date of the Securities plus the Applicable Premium. In order to effect a
Change of Control Redemption, the Company must send a notice to each holder of
Securities, which notice shall govern the terms of the Change of Control
Redemption. Such notice must be mailed to holders of Securities within 30 days
following the date the Change of Control occurred (the "Change of Control
Redemption Date") and state that the Company is effecting a Change of Control
Redemption in lieu of a Change of Control Offer.
"Applicable Premium" means, with respect to a Security at any
Change of Control Redemption Date, the greater of (i) 1.0% of the Accreted
Value of such Security and (ii) the excess of (A) the present value at such
time of the redemption price of such Security at February 1, 2002 (such
redemption price being described in paragraph (a) above) computed using a
discount rate equal to the Treasury Rate plus 150 basis points over (B) the
principal amount at maturity of such Security.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) that has become publicly available at least two business days prior
to the Change of Control Redemption Date (or, if such Statistical Release is no
longer published, any publicly available source or similar market data)) most
nearly equal to the period from the Change of Control Redemption Date to
February 1, 2002; provided, however, that if the period from the Change of
Control Redemption Date to February 1, 2002 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average
yields of United States Treasury securities for which such yields are given
except that if the period from the Change of Control Redemption Date to
February 1, 2002 is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one
year shall be used.
6. Notice of Redemption. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at such Holder's registered address.
Securities in denominations larger than $1,000 may be redeemed in part.
<PAGE> 86
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7. Change of Control Offer. In the event of a Change of
Control, upon the satisfaction of the conditions set forth in the Indenture,
the Company shall be required to offer to repurchase all of the then
outstanding Securities pursuant to a Change of Control Offer at a purchase
price equal to 101% of the Accreted Value thereof on the Change of Control
Payment Date if the Change of Control Payment Date is on or before February 1,
2002 and (ii) 101% of the principal amount at maturity thereof, plus, without
duplication, all accrued and unpaid interest, if any, to the Change of Control
Payment Date if such Change of Control Payment Date is after February 1, 2002.
Holders of Securities that are the subject of such an offer to repurchase shall
receive an offer to repurchase and may elect to have such Securities
repurchased in accordance with the provisions of the Indenture pursuant to and
in accordance with the terms of the Indenture.
8. Limitation on Disposition of Assets. Under certain
circumstances the Company is required to apply the net proceeds from Asset
Sales to offer to repurchase Securities at a price equal to 100% of the
Accreted Value thereof, plus accrued interest to the date of repurchase.
9. Denominations; Transfer; Exchange. The Securities are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Securities during a period
beginning 15 days before the mailing of a redemption notice for any Securities
or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a
Security shall be treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee
and such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of, premium and interest on the
Securities to redemption or maturity and complies with the other provisions of
the Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Securities (including certain covenants,
but excluding its obligation to pay the principal of, premium and interest on
the Securities).
<PAGE> 87
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13. Amendment; Supplement; Waiver. Subject to certain
exceptions, the Indenture or the Securities may be amended or supplemented with
the written consent of the Holders of at least a majority in aggregate
principal amount at maturity of the Securities then outstanding, and any
existing Default or Event of Default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in aggregate
principal amount at maturity of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Securities to, among other things, cure any ambiguity,
defect or inconsistency, provide for uncertificated Securities in addition to
or in place of certificated Securities, or comply with Article Five of the
Indenture or make any other change that does not adversely affect in any
material respect the rights of any Holder of a Security.
14. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Subsidiaries to, among other
things, incur additional Indebtedness and issue Disqualified Capital Stock,
engage in certain Asset Swaps, enter into transactions with Affiliates, create
dividend or other payment restrictions affecting Subsidiaries and merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. The Company must annually report to the Trustee
on compliance with such limitations.
15. Successors. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Securities and
the Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount at maturity of Securities then outstanding may declare all the
Securities to be due and payable in the manner, at the time and with the effect
provided in the Indenture. Holders of Securities may not enforce the Indenture
or the Securities except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture or the Securities unless it has been offered
indemnity or security reasonably satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, Holders of a majority in
aggregate principal amount at maturity of the Securities then outstanding to
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Securities notice of any continuing Default or Event
of Default (except a Default in payment of principal or interest) if it
determines in good faith that withholding notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may
<PAGE> 88
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otherwise deal with the Company, its Subsidiaries, Unrestricted Subsidiaries or
their respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No past, present or future
stockholder, director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication. This Security shall not be valid until
the Trustee or authenticating agent manually signs the certificate of
authentication on this Security.
20. Governing Law. The laws of the State of New York shall
govern this Security and the Indenture, without regard to principles of
conflict of laws.
21. Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Security or an assignee, such as: TEN
COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint
tenants with right of survivorship and not as tenants in common), CUST
(=Custodian), and U/G/M/A (=Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities as a convenience to the
Holders of the Securities. No representation is made as to the accuracy of
such numbers as printed on the Securities and reliance may be placed only on
the other identification numbers printed hereon.
23. Registration Rights. Pursuant to the Registration Rights
Agreement, the Company will be obligated upon the occurrence of certain events
to consummate an exchange offer pursuant to which the Holder of this Security
shall have the right to exchange this Series A Security for the Company's 12
3/4% Senior Discount Notes due 2009, Series B, which have been registered under
the Securities Act, in like principal amount at maturity and having terms
identical in all material respects as the Series A Securities. The Holders
shall be entitled to receive certain additional interest payments in the event
such exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
24. Indenture. Each Holder, by accepting a Security, agrees
to be bound by all of the terms and provisions of the Indenture, as the same
may be amended from time to time.
<PAGE> 89
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Capitalized terms used herein and not defined herein have the meanings ascribed
thereto in the Indenture.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
CAPSTAR BROADCASTING PARTNERS, INC., 600 Congress Avenue, Suite 1400, Austin,
Texas 78701.
<PAGE> 90
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[FORM OF ASSIGNMENT]
I or we assign to
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
________________________________________________________________________
(please print or type name and address)
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
the within Security and all rights thereunder, hereby irrevocably
constituting and appointing
________________________________________________________________________
attorney to transfer the Security on the books of the Company
with full power of substitution in the premises.
Dated:___________________ ______________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Security in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed by the endorser's
bank or broker.
Signature Guarantee: __________________________________________________
<PAGE> 91
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture, check the
appropriate box:
Section 4.14 [ ] Section 4.15 [ ]
If you want to elect to have only part of this Security purchased
by the Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state
the amount: $_____________
Date: ___________________ Your Signature: _______________________________
(Sign exactly as
your name appears
on the other side
of this Security)
Signature Guarantee: ____________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE> 92
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EXHIBIT B
CAPSTAR BROADCASTING PARTNERS, INC.
The Security is issued with original issue discount for purposes of Section
1271 et seq. of the Internal Revenue Code. For each $1,000 of principal amount
of this Security, the issue price is $542.54 and the amount of original issue
discount is $457.46. The issue date of this Security is February 20, 1997 and
the yield to maturity is 12 3/4%.
12 3/4% Senior Discount Note due 2009, Series B
No. 1 $
CAPSTAR BROADCASTING PARTNERS, INC., a Delaware corporation (the
"Company"), for value received, promises to pay to or registered
assigns, the principal sum of Dollars, on February 1, 2009.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
CAPSTAR BROADCASTING PARTNERS, INC.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
<PAGE> 93
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Trustee's Certificate of Authentication
This is one of the 12 3/4% Senior Discount Notes due 2009
referred to in the within-mentioned Indenture.
Dated:
U.S. TRUST COMPANY OF
TEXAS, N.A., as Trustee
By:
---------------------------------
Authorized Signatory
<PAGE> 94
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(REVERSE OF SECURITY)
12 3/4% Senior Discount Note due 2009
1. Interest. CAPSTAR BROADCASTING PARTNERS, INC., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above. The Company will pay
interest semi-annually in arrears on each February 1 and August 1 (each an
"Interest Payment Date") and at stated maturity, commencing August 1, 2002.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The principal of this Security shall not bear or accrue interest
until February 1, 2002, except in the case of a default in payment of principal
and/or premium, if any, upon acceleration, redemption or purchase and, in such
case, the overdue principal and any overdue premium shall bear interest at the
rate of 12 3/4% per annum (compounded semiannually on each February 15 and
August 15) (to the extent that the payment of such interest shall be legally
enforceable), from the dates such amounts are due until they are paid or duly
provided for. To the extent, but only to the extent, interest on amounts in
default constituting original issue discount prior to February 1, 2002 is not
permitted by law, original issue discount shall continue to accrete until paid
or duly provided for. On or after February 1, 2002, interest on overdue
principal and premium, if any, and, to the extent permitted by law, on overdue
installments of interest will accrue, until the principal and premium, if any,
is paid or duly provided for, at the rate of 12 3/4% per annum. Interest on
any overdue principal or premium shall be payable on demand.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Securities are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal, premium and interest in money of the United States
that at the time of payment is legal tender for payment of public and private
debts ("U.S. Legal Tender"). However, the Company may pay principal, premium
and interest by its check payable in such U.S. Legal Tender. The Company may
deliver any such interest payment to the Paying Agent or to a Holder at the
Holder's registered address.
3. Paying Agent and Registrar. Initially, U.S. Trust Company
of Texas, N.A. (the "Trustee") will act as Paying Agent and Registrar. The
Company may change any Paying
<PAGE> 95
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Agent, Registrar or co-Registrar without notice to the Holders. The Company or
any of its Subsidiaries may, subject to certain exceptions, act as Registrar or
co-Registrar.
4. Indenture. The Company issued the Securities under an
Indenture, dated as of February 20, 1997 (the "Indenture"), between the Company
and the Trustee. This Security is one of a duly authorized issue of Securities
of the Company designated as its 12 3/4% Senior Discount Notes due 2009 (the
"Securities"), limited (except as otherwise provided in the Indenture) in
aggregate principal amount at maturity to $277,000,000, which may be issued
under the Indenture. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are general unsecured obligations of the Company.
5. Optional Redemption. (a) The Securities will be
redeemable, at the Company's option, in whole at any time or in part from time
to time, on and after February 1, 2002, at the following redemption prices
(expressed as percentages of Accreted Value thereof on the applicable
redemption date) if redeemed during the twelve-month period commencing on
February 1 of the year set forth below, plus, in each case, accrued and unpaid
interest, if any, thereon to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.375%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.313%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.250%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.188%
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.125%
2007 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
(b) In addition, prior February 1, 2001, the Company may, at its
option, use the net cash proceeds of one or more Public Equity Offerings or
Major Asset Sales to redeem up to 25% of the principal amount at maturity of
the Securities at a redemption price of 112.75% of the Accreted Value thereof
at the redemption date of the Securities so redeemed; provided, however, that
after any such redemption, at least 75% in aggregate principal amount at
maturity of Securities would remain outstanding immediately after giving effect
to such redemption. Any such redemption will be required to occur on or prior
to the date that is one year after the receipt
<PAGE> 96
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by the Company of the proceeds of a Public Equity Offering or Major Asset Sale.
The Company shall effect such redemption on a pro rata basis.
(c) In addition, prior to February 1, 2002, upon the
occurrence of a Change of Control, the Company will have the option to redeem
the Securities in whole but not in part (a "Change of Control Redemption") at a
redemption price equal to 100% of the Accreted Value thereof at the redemption
date of the Securities plus the Applicable Premium. In order to effect a
Change of Control Redemption, the Company must send a notice to each holder of
Securities, which notice shall govern the terms of the Change of Control
Redemption. Such notice must be mailed to holders of Securities within 30 days
following the date the Change of Control occurred (the "Change of Control
Redemption Date") and state that the Company is effecting a Change of Control
Redemption in lieu of a Change of Control Offer.
"Applicable Premium" means, with respect to a Security at any
Change of Control Redemption Date, the greater of (i) 1.0% of the Accreted
Value of such Security and (ii) the excess of (A) the present value at such
time of the redemption price of such Security at February 1, 2002 (such
redemption price being described in paragraph (a) above) computed using a
discount rate equal to the Treasury Rate plus 150 basis points over (B) the
principal amount at maturity of such Security.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) that has become publicly available at least two business days prior
to the Change of Control Redemption Date (or, if such Statistical Release is no
longer published, any publicly available source or similar market data)) most
nearly equal to the period from the Change of Control Redemption Date to
February 1, 2002; provided, however, that if the period from the Change of
Control Redemption Date to February 1, 2002 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one- twelfth of a year) from the weekly average
yields of United States Treasury securities for which such yields are given
except that if the period from the Change of Control Redemption Date to
February 1, 2002 is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one
year shall be used.
6. Notice of Redemption. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at such Holder's registered address.
Securities in denominations larger than $1,000 may be redeemed in part.
<PAGE> 97
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7. Change of Control Offer. In the event of a Change of
Control, upon the satisfaction of the conditions set forth in the Indenture,
the Company shall be required to offer to repurchase all of the then
outstanding Securities pursuant to a Change of Control Offer at a purchase
price equal to 101% of the Accreted Value thereof on the Change of Control
Payment Date if the Change of Control Payment Date is on or before February 1,
2002 and (ii) 101% of the principal amount at maturity thereof, plus, without
duplication, all accrued and unpaid interest, if any, to the Change of Control
Payment Date if such Change of Control Payment Date is after February 1, 2002.
Holders of Securities that are the subject of such an offer to repurchase shall
receive an offer to repurchase and may elect to have such Securities
repurchased in accordance with the provisions of the Indenture pursuant to and
in accordance with the terms of the Indenture.
8. Limitation on Disposition of Assets. Under certain
circumstances the Company is required to apply the net proceeds from Asset
Sales to offer to repurchase Securities at a price equal to 100% of the
Accreted Value thereof, plus accrued interest to the date of repurchase.
9. Denominations; Transfer; Exchange. The Securities are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Securities during a period
beginning 15 days before the mailing of a redemption notice for any Securities
or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a
Security shall be treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee
and such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of, premium and interest on the
Securities to redemption or maturity and complies with the other provisions of
the Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Securities (including certain covenants,
but excluding its obligation to pay the principal of, premium and interest on
the Securities).
<PAGE> 98
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13. Amendment; Supplement; Waiver. Subject to certain
exceptions, the Indenture or the Securities may be amended or supplemented with
the written consent of the Holders of at least a majority in aggregate
principal amount at maturity of the Securities then outstanding, and any
existing Default or Event of Default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in aggregate
principal amount at maturity of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Securities to, among other things, cure any ambiguity,
defect or inconsistency, provide for uncertificated Securities in addition to
or in place of certificated Securities, or comply with Article Five of the
Indenture or make any other change that does not adversely affect in any
material respect the rights of any Holder of a Security.
14. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Subsidiaries to, among other
things, incur additional Indebtedness and issue Disqualified Capital Stock,
engage in certain Asset Swaps, enter into transactions with Affiliates, create
dividend or other payment restrictions affecting Subsidiaries and merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. The Company must annually report to the Trustee
on compliance with such limitations.
15. Successors. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Securities and
the Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount at maturity of Securities then outstanding may declare all the
Securities to be due and payable in the manner, at the time and with the effect
provided in the Indenture. Holders of Securities may not enforce the Indenture
or the Securities except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture or the Securities unless it has been offered
indemnity or security reasonably satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, Holders of a majority in
aggregate principal amount at maturity of the Securities then outstanding to
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Securities notice of any continuing Default or Event
of Default (except a Default in payment of principal or interest) if it
determines in good faith that withholding notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may
<PAGE> 99
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otherwise deal with the Company, its Subsidiaries, Unrestricted Subsidiaries or
their respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No past, present or future
stockholder, director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication. This Security shall not be valid until
the Trustee or authenticating agent manually signs the certificate of
authentication on this Security.
20. Governing Law. The laws of the State of New York shall
govern this Security and the Indenture, without regard to principles of
conflict of laws.
21. Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Security or an assignee, such as: TEN
COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint
tenants with right of survivorship and not as tenants in common), CUST
(=Custodian), and U/G/M/A (=Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities as a convenience to the
Holders of the Securities. No representation is made as to the accuracy of
such numbers as printed on the Securities and reliance may be placed only on
the other identification numbers printed hereon.
23. Indenture. Each Holder, by accepting a Security, agrees
to be bound by all of the terms and provisions of the Indenture, as the same
may be amended from time to time. Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
CAPSTAR BROADCASTING PARTNERS, INC., 600 Congress Avenue, Suite 1400, Austin,
Texas 78701.
<PAGE> 100
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[FORM OF ASSIGNMENT]
I or we assign to
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
________________________________
_______________________________________________________________________
(please print or type name and address)
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
the within Security and all rights thereunder, hereby irrevocably
constituting and appointing
_______________________________________________________________________
attorney to transfer the Security on the books of the Company
with full power of substitution in the premises.
Dated:___________________ ______________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Security in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed by the endorser's
bank or broker.
Signature Guarantee: _________________________________
<PAGE> 101
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture, check the
appropriate box:
Section 4.14 [ ] Section 4.15 [ ]
If you want to elect to have only part of this Security purchased
by the Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state
the amount: $_____________
Date: ___________________ Your Signature:______________________________________
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee: _________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE> 102
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EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall
bear a legend (which would be in addition to any other legends required in the
case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE> 103
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EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 12 3/4% Senior Discount Notes due 2009, Series A and 12 3/4%
Senior Discount Notes due 2009, Series B (the "Securities"), of
Capstar Broadcasting Partners, Inc.
This Certificate relates to $_______ principal amount at maturity
of Securities held in the form of* ___ a beneficial interest in a Global
Security or* _______ physical securities by ______ (the "Transferor").
The Transferor:*
/ / has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a physical security or physical securities in definitive, registered
form of authorized denominations and an aggregate number equal to its
beneficial interest in such Global Security (or the portion thereof indicated
above); or
/ / has requested that the Registrar by written order to exchange or
register the transfer of a physical security or physical securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.16 of such
Indenture, and that the transfer of this Security does not require registration
under the Securities Act of 1933, as amended (the "Act") because*:
/ / Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16(a)(II)(A) or Section
2.16(d)(i)(A) of the Indenture).
/ / Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
/ / Such Security is being transferred to an institutional
"accredited investor" (within the meaning of subparagraphs (a)(1), (2), (3) or
(7) of Rule 501 under the Act.
<PAGE> 104
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/ / Such Security is being transferred in reliance on Regulation S
under the Act.
/ / Such Security is being transferred in reliance on Rule 144 under
the Act.
/ / Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act
other than Rule 144A or Rule 144 under the Act to a person other than an
institutional "accredited investor."
______________________________
[INSERT NAME OF TRANSFEROR]
By: _________________________
[Authorized Signatory]
Date: _____________
*Check applicable box.
<PAGE> 105
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EXHIBIT E
Form of Certificate To Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
Capstar Broadcasting Partners, Inc.
c/o U.S. Trust Company of Texas, N.A.
Dear Sirs:
This certificate is delivered to request a transfer of $ million
in principal amount at maturity of 12 3/4% Senior Discount Notes due 2009 (the
"Notes") of Capstar Broadcasting Partners, Inc. (the "Company"). Upon
transfer, the Notes would be registered in the name of the new beneficial owner
as follows:
Name:
Address:
Taxpayer ID Number:
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the
"Securities Act")) purchasing Notes for our own account or for the account of
such an institutional "accredited investor" and we are acquiring the Notes not
with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act. We have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risk of our investment in the shares of the Notes and we invest in or purchase
securities similar to the Notes in the normal course of our business. We and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
2. We understand that the shares of the Notes have not been
registered under the Securities Act and, unless so registered, may not be sold
except as permitted in the following sentence. We agree on our own behalf and
on behalf of any investor account for which we are purchasing Notes to offer,
sell or otherwise transfer such Notes prior to the date which is three years
after the later of the date of original issue and the last date on which the
Company or any affiliate of the Company was the owner of such Notes (or any
predecessor thereto) (the "Resale
<PAGE> 106
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Restriction Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) in a transaction complying with the requirements of Rule 144A under
the Securities Act, to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own
account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act, that
is purchasing for its own account or for the account of such an institutional
"accredited investor," or (f) pursuant to any other available exemption from
the registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our property
or the property of such investor account or accounts be at all times within our
or their control and in compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of any of the
Notes is proposed to be made pursuant to clause (e) above prior to the Resale
Restriction Termination Date, the transferor shall deliver a letter from the
transferee substantially in the form of this letter to the Company and the U.S.
Trust Company of Texas, N.A. (the "Trustee"), which shall provide, among other
things, that the transferee is an institutional "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and
that it is acquiring such Notes for investment purposes and not for
distribution in violation of the Securities Act. Each purchaser acknowledges
that the Company and the Trustee reserve the right prior to any offer, sale or
other transfer prior to the Resale Restriction Termination Date of the Notes
pursuant to clause (d), (e) or (f) above to require the delivery of an opinion
of counsel, certificates and/or other information satisfactory to the Company
and the Transfer Agent.
TRANSFEREE:
By: ____________________________
<PAGE> 1
EXHIBIT 4.3.7.
================================================================================
COMMODORE MEDIA, INC., AS ISSUER,
THE PARTIES LISTED
ON THE SIGNATURE PAGES
HERETO AS GUARANTORS,
AS GUARANTORS,
AND
IBJ SCHRODER BANK & TRUST COMPANY, AS TRUSTEE
--------------------------------------------
AMENDMENT NO. 6
DATED AS OF APRIL 10, 1997
TO THE
INDENTURE
DATED AS OF APRIL 21, 1995
--------------------------------------------
$76,808,000
13 1/4% SENIOR SUBORDINATED NOTES DUE 2003
================================================================================
<PAGE> 2
AMENDMENT NO. 6, dated as of April 10, 1997 ("Amendment No. 6"), to
the INDENTURE, dated as of April 21, 1995, as amended (the "Indenture"), among
COMMODORE MEDIA, INC., a Delaware corporation, as Issuer (the "Company"), the
parties listed on the signature pages hereto as Guarantors (each individually,
a "Guarantor" and collectively, the "Guarantors"), and IBJ SCHRODER BANK &
TRUST COMPANY, a New York banking corporation, as Trustee (the "Trustee").
Each party agrees for the benefit of the other parties and for the
equal and ratable benefit of the Holders of the Company's 13 1/4% Senior
Subordinated Notes due 2003 (the "Notes") to amend, pursuant to Section 8.01(4)
of the Indenture, the Indenture as follows:
1. In March 1997, the corporate name of Emerald City
Broadcasting Corporation was changed to WNOK Acquisition Company, Inc. All
references in the Indenture shall be to the new corporate name of such entity.
2. In April 1997, the corporate name of Commodore Holdings, Inc.
was changed to Atlantic Star Communications, Inc. All references in the
Indenture shall be to the new corporate name of such entity.
3. In April 1997, the corporate name of Osborn Communications
Corporation was changed to Southern Star Communications, Inc. All references in
the Indenture shall be to the new corporate name of such entity.
4. Capstar Acquisition Company, Inc., a Delaware corporation and
a wholly owned subsidiary of the Company ("Capstar Acquisition"), is a
Restricted Subsidiary acquired or created pursuant to Section 4.14(ii) of the
Indenture. Capstar Acquisition delivers herewith the Guarantee attached as
Exhibit A to this Amendment No. 6 pursuant to the provisions set forth in
Sections 4.14 and 10.04 of the Indenture guaranteeing the obligations of the
Company under the Indenture. For all purposes of the Indenture, Capstar
Acquisition shall be deemed a party to the Indenture by virtue of its execution
of this Amendment No. 6 and the defined term the "Guarantor" contained in
Article 1.01 of the Indenture shall be deemed to include Capstar Acquisition.
5. This Amendment No. 6 supplements the Indenture and shall be a
part and subject to all the terms thereof. Except as supplemented hereby, the
Indenture and the Securities issued thereunder shall continue in full force and
effect.
6. This Amendment No. 6 may be executed in counterparts, each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
7. THIS AMENDMENT NO. 6 SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
8. The Trustee shall not be responsible for any recital herein
as such recitals shall be taken as statements of the Company, or the validity
of the execution by the Guarantors of this Amendment No. 6. The Trustee makes no
representation as to the validity or sufficiency of this Amendment No. 6.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Amendment No. 6 to
the Indenture to be duly executed and attested as of the date and year first
written above.
COMMODORE MEDIA, INC.
By: /s/ James T. Shea, Jr.
-------------------------------------
James T. Shea, Jr.
President
ATTEST:
/s/ William Banowsky, Jr.
- ---------------------------------------
William S. Banowsky, Jr.
Vice President
GUARANTORS:
ATLANTIC STAR COMMUNICATIONS, INC.
COMMODORE MEDIA OF DELAWARE, INC
COMMODORE MEDIA OF PENNSYLVANIA, INC.
COMMODORE MEDIA FLORIDA, INC.
COMMODORE MEDIA OF KENTUCKY, INC.
COMMODORE MEDIA OF NORWALK, INC.
COMMODORE MEDIA OF WESTCHESTER, INC.
DANBURY BROADCASTING, INC.
By: /s/ James T. Shea, Jr.
-------------------------------------
James T. Shea, Jr.
President
ATTEST:
/s/ William S. Banowsky, Jr.
- -----------------------------------------
William S. Banowsky, Jr.
Vice President
<PAGE> 4
SOUTHERN STAR COMMUNICATIONS, INC.
ATLANTIC CITY BROADCASTING CORP.
O.C.C., INC.
BREADBASKET BROADCASTING CORPORATION
SOUTHEAST RADIO HOLDING CORP.
HOUNDSTOOTH BROADCASTING CORPORATION
SNG HOLDINGS, INC.
OSBORN ENTERTAINMENT ENTERPRISES
CORPORATION
ORANGE COMMUNICATIONS, INC.
MOUNTAIN RADIO CORPORATION
LADNER COMMUNICATIONS HOLDING CORP.
RKZ TELEVISION, INC.
YELLOW BRICK RADIO CORPORATION
ASHEVILLE BROADCASTING CORP.
CORKSCREW BROADCASTING CORPORATION
DAYTONA BEACH BROADCASTING CORP.
RAINBOW BROADCASTING CORPORATION
GREAT AMERICAN EAST, INC.
NELSON BROADCASTING CORPORATION
SHORT BROADCASTING CORPORATION
JAMBOREE IN THE HILLS, INC.
MUSIC HALL CLUB, INC.
BEATRICE BROADCASTING CORP.
CURREY BROADCASTING CORPORATION
OSBORN SOUND AND COMMUNICATIONS CORP.
WAITE BROADCASTING CORP.
AMERON BROADCASTING CORPORATION
WNOK ACQUISITION COMPANY, INC.
By: /s/ Frank D. Osborn
--------------------------------
Frank D. Osborn
President
ATTEST:
/s/ Michael F. Mangan
- ----------------------------------------
Michael F. Mangan
Vice President, Controller and Secretary
<PAGE> 5
CAPSTAR ACQUISITION COMPANY, INC.
By: /s/ William S. Banowsky, Jr.
-------------------------------
William S. Banowsky, Jr.
Vice President
ATTEST:
/s/ Peter S. Brodsky
- ----------------------------
Peter S. Brodsky
Secretary and Treasurer
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ATTEST:
- -------------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE> 6
GUARANTEE
The Guarantor (the "Guarantor," which term includes any successor
Person under the Indenture, dated April 21, 1995, as amended, among Commodore
Media, Inc. and its subsidiaries and IBJ Schroder Bank & Trust Company (the
"Indenture")) has unconditionally guaranteed, on a senior subordinated basis,
jointly and severally, to the extent set forth in the Indenture and subject to
the provisions of the Indenture, (a) the due and punctual payment of the
principal of and interest on the Notes, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on overdue principal, and,
to the extent permitted by law, interest, and the due and punctual performance
of all other obligations of the Company to the Noteholders or the Trustee all
in accordance with the terms set forth in Article 10 of the Indenture, and (b)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
The obligations of the Guarantor to the Noteholders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to the Indenture for the
precise terms of this Guarantee. Terms used and not defined herein shall have
the meaning set forth in the Indenture.
GUARANTOR:
CAPSTAR ACQUISITION COMPANY, INC.
By: /s/ William S. Banowsky, Jr.
--------------------------------
Name: William S. Banowsky, Jr.
Title: Vice President
<PAGE> 1
EXHIBIT 10.4
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of February 20, 1997
between
CAPSTAR BROADCASTING PARTNERS, INC.
as Issuer
and
BT SECURITIES CORPORATION
as Initial Purchaser
================================================================================
$277,000,000
12-3/4% Senior Discount Notes due 2009
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. Additional Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8. Rules 144 and 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9. Underwritten Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Adjustments Affecting Registrable
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(c) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(e) Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(i) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(j) Securities Held by the Company
or Its Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(k) Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(l) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated
as of February 20, 1997, between Capstar Broadcasting Partners, Inc., a
Delaware corporation (the "Company"), and BT Securities Corporation (the
"Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated February 14, 1997, between the Company and the Initial
Purchaser (the "Purchase Agreement"), which provides for the issuance and sale
by the Company to the Initial Purchaser of $277,000,000 of the Company's
12-3/4% Senior Discount Notes (the "Notes"). In order to induce the Initial
Purchaser to enter into the Purchase Agreement, the Company has agreed to
provideruar the registration rights set forth in this Agreement for the benefit
of the Initial Purchaser and its direct and indirect transferees and assigns.
The execution and delivery of this Agreement is a condition to the Initial
Purchaser's obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4 hereof.
Advice: See Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2 hereof.
Closing Date: The Closing Date as defined in the Purchase Agreement.
Company: See the introductory paragraphs hereto.
Depositary: The Depository Trust Company until a successor is
appointed by the Company and the Transfer Agent.
Effectiveness Date: The 180th day after the Issue Date.
<PAGE> 4
-2-
Effectiveness Period: See Section 3 hereof.
Event Date: See Section 4 hereof.
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2 hereof.
Exchange Offer: See Section 2 hereof.
Exchange Registration Statement: See Section 2 hereof.
Filing Date: Within 90 days after the Issue Date.
Holder: Any holder of Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Initial Purchaser: See the introductory paragraphs hereto.
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(o) hereof.
Issue Date: The date on which the Notes were issued and sold
to the Initial Purchaser pursuant to the Purchase Agreement.
NASD: See Section 5(t) hereof.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2 hereof.
Person: An individual, partnership, corporation, limited
liability company, unincorporated association, trust or joint venture, or a
governmental agency or political subdivision thereof.
<PAGE> 5
-3-
Private Exchange: See Section 2 hereof.
Private Exchange Notes: See Section 2 hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
Purchase Agreement: See the introductory paragraphs hereto.
Records: See Section 5(o) hereof.
Registrable Notes: Each Note upon original issuance thereof
and at all times subsequent thereto, each Exchange Note as to which Section
2(c)(vi) hereof is applicable upon original issuance and at all times
subsequent thereto and each Private Exchange Note upon original issuance
thereof and at all times subsequent thereto, until in the case of any such
Note, Exchange Note, or Private Exchange Note, as the case may be, the earliest
to occur of (i) in the case of any Note, the date on which such Note has been
exchanged for a freely transferable Note in the Exchange Offer, (ii) in the
case of any Note, the date on which such Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) the date on which such Notes, Exchange Notes
and Private Exchange Notes are distributed to the public pursuant to Rule 144
under the Securities Act or are saleable pursuant to Rule 144(k) under the
Securities Act.
Registration Statement: Any registration statement of the
Company, including, but not limited to, the Exchange Registration Statement,
filed with the SEC pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statement,
including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule 144A) or regulation hereafter adopted by the SEC providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders that are not affiliates of an issuer of such
<PAGE> 6
-4-
securities being free of the registration and prospectus delivery requirements
of the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule 144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2 hereof.
Shelf Registration: See Section 3(b) hereof.
Subsequent Shelf Registration: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The Trustee under the Indenture for the Notes, the
Exchange Notes and/or the Private Exchange Notes, as the context may require.
Underwritten registration or underwritten offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
2. Exchange Offer
(a) The Company shall file with the SEC, no later than
the Filing Date, a registration statement on Form S-1 or S-4, if the use of
such forms is then available, or other such appropriate form (the "Exchange
Registration Statement") relating to a registered exchange (the "Exchange
Offer") for any and all Notes for a like aggregate principal amount at
maturity of another series of notes of the Company that will have terms
identical in all material respects to the Notes (the "Exchange Notes"), except
that the Exchange Notes shall have been registered pursuant to an effective
Registration Statement under the Securities Act and shall contain no
restrictive legend thereon. The Exchange Offer shall comply with all
applicable tender offer
<PAGE> 7
-5-
rules and regulations under the Exchange Act. The Company agrees to use its
reasonable best efforts to (x) cause the Exchange Registration Statement to be
declared effective under the Securities Act on or before the Effectiveness
Date; (y) keep the Exchange Offer open for at least 20 business days (or longer
if required by applicable law) after the date that notice of the Exchange Offer
is mailed to Holders; and (z) consummate the Exchange Offer on or prior to the
225th day following the Issue Date. If, after such Exchange Registration
Statement is initially declared effective by the SEC, the Exchange Offer or the
issuance of the Exchange Notes thereunder is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Exchange Registration Statement shall be deemed not to
have become effective for purposes of this Agreement. Each Holder who wishes
to exchange Notes for Exchange Notes in the Exchange Offer will be required to
represent to the Company that (i) any Exchange Notes to be received by it will
be acquired in the ordinary course of its business, (ii) it has no arrangement
with any person to participate in the distribution of the Exchange Notes, and
(iii) it is not an "affiliate," as defined in Rule 405 of the Securities Act,
of the Company, or if it is an affiliate, it will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable. Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Notes that are Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers, and the Company
shall have no further obligation to register Registrable Notes (other than
Private Exchange Notes and other than in respect of any Exchange Notes as to
which clause 2(c)(v) hereof applies) pursuant to Section 3 hereof. No
securities other than the Exchange Notes shall be included in the Exchange
Registration Statement.
(b) The Company shall include within the Prospectus
contained in the Exchange Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchaser, that shall
contain a summary statement of the positions taken or policies made by the
Staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-dealer (a
"Participating Broker-Dealer") in the Exchange Offer (other than with respect
to any Notes acquired by it and having the status of an unsold allotment in the
initial distribution), whether such positions or policies have been publicly
disseminated by the Staff of the SEC or such positions or policies, in the
judgment of the Initial Purchaser, represent the prevailing views of the Staff
of the SEC. Such "Plan of Distribution" section shall also expressly permit
the use of the Prospectus by all Persons subject to the prospectus delivery
requirements of the Securities Act, including all Participating Broker-Dealers,
and include a statement describing the means by which Participating
Broker-Dealers may resell the Exchange Notes.
<PAGE> 8
-6-
The Company shall use its reasonable best efforts to keep the
Exchange Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as is necessary to comply with
applicable law in connection with any resale of the Exchange Notes; provided,
however, that such period shall not exceed 90 days after the consummation of
the Exchange Offer (or such longer period if extended pursuant to the last
paragraph of Section 5 hereof) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it and having the status of an unsold
allotment in the initial distribution, the Company shall, upon the request of
the Initial Purchaser simultaneously with the delivery of the Exchange Notes in
the Exchange Offer, issue and deliver to the Initial Purchaser in exchange (the
"Private Exchange") for such Notes held by the Initial Purchaser a like
principal amount at maturity of notes having terms identical in all material
respects to the Notes (the "Private Exchange Notes"), except for the placement
of a restrictive legend on such Private Exchange Notes. The Private Exchange
Notes shall be issued pursuant to the same indenture as the Exchange Notes and
will bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming
part of the Exchange Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York;
(3) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business
day on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all
applicable laws, rules and regulations.
<PAGE> 9
-7-
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, them Company shall:
(1) accept for exchange all Notes tendered and not
validly withdrawn pursuant to the Exchange Offer or the Private
Exchange;
(2) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver
promptly to each Holder of Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount at maturity to
the Notes of such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture, which in either event shall provide that (1) the
Exchange Notes shall not be subject to the transfer restrictions set forth in
the Indenture and (2) the Private Exchange Notes shall be subject to the
transfer restrictions set forth in the Indenture. The Indenture or such
indenture shall provide that the Exchange Notes, the Private Exchange Notes and
the Notes shall vote and consent together on all matters as one class and that
neither the Exchange Notes, the Private Exchange Notes nor the Notes will have
the right to vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the Staff of the SEC, the Company is not
permitted to effect an Exchange Offer, (ii) any Holder either is not eligible
to participate in the Exchange Offer or participates in the Exchange Offer, and
does not receive Exchange Notes in exchange for tendered Notes (in each case
under this clause (ii) other than as a result of applicable interpretations of
the staff of the SEC or applicable law then in effect as of the Issue Date),
(iii) the Exchange Offer is not consummated within 225 days of the date of
original issuance of the Notes, (iv) any holder of Private Exchange Notes so
requests at any time after the consummation of the Private Exchange, (v) the
Holders of not less than a majority of Registrable Notes reasonably determine
that the interests of the Holders would be adversely affected by consummation
of the Exchange Offer or (vi) in the case of any Holder that participates in
the Exchange Offer, such Holder does not receive Exchange Notes on the date of
the exchange that may be sold without restriction under state and federal
securities laws (other than due solely to the status of such Holder as an
affiliate of the Company within the meaning of the Securities Act or any
prospectus delivery requirement applicable to such Holder), in the case of each
of clauses (i) to and including (vi) of this sentence, then the Company shall
promptly deliver to the Holders written notice thereof (the "Shelf Notice") and
shall file a Shelf Registration pursuant to Section 3 hereof.
<PAGE> 10
-8-
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c)
hereof, then:
(a) Shelf Registration. The Company shall as promptly as
reasonably practicable file with the SEC a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Preferred Stock (the "Initial Shelf Registration"). If the
Company shall not have yet filed an Exchange Registration Statement, the
Company shall use its reasonable best efforts to file with the SEC the Initial
Shelf Registration on or prior to the Filing Date. Otherwise, the Company
shall use its best efforts to file with the SEC the Initial Shelf Registration
within 30 days of the delivery of the Shelf Notice. The Initial Shelf
Registration shall be on Form S-1 or another appropriate form permitting
registration of such Registrable Preferred Stock for resale by Holders in the
manner or manners designated by them (including, without limitation, one
underwritten offering). The Company shall not permit any securities other than
the Registrable Notes to be included in the Initial Shelf Registration or any
Subsequent Shelf Registration (as defined below).
The Company shall use its reasonable best efforts to cause the
Initial Shelf Registration to be declared effective under the Securities Act on
or prior to the Effectiveness Date and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date that is 36
months from the Issue Date, subject to extension pursuant to the last paragraph
of Section 5 hereof (the "Effectiveness Period"), or such shorter period ending
when (i) all Registrable Notes covered by the Initial Shelf Registration have
been sold in the manner set forth and as contemplated in the Initial Shelf
Registration, (ii) a Subsequent Shelf Registration covering all of the
Registrable Notes has been declared effective under the Securities Act or (iii)
there are no longer any Registrable Notes outstanding.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for
any reason at any time during the Effectiveness Period (other than because of
the sale of all of the securities registered thereunder), the Company shall use
its reasonable best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45 days of
such cessation of effectiveness amend the Initial Shelf Registration in a
manner to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" Registration Statement pursuant to Rule
415 covering all of the Registrable Notes (a "Subsequent Shelf Registration").
If a Subsequent Shelf Registration is filed, the Company shall use its
reasonable best efforts to cause the Subsequent Shelf Registration to be
declared effective under the Securities Act as soon as practicable after such
filing and to keep such Registration Statement continuously effective for a
period equal to the number of days in the Effectiveness Period less the
aggregate number of
<PAGE> 11
-9-
days during which the Initial Shelf Registration or any Subsequent Shelf
Registration was previously continuously effective. As used herein the term
"Shelf Registration" means the Initial Shelf Registration and any Subsequent
Shelf Registration.
(c) Supplements and Amendments. The Company shall use
all reasonable efforts to supplement and amend the Shelf Registration if
required by the rules, regulations or instructions applicable to the
registration form used for such Shelf Registration, if required by the
Securities Act, or if reasonably requested by the Holders of a majority of
shares of the Registrable Notes covered by such Registration Statement or by
any underwriter of such Registrable Notes.
(d) Suspension of Shelf Registration Statement. The
Company's obligation to keep the Shelf Registration Statement effective and
usable for offers and sales of the Notes and Exchange Notes may be suspended by
the Company in good faith for valid business reasons, including, without
limitation, a pending acquisition or divestiture of assets. Any such period
during which the Company fails to keep the Shelf Registration Statement
effective and usable for offers and sales of Notes and Exchange Notes is
referred to as a "Suspension Period." A Suspension Period shall commence on
and include the date that the Company gives notice that the Shelf Registration
Statement is no longer effective or the prospectus included therein is no
longer usable for offers and sales of Notes and Exchange Notes and shall end on
the date when each Holder of Notes and Exchange Notes covered by such
registration statement either receives the copies of the supplemented or
amended prospectus contemplated by Section 3(c) hereof or is advised in writing
by the Company that use of the prospectus may be resumed; provided that no
Suspension Period shall exceed 90 days in any period of 365 consecutive days.
4. Additional Interest
The Company and the Initial Purchaser agree that the Holders
of Notes will suffer damages if the Company fails to fulfill its obligations
under Section 2 or Section 3 hereof and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, the Company
agrees to pay, as liquidated damages, additional interest on the Notes or the
Private Exchange Notes (in either case, "Additional Interest") under the
circumstances and to the extent set forth below (without duplication):
(a) (i) if the Exchange Registration Statement, or, if
required to be filed on behalf of any Holder, the Shelf Registration Statement
is not filed within 90 days following the Issue Date, Additional Interest shall
accrue on the Accreted Value of the Notes at a rate of 0.5% per annum for the
first 90 days commencing on the 91st day after the Issue Date, such Additional
<PAGE> 12
-10-
Interest increasing by an additional 0.5% per annum at the beginning of each
subsequent 90-day period,
(ii) if the Exchange Registration Statement, or, if
required to be filed on behalf of any Holder, the Shelf Registration Statement,
is not declared effective within 180 days following the Issue Date, Additional
Interest shall accrue on the Accreted Value of the Notes at a rate of 0.5% per
annum for the first 90 days commencing on the 181st day after the Issue Date,
such Additional Interest increasing by an additional 0.5% per annum at the
beginning of each subsequent 90-day period, or
(iii) if (A) the Company has not exchanged all of the Notes
validly tendered in accordance with the terms of hte Exchange Offer on or prior
to 225 days after the Issue Date or (B) the Exchange Registration Statement
ceases to be effective at any time prior to the time that the Exchange Offer is
consummated or (C) if applicable, the Shelf Registration Statement has been
declared effective, if required to be filed on behalf of any Holder, and ceases
to be effective at any time prior to the third anniversary of the Issue Date,
unless all of the Notes registered thereunder have been sold thereunder or an
amended or additional Registration Statement has been filed and declared
effective within 90 days of the date on which the Shelf Registration Statement
ceases to be effective, then Additional Interest shall accrue on the Accreted
Value of the Notes at a rate of 0.5% per annum during the first 90 days
commencing on (x) the 226th day after the Issue Date with respect to the Notes
validly tendered and not exchanged by the Company, in the case of (A) above, or
(y) the day the Exchange Registration Statement ceases to be effective or
usable for its intended purpose in the case of (B) above, or (z) the 90th day
following the day such Shelf Registration Statement ceases to be effective in
the case of (C) above, such Additional Interest increasing by an additional
0.5% per annum at the beginning of each subsequent 90-day period; provided,
however, that the Additional Interest may not exceed in the aggregate 1.0% per
annum; and provided further, that (1) upon the filing of the Exchange
Registration Statement or Shelf Registration Statement (in the case of clause
(i) above), (2) upon the effectiveness of the Exchange Registration Statement
or Shelf Registration Statement (in the case of (ii) above), or (3) upon the
exchange of Exchange Notes for the Notes tendered (in the case of clause
(iii)(A) above), or upon the effectiveness of the Exchange Registration
Statement that had ceased to remain effective in the case of clause (iii)(B)
above, or upon the effectiveness of the Shelf Registration Statement that had
ceased to remain effective or the effectiveness of the additional Registration
Statement (in the case of clause (iii)(C) above), the interest rate on the
Notes shall decline to its original rate and Additional Interest on the Notes
shall cease to accumulate.
(b) The Company shall notify the Trustee within one
business day after each and every date on which an event occurs in respect of
which Additional Interest is required to be
<PAGE> 13
-11-
paid (an "Event Date"). Any amounts of Additional Interest due pursuant to
(a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in cash
semiannually on each February 1 and August 1 (to the holders of record on the
January 15 and July 15 immediately preceding such dates), commencing with the
first such date occurring after any such Additional Interest commences to
accrue. The amount of Additional Interest will be determined by multiplying
the applicable Additional Interest rate by the Accreted Value of the
Registrable Notes, multiplied by a fraction, the numerator of which is the
number of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year consisting of twelve 30-day months
and, in the case of a partial month, the actual number of days elapsed) and the
denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Company shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Company hereunder the
Company shall:
(a) Prepare and file with the SEC prior to the Filing
Date, a Registration Statement or Registration Statements as prescribed by
Sections 2 or 3 hereof, and use its reasonable best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; provided, however, that, if (1) such filing is pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, the Company shall furnish
to and afford the Holders of the Registrable Notes covered by such Registration
Statement or each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be
filed (in each case at least five business days prior to such filing). The
Company shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto if the Holders of a majority in aggregate
principal amount at maturity of Registrable Notes covered by such Registration
Statement, or any such Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriters, if any, shall reasonably object.
Notwithstanding anything to the contrary contained in this Agreement, the
Company shall not be required to engage in more than one underwritten offering
pursuant to this Agreement.
<PAGE> 14
-12-
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented by
any Prospectus supplement required by applicable law, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. The Company shall be deemed not to have used
its reasonable best efforts to keep a Registration Statement effective during
the Applicable Period if it voluntarily takes any action that would result in
selling Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes during that period unless such action
is required by applicable law or unless the Company complies with this
Agreement, including without limitation, the provisions of paragraphs 3(d) and
5(k) hereof and the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, notify the selling Holders of
Registrable Notes, or each such Participating Broker-Dealer, as the case may
be, their counsel and the managing underwriters, if any, promptly (but in any
event within two business days), and confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon
request, obtain, at the sole expense of the Company, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incorporated
by reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in connection with
sales of the Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Company contained in
any agreement (including any underwriting agreement), contemplated by Section
5(m) hereof cease to be true and correct, (iv) of the receipt by the Company of
any notification with respect to the suspension
<PAGE> 15
-13-
of the qualification or exemption from qualification of a Registration
Statement or any of the Registrable Notes or the Exchange Notes to be sold by
any Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event, the existence of any condition or any information
becoming known that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in or amendments or supplements to such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading
and (vi) of the Company's determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, use its reasonable best efforts to
prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of a
Prospectus or suspending the qualification (or exemption from qualification) of
any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any such
order is issued, to use its reasonable best efforts to obtain the withdrawal of
any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section
3 and if requested by the managing underwriter or underwriters (if any), or the
Holders of a majority in aggregate principal amount at maturity of Registrable
Notes being sold in connection with an underwritten offering or any
Participating Broker-Dealer, (i) promptly incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriter or underwriters (if any), such Holders, any Participating
Broker-Dealer or counsel for any of them determine is reasonably necessary to
be included therein, (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment and (iii) supplement or make
amendments to such Registration Statement.
<PAGE> 16
-14-
(f) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling Holder of
Registrable Notes and to each such Participating Broker-Dealer who so requests
and to counsel and each managing underwriter, if any, at the sole expense of
the Company, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, deliver to each selling Holder of
Registrable Notes, or each such Participating Broker-Dealer, as the case may
be, their respective counsel, and the underwriters, if any, at the sole expense
of the Company, as many copies of the Prospectus (including each form of
preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or
agents, if any, and dealers (if any), in connection with the offering and sale
of the Registrable Notes covered by, or the sale by Participating
Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any
amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or
any delivery of a Prospectus contained in the Exchange Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its reasonable best efforts to register or qualify,
and to cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder, Participating Broker-Dealer, or the managing underwriter or
underwriters reasonably request; provided, however, that where Exchange Notes
held by Participating Broker-Dealers or Registrable Notes offered other than
through an underwritten offering, the Company agrees to cause the Company's
counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); keep each
such registration or qualification (or exemption therefrom) effective during
the period such Registration Statement is
<PAGE> 17
-15-
required to be kept effective and do any and all other acts or things
reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the
Registrable Notes covered by the applicable Registration Statement; provided,
however, that the Company shall not be required to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction or be subject to taxation in any jurisdiction in which it is not
so subject.
(i) If a Shelf Registration is filed pursuant to Section
3 hereof, cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes to be
sold, which certificates shall not bear any restrictive legends and shall be in
a form eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may reasonably
request.
(j) Use its reasonable best efforts to cause the
Registrable Notes covered by the Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter or
underwriters, if any, to consummate the disposition of such Registrable Notes
except as may be required solely as a consequence of the nature of such selling
Holder's business, in which case the Company will cooperate in all reasonable
respects with the filing of such Registration Statement and the granting of
such approvals.
(k) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as
practicable prepare and (subject to Sections 3(d) and 5(a) hereof) file with
the SEC, at the sole expense of the Company, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Notes being sold thereunder or to the
purchasers of the Exchange Notes to whom such Prospectus will be delivered by a
Participating Broker-Dealer, any such Prospectus will not 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, in the light of the
circumstances under which they were made, not misleading.
<PAGE> 18
-16-
(l) Use its reasonable best efforts to cause the
Registrable Notes covered by a Registration Statement or the Exchange Notes, as
the case may be, to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement or the Exchange Notes,
as the case may be, or the managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes in a form eligible for deposit with The
Depository Trust Company and (ii) provide a CUSIP number for the Registrable
Notes.
(n) In connection with any underwritten offering of
Registrable Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings of debt securities similar
to the Notes and take all such other actions as are reasonably requested by the
managing underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Notes and, in such
connection, (i) make such representations and warranties to, and covenants
with, the underwriters with respect to the business of the Company and its
subsidiaries (including any acquired business, properties or entity, if
applicable) and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case,
as are customarily made by issuers to underwriters in underwritten offerings of
debt securities similar to the Notes, and confirm the same in writing if and
when requested; (ii) obtain the written opinion of counsel to the Company and
written updates thereof in form, scope and substance reasonably satisfactory to
the managing underwriter or underwriters, addressed to the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings of debt securities similar to the Notes and such other matters as may
be reasonably requested by the managing underwriter or underwriters; (iii)
obtain "cold comfort" letters and updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data are, or are required to be, included or incorporated by
reference in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such other
matters as reasonably requested by the managing underwriter or underwriters;
and (iv) if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those set
forth in Section 7 hereof (or such other provisions and procedures acceptable
to Holders of a majority in aggregate principal amount at maturity of
Registrable Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents) with respect to
<PAGE> 19
-17-
all parties to be indemnified pursuant to said Section. The above shall be
done at each closing under such underwriting agreement, or as and to the extent
required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, make available for inspection by
any selling Holder of such Registrable Notes being sold, or each such
Participating Broker-Dealer, as the case may be, any underwriter participating
in any such disposition of Registrable Notes, if any, and any attorney,
accountant or other agent retained by any such selling Holder or each such
Participating Broker-Dealer, as the case may be, or underwriter (collectively,
the "Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate documents
and instruments of the Company and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the officers, directors
and employees of the Company and its subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such Registration
Statement. Records that the Company determines, in good faith, to be
confidential and any Records that it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction, (iii)
disclosure of such information is, in the reasonable opinion of counsel for any
Inspector, necessary or advisable in connection with any action, claim, suit or
proceeding, directly or indirectly, involving or potentially involving such
Inspector and arising out of, based upon, relating to, or involving this
Agreement or any transactions contemplated hereby or arising hereunder or (iv)
the information in such Records has been made generally available to the public
(other than as a result of an impermissable disclosure or failure to safeguard
by the Inspectors). Each selling holder of such Registrable Notes and each
such Participating Broker-Dealer will be required to agree that information
obtained by it as a result of such inspections shall be deemed confidential and
shall not be used by it as the basis for any market transactions in the
securities of the Company unless and until such information is generally
available to the public (other than as a result of an impermisable disclosure
or failure to safeguard by such person). Each selling Holder of such
Registrable Notes and each such Participating Broker-Dealer will be required to
further agree that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the Company and
allow the Company to undertake appropriate action to prevent disclosure of the
Records deemed confidential at the Company's sole expense.
<PAGE> 20
-18-
(p) Provide an indenture trustee for the Registrable
Notes or the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(b) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange Offer
or the first Registration Statement relating to the Registrable Notes; and in
connection therewith, cooperate with the trustee under any such indenture and
the Holders of the Registrable Notes, to effect such changes to such indenture
as may be required for such indenture to be so qualified in accordance with the
terms of the TIA; and execute, and use its reasonable best efforts to cause
such trustee to execute, all documents as may be required to effect such
changes and all other forms and documents required to be filed with the SEC to
enable such indenture to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of
the SEC and make generally available to its securityholders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no later
than 45 days after the end of any 12- month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i) commencing at the end
of any fiscal quarter in which Registrable Notes is sold to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
(r) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, that the Exchange Notes or Private Exchange
Notes, as the case may be and the related indenture constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with its respective terms, subject to customary exceptions and
qualifications.
(s) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of Registrable Notes by Holders to the Company (or
to such other Person as directed by the Company) in exchange for Exchange Notes
or Private Exchange Notes, as the case may be, the Company shall mark, or cause
to be marked, on the certificates representing such Registrable Notes that such
Registrable Notes are being cancelled in exchange for the Exchange Notes or the
Private Exchange Notes, as the case may be.
(t) Cooperate with each seller of Registrable Notes
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such
<PAGE> 21
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Registrable Notes and their respective counsel in connection with any filings
required to be made with the National Association of Securities Dealers, Inc.
(the "NASD").
(u) Use its reasonable best efforts to take all other
steps necessary or advisable to effect the registration of the Exchange Notes
and/or Registrable Notes covered by a Registration Statement contemplated
hereby.
The Company may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable
Notes as the Company may, from time to time, reasonably request. The Company
may exclude from such registration the Registrable Notes of any seller who
unreasonably fails to furnish such information within a reasonable time after
receiving such request. Each seller as to which any Shelf Registration is
being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
actual receipt of any notice from the Company of the happening of any event of
the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof,
such Holder will forthwith discontinue disposition of such Registrable Notes
covered by such Registration Statement or Prospectus or Exchange Notes to be
sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or
until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event the Company shall give any
such notice, each of the Effectiveness Period and the Applicable Period shall
be extended by the number of days during such periods from and including the
date of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to
be sold by such Participating Broker-Dealer, as the case may be, shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 5(k) hereof or (y) the Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance of
or compliance with this Agreement by the Company shall be borne by the Company
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation, (i) all
<PAGE> 22
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registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes, (ii) printing expenses, including, without
limitation, expenses of printing certificates for Registrable Notes or Exchange
Notes in a form eligible for deposit with The Depository Trust Company and of
printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Company and
fees and disbursements of special counsel for the sellers of Registrable Notes
(subject to the provisions of Section 6(b) hereof), (v) fees and disbursements
of all independent certified public accountants referred to in Section
5(m)(iii) hereof (including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such performance),
(vi) rating agency fees, (vii) Securities Act liability insurance, if the
Company desires such insurance, (viii) fees and expenses of all other Persons
retained by the Company, (ix) internal expenses of the Company (including,
without limitation, all salaries and expenses of officers and employees of the
Company performing legal or accounting duties), (x) the expense of any annual
audit, (xi) the fees and expenses incurred in connection with the listing of
the securities to be registered on any securities exchange, if applicable, and
(xii) the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement. Notwithstanding the foregoing, the Holders of Transfer Restricted
Securities being registered shall pay all underwriting discounts, commissions
and placement agent fees attributable to the sale of such Transfer Restricted
Securities.
(b) The Company shall reimburse the Holders of the
Registrable Notes being registered in a Shelf Registration for the reasonable
fees and disbursements of not more than one counsel (in addition to appropriate
local counsel) chosen by the Holders of a majority in aggregate principal
amount at maturity of the Registrable Notes to be included in such Registration
Statement.
7. Indemnification
(a) The Company agrees to indemnify and hold harmless
each Holder of Registrable Notes and each Participating Broker-Dealer selling
Exchange Notes during the Applicable Period, the officers and directors of each
such Person, and each Person, if any, who controls any such Person within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, the reasonable
legal fees and other
<PAGE> 23
-21-
expenses actually incurred in connection with any suit, action or proceeding or
any claim asserted) caused by, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) or Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by, arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except insofar
as such losses, claims, damages or liabilities are caused by any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information relating to any Participant furnished
to the Company in writing by such Participant expressly for use therein;
provided, however, that the Company will not be required to indemnify a
Participant if such untrue statement or omission or alleged untrue statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus or any amendment or supplement thereto and it is established in
the related proceeding that such Participant failed to deliver or provide a
copy of the Prospectus (as amended or supplemented) to such Person with or
prior to the confirmation of the sale of such Registrable Notes or Exchange
Notes sold to such Person if required by applicable law, unless such failure to
deliver or provide a copy of the Prospectus (as amended or supplemented) was a
result of noncompliance by the Company with Section 5 of this Agreement;
provided further that the foregoing proviso shall not limit the Company's
obligation to indemnify a Participant for any other untrue statement or
omission or alleged untrue statement or omission of a material fact in the
Prospectus that was the subject matter of the related proceeding.
(b) Each Participant agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors and officers who sign
the Registration Statement and each Person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
to the same extent as the foregoing indemnity from the Company to each
Participant, but only (i) with reference to information relating to such
Participant furnished to the Company in writing by such Participant expressly
for use in any Registration Statement or Prospectus, any amendment or
supplement thereto, or any preliminary prospectus or (ii) with respect to any
untrue statement or representation made by such Participant in writing to the
Company. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of
Registrable Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought
pursuant to either of the two preceding paragraphs, such Person (the
"Indemnified Person") shall promptly notify the Person against whom such
indemnity may
<PAGE> 24
-22-
be sought (the "Indemnifying Person") in writing, and the Indemnifying Person,
upon request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and
any others the Indemnifying Person may reasonably designate in such proceeding
and shall pay the reasonable fees and expenses actually incurred by such
counsel related to such proceeding; provided, however, that the failure to so
notify the Indemnifying Person shall not relieve it of any obligation or
liability which it may have hereunder or otherwise (unless and to the extent
that it did not otherwise learn of such action or claim and such omission
results in the forfeiture by the Indemnifying Person of substantial rights and
defenses). In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Person unless (i) the Indemnifying Person
and the Indemnified Person shall have mutually agreed in writing to the
contrary, (ii) the Indemnifying Person has failed to retain counsel reasonably
satisfactory to the Indemnified Person or (iii) the named parties in any such
proceeding (including any impleaded parties) include both the Indemnifying
Person and the Indemnified Person and the Indemnified Person shall have been
advised by counsel that representation of both parties by the same counsel
would be inappropriate under applicable standards of professional conduct due
to differing interests between them. It is understood that, unless there
exists a conflict among Indemnified Persons, the Indemnifying Person shall not,
in connection with any one such proceeding or separate but substantially
similar related proceeding in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed
promptly as they are incurred. Any such separate firm for the Participants and
such control Persons of Participants shall be designated in writing by
Participants who sold a majority in aggregate principal amount at maturity of
Registrable Notes and Exchange Notes sold by all such Participants and any such
separate firm for the Company, its directors, its officers and such control
Persons of the Company shall be designated in writing by the Company. The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its prior written consent (which consent shall not be
unreasonably withheld or delayed), but if settled with such consent or if there
be a final non-appealable judgment for the plaintiff for which the Indemnified
Person is entitled to indemnification pursuant to this Agreement, the
Indemnifying Person agrees to indemnify and hold harmless each Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. No Indemnifying Person shall, without the prior written consent of
the Indemnified Person, effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional
written release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
<PAGE> 25
-23-
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of any
Indemnified Person.
(d) If the indemnification provided for in the first and
second paragraphs of this Section 7 is for any reason unavailable to, or
insufficient to hold harmless, an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder and in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect (i) the relative benefits received by the Indemnifying
Person or Persons on the one hand and the Indemnified Person or Persons on the
other from the offering of the Notes or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, not only such relative
benefits but also the relative fault of the Indemnifying Person or Persons on
the one hand and the Indemnified Person or Persons on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof) as well as any other relevant equitable considerations. The relative
fault of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or such Participant or such other
Indemnified Person, as the case may be, on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances.
(e) The parties agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, in no event
shall a Participant be required to contribute any amount in excess of the
amount by which proceeds received by such Participant from sales of Registrable
Notes or Exchange Notes, as the case may be, exceeds the amount of any damages
that such Participant has otherwise been required to pay or has paid by reason
of such 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
<PAGE> 26
-24-
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnity and contribution agreements contained
in this Section 7 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder in a timely manner in accordance
with the requirements of the Securities Act and the Exchange Act and, if at any
time the Company is not required to file such reports, it will, upon the
request of any Holder of Registrable Notes, make publicly available annual
reports and such information, documents and other reports of the type specified
in Sections 13 and 15(d) of the Exchange Act. The Company further covenants
for so long as any Registrable Notes remain outstanding, to make available to
any Holder or beneficial owner of Registrable Notes in connection with any sale
thereof and any prospective purchaser of such Registrable Notes from such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Securities Act in order to permit resales of such Registrable Notes
pursuant to Rule 144A.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf
Registration is to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering
will be selected by the Holders of a majority in aggregate principal amount at
maturity of such Registrable Notes included in such offering and reasonably
acceptable to the Company.
No Holder of Registrable Notes may participate in any
underwritten registation hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
<PAGE> 27
-25-
(a) No Inconsistent Agreements. The Company has not, as
of the date hereof, and the Company shall not, after the date of this
Agreement, enter into any agreement with respect to any of its securities that
is inconsistent with the rights granted to the Holders of Registrable Notes in
this Agreement or otherwise conflicts with the provisions hereof. The Company
has not entered and will not enter into any agreement with respect to any of
its securities that will grant to any Person piggy-back registration rights
with respect to a Registration Statement.
(b) Adjustments Affecting Registrable Notes. The Company
shall not, directly or indirectly, take any action with respect to the
Registrable Notes as a class that would adversely affect the ability of the
Holders of Registrable Notes to include such Registrable Notes in a
registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, otherwise than with
the prior written consent of (A) the Holders of not less than a majority in
aggregate principal amount at maturity of the then outstanding Registrable
Notes and (B) in circumstances that would adversely affect the Participating
Broker-Dealers, the Participating Broker-Dealers holding not less than a
majority in aggregate principal amount at maturity of the Exchange Notes held
by all Participating Broker-Dealers; provided, however, that Section 7 and this
Section 10(c) may not be amended, modified or supplemented without the prior
written consent of each Holder and each Participating Broker-Dealer (including
any person who was a Holder or Participating Broker-Dealer of Registrable Notes
or Exchange Notes, as the case may be, disposed of pursuant to any Registration
Statement). Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Notes whose securities are being sold pursuant
to a Registration Statement and that does not directly or indirectly affect,
impair, limit or compromise the rights of other Holders of Registrable Notes
may be given by Holders of at least a majority of shares of the Registrable
Notes being sold by such Holders pursuant to such Registration Statement;
provided, however, that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately proceeding sentence.
(d) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable Notes or any
Participating Broker-Dealer, at the most current address of such
Holder or Participating Broker-Dealer, as the case
<PAGE> 28
-26-
may be, on the stock books of the Company with a copy in like manner
to the Initial Purchaser as follows:
BT SECURITIES CORPORATION
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-7200
Attention: Corporate Finance
Department
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No: (212) 269-5420
Attention: William M. Hartnett, Esq.
2. if to the Initial Purchaser, at the addresses
specified in Section 11(d)(1);
3. if to the Company, at the addresses as follows:
Capstar Broadcasting Partners, Inc.
600 Congress Avenue
Suite 1400
Austin, Texas 75243
Facsimile No: (512) 477-7388
Attention: R. Steven Hicks
with copies to:
Vinson & Elkins LLP
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Facsimile No: (214) 220-7716
Attention: Michael D. Wortley, Esq.
<PAGE> 29
-27-
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when receipt
is acknowledged by the addressee, if sent by facsimile.
(e) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of
the parties hereto, including the Holders; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign holds
Registrable Notes.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable best efforts to find and employ
an alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
<PAGE> 30
-28-
(j) Securities Held by the Company or Its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Company
or its affiliates (as such term is defined in Rule 405 under the Securities
Act) shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
(k) Third Party Beneficiaries. Holders of Registrable
Notes and Participating Broker-Dealers are intended third party beneficiaries
of this Agreement and this Agreement may be enforced by such Persons.
(l) Entire Agreement. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all
prior oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda between the Initial
Purchaser on the one hand and the Company on the other, or between or among any
agents, representatives, parents, subsidiaries, affiliates, predecessors in
interest or successors in interest with respect to the subject matter hereof
and thereof are merged herein and replaced hereby.
<PAGE> 31
-29-
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
-------------------------------------
Name: William S. Banowsky, Jr.
Title:
BT SECURITIES CORPORATION
By: /s/ CHRISTINE BARBELLA LOGGIA
-------------------------------------
Name: Christine Barbella Loggia
Title:
<PAGE> 1
EXHIBIT 10.7
FINANCIAL ADVISORY AGREEMENT
THIS FINANCIAL ADVISORY AGREEMENT (this "Agreement") is made and entered
into as of October 16, 1996, between Capstar Broadcasting Partners, Inc. (the
"Company"), a Delaware corporation, and Hicks, Muse & Co. Partners, L.P., a
Texas limited partnership (together with its successors, "HMCo.").
WHEREAS, certain affiliates of HMCo., including Hicks, Muse, Tate &
Furst Equity Fund III, L.P. ("HMTF") are simultaneously with the execution of
this Agreement, purchasing, by means of the Company, all or a portion of the
common stock of Commodore Media, Inc. ("Commodore"), a Delaware corporation
(the "Acquisition");
WHEREAS, the Company has requested that HMCo. render, and HMCo. has
rendered, financial advisory services to the Company and Commodore in
connection with the negotiation of the Acquisition and the debt and equity
financing transactions related thereto (collectively with the Acquisition, the
"Transaction"); and
WHEREAS, the Company has requested that HMCo. render financial advisory,
investment banking, and other similar services to the Company and Commodore
with respect to any future proposals for a tender offer, acquisition, sale,
merger, exchange offer, recapitalization, restructuring, or other similar
transaction directly or indirectly involving the Company or Commodore, or any
of their respective subsidiaries, and any other person or entity (collectively,
"Add-on Transactions");
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by HMCo. to the Company and Commodore, and to evidence the obligations
of the Company to HMCo. and the mutual covenants herein contained, the Company
and HMCo. hereby agree as follows:
1. Retention.
(a) The Company hereby acknowledges that it has retained HMCo.
for the benefit of the Company and Commodore, and HMCo. acknowledges that it
has acted, as financial advisor to the Company and Commodore in connection with
the Transaction.
(b) The Company acknowledges that it has retained HMCo. as the
exclusive financial advisor in connection with any Add-on Transactions that may
be consummated during the term of this Agreement, and that the Company will
not, and will cause Commodore not to, retain any other person or entity to
provide such services in connection with any such Add-on Transaction without
the prior written consent of HMCo. HMCO. agrees that it shall provide such
financial
<PAGE> 2
advisory, investment banking, and other similar services in connection with any
such Add-on Transaction as may be requested from time to time by the board of
directors of the Company.
2. Term. The term of this Agreement shall continue until the
earlier to occur of (i) the tenth anniversary of the date hereof or (ii) the
date on which HMTF and its affiliates cease to own beneficially, directly or
indirectly, any securities of the Company or their successors.
3. Compensation.
(a) As compensation for HMCo.'s services as financial advisor
to the Company and Commodore in connection with the Transaction, the Company
hereby irrevocably agrees to pay to HMCo. a cash fee of $3,375,000 to be paid
at the closing of the Transaction. The parties hereto agree that the
compensation due pursuant to this Section 3(a) shall be allocated among the
segments of the financing for the Transaction in proportion to the dollar
amount of each such segment.
(b) As compensation for HMCo.'s financial advisory, investment
banking, and other similar services rendered in connection with any Add-on
Transaction pursuant to Section 1(b) hereof, the Company shall pay to HMCo., at
the closing of any such Add-on Transaction, a cash fee in the amount of 1.5% of
the Transaction Value of such Add-on Transaction. As used herein, the term
"Transaction Value" means the total value of the Add-on Transaction, including,
without limitation, the aggregate amount of the funds required to complete the
Add-on Transaction (excluding any fees payable pursuant to this Section 3(b))
including the amount of any indebtedness, preferred stock or similar items
assumed (or remaining outstanding).
4. Reimbursement of Expenses. In addition to the compensation to be
paid pursuant to Section 3 hereof, the Company agrees to reimburse HMCo.,
promptly following demand therefor, together with invoices or reasonably
detailed descriptions thereof, for all reasonable disbursements and
out-of-pocket expenses (including fees and disbursements of counsel) incurred
by HMCo. (i) as financial advisor to the Company or Commodore in connection
with the Transaction or (ii) in connection with the performance by it of the
services contemplated by Section 1(b) hereof.
5. Indemnification. The Company shall indemnify and hold harmless
each of HMCo., its affiliates, and their respective directors, officers,
controlling persons (within the meaning of Section 15 of the Securities Act of
1933 or Section 20(a) of the Securities Exchange Act of 1934), if any, agents
and employees (HMCo., its affiliates, and such other specified persons being
collectively referred to as "Indemnified Persons" and individually as an
"Indemnified Person") from and against any and all claims, liabilities, losses,
damages and expenses incurred by any Indemnified Person (including those
resulting from the negligence of the Indemnified Person and fees and
disbursements of the respective Indemnified Person's counsel) which (A) are
related to or arise out of (i) actions taken or omitted to be taken (including
any untrue statements made or any statements omitted to be made) by the Company
and/or Commodore or (ii) actions taken or omitted to be taken
2
<PAGE> 3
by an Indemnified Person with the Company's or Commodore's consent or in
conformity with the Company's or Commodore's instructions or the Company's or
Commodore's actions or omissions or (B) are otherwise related to or arise out
of HMCo.'s engagement, and will reimburse each Indemnified Person for all costs
and expenses, including fees of any Indemnified Person's counsel, as they are
incurred, in connection with investigating, preparing for, defending, or
appealing any action, formal or informal claim, investigation, inquiry or other
proceeding, whether or not in connection with pending or threatened litigation,
caused by or arising out of or in connection with HMCo.'s acting pursuant to
the engagement, whether or not any Indemnified Person is named as a party
thereto and whether or not any liability results therefrom. The Company will
not however, be responsible for any claims, liabilities, losses, damages, or
expenses pursuant to clause (B) of the preceding sentence that have resulted
primarily from HMCo.'s bad faith, gross negligence or willful misconduct. The
Company also agrees that neither HMCo. nor any other Indemnified Parson shall
have any liability to the Company or Commodore for or in connection with such
engagement except for any such liability for claims, liabilities, losses,
damages, or expenses incurred by the Company and/or Commodore that have
resulted primarily from HMCo.'s bad faith, gross negligence or willful
misconduct. The Company further agrees that it will not, and the Company will
cause Commodore to not, without the prior written consent of HMCo., settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of HMCo.
and each other Indemnified Person hereunder from all liability arising out of
such claim, action, suit or proceeding. THE COMPANY HEREBY ACKNOWLEDGES THAT
THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO ANY CLAIMS, LIABILITIES, LOSSES,
DAMAGES, OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED
FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE
OF HMCO. OR ANY OTHER INDEMNIFIED PERSEON.
The foregoing right to indemnity shall be in addition to any rights that
HMCo. and/or any other Indemnified Person may have at common law or otherwise
and shall remain in full force and effect following the completion or any
termination of the engagement. The Company hereby consents, and shall cause
Commodore to consent, to personal jurisdiction and to service and venue in any
court in which any claim which is subject to this agreement is brought against
HMCo. or any other Indemnified Person.
It is understood that, in connection with HMCo.'s engagement, HMCo. may
also be engaged to act for the Company and/or Commodore in one or more
additional capacities, and that the terms of this engagement or any such
additional engagement may be embodied in one or more separate written
agreements. This indemnification shall apply to the engagement specified in
the first paragraph hereof as well as to any such additional engagement(s)
(whether written or oral) and any modification of said engagement or such
additional engagement(s) and shall remain in full force and effect following
the completion or termination of said engagement or such additional
engagements.
3
<PAGE> 4
The Company further understands that if HMCo. is asked to furnish the
Company and/or Commodore a financial opinion letter or act for the Company
and/or Commodore in any other formal capacity, such further action may be
subject to a separate agreement containing provisions and terms to be mutually
agreed upon.
6. Confidential Information. In connection with the performance of
the services hereunder, HMCo. agrees not to divulge any confidential
information, secret processes or trade secrets disclosed by the Company or
Commodore to it solely in its capacity as a financial advisor, unless the
Company consents to the divulging thereof or such information, secret
processes, or trade secrets are publicly available or otherwise available to
HMCo. without restriction or breach of any confidentiality agreement or unless
required by any governmental authority or in response to any valid legal
process.
7. Governing Law. This Agreement shall be construed, interpreted,
and enforced in accordance with the laws of the State of Texas, excluding any
choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained herein
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned
(other than with respect to the rights and obligations of HMCo., which may be
assigned to any one or more of its principals or affiliates) by any of the
parties without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended
to, any other counterpart.
10. Other Understanding. All discussions, understandings, and
agreements theretofore made between any of the parties hereto with respect to
the subject matter hereof are merged in this Agreement, which alone fully and
completely expresses the Agreement of the parties hereto.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
HICKS, MUSE & CO. PARTNERS, L.P.,
its General Partner
By: HM PARTNERS INC., its General
Partner
By: /s/ MICHAEL D. SALIM
---------------------------
Name: Michael D. Salim
Title: Chief Financial Officer
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ PETER BRODSKY
------------------------------------------
Name: Peter Brodsky
Title: Secretary
5
<PAGE> 1
EXHIBIT 10.8
MONITORING AND OVERSIGHT AGREEMENT
THIS MONITORING AND OVERSIGHT AGREEMENT (the "Agreement") is made and
entered into effective as of October 16, 1996, between Capstar Broadcasting
Partners, Inc., a Delaware corporation (the "Company") and Hicks, Muse & Co.
Partners, L.P., a Texas limited partnership (together with its successors,
"HMCo").
1. Retention. The Company hereby acknowledges that it has retained
HMCo, and HMCo acknowledges that, subject to reasonable advance notice in order
to accommodate scheduling, HMCo will provide financial oversight and monitoring
services to the Company as requested by the board of directors of the Company
during the term of this Agreement.
2. Term. The term of this Agreement shall continue until the
earlier to occur of (i) the tenth anniversary of the date hereof, or (ii) the
date on which Hicks, Muse, Tate & Furst Equity Fund III, L.P. and its
affiliates cease to own beneficially, directly, or indirectly, any securities
of the Company or its successors.
3. Compensation.
(a) As compensation for HMCo's services under this Agreement,
the Company shall be obligated to pay to HMCo an annual fee (the "Monitoring
Fee") of $100,000 (the "Base Fee"), subject to adjustment pursuant to
paragraphs (b) and (c) below and prorated on a daily basis for any partial
calendar year during the term of this Agreement. The Monitoring Fee shall be
payable in equal quarterly installments on each January 1, April 1, July 1, and
October 1 during the term of this Agreement (each a "Payment Date"), beginning
with the first Payment Date following the date hereof. All payments shall be
made by wire transfer of immediately available funds to the account described
on Exhibit A hereto (or such other account as HMCo may hereafter designate in
writing).
(b) On January 1 of each calendar year during the term of this
Agreement, the Monitoring Fee shall be adjusted to an annual amount equal to
(i) the budgeted consolidated annual net sales of the Company and its
subsidiaries for the then-current fiscal year, multiplied by (ii) 0.2% (the
"Percentage"); provided, however, that in no event shall the annual Monitoring
Fee be less than the Base Fee.
(c) On each occasion that the Company or any of its
subsidiaries shall acquire another entity or business during the term of this
Agreement, the annual Monitoring Fee for the calendar year in which such
acquisition occurs shall be adjusted prospectively (i.e., for periods
subsequent to such acquisition until the next adjustment pursuant to clause (b)
above), as of the
<PAGE> 2
closing of such acquisition, to an annual amount equal to (i) the pro forma
combined budgeted consolidated annual net sales of the Company and its
subsidiaries for the entire then-current fiscal year of the Company (including
the sales of the acquired entity or business for such entire fiscal year, on a
pro forma basis), multiplied by (ii) the Percentage; provided, however, that in
no event shall the annual Monitoring Fee be less than the Base Fee.
(d) All past due payments in respect of the Monitoring Fee
shall bear interest at the lesser of the highest rate of interest which may be
charged under applicable law or the prime commercial lending rate per annum of
Chemical Bank, N.A. or its successors (which rate is a reference rate and is
not necessarily its lowest or best rate of interest actually charged to any
customer) (the "Prime Rate") as in effect from time to time, plus five percent
(5%), from the due date of such payment to and including the date on which
payment is made to HMCo in full, including such interest accrued thereon.
4. Reimbursement of Expenses. In addition to the compensation to be
paid pursuant to Section 3 hereof, the Company agrees to pay or reimburse HMCo
for all "Reimbursable Expenses", which shall consist of (i) all reasonable
disbursement and out-of-pocket expenses (including without limitation, costs of
travel, postage, deliveries, communications, etc.) incurred by HMCo or its
affiliates for the account of the Company or in connection with the performance
by HMCo of the services contemplated by Section 1 hereof and (ii) the Company's
Pro Rata Share of Allocable Expenditures as defined in Exhibit B hereto.
Promptly (but not more than 10 days) after request by or notice from HMCo, the
Company shall pay HMCo, by wire transfer of immediately available funds to the
account described on Exhibit A hereto (or such other account as HMCo may
hereafter designate in writing), the Reimbursable Expenses for which HMCo has
provided the Company invoices or reasonably detailed descriptions. All past
due payments in respect of the Reimbursable Expenses shall bear interest at the
lesser of the highest rate of interest which may be charged under applicable
law or the Prime Rate plus 5% from the Payment Date to and including the date
on which such Reimbursable Expenses plus accrued interest thereon, are fully
paid to HMCo.
5. Indemnification. The Company shall indemnify and hold harmless
each of HMCo, its affiliates, and the respective directors, officers,
controlling persons (within the meaning of Section 15 of the Securities Act of
1933 or Section 20(a) of the Securities Exchange Act of 1934), if any, agents
and employees of HMCo and/or any of its affiliates (HMCo, its affiliates, and
such other specified persons being collectively referred to as "Indemnified
Persons", and individually as an "Indemnified Person") from and against any and
all claims, liabilities, losses, damages, and expenses incurred by any
Indemnified Person (including those arising out of an Indemnified Person's
negligence and fees and disbursements of the respective Indemnified Person's
counsel) which (A) are related to or arise out of (i) actions taken or omitted
to be taken (including any untrue statements made or any statements omitted to
be made) by the Company or (ii) actions taken or omitted to be taken by an
Indemnified Person with the Company's consent or in conformity with the
Company's instructions or the Company's actions or omissions or (B) are
otherwise related to or
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<PAGE> 3
arise out of HMCo's engagement, and will reimburse each Indemnified Person for
all costs and expenses, including fees and disbursements of any Indemnified
Person's counsel, as they are incurred, in connection with investigating,
preparing for, defending, or appealing any action, formal or informal claim,
investigation, inquiry, or other proceeding, whether or not in connection with
pending or threatened litigation, caused by or arising out of or in connection
with HMCo's acting pursuant to the engagement, whether or not any Indemnified
Person is named as a party thereto and whether or not any liability results
therefrom. The Company will not, however, be responsible for any claims,
liabilities, losses, damages, or expenses pursuant to clause (B) of the
preceding sentence that have resulted primarily from HMCo's bad faith, gross
negligence, or willful misconduct. The Company also agrees that neither HMCo
nor any other Indemnified Person shall have any liability to the Company for or
in connection with such engagement except for any such liability for claims,
liabilities, losses, damages, or expenses incurred by the Company that have
resulted primarily from HMCo's bad faith, gross negligence, or willful
misconduct. The Company further agrees that it will not, without the prior
written consent of HMCo, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit, or proceeding in
respect of which indemnifications may be sought hereunder (whether or not any
Indemnified Person is an actual or potential party to such claim, action, suit,
or proceeding) unless such settlement, compromise, or consent includes an
unconditional release of HMCo and each other Indemnified Person hereunder from
all liability arising out of such claim, action, suit, or proceeding. THE
COMPANY HEREBY ACKNOWLEDGES THAT THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO
ANY CLAIMS, LIABILITIES, LOSSES, DAMAGES, OR EXPENSES THAT HAVE RESULTED FROM
OR ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT,
OR CONCURRENT ORDINARY NEGLIGENCE OF HMCO OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any rights that
HMCo and/or any other Indemnified Person may have at common law or otherwise
and shall remain in full force and effect following the completion or any
termination of the engagement. The Company hereby consents to personal
jurisdiction and to service and venue in any court in which any claim, which is
subject to this agreement, is brought against HMCo or any other Indemnified
Person.
It is understood that, in connection with HMCo's engagement, HMCo may
also be engaged to act for the Company in one or more additional capacities,
and that the terms of this engagement or any such additional engagement(s) may
be embodied in one or more separate written agreements. This indemnification
shall apply to the engagement specified in the first paragraph hereof as well
as to any such additional engagement(s) (whether written or oral) and any
modification of said engagement or such additional engagement(s) and shall
remain in full force and effect following the completion or termination of said
engagement or such additional engagement(s).
The Company further understands that if HMCo is asked to furnish the
Company a financial opinion letter or act for the Company in any other formal
capacity, such further action may be subject to a separate agreement containing
provisions and terms to be mutually agreed upon.
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<PAGE> 4
6. Confidential Information. In connection with the performance of
the services hereunder, HMCo agrees not to divulge any confidential
information, secret processes, or trade secrets disclosed by the Company to it
solely in its capacity as a financial advisor, unless the Company consents to
the divulging thereof or such information, secret processes, or trade secrets
are publicly available or otherwise available to HMCo without restriction or
breach of any confidentiality agreement or unless required by any governmental
authority or in response to any valid legal process.
7. Governing Law. This Agreement shall be construed, interpreted,
and enforced in accordance with the laws of the State of Texas, excluding any
choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained herein
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned
(other than with respect to the rights and obligations of HMCo, which may be
assigned to any one or more of its principals or affiliates) by any of the
parties without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended
to, any other counterpart.
10. Other Understandings. All discussions, understandings, and
agreements theretofore made between any of the parties hereto with respect to
the subject matter hereof are merged in this Agreement, which alone fully and
completely expresses the Agreement of the parties hereto. All calculations of
the Monitoring Fee and Reimbursable Expenses shall be made by HMCo and, in the
absence of mathematical error, shall be final and conclusive.
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<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
HICKS, MUSE & CO. PARTNERS, L.P.
By: HM PARTNERS INC.,
its General Partner
By: /s/ MICHAEL D. SALIM
---------------------------
Name: MICHAEL D. SALIM
-------------------------
Title: CHIEF FINANCIAL OFFICER
------------------------
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ PETER BRODSKY
----------------------------------
Name: PETER BRODSKY
--------------------------------
Title: SECRETARY
-------------------------------
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<PAGE> 6
EXHIBIT A
[Wire Transfer Instructions]
Texas Commerce Bank
ABA #: 113000609
Account #: 08805113824
Credit: Hicks, Muse & Co. Partners
Reference: Payment of [Monitoring Fees or Expenses]
by _____________________________.
<PAGE> 7
EXHIBIT B
PRO RATA SHARE OF ALLOCABLE EXPENDITURES AND RELATED DEFINITIONS
Pro Rata Share of Allocable Expenditures shall equal the product
obtained by multiplying (i) the sum of all Allocable Expenditures that have not
previously been paid or reimbursed to HMCo by the Company and other
Participating Acquired Companies, by (ii) a fraction, the numerator of which
shall equal the total amount of Invested Capital (as from time to time
outstanding) that any Fund has invested in the Company's securities or
instruments and the denominator of which shall equal the total amount of
Invested Capital (as from time to time outstanding) that any Fund has invested
in the securities or instruments of any and all Participating Acquired
Companies.
The capitalized terms used in the foregoing definitions have the
meanings set forth below:
Allocable Expenditures shall mean all variable, fixed, and other costs,
expenses, expenditures, charges, or obligations (including without limitation
letters of credit, deposits, etc.) that are related to assets utilized,
services provided, or programs administered by HMCo or its affiliates in
connection with the performance by HMCo of financial oversight and monitoring
services on behalf of the Company and other Participating Acquired Companies,
including without limitation corporate airplanes, charitable contributions,
retainers for lobbyists and other professionals, and premiums and finance
charges for director and officer insurance maintained for representatives of
HMCo or its affiliates.
Fund shall mean any one or more of the equity funds now or hereafter
sponsored by Hicks, Muse, Tate & Furst Incorporated or its successors,
including any LP Investment Entity (as defined in the limited partnership
agreement for any such equity fund) formed under or with respect to any such
equity fund.
Invested Capital shall mean the total amount of partner capital that a
Fund from time to time invests in the purchase of securities or instruments of
a Participating Acquired Company, less the total cash distributions that
constitute a return of such partner capital with proceeds from the disposition
of all or any part of such securities or instruments. For each period for
which the Pro Rata Share of Allocable Expenditures is being made, the
applicable Invested Capital shall equal the amount outstanding as of the end of
the respective period.
Participating Acquired Company shall mean any partnership, corporation,
trust, limited liability company, or other entity that is, for the period for
which the Pro Rata Share of Allocable Expenditures is being determined, a party
to a monitoring agreement or similar contract with HMCo or its affiliates and
is, as of the end of such period, designated by HMCo to bear a portion of such
allocable expenditures. HMCo may, in its sole and absolute discretion,
determine not to designate an entity as a Participating Acquired Company with
respect to such period. HMCo may make such
<PAGE> 8
determination of non-designation for no reason or for any reason, including
without limitation the respective entity's bankruptcy or other temporary or
permanent inability to pay fees or expenses to HMCo or its affiliates.
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 14th day of February, 1997 by and between Capstar Broadcasting Partners,
Inc., a Delaware corporation (together with its successors and assigns
permitted hereunder, the "Company"), and R. Steven Hicks (the "Executive").
WHEREAS, the Company has a need for executive management services;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its stockholders
to employ the Executive on the terms and conditions set forth herein; and
WHEREAS, the Company acknowledges that contemporaneously with the
execution and delivery of this Agreement, the Executive and GulfStar
Communications, Inc. ("GulfStar") are entering into a substantially similar
employment agreement (the "GulfStar Agreement") pursuant to which the Executive
will provide executive management services to GulfStar.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EMPLOYMENT PERIOD. Subject to Section 3, the Company hereby
agrees to employ the Executive, and the Executive hereby agrees to be employed
by the Company, in accordance with the terms and provisions of this Agreement,
for the period commencing as of July 1, 1996 and ending on December 31, 2001
(the "Employment Period"); provided, however, that commencing on December 31,
2001 and on each anniversary of such date occurring thereafter, the Employment
Period shall automatically be extended for one additional year unless at least
six months prior to the ensuing expiration date (but no more than 12 months
prior to such expiration date), the Company or the Executive shall have given
written notice that it or he, as applicable, does not wish to extend this
Agreement (a "Non-Renewal Notice"). The term "Employment Period", as utilized
in this Agreement, shall refer to the Employment Period as so automatically
extended.
2. TERMS OF EMPLOYMENT.
(a) Position and Duties.
(i) During the term of the Executive's employment, the
Executive shall serve as the Chairman of the Board, President, and Chief
Executive Officer of the Company and, in so doing, shall report to the Board.
The Executive shall have supervision and control over, and responsibility for,
such management and operational functions of the Company currently assigned
<PAGE> 2
to such positions, and shall have such other powers and duties (including
holding officer positions with the Company and one or more subsidiaries of the
Company) as may from time to time be prescribed by the Board, so long as such
powers and duties are reasonable and customary for the President and Chief
Executive Officer of an enterprise comparable to the Company.
(ii) During the term of the Executive's employment, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his business time
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully, effectively and
efficiently such responsibilities. During the term of Executive's employment
it shall not be a violation of this Agreement for the Executive to (1) serve on
corporate, civic or charitable boards or committees, (2) deliver lectures or
fulfill speaking engagements, (3) manage personal investments, and (4) devote a
portion of his business time to the performance of his duties and obligations
under the GulfStar Agreement, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement.
(b) Compensation.
(i) Base Salary. During the term of the Executive's
employment, the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid in accordance with the customary payroll
practices of the Company, at least equal to $250,000. Commencing on January 1,
1998, and on each subsequent January 1 as long as the Executive remains an
employee of the Company (each such January 1 being herein referred to as an
"Adjustment Date"), the Annual Base Salary of the Executive shall be increased
by an amount equal to five percent (5%) of the then current Annual Base Salary
or such greater amount as the Board in its discretion may determine appropriate
The result of such increase to the then current Annual Base Salary shall
constitute the Executive's Annual Base Salary commencing on the Adjustment Date
then at hand and continuing until the next Adjustment Date. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. The term Annual Base Salary as utilized in
this Agreement shall refer to Annual Base Salary as so increased.
(ii) Bonuses. For each fiscal year of the Company, the
Board shall approve a budget which shall include, among other things, a target
for the revenues and net income of the Company for that year. If the revenues
and net income for a fiscal year of the Company equal or exceed the targets for
such revenues and net income as set forth in the budget, as evidenced by the
audited income statement of the Company for such fiscal year, then, in addition
to the Annual Base Salary, the Executive shall be awarded an annual performance
bonus in such amount, if any, as shall be determined appropriate by the Board.
At the election of the Board, the Bonus shall be payable on the first day of
the first calendar month after such audited income statement is delivered to
the Board or shall be payable in monthly payments, as nearly equal as
practicable, payable on the first
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<PAGE> 3
day of such first calendar month and on the first day of each calendar month
thereafter occurring during the remainder of the fiscal year next succeeding
the fiscal year with respect to which the bonus is payable.
(iii) Incentive, Savings and Retirement Plans. During
the term of the Executive's employment, the Executive shall be entitled to
participate in all incentive, savings and retirement plans, practices, policies
and programs applicable generally to other executives of the Company
("Investment Plans").
(iv) Welfare Benefit Plans. During the term of the
Executive's employment, the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and programs
("Welfare Plans") provided by the Company (including, without limitation,
medical, prescription, dental, disability, salary continuance, employee life,
group life, accidental death and travel accident insurance plans and programs)
to the extent applicable generally to other executives of the Company.
(v) Automobile Allowance. During the term of the
Executive's employment, the Executive shall be entitled to receive a monthly
automobile allowance equal to $750, which shall be paid monthly in accordance
with the customary practices of the Company.
(vi) Perquisites. During the term of the Executive's
employment, the Executive shall be entitled to receive (in addition to the
benefits described above) such perquisites and fringe benefits appertaining to
his position in accordance with any practice established by the Board.
(vii) Expenses. During the term of the Executive's
employment, the Executive shall be entitled to receive prompt reimbursement for
all reasonable employment expenses incurred by the Executive in accordance with
the policies, practices and procedures of the Company.
(viii) Vacation and Holidays. During the term of the
Executive's employment, the Executive shall be entitled to paid vacation and
paid holidays in accordance with the plans, policies, programs and practices of
the Company for its executive officers. Each vacation day taken by the
Executive under the terms of the GulfStar Agreement shall be counted as a
vacation day under the plans, policies, programs and practices of the Company.
(ix) Stock Options. In addition to any benefits the
Executive may receive pursuant to paragraph 2(b)(iii), as may be determined
appropriate by the Board, Capstar may, from time to time, grant Executive stock
options (the "Executive Options") exercisable for shares of common stock, par
value $.01 per share, of Capstar and subject to the terms of this Agreement,
such Executive Options shall have such terms and provisions as may be
determined appropriate by the
3
<PAGE> 4
Board. Any such Executive Options will be granted under Capstar's 1996 Stock
Option Plan (the "Stock Option Plan").
3. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment
Period. If the Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth below), the Company
may give to the Executive written notice in accordance with Section 11(b) of
its intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties.
For purposes of this Agreement, "Disability" shall mean the Executive's
inability to perform his duties and obligations hereunder for a period of 180
consecutive days due to mental or physical incapacity as determined by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably).
(b) Cause or Board Termination. The Company may terminate the
Executive's employment during the Employment Period for Cause or without Cause.
For purposes of this Agreement, "Cause" shall mean (i) a breach by the
Executive of the Executive's obligations under Section 2(a) (other than as a
result of physical or mental incapacity) which constitutes a continued material
nonperformance by the Executive of his obligations and duties thereunder, as
reasonably determined by the Board, and which is not remedied within 30 days
after receipt of written notice from the Company specifying such breach, (ii)
commission by the Executive of an act of fraud upon, or willful misconduct
toward, the Company, as reasonably determined by a majority of the
disinterested members of the Board (neither the Executive nor members of his
family being deemed disinterested for this purpose) after a hearing by the
Board following ten days' notice to the Executive of such hearing, (iii) a
material breach by the Executive of Section 6 or Section 9, (iv) the conviction
of the Executive of any felony (or a plea of nolo contendere thereto); or (v)
the failure of the Executive to carry out, or comply with, in any material
respect any directive of the Board consistent with the terms of this Agreement,
which is not remedied within 30 days after receipt of written notice from the
Company specifying such failure. For purposes of this Agreement, a "Board
Determination" shall mean a determination by the Board (which is evidenced by
one or more written resolutions to such effect) (i) to terminate the
Executive's employment during the Employment Period based upon the Board's
dissatisfaction with the manner in which the Executive has performed his
obligations and duties under Section 2(a) and (ii) that Cause does not exist as
a basis for such termination. For purposes of this Agreement, "without Cause"
shall mean a termination by the Company of the Executive's employment during
the Employment Period pursuant to a Board
4
<PAGE> 5
Determination or for any other reason other than a termination based upon
Cause, death or Disability.
(c) Good Reason. The Executive's employment may be terminated
during the Employment Period by the Executive for Good Reason or without Good
Reason; provided, however, that the Executive agrees not to terminate his
employment for Good Reason unless (i) the Executive has given the Company at
least 30 days' prior written notice of his intent to terminate his employment
for Good Reason, which notice shall specify the facts and circumstances
constituting Good Reason, and (ii) the Company has not remedied such facts and
circumstances constituting Good Reason within such 30-day period. For purposes
of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2(a) or any other action by the
Company which results in a material diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive (without limiting the foregoing, the Company and the Executive agree
that the delegation of the authority, duties or responsibilities of the
Executive to another person or persons, including any committee, shall be
deemed to be an action by the Company which results in a material diminution in
the Executive's position, authority, duties, or responsibilities as
contemplated by Section 2(a)), provided, however, that Good Reason may not be
asserted by the Executive under this clause (i) of Section 3(c) after a
Non-Renewal Notice has been given by either the Company or the Executive;
(ii) any termination or material reduction of a material
benefit under any Investment Plan or Welfare Plan in which the Executive
participates unless (1) there is substituted a comparable benefit that is
economically substantially equivalent to the terminated or reduced benefit
prior to such termination or reduction or (2) benefits under such Investment
Plan or Welfare Plan are terminated or reduced with respect to all employees
previously granted benefits thereunder;
(iii) any failure by the Company to comply with any of
the provisions of Section 2(b), other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(iv) any failure by the Company to comply with and
satisfy Section 8(c), provided that such successor has received at least ten
days prior written notice from the Company or the Executive of the requirements
of Section 8(c);
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<PAGE> 6
(v) the relocation or transfer of the Executive's
principal office to a location more than 20 miles from the Company's current
executive offices as such are maintained on the date hereof in the city of
Austin, Texas; or
(vi) without limiting the generality of the foregoing,
any material breach by the Company or any of its subsidiaries or other
affiliates (as defined below) of (1) this Agreement or (2) any other agreement
between the Executive and the Company or any such subsidiary or other
affiliate.
As used in this Agreement, "affiliate" means, with respect to a person,
any other person controlling, controlled by or under common control with the
first person; the term "control," and correlative terms, means the power,
whether by contract, equity ownership or otherwise, to direct the policies or
management of a person; and "person" means an individual, partnership,
corporation, limited liability company, trust or unincorporated organization,
or a government or agency or political subdivision thereof.
(d) Notice of Termination. Any termination by the Company for
Cause or without Cause, or by the Executive for Good Reason or without Good
Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 11(b). For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall not be more than 15 days after the giving of
such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of the Executive or the
Company hereunder or preclude the Executive or the Company from asserting such
fact or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason or without Good Reason, the date of receipt of the
Notice of Termination or any later date specified therein pursuant to Section
3(d), as the case may be, (ii) if the Executive's employment is terminated by
the Company other than for Cause, the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the date of death of the Executive
or the Disability Effective Date, as the case may be.
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<PAGE> 7
4. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Good Reason; Other Than for Cause, Death or Disability.
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for either Cause or Disability or the Executive shall
terminate his employment for Good Reason, and the termination of the
Executive's employment in any case is not due to his death or Disability:
(i) The Company shall pay to the Executive in a lump
sum in cash within ten days after the Date of Termination the aggregate of the
following amounts: (1) the sum of the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid and any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay ("Accrued Obligations"); (2) the
sum of two times the Executive's then current Annual Base Salary; and (3) any
amount arising from Executive's participation in, or benefits under, any
Investment Plans ("Accrued Investments"), which amounts shall be payable in
accordance with the terms and conditions of such Investment Plans.
(ii) Except as otherwise provided in Section 4(d), the
Executive (and members of his family) shall be entitled to continue their
participation in the Company's Welfare Plans for a period of 24 months from the
Date of Termination.
(iii) Notwithstanding the terms or conditions of any
Executive Option or other similar stock option, stock appreciation right or
similar agreements between the Company and the Executive, the Executive shall
vest, as of the Date of Termination, in all rights under such agreements (i.e.,
Executive Options that would otherwise vest after the Date of Termination) and
thereafter shall be permitted to exercise any and all such rights until the
earlier to occur of (x) the expiration of such Executive Option, stock option,
stock appreciation right or similar agreement pursuant to its terms or (y) 5:00
p.m., Dallas, Texas time, on the 90th day after the Date of Termination;
provided, however, the provisions of this clause (iii) of this Section 4(a)
shall not apply to a termination of the Executive's employment during the
Employment Period that is made by the Company pursuant to a Board
Determination.
(b) Death or Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall pay to his legal representatives (i) in a
lump sum in cash within ten days after the Date of Termination the aggregate of
the following amounts: (A) an amount equal to the Executive's then current
Annual Base Salary; and (B) the Accrued Obligations; and (ii) the Accrued
Investments which shall be payable in accordance with the terms and conditions
of the Investment Plans. In addition, except as otherwise provided in Section
4(d), the members of the Executive's family shall be entitled to continue their
participation in the Company's Welfare Plans for a period of 12 months after
the Date of Termination. Further, notwithstanding the terms or conditions of
any Executive Options, stock option, stock appreciation right or similar
agreements between the Company and the Executive, the
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<PAGE> 8
Executive shall vest, as of the Date of Termination, in all rights under such
agreements (i.e., Executive Options, stock options that would otherwise vest
after the Date of Termination) and thereafter his legal representatives shall
be permitted to exercise any and all such rights until the earlier to occur of
(x) the expiration of such Executive Option, stock option, stock appreciation
right or similar agreement pursuant to its terms or (y) the first anniversary
of the Date of Termination. The Company shall have no further payment
obligations to the Executive or his legal representatives under this Agreement.
(c) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated by the Company for Cause or by the Executive
without Good Reason during the Employment Period, the Company shall have no
further payment obligations to the Executive other than for payment of Accrued
Obligations, Accrued Investments (which shall be payable in accordance with the
terms and conditions of the Investment Plans), and the continuance of benefits
under the Welfare Plans to the Date of Termination.
(d) If pursuant to the terms and provisions of the Company's
Welfare Plans the Executive (or members of his family) are not eligible to
participate in the Company's Welfare Plans because the Executive is no longer
an employee of the Company, then the Company may fulfill its obligations under
clause (ii) of Section 4(a) or Section 4(b), as applicable, by either providing
to the Executive (or his legal representatives), or reimbursing the Executive
(or his legal representatives) for the costs of, benefits substantially similar
to the benefits provided by the Company to its senior management under its
Welfare Plans as such may from time to time exist after the Date of
Termination.
5. FULL SETTLEMENT, MITIGATION. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the provisions
of this Agreement and such amounts shall not be reduced whether or not the
Executive obtains other employment. Neither the Executive nor the Company
shall be liable to the other party for any damages in addition to the amounts
payable under Section 4 arising out of the termination of the Executive's
employment prior to the end of the Employment Period; provided, however, that
the Company shall be entitled to seek damages for any breach of Sections 6, 7
or 9 or criminal misconduct.
6. CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that the Company and their
affiliates have trade, business and financial secrets and other confidential
and proprietary information (collectively, the "Confidential Information"). As
defined herein, Confidential Information shall not include (i) information that
is generally known to other persons or entities who can obtain economic value
from its disclosure or use and (ii) information required to be disclosed by the
Executive pursuant to a subpoena or court order, or pursuant to a requirement
of a governmental agency or law of the
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United States of America or a state thereof or any governmental or political
subdivision thereof; provided, however, that the Executive shall take all
reasonable steps to prohibit disclosure pursuant to subsection (ii) above.
(b) The Executive agrees (i) to hold such Confidential
Information in confidence and (ii) not to release such information to any
person (other than Company employees and other persons to whom the Company has
authorized the Executive to disclose such information and then only to the
extent that such Company employees and other persons authorized by the Company
have a need for such knowledge).
(c) The Executive further agrees not to use any Confidential
Information for the benefit of any person or entity other than the Company.
7. SURRENDER OF MATERIALS UPON TERMINATION. Upon any termination of
the Executive's employment, the Executive shall immediately return to the
Company all copies, in whatever form, of any and all Confidential Information
and other properties of the Company and their affiliates which are in the
Executive's possession, custody or control.
8. SUCCESSORS.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
9. NON-COMPETITION.
(a) The term of Non-Competition (herein so called) shall be
for a term beginning on the date hereof and continuing until (i) if this
Agreement is terminated during the Employment Period by either the Company or
the Executive for any reason, the first anniversary of the Date of
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Termination or (ii) if the Employment Period expires by reason of a Non-Renewal
Notice, the last day of the Employment Period.
(b) During the term of Non-Competition, the Executive will not
(other than for the benefit of the Company pursuant to this Agreement) directly
or indirectly, individually or as an officer, director, employee, shareholder,
consultant, contractor, partner, joint venturer, agent, equity owner or in any
capacity whatsoever, (i) engage in any radio broadcasting business that
transmits a primary or city-grade signal within a Metro Survey Area (as
currently defined by The Arbitron Company in its Radio Markets Reports) in
which a station directly operated by the Company transmits a primary or city-
grade signal (1), with respect to the term of Non-Competition that is during
the Executive's employment, during such term of employment, and (2), with
respect to the term of Non-Competition that is after the term of the
Executive's employment, on the Date of Termination (all such areas being
collectively called the "Geographic Area") (a "Competing Business"), (ii) hire,
attempt to hire, or contact or solicit with respect to hiring any employee of
the Company, or (iii) divert or take away any customers or suppliers of the
Company in the Geographic Area. Notwithstanding the foregoing, the Company
agrees that the Executive may own less than five percent of the outstanding
voting securities of any publicly traded company that is a Competing Business
so long as the Executive does not otherwise participate in such competing
business in any way prohibited by the preceding clause. As used in this
Section 9(b) (and in Section 6), "Company" shall include the Company and any of
its subsidiaries.
(c) During the term of Non-Competition, the Executive will not
use the Executive's access to, knowledge of, or application of Confidential
Information to perform any duty for any Competing Business; it being understood
and agreed to that this Section 9(c) shall be in addition to and not be
construed as a limitation upon the covenants in Section 9(b) hereof.
(d) The Executive acknowledges that the geographic boundaries,
scope of prohibited activities, and time duration of the preceding paragraphs
are reasonable in nature and are no broader than are necessary to maintain the
confidentiality and the goodwill of the Company's proprietary information,
plans and services and to protect the other legitimate business interests of
the Company.
10. EFFECT OF AGREEMENT ON OTHER BENEFITS. The existence of this
Agreement shall not prohibit or restrict the Executive's entitlement to full
participation in the executive compensation, employee benefit and other plans
or programs in which executives of the Company are eligible to participate.
11. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to
principles of conflict of laws. The captions of this
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Agreement are not part of the provisions hereof and shall have no force or
effect. Whenever the terms "hereof", "hereby", "herein", or words of similar
import are used in this Agreement they shall be construed as referring to this
Agreement in its entirety rather than to a particular section or provision,
unless the context specifically indicates to the contrary. Any reference to a
particular "Section" or "paragraph" shall be construed as referring to the
indicated section or paragraph of this Agreement unless the context indicates
to the contrary. The use of the term "including" herein shall be construed as
meaning "including without limitation." This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: R. Steven Hicks
Capstar Broadcasting Partners, Inc.
600 Congress Avenue, Suite 1400
Austin, Texas 78701
If to the Company: Capstar Broadcasting Partners, Inc.
200 Crescent Court, Suite 1600
Dallas, Texas 75201 Attn: Lawrence
D. Stuart, Jr.
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
of this Agreement, such provision shall be fully severable; this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a portion of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall
not be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal, invalid
or unenforceable provision there shall be added automatically as part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
(d) The Company agrees to attempt to obtain and maintain a
director's and officer's liability insurance policy during the term of the
Executive's employment covering the Executive on commercially reasonable terms,
and the amount of coverage shall be reasonable in relation to the Executive's
position and responsibilities hereunder; provided, however, that such
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coverage may be reduced or eliminated to the extent that the Company reduces or
eliminates coverage for its directors and executives generally.
(e) The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(g) The Executive acknowledges that money damages would be
both incalculable and an insufficient remedy for a breach of Section 6 or 9 by
the Executive and that any such breach would cause the Company irreparable
harm. Accordingly, the Company, in addition to any other remedies at law or in
equity it may have, shall be entitled, without the requirement of posting of
bond or other security, to equitable relief, including injunctive relief and
specific performance, in connection with a breach of Section 6 or 9 by the
Executive.
(h) The provisions of this Agreement constitute the complete
understanding and agreement between the parties with respect to the subject
matter hereof.
(i) This Agreement may be executed in two or more
counterparts.
(j) In the event any dispute or controversy arises under this
Agreement and is not resolved by mutual written agreement between the Executive
and the Company within 30 days after notice of the dispute is first given,
then, upon the written request of the Executive or the Company, such dispute or
controversy shall be submitted to arbitration to be conducted in accordance
with the rules of the American Arbitration Association. Judgment may be
entered thereon and the results of the arbitration will be binding and
conclusive on the parties hereto. Any arbitrator's award or finding or any
judgment or verdict thereon will be final and unappealable. All parties agree
that venue for arbitration will be in Dallas, Texas, and that any arbitration
commenced in any other venue will be transferred to Dallas, Texas, upon the
written request of any party to this Agreement. All arbitrations will have
three individuals acting as arbitrators: one arbitrator will be selected by
the Executive, one arbitrator will be selected by the Company, and the two
arbitrators so selected will select a third arbitrator. Any arbitrator
selected by a party will not be affiliated, associated or related to the party
selecting that arbitrator in any matter whatsoever. The decision of the
majority of the arbitrators will be binding on all parties. The Company shall
be responsible for paying its own and the Executive's attorneys fees, costs and
other expenses pertaining to any such arbitration and enforcement regardless of
whether an arbitrator's award or finding or any judgment or verdict thereon is
entered
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against the Executive. The Company shall promptly (and in no event after ten
days following its receipt from the Executive of each written request therefor)
reimburse the Executive for his reasonable attorneys fees, costs and other
expenses pertaining to any such arbitration and the enforcement thereof.
(k) Sections 6 and 9 of this Agreement shall survive the
termination of this Agreement.
(l) The Company and the Executive acknowledge that the
Employment Period hereunder commenced as of July 1, 1996 and that no default
exists hereunder on the part of either the Company or the Executive as to their
respective obligations hereunder for the time period occurring prior to the
date of this Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
EXECUTIVE
/s/ R. STEVEN HICKS
-----------------------------------
R. Steven Hicks
CAPSTAR BROADCASTING PARTNERS, INC.
/s/ PAUL D. STONE
-----------------------------------
By: PAUL D. STONE
----------------------------------
Title: CHIEF FINANCIAL OFFICER
-------------------------------
<PAGE> 1
EXHIBIT 10.13
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement"), dated
as of October , 1996, is made by and among Commodore Media, Inc., a
Delaware corporation, (the "Company"), Capstar Broadcasting Partners, Inc.,
and Mr. James T. Shea, Jr. (the "Executive").
WHEREAS, effective as of October 16, 1996 ("Closing Date") and pursuant to
a Plan and Agreement of Merger dated as of June 21, 1996, entered into by and
among CMI Acquisition Company, Inc., the Company and certain designated
shareholders (the "Merger Agreement"), CMI Acquisition Company, Inc. has been
merged into the Company which now continues as the surviving corporation;
WHEREAS, effective as of the Closing Date and pursuant to the Merger
Agreement, Capstar Broadcasting Partners, Inc. has acquired a controlling
interest in the Company and hereby enters into this Agreement for the sole
purpose of confirming to the Executive that Capstar Broadcasting Partners, Inc.
agrees to cause the Company to abide by the terms and conditions of this
Agreement;
WHEREAS, prior to the Closing Date, the Executive has served as the Chief
Operating Officer of the Company pursuant to the terms of the Employment
Agreement dated as of March 23, 1992, as amended on May 31, 1994, and as
amended and restated April 21, 1995 ("Prior Agreement"), and the Executive has
acquired special and unique knowledge, abilities and expertise with respect to
the business of the Company;
WHEREAS, since the Company desires to continue to employ the Executive
after the Closing Date and for the Executive to serve as the President of the
Company, the parties hereto deem it necessary and desirable to amend and
restate the Prior Agreement to memorialize the terms and conditions of the
Executive's employment with the Company after the Closing Date.
NOW THEREFORE, in consideration of the promises and mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
adequacy of which are hereby acknowledged, the parties agree to the following:
1. Definitions.
"Annual Base Salary" shall mean the annual salary payable to Executive
pursuant to Section 5.1 hereof from time to time in effect during the Term of
Employment.
"Annual Incentive" shall have the meaning set forth in Section 5.2(a)
<PAGE> 2
hereof.
"Board" shall mean the Board of Directors of the Company.
"Cause" means (i) the commission by Executive of a felony, fraud,
embezzlement or an act of serious, criminal moral turpitude which, in case of
any of the foregoing, is reasonably likely to cause material harm to the
business of the Company or any Company Affiliate, (ii) the commission of an act
by Executive constituting material financial dishonesty against the Company or
any Company Affiliate, (iii) the repeated refusal by Executive to use his
reasonable and diligent efforts to follow the lawful and reasonable directives
(in light of the terms of this Agreement) of the Board with respect to a matter
or matters within the control of Executive, provided that, if such breach
described in this clause (iii) is curable, Executive will, subject to the
following proviso, be given written notice ( a "default notice") of such breach
and will be given an opportunity to cure such breach to the reasonable
satisfaction of the Board with thirty (30) days of receipt of such written
notice, and provided further that Executive will only be entitled to cure two
such defaults during the Term of Employment, or (iv) Executive's willful gross
neglect in carrying out his duties and responsibilities under this Agreement,
provided that, if such breach described in this clause (iv) is not likely to
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole, Executive will, subject to the following proviso, be given a default
notice of such breach and will be given an opportunity to cure such breach to
the reasonable satisfaction of the Board within thirty (30) days of receipt of
such written notice, and provided, further, that Executive will only be
entitled to cure two such defaults during the Term of Employment.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commencement Date" shall have the meaning set forth in Section 3
hereof.
"Company Affiliate" shall mean any Person directly or indirectly
controlling, controlled by, or under common control with, the Company.
"Confidential Information" shall have the meaning set forth in Section 7
hereof.
"Date of Termination" shall mean the earlier of (a) the date of
termination, if any, specified in the Notice of Termination (which date shall
not be earlier than the date of receipt of such Notice of Termination ) or (b)
the date on which Executive's employment under its Agreement actually
terminates.
"Disability" shall mean Executive's inability to perform his duties and
responsibilities under this Agreement for a period of more than 180 days in any
twelve month period during the Term of Employment due to physical or mental
incapacity or impairment. A determination of Disability will be made by a
physician satisfactory to
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both Executive (or his personal representative) and the Company; provided that
if Executive (or such representative) and the Company cannot agree as to a
physician, then each will select a physician and such physicians shall together
select a third physician, whose determination as to Disability shall be
completed within ten (10) days of the date on which the disagreement between
Executive (or such representative) and the Company arose and the decision of
such third physician will be final and binding on Executive and the Company.
Executive (or his personal representative) and the Company shall have the right
to present to such physician such information and arguments as each deems
appropriate, including the opinion of other physicians.
"Effective Date" shall mean the Closing Date.
"GAAP" shall mean United States generally accepted accounting principles
as in effect on the date hereof and on a basis consistent with such principles
applied in the preparation of the Company's financial statements.
"Good Reason" shall be deemed to exist if, without the express written
consent of Executive, (a) Executive's rate of Annual Base Salary (as provided
in Section 5.1 of this Agreement) is reduced, (b) Executive suffers a
substantial reduction in his title, duties and responsibilities; provided,
however, that Good Reason shall not be deemed to exist if the Company employs
any person to fulfill Executive's duties hereunder during the 180-day period
referred to in the definition "Disability," (c) Executive is required to
provide services to the Company on a regular basis at a location outside the
geographic area described in Section 5.8 hereof, (d) the Company fails to pay
any amount in excess of $1,000 due to Executive hereunder within thirty (30)
days of written notice from Executive, or (e) the Company breaches in any
material respect of any of its material obligations pursuant to this Agreement
(other than a payment obligation covered by (d) above), provided that if such
breach described in this clause (e) is curable, the Company will, subject to
the following proviso, be given written notice of such breach and will be given
an opportunity to cure such breach to the reasonable satisfaction of Executive
within thirty (30 ) days of receipt of such written notice, and provided
further that the Company will only be entitled to cure two such breaches during
the Term of Employment.
"Noncompete Period" shall have the meaning set forth in Section 8(a)
hereof.
"Notice of Termination" shall have the meaning set forth in Section 6.4
hereof.
"Person" shall mean any natural or legal person including any
individual, partnership, joint venture, corporation, association, joint stock
company, limited liability company, trust, unincorporated organization or
government or any department or agency or political subdivision thereof.
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"Prior Agreement" shall have the meaning set forth in the recitals
hereof.
"Subsidiary" shall mean, with respect to any Person, a corporation of
which the securities having a majority of the voting power in electing
directors are, at the time of determination, owned by such Person, directly or
through one or more Subsidiaries.
"Term of Employment" shall have the meaning set forth in Section 3
hereof.
2. Employment. During the Term of Employment, subject to the terms and
provisions set forth in this Agreement, the Company shall employ the Executive
as its President and Executive hereby accepts such employment.
3. Term of Employment. The term of employment under this Agreement shall
commence as of the Effective Date (the "Commencement Date") and, unless earlier
terminated by the Company or Executive under Section 6 of this Agreement, shall
continue until April 30, 1999 (the "Term of Employment"). Notwithstanding the
foregoing, the Company and Executive may mutually agree to extend the term of
this Agreement, in which event all references herein to April 30, 1999 shall be
replaced with such mutually agreed upon extended date.
4. Positions, Responsibilities and Duties.
4.1 Duties. During the Term of Employment, the Executive, as President
of the Company, shall report to Steven Hicks and shall be responsible, subject
to the direction of the Board, for the day-to-day operations of the Company and
for such other duties and functions as may be directed from time to time by the
Board; provided that such duties and functions are reasonable and customary for
a President of a corporation engaged in the same industry as the Company and do
not materially extend the scope of the Executive's regular duties.
4.2 Attention to Duties and Responsibilities. During the Term of
Employment, Executive shall devote substantially all of his business time to
the business and affairs of the Company and shall use his best efforts and
ability to perform faithfully and efficiently his duties and responsibilities;
provided, however, that Executive shall be allowed, to the extent that such
activities do not interfere in any material respect with the performance by
Executive of his duties and responsibilities under this Agreement and do not
otherwise involve a material amount of his time, (i) to manage his personal
affairs and to serve on the boards of directors, advisory boards or committees
of, or otherwise participate in, civic or charitable organizations, trade
associations or not-for-profit corporations, (ii) with the prior written
approval of the Board, serve on the board of directors, advisory board or
committee of any for-profit corporation, and (iii) to write for publications or
speak publicly.
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5. Compensation and Related Matters.
5.1 Annual Base Salary. During the Term of Employment, as compensation
for the services to be provided by Executive under this Agreement, the Company
shall pay Executive an Annual Base Salary of Two Hundred Sixty Two Thousand
Five Hundred Dollars ($262,500), which shall be increased (but not decreased)
at the commencement of each calendar year by an amount which shall not be less
than (but, in the sole discretion of the Board, may be more than) five percent
(5%) of the Annual Base Salary in effect immediately prior to such increase.
The Annual Base Salary shall be payable in equal installments every two weeks.
5.2 Annual Incentive.
(a) Calculation of Annual Incentive. Subject to Section 6 hereof,
Executive shall be entitled to receive an annual incentive payment (the "Annual
Incentive") for each year or portion thereof during the Term of Employment.
For each calendar year or portion thereof during the Term of Employment ending
after December 31, 1995, the Annual Incentive percentages, targets, limits and
other factors shall be determined in good faith by the Board (after
consultation with the Executive) to provide the Executive with a reasonable
opportunity no less favorable to the Executive to earn a reasonable amount, no
less than One Hundred Fifty Thousand Dollars ($150,000.00), the amount that had
been available as the Annual Incentive for the period ending December 31, 1995.
The Executive shall make a proposal to the Board of such percentages, targets,
limits and other factors no later than fifteen (15) days after the commencement
of the calendar year or portion thereof to which they will relate, and the
Board, in consultation with the Executive, shall determine and adopt such
percentages, targets, limits and other factors as it deems advisable and notify
Executive of the same no later than forty-five (45) days after such
commencement. If Executive and the Company are unable to agree on the Annual
Incentive percentages, targets, limits and/or other factors, the dispute
between the parties shall be submitted to arbitration in accordance with
Section 10 hereof.
(b) Payment of Annual Incentive. The Annual Incentive shall be due
and payable by the Company as follows:
(i) On October 15 of each calendar year commencing on October
15, 1996, the Company shall make a good faith estimate of the Annual
Incentive to be paid to Executive in respect of such calendar year
(or portion thereof) and shall provide Executive with a written copy
thereof, together with such supporting information as executive may
reasonably request. The Company shall, with fifteen (15) days
thereof, pay to Executive an amount in cash equal to one-third of
such estimate.
(ii) On January 15 of each calendar year commencing on January
15, 1997, the Company shall make a good faith
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estimate of the Annual Incentive to be paid to Executive in
respect of the prior calendar year (or portion thereof) and shall
provide Executive with a written copy thereof, together with such
supporting information as Executive may reasonably request. The
Company shall, within fifteen (15) day thereof, pay to Executive an
amount in cash equal to the difference between (a) two-thirds of
such estimate and (B) the amount previously paid to Executive
pursuant to clause (i) above.
(iii) Within fifteen (15) days after the delivery by the
Company's accountants to the Company of the Company's audited
financial statements for the prior calendar year but in any event no
later than April 15 of such calendar year commencing with April 15,
1997, the Company shall finally determine the total Annual Incentive
to be paid to Executive for the prior calendar year (or portion
thereof) and pay to Executive the remaining portion, if any, of such
Annual Incentive and shall provide Executive with a written copy of
such final determination, together with such supporting information
as Executive may reasonably request.
The Annual Incentive shall be calculated by the Company's accountants in
accordance wit GAAP. In the event that the payments made under clauses (i) and
(ii) of this Section 5.2(b) are, in aggregate, in excess of the total amount
finally determined under clause (iii) of the Section 5.2(b) to be due to
Executive in respect of the Annual Incentive for a calendar year (or portion
thereof), Executive shall repay such excess to the Company within thirty (30)
days of such notice. If Executive fails to repay such excess in full within
such thirty-day period, in addition to any other remedy that may be available
to the Company by law or under this Agreement, the Company shall have the right
to withhold any payments due to Executive hereunder in an amount up to, and to
offset such withheld payments against, such excess.
5.3 Retirement and Savings Plan. During the Term of Employment,
Executive shall be entitled to participate in all pension, retirement, savings
and other employee benefit plans and programs, if any, generally applicable to
employees or available to executives of the Company in accordance with the terms
of such plans and programs.
5.4 Welfare Benefit Plans. During the Term of Employment, Executive,
Executive's spouse, if any, and the Executive's eligible dependents, if any,
shall be entitled top participate in and be covered by all welfare benefit
plans and programs, if any, generally applicable to employees or available to
executives of the Company in accordance with the terms of such plans and
programs.
5.5 Expense Reimbursement. During the Term of Employment, the Executive
shall be entitled to receive reimbursement for all reasonable expenses incurred
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by the Executive in performing his duties and responsibilities hereunder in
accordance with the policies and procedures of the Company as in effect at the
time the expense was incurred, as the same may be changed prospectively from
time to time.
5.6 Vacation Benefits. During the Term of Employment, Executive shall
be entitled to four weeks paid vacation annually at such times which do not
materially interfere with the operations of the Company.
5.7 Car Allowance. During the Term of Employment, the Company shall pay
the lease payments with respect to an automobile leased by Executive in amount
not to exceed $600 per month and shall reimburse Executive for any and all of
his reasonable expenses in respect of such automobile including but not limited
to insurance costs.
5.8 Geographic Location. Executive's services are now rendered and,
during the Term of Employment, shall continue to be rendered hereunder
primarily in (a) New York City, (b) at any location between Manhattan and lower
Fairfield County (including lower Fairfield County), (c)Allentown,
Pennsylvania, or (d) such other location mutually agreed to by the Company and
Executive.
5.9 Life Insurance. As of the Effective Date, the Company shall obtain
or continue the life insurance policy obtained by the Company prior to the
Merger under the Prior Agreement, until the earlier to occur of (i) April 21,
2005 or (ii) the death of Executive, and the Company shall maintain and pay all
premiums payable under, a ten-year term life insurance policy on Executive's
life with a nationally recognized and reputable carrier of insurance reasonably
acceptable to Executive for the benefit of the Company which policy provides (a)
that such carrier of insurance shall provide the Company and Executive with
thirty (30) days prior written notice of any cancellation of such policy and (b)
subject to the proviso immediately below, Six Hundred Fifty Thousand Dollars
($650,000) of life insurance; provided, however, that in no event shall the
Company be required to pay annual premiums in excess of One Thousand Dollars
($1,000) for any such life insurance policy. The Company's obligation under
this Section 5.9 shall survive any termination of Executive's employment under
this Agreement and the termination of this Agreement regardless of the
circumstances of such termination.
5.10 Option Plan. On and after the Effective Date, the Executive shall
participate in the Capstar Broadcasting Partners, Inc. 1996 Stock Option Plan,
in substantially the form attached hereto as Exhibit A, (the "Option Plan")
and, in connection therewith, the Executive shall be granted, as soon as
practicable after execution of this Agreement, options under the Option Plan to
purchase an aggregate of 549,500 shares of common stock, par value $.01 per
share, of Capstar Broadcasting Partners, Inc. at an exercise price of $1.00 per
share, with the grant of such options to be memorialized in written option
grant agreements, in substantially the forms attached hereto as Exhibit B. The
options granted to the Executive under this Section 5.10 shall be
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subject to the terms and conditions of the Option Plan and the written option
grant agreements memorializing the grant of such options to the Executive
thereunder.
6. Termination. Executive's employment hereunder shall terminate
automatically on April 30, 1999. Executive's employment hereunder may be
terminated prior to April 30, 1999 under the following circumstances:
6.1 Termination Due Death, Disability, Without Cause or for Good Reason.
(a) Upon sixty (60) days' prior written notice to Executive, the
Company may terminate Executive's employment under this Agreement without
Cause.
(b) Upon thirty (30) days' prior written notice to the Board,
Executive may terminate his employment under this Agreement for Good
Reason and such notification shall specify the act, or acts, on the basis of
which Executive has found Good Reason. The Board shall then be provided the
opportunity, within twenty (20) days of its receipt of such notification, to
meet with Executive to discuss such act or acts. If Executive does not rescind
his termination of employment at such meeting, Executive's employment by the
Company shall be terminated for Good Reason pursuant to this Section 6.1(b),
subject to the Company's right to seek arbitration of the existence of Good
Reason as provided in Section 11 of this Agreement.
(c) In the event of Executive's death, or a termination of
Executive's employment under this Agreement by either the Company or Executive
due to Disability, or a termination by the Company of Executive's employment
under this Agreement without Cause, or a termination by Executive of Executive's
employment under this Agreement for Good Reason, the Term of Employment shall
end and, notwithstanding Section 5 hereof, Executive, his estate or other legal
representative, as the case may be, shall only be entitled to:
(i) the continuation of the Annual Base Salary at the rate then
in effect (as provided in Section 5.1 of this Agreement) on the Date of
Termination for a period equal to (A) if the Date of Termination occurs
after the April 21, 1998 but prior to April 30, 1999, a twelve month
period commencing on such Date of Termination or (B) if the Date of
Termination occurs prior to April 21, 1998, the lesser of (x) a
twenty-four month period commencing on such Date of Termination and (y)
the period commencing on such Date of Termination and ending on April 30,
1999;
(ii) the pro rata amount of Annual Incentive due for the
calendar year (or portion thereof) in which the Date of Termination
occurs (based upon the number of days elapsed in such calendar year or
portion thereof prior to
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<PAGE> 9
such Date of Termination);
(iii) any Annual Base Salary accrued to the Date of Termination
and any Annual Incentive relating to a prior year (or portion
thereof) due in accordance with this Agreement, but not yet paid as
of the Date of Termination;
(iv) reimbursement for all expenses reimbursable under Section
5.5 and 5.7 of this Agreement incurred as of the Date of
Termination, but not yet paid as of the Date of Termination;
(v) except to the extent inapplicable due to Executive's death,
the continuation of Executive's welfare benefits (as described in
Section 5.4 of this Agreement) at the level in effect on the Date of
Termination for a period equal to (A) if the Date of Termination
occurs after April 21, 1998 but prior to April 30, 1999, a twelve
month period commencing on such Date of Termination or (B) if the
Date of Termination occurs prior to April 21, 1998, the lesser of
(x) a twenty-four month period commencing on such Date of
Termination and (y) the period commencing on such Date of
Termination and ending on April 30, 1999 (or, to the extent that
such continuation is not permitted by applicable law or if the Board
so determines, the Company shall provide the economic equivalent in
lieu thereof);
(vi) except to the extent inapplicable due to Executive's death,
any other compensation and benefits as may be provided in accordance
with the terms and provisions of any applicable plans and programs,
if any, generally applicable to employees or available to executives
of the Company;
(vii) except to the extent inapplicable due to Executive's
death, the continuation of the life insurance policy pursuant to
Section 5.9 of this Agreement; and (viii) such rights as Executive
may have under any other written agreement between the Company and
the Executive which is currently in effect.
The amounts owed under Section 6.1(c)(i) shall be payable in equal installments
every two weeks from the Date of Termination through the end of the period with
respect to which such payments are to be made under Section 6.1(c)(i). Any
amounts owed under Section 6.1(c)(ii) shall be determined and payable in
accordance with Section 5.2. The amounts owed under Section 6.1(c)(iii) shall
be paid within fifteen (15) days of the Date of Termination, and the amounts
owed under Section 6.1(c)(iv) shall be paid in accordance with the policies and
procedures of the Company in effect at the time the applicable expenses were
incurred. Any amounts owed under Sections 6.1(c)(v) and (vi) shall be payable
in accordance with the terms of the applicable plans and programs. Any amounts
owed under Section 6.1(c)(ix) shall be payable in accordance with the
respective
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<PAGE> 10
terms of the written agreements referred to therein.
6.2 Termination by the Company for Cause or the Termination of
Employment by Executive without Good Reason.
(a) The Company may terminate the Executive for Cause. In each case,
the existence of Cause must be confirmed by the Board prior to any termination
therefor. In the event of such a confirmation, the Company shall notify
Executive that the Company intends to terminate Executive's employment for
Cause under this Section 6.2. Such notification shall specify the act, or
acts, on the basis of which the Board has so confirmed the existence of Cause,
and Executive shall then be provided the opportunity together at the option of
Executive with counsel selected by Executive, not less than seven(7) or more
than thirty (30) days after his receipt of such notification, to meet with the
Board to discuss such act or acts. If the Board does not rescind such
confirmation at such meeting, Executive's employment by the Company shall
immediately be terminated for Cause under this Section 6.2, subject to
Executive's right to seek arbitration of the existence of Cause as provided in
Section 11 of this Agreement, provided that if in any such arbitration
proceeding, the arbitration determines that Cause did not exist, Executives'
employment shall be deemed to be terminated without Cause as of the date the
Company attempted to terminate Executive for Cause.
(b) In the event that the Company terminates Executive's employment
under this Agreement for Cause, or Executive terminates his employment with the
Company without Good Reason, the Term of Employment shall end and,
notwithstanding Section 5 hereof, Executive shall only be entitled to:
(i) any Annual Base Salary accrued to the Date of Termination and any
Annual Incentive relating to a prior year (or portion thereof) due in
accordance with this Agreement, but not yet paid as of the Date of
Termination;
(ii) reimbursement for all expenses reimbursable under Sections 5.5
and 5.7 of this Agreement incurred as of the Date of Termination, but
not yet paid as of the Date of Termination;
(iii) any other compensation then due and owing and benefits under a
benefit plan or program through the Date of Termination as may be provided
in accordance with terms and provisions of any applicable plans and
programs, if any, generally applicable to employees or available to
executives of the Company (including claims for benefits arising prior to
the Date of Termination that are payable in accordance with the terms and
provisions of the applicable plan or program, regardless of whether such
claims have been submitted as of the Date of Termination);
(iv) except to the extent inapplicable due to Executive's death, the
continuation of the life insurance policy pursuant to Section 5.9 of this
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<PAGE> 11
Agreement; and
(v) such rights as Executive may have under any other written agreement
between the Company and the Executive which is currently in effect.
The amounts owed under Section 6.2(b)(i) shall be paid within fifteen (15) days
of the Date of Termination, and the amounts owed under section 6.2(b)(ii) shall
be paid in accordance with the policies and procedures of the Company in effect
at the time the applicable expenses were incurred. Any amount owed under
Section 6.2(b)(iii) shall be payable in accordance with the terms of the
applicable plans and programs. Any amounts owed under Section 6.2(b)(v) shall
be payable in accordance with the respective terms of the written agreement
referred to therein.
6.3 No Mitigation; No Offset. In the event of any termination of
employment under this Section 6, Executive shall be under no obligation to seek
other employment and there shall be no offset against any amounts due Executive
under this Agreement on account of any remuneration attributable to any
subsequent employment that Executive may obtain. Any amounts due under this
Section 6 are in the nature of severance payments, or liquidated damages, or
both, and are not in the nature of penalty.
6.4 Notice of Termination. Any termination of Executive's employment
under this Section 6 (other than a termination on April 30, 1999 or termination
was a result of Executive's death) shall be communicated by a notice of
termination (the "Notice of Termination") to the other party hereto given in
accordance with Section 12.3 of this Agreement. Such Notice of Termination
shall (a) indicate the specific termination provision in this Agreement relied
upon, (b) set froth in reasonable detail the facts and circumstances claimed to
provide basis for termination of Executive's employment under the provision so
indicated, and (c) if the termination date is other than the date of receipt of
such Notice of Termination, specify the date on which Executive's employment is
to be terminated (which date shall not be earlier than the date on which such
Notice of Termination is actually received).
7. Confidential Information. Executive acknowledges that the confidential
information obtained by him while employed by the Company concerning the
business or affairs of the Company, any Company Affiliate, or any stockholder
of the Company ("Confidential Information") is the property of the Company,
such Company Affiliate, or such stockholder, as the case may be. For purposes
of this Agreement, the term "Confidential Information" does not include
information that Executive can demonstrate (a) was in Executive's possession
prior to first being employed by the Company, provided that such information is
not known by Executive to be subject to another confidentiality agreement with,
or other obligation of secrecy to, the Company or another party, (b) is
generally available to the public and became generally available to the public
other than as a result of a disclosure by Executive in violation of this
Agreement, (c) became available to Executive on a non-confidential basis from a
third party, provided that such third party is not known by Executive to be
bound by a confidentiality
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<PAGE> 12
agreement with, or other obligation of secrecy to, the Company or another party
or is otherwise prohibited from providing such information to Executive by a
contractual, legal or fiduciary obligation to the Company , or (d) Executive is
required to disclose pursuant to applicable law or regulation (as to which
information, Executive will provide the Company with prior notice of such
requirement and, if practicable, an opportunity to obtain an appropriate
protective order). Executive agrees that he will not during the Term of
Employment and for the two-year period following the Term of Employment,
willfully disclose Confidential Information to any Person (other than employees
of the Company or any Subsidiary thereof or any other person expressly
authorized by the Board to receive Confidential Information or otherwise as
required in the course of his duties during the Term of Employment) or use for
his own account any Confidential Information without the prior written consent
of the Board; provided, however, that Executive may disclose Confidential
Information in connection with the resolution of any dispute arising in
connection with the rights and obligations under this Agreement or any other
agreements entered into by the parties in connection with the transactions
contemplated by the Merger Agreement to the arbitrator in an arbitration
proceeding pursuant to Section 10 upon receipt of appropriate assurances that
the arbitrator and the other persons involved in such proceeding shall maintain
the confidentiality of all such Confidential Information. Executive shall
deliver to the Company at such time as the Board may request in writing, all
memoranda, notes, plans, records, reports, computer tapes and software and
other documents and data (and copies thereof) containing Confidential
Information which he may then possess or have under his control.
8. Noncompete, Non-Solicitation.
(a) Executive acknowledges that in the course of his employment with the
Company he will become familiar with Confidential Information and that his
services will be special unique and extraordinary value to the Company.
Therefore, Executive agrees that, during the Term of Employment and, for (i)
two years thereafter, or (ii) if Executive's employment is terminated without
Cause or Executive resigns for Good Reason, for one year thereafter, provided
that all amounts in excess of $1,000 required to be paid to Executive under
this Agreement are promptly paid when due in accordance with this Agreement
(in any case, the "Noncompete Period"), he shall not directly or indirectly
own, manage, control, participate in, consult with, render services for, or in
any manner engage in any broadcast radio business competing with the businesses
of the Company or any of its Subsidiaries in any geographic market (as defined
by Arbitron Metro) in which the Company or any of its Subsidiaries (x) operates
on the Date of the Termination or (y) commences operations during the
Noncompete Period and in either case continues to operate during the Noncompete
Period; provided, however, that for purposes of this clause (y) operations in a
market shall be deemed to be commenced during the Noncompete Period only if the
Company or such Subsidiary have had substantial discussions prior to the Date
of Termination concerning the commencement of such operations. Nothing herein
shall prohibit Executive from being a passive owner of not more than seven and
one-half percent (7 1/2%) of the outstanding stock of any class of a
corporation which is publicly traded, so long as Executive has no active
participation in
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<PAGE> 13
the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another person (i) induce or attempt to induce any employee
of the Company or any Subsidiary of the Company to leave the employ of such
Person, or in any way interfere with the employment relationship between the
Company or any Subsidiary of the Company and any employee thereof, (ii) hire
any individual who was an executive of the Company or its Subsidiaries, a
station or regional manager of the Company or its Subsidiaries or a radio
personality employed by the Company or its Subsidiaries at any time during the
Term of Employment (other than individuals who have not been employed by the
Company or a Subsidiary of the Company for a period of at least six months
prior to employment by Executive directly or indirectly through another
Person), or (iii) induce or attempt to induce any customer, supplier, licensee
or other Person having a business relationship with the Company or any
Subsidiary of the Company to cease doing business with the Company or such
Subsidiary of the Company, or interfere materially with the relationship
between any such customer, supplier, licensee or other Person having a business
relationship with the Company or and Subsidiary of the Company.
(c) If, at the time of enforcement of this Section 8, a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area held to be unreasonable and
that the court shall be allowed to revise the restrictions contained herein and
held to be unreasonable to cover the maximum period, scope and area permitted
by law.
9. Non-Exclusivity of Rights. Nothing in this Agreement shall limit or
otherwise prejudice such rights as Executive may have under any future
agreements with the Company.
10. Resolution of Disputes. Any disputes arising under or in connection
with this Agreement shall be resolved by arbitration, to be held in New York,
New York, in accordance with the Commercial Arbitration Rules and procedures of
the American Arbitration Association. Such arbitration shall be before a
single arbitrator who shall be a retired federal or New York State judge
acceptable to the Company and Executive. In the event that Executive and the
Company cannot agree upon an arbitrator within thirty (30) days of a notice
demanding such agreement from one to the other, the arbitrator shall be chosen
by the American Arbitration Association in accordance with its Commercial
Arbitration Rules. The decision of the arbitrator shall be final, conclusive
and binding upon the Company and Executive. All costs, fees and expenses,
including attorney fees, of any arbitration in connection with this Agreement,
which results in any final decision of the arbitrator requiring the Company to
make a payment to Executive , shall be borne by, and be the obligation of, the
Company. In no event shall Executive be required to reimburse the Company for
any of the costs and expenses incurred by the Company
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<PAGE> 14
relating to any arbitration. The obligations of the Company and Executive
under this Section 11 shall survive the termination for any reason of the Term
of Employment (whether such termination is by the Company, by Executive, or
upon the expiration of the Term of Employment). Pending the outcome or
resolution of any arbitration in connection with this Agreement other than a
dispute relating to Executive's termination for Cause, the Company shall
continue payment of all amounts, payments and benefits which are due to
Executive under this Agreement; provided that in the event that the decision
rendered by the arbitrator indicates that Executive was not entitled to
continue to receive all or any portion of such amounts, payments and benefits,
Executive shall immediately reimburse the Company for the same; and provided
further, that in the event the decision rendered by the arbitrator indicates
that Executive was wrongfully terminated for Cause, the Company will pay
Executive all amounts Executive is entitled to receive under Section 6.1(c).
11. Successors.
11.1 Executive. This Agreement is personal to Executive and, without
the prior express written consent of the Company, shall not be assignable by
Executive, except that the Executive's rights to receive any compensation or
benefits under this Agreement may be transferred or assigned pursuant to
testamentary disposition, intestate succession or pursuant to a qualified
domestic relations order. This Agreement shall inure to the benefit of and be
enforceable by Executive's heirs, beneficiaries and/or legal representatives.
11.2 The Company. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns; provided that the
Company shall only assign this Agreement to a purchaser of substantially all of
the business of the Company, which purchaser shall agree to assume all of the
Company's obligations hereunder.
12. Miscellaneous.
12.1 Applicable Law. The construction, validity and interpretations of
this Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York.
12.2 Amendments/Waiver. This Agreement may not be amended or modified
other than by written agreement executed by the parties hereto or their
respective successors and legal representatives. No waiver by any party to
this Agreement of any breach of any term, provision or condition of this
Agreement by the other party shall be deemed a waiver of a similar or
dissimilar term, provision or condition at the same time, or any prior or
subsequent time.
12.3 Notices. All notices, waivers and other communications hereunder
shall be in writing and shall be given by hand-delivery to the other party, by
facsimile
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<PAGE> 15
(with appropriate confirmation of transmission and with a hard copy to promptly
follow by registered or certified mail, return receipt request, postage
prepaid), by reputable overnight courier, or by registered or certified mail,
return receipt requested, postage prepaid, and shall be deemed delivered when
actually delivered by hand, upon receipt of confirmation of facsimile
transmission, three days after mailing, or one day after dispatch by overnight
courier, addressed as follows:
If to Executive:
Mr. James T. Shea, Jr.
3755 Foxrun Drive
Allentown, Pennsylvania 18103
Telephone (610) 439-4110
If to the Company:
Attn: Chairman of the Board
Commodore Media, Inc.
500 Fifth Avenue, Suite 3000
New York, New York 10110
Facsimile: (212) 302-6457
or to such other address as either party shall have furnished to the other in
writing in accordance herewith.
12.4 Withholding. Notwithstanding anything else to the contrary
herein, the Company may withhold from any amounts payable under this Agreement
such taxes as shall be required to be withheld pursuant to any applicable law
or regulation. Where amounts are payable to Executive pursuant to this
Agreement both in cash and in a form other than cash, the Company may, at its
option and upon prior notice to Executive, withhold from such cash payments, or
withhold from such payments in a form other than cash, or withhold from both.
12.5 Expenses. The Company shall promptly reimburse Executive for the
reasonable attorney's fees of and expenses payable to the law firm of Dewey
Ballantine for its representation of Executive in connection with the
negotiation and preparation of this Agreement, and the other agreements
contemplated in connection with the Merger contemplated hereby and thereby,
against delivery of an invoice for such fees and expenses.
12.6 Severability. If any provision of this Agreement is held illegal,
invalid or unenforceable under nay present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby: (a) such provision will be fully severable; (b)
this Agreement will be construed
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<PAGE> 16
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof; (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom; and (d) in
lieu of such illegal, invalid or unenforceable provision, there will be added,
to the extent possible, automatically as a part of this Agreement a legal,
valid and enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as shall be agreed upon by the Company and Executive.
12.7 Captions. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
12.8 Entire Agreement. This Agreement contains the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior agreements (including, without limitation, the Prior Agreement),
understandings, discussions, negotiations and undertakings, whether written or
oral, between the parties with respect thereto.
12.9 Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
12.10 Representation. Executive represents and warrants that the
performance of Executive's duties and obligations under this Agreement will not
violate any agreement between Executive and any other Person.
12.11 Survivorship. The respective rights and obligations of the
parties under this Agreement shall survive any termination of this Agreement or
Executive's employment hereunder for any reason to the extent necessary to the
intended preservation of such rights and obligations
[END OF PAGE]
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Executive has hereunto set his hand, and the Company
has caused this Amended and Restated Employment Agreement to be executed in its
name and on behalf by its authorized representative, all as of the day and year
first above written.
COMMODORE MEDIA, INC.
By: /s/ MICHAEL J. SALIM
---------------------------
Its: Treasurer
---------------------------
EXECUTIVE
/s/ JAMES T. SHEA, JR.
------------------------------
JAMES T. SHEA, JR.
FOR THE SOLE PURPOSE OF CONFIRMING TO THE EXECUTIVE THAT CAPSTAR BROADCASTING
PARTNERS, INC. AGREES TO CAUSE THE COMPANY TO ABIDE BY THE TERMS AND CONDITIONS
OF THIS AGREEMENT AS AMENDED AND RESTATED HEREIN.
CAPSTAR BROADCASTING PARTNERS,
INC.
By: /s/ PETER BRODSKY
----------------------------
Its: Vice President
---------------------------
17
10871
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 27th day of January, 1997 by and between Pacific Star Communications,
Inc. (formerly known as Community Acquisition Company, Inc. ), a Delaware
corporation (together with its successors and assigns permitted hereunder, the
"Company"), and Claude C. Turner (also known as Dex Allen) (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its stockholders
to employ the Executive on the terms and conditions set forth herein.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EMPLOYMENT PERIOD. Subject to Section 3, the Company hereby
agrees to employ the Executive, and the Executive hereby agrees to be employed
by the Company, in accordance with the terms and provisions of this Agreement,
for the period commencing on January 1, 1997 and ending on the fifth
anniversary of such date (the "Employment Period"); provided, however, that
commencing on such fifth anniversary and on each anniversary thereafter, the
Employment Period shall automatically be extended for one additional year
unless at least six months prior to such anniversary (but no more than 12
months prior to such anniversary), the Company or the Executive shall have
given written notice that it or he, as applicable, does not wish to extend this
Agreement (a "Non-Renewal Notice"). The term "Employment Period", as utilized
in this Agreement, shall refer to the Employment Period as so automatically
extended.
2. TERMS OF EMPLOYMENT.
(a) Position and Duties.
(i) During the term of the Executive's employment, the
Executive shall serve as President and the Chief Operating Officer of the
Company and the Chief Operating Officer of the West Coast Group operating
division of the Company's parent, Capstar Broadcasting Partners, Inc.
("Capstar"), as defined from time to time by the Chief Executive Officer of
Capstar (the "West Coast Group") and, in so doing, shall report to the Board
and the President and/or Chief Executive Officer of Capstar. The Executive
shall have supervision and control over, and responsibility for, such
management and operational functions of the West Coast Group currently assigned
to such position, and shall have such other powers and duties (including
holding officer positions with the Company and one or more subsidiaries of the
Company) as may from time to time be prescribed by
<PAGE> 2
the Board, so long as such powers and duties are reasonable and customary for
the Chief Operating Officer of an enterprise comparable to the Company.
(ii) During the term of the Executive's employment, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote full business time to the business and
affairs of the West Coast Group and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully, effectively and efficiently such
responsibilities. During the term of Executive's employment it shall not be a
violation of this Agreement for the Executive to (1) serve on corporate, civic
or charitable boards or committees, (2) deliver lectures or fulfill speaking
engagements and (3) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
(b) Compensation.
(i) Base Salary. During the term of the Executive's
employment, the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid in accordance with the customary payroll
practices of the Company, at least equal to $150,000 for the initial year of
the Employment Period and an amount of at least $200,000 for each subsequent
year of the Employment Period. Commencing on January 1, 1998, and on each
subsequent January 1 as long as the Executive remains an employee of the
Company (each such January 1 being herein referred to as an "Adjustment Date"),
the Annual Base Salary of the Executive (which shall be deemed equal to
$200,000 for initial Adjustment Date) shall be adjusted to reflect increases in
the Consumer Price Index for Urban Wage Earners and Clerical Workers for the
San Diego, California metropolitan area (1967 = 100), published by the Bureau
of Labor Statistics, United States Department of Labor (the "Index"). On each
Adjustment Date, the Executive's Annual Base Salary shall be increased by a
percentage of the Annual Base Salary for the prior calendar year equal to the
percentage increase in the Index for the prior calendar year. The result of
such calculation shall constitute the Executive's Annual Base Salary, as
adjusted, commencing on the Adjustment Date then at hand and continuing until
the next Adjustment Date. If (1) the Index ceases using the 1967 average of
100 as the basis of calculation, (2) a significant change is made in the number
or nature (or both) of items used in determining the Index, or (3) the Index is
discontinued for any reason, then the Company and the Executive shall, in good
faith, agree upon a substitute Index or procedure which reasonably reflects and
monitors the salaries of urban wage earners and clerical workers in the San
Diego, California metropolitan area. Any increase in Annual Base Salary shall
not serve to limit or reduce any other obligation to the Executive under this
Agreement. The term Annual Base Salary as utilized in this Agreement shall
refer to Annual Base Salary as so increased.
(ii) Bonuses. For each fiscal year of the Company, the
Board shall approve a budget which shall include, among other things, a target
for the revenues and net income
2
<PAGE> 3
of the West Coast Group for that year. If the revenues and net income for a
fiscal year of the West Coast Group equal or exceed the targets for such
revenues and net income as set forth in the budget, as evidenced by the audited
income statement of Capstar for such fiscal year, then, in addition to the
Annual Base Salary, the Executive shall be awarded a bonus in the amount of
$50,000 (or such greater amount as the Board may determine appropriate) with
respect to such fiscal year. At the election of the Board, the Bonus shall be
payable on the first day of the first calendar month after such audited income
statement is delivered to the Board or shall be payable in monthly payments, as
nearly equal as practicable, payable on the first day of such first calendar
month and on the first day of each calendar month thereafter occurring during
the remainder of the fiscal year next succeeding the fiscal year with respect
to which the bonus is payable.
(iii) Incentive, Savings and Retirement Plans. During
the term of the Executive's employment, the Executive shall be entitled to
participate in all incentive, savings and retirement plans, practices, policies
and programs applicable generally to other executives of the Company
("Investment Plans").
(iv) Welfare Benefit Plans. During the term of the
Executive's employment, the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and programs
("Welfare Plans") provided by the Company (including, without limitation,
medical, prescription, dental, disability, salary continuance, employee life,
group life, accidental death and travel accident insurance plans and programs)
to the extent applicable generally to other executives of the Company.
(v) Stock Options. In addition to any benefits the
Executive may receive pursuant to paragraph 2(b)(iii), as may be determined
appropriate by the Board of Directors of Capstar, Capstar may, from time to
time, grant Executive stock options (the "Executive Options") exercisable for
shares of common stock, par value $.01 per share, of Capstar and subject to the
terms of this Agreement, such Executive Options shall have such terms and
provisions as may be determined appropriate by the Board of Directors of
Capstar. Any such Executive Options will be granted under Capstar's 1996 Stock
Option Plan.
(vi) Perquisites. During the term of the Executive's
employment, the Executive shall be entitled to receive (in addition to the
benefits described above) such perquisites and fringe benefits appertaining to
his position in accordance with any practice established by the Board.
(vii) Expenses. During the term of the Executive's
employment, the Executive shall be entitled to receive prompt reimbursement for
all reasonable employment expenses incurred by the Executive in accordance with
the policies, practices and procedures of the Company.
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<PAGE> 4
(viii) Vacation and Holidays. During the term of the
Executive's employment, the Executive shall be entitled to paid vacation and
paid holidays in accordance with the plans, policies, programs and practices of
the Company for its executive officers.
3. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment
Period. If the Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth below), the Company
may give to the Executive written notice in accordance with Section 11(b) of
its intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties.
For purposes of this Agreement, "Disability" shall mean the Executive's
inability to perform his duties and obligations hereunder for a period of 180
consecutive days due to mental or physical incapacity as determined by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably).
(b) Cause or Board Termination. The Company may terminate the
Executive's employment during the Employment Period for Cause or without Cause.
For purposes of this Agreement, "Cause" shall mean (i) a breach by the
Executive of the Executive's obligations under Section 2(a) (other than as a
result of physical or mental incapacity) which constitutes a continued material
nonperformance by the Executive of his obligations and duties thereunder, as
determined by the Board, and which is not remedied within 30 days after receipt
of written notice from the Company specifying such breach, (ii) commission by
the Executive of an act of fraud upon, or willful misconduct toward, the
Company, as reasonably determined by a majority of the disinterested members of
the Board (neither the Executive nor members of his family being deemed
disinterested for this purpose) after a hearing by the Board following ten
days' notice to the Executive of such hearing, (iii) a material breach by the
Executive of Section 6 or Section 9, (iv) the conviction of the Executive of
any felony (or a plea of nolo contendere thereto); or (v) the failure of the
Executive to carry out, or comply with, in any material respect any directive
of the Board consistent with the terms of this Agreement, which is not remedied
within 30 days after receipt of written notice from the Company specifying such
failure. For purposes of this Agreement, a "Board Determination" shall mean a
determination by the Board (which is evidenced by one or more written
resolutions to such effect) (i) to terminate the Executive's employment during
the Employment Period based upon the Board's dissatisfaction with the manner in
which the Executive has performed his obligations and duties under Section 2(a)
and (ii) that Cause does not exist as a basis for such termination. For
purposes of this Agreement, "without Cause" shall mean a termination by the
Company of the
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<PAGE> 5
Executive's employment during the Employment Period pursuant to a Board
Determination or for any other reason other than a termination based upon
Cause, death or Disability.
(c) Good Reason. The Executive's employment may be terminated
during the Employment Period by the Executive for Good Reason or without Good
Reason; provided, however, that the Executive agrees not to terminate his
employment for Good Reason unless (i) the Executive has given the Company at
least 30 days' prior written notice of his intent to terminate his employment
for Good Reason, which notice shall specify the facts and circumstances
constituting Good Reason, and (ii) the Company has not remedied such facts and
circumstances constituting Good Reason within such 30-day period. For purposes
of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2(a) or any other action by the
Company which results in a material diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive (without limiting the foregoing, the Company and the Executive agree
that the delegation of the authority, duties or responsibilities of the
Executive to another person or persons, including any committee, shall be
deemed to be an action by the Company which results in a material diminution in
the Executive's position, authority, duties, or responsibilities as
contemplated by Section 2(a)), provided, however, that Good Reason may not be
asserted by the Executive under this clause (i) of Section 3(c) after a
Non-Renewal Notice has been given by either the Company or the Executive;
(ii) any termination or material reduction of a material
benefit under any Investment Plan or Welfare Plan in which the Executive
participates unless (1) there is substituted a comparable benefit that is
economically substantially equivalent to the terminated or reduced benefit
prior to such termination or reduction or (2) benefits under such Investment
Plan or Welfare Plan are terminated or reduced with respect to all employees
previously granted benefits thereunder;
(iii) any failure by the Company to comply with any of
the provisions of Section 2(b), other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(iv) any failure by the Company to comply with and
satisfy Section 8(c), provided that such successor has received at least ten
days prior written notice from the Company or the Executive of the requirements
of Section 8(c);
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<PAGE> 6
(v) the relocation or transfer of the Executive's
principal office to a location more than 50 miles from the Executive's current
executive offices as such are maintained on the date hereof in the city of San
Diego, California; or
(vi) without limiting the generality of the foregoing,
any material breach by the Company or any of its subsidiaries or other
affiliates (as defined below) of (1) this Agreement or (2) any other agreement
between the Executive and the Company or any such subsidiary or other
affiliate.
As used in this Agreement, "affiliate" means, with respect to a person,
any other person controlling, controlled by or under common control with the
first person; the term "control," and correlative terms, means the power,
whether by contract, equity ownership or otherwise, to direct the policies or
management of a person; and "person" means an individual, partnership,
corporation, limited liability company, trust or unincorporated organization,
or a government or agency or political subdivision thereof.
(d) Notice of Termination. Any termination by the Company for
Cause or without Cause, or by the Executive for Good Reason or without Good
Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 11(b). For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall not be more than 15 days after the giving of
such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing
of Good Reason, Cause or a termination made pursuant to a Board Determination
shall not waive any right of the Executive or the Company hereunder or preclude
the Executive or the Company from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause or pursuant
to a Board Determination, or by the Executive for Good Reason or without Good
Reason, the date of receipt of the Notice of Termination or any later date
specified therein pursuant to Section 3(d), as the case may be, (ii) if the
Executive's employment is terminated by the Company other than for Cause or
pursuant to a Board Determination, the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the date of death of the Executive
or the Disability Effective Date, as the case may be.
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<PAGE> 7
4. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Good Reason; Other Than for Cause, Death or Disability.
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for either Cause or Disability or the Executive shall
terminate his employment for Good Reason, and the termination of the
Executive's employment in any case is not due to his death or Disability:
(i) The Company shall pay to the Executive (1) in a
lump sum in cash within ten days after the Date of Termination the aggregate of
the following amounts: (a) the sum of the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore paid and any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay ("Accrued
Obligations"); and (b) any amount arising from Executive's participation in, or
benefits under, any Investment Plans ("Accrued Investments"), which amounts
shall be payable in accordance with the terms and conditions of such Investment
Plans; and (2) in regular installments in accordance with the customary payroll
practices of the Company the Executive's then current Annual Base Salary for a
period of one year from the Date of Termination.
(ii) Notwithstanding the terms or conditions of any
Executive Option, stock option, stock appreciation right or similar agreements
between the Company and the Executive, the Executive shall vest, as of the Date
of Termination, in all rights under such agreements (i.e., Executive Options or
other similar stock options that would otherwise vest after the Date of
Termination) and thereafter shall be permitted to exercise any and all such
rights until the earlier to occur of (x) the expiration of such Executive
Options or other similar stock option, stock appreciation right or similar
agreement pursuant to its terms or (y) 5:00 p.m., Dallas, Texas time, on the
90th day after the Date of Termination; provided, however, the provisions of
this clause (ii) of this Section 4(a) shall not apply to a termination of the
Executive's employment during the Employment Period that is made by the Company
pursuant to a Board Determination.
(iii) Except as otherwise provided in Section 4(e), the
Executive (and members of his family) shall be entitled to continue their
participation in the Company's Welfare Plans until the earlier of (1) a period
of one year from the Date of Termination or (2) the date the Executive has
commenced new employment and has become eligible for comparable medical
benefits.
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, the Company shall
pay to his legal representatives (i) in a lump sum in cash within ten days
after the Date of Termination the Accrued Obligations; and (ii) the Accrued
Investments which amounts shall be payable in accordance with the terms and
conditions of the Investment Plans.
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<PAGE> 8
(c) Disability. If the Executive's employment is terminated
by reason of the Executive's Disability during the Employment Period, the
Company shall have no further payment obligations to the Executive or his legal
representatives under this Agreement, other than (i) the payment in a lump sum
in cash within ten days after the Date of Termination, of the Accrued
Obligations and (ii) the Accrued Investments which amounts shall be payable in
accordance with the terms and conditions of the Investment Plans.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated by the Company for Cause or by the Executive
without Good Reason during the Employment Period, the Company shall have no
further payment obligations to the Executive other than (i) the payment, in a
lump sum in cash within ten days after the Date of Termination, of the Accrued
Obligations, (ii) payment of the Accrued Investments, which amounts shall be
payable in accordance with terms and conditions of the Investment Plans, and
(iii) the continuance of benefits under the Welfare Plans to the Date of
Termination.
(e) If pursuant to the terms and provisions of the Company's
Welfare Plans the Executive (or members of his family) are not eligible to
participate in the Company's Welfare Plans because the Executive is no longer
an employee of the Company, then the Company may fulfill its obligations under
clause (iii) of Section 4(a) by either providing to the Executive (or his legal
representatives), or reimbursing the Executive (or his legal representatives)
for the costs of, benefits substantially similar to the benefits provided by
the Company to its senior management under its Welfare Plans as such may from
time to time exist after the Date of Termination.
5. FULL SETTLEMENT, MITIGATION. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the provisions
of this Agreement and such amounts shall not be reduced whether or not the
Executive obtains other employment. Neither the Executive nor the Company
shall be liable to the other party for any damages in addition to the amounts
payable under Section 4 arising out of the termination of the Executive's
employment prior to the end of the Employment Period; provided, however, that
the Company shall be entitled to seek damages for any breach of Sections 6, 7
or 9 or criminal misconduct.
6. CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges that the West Coast Group, the
Company and their affiliates have trade, business and financial secrets and
other confidential and proprietary information (collectively, the "Confidential
Information"). As defined herein, Confidential Information shall not include
(i) information that is generally known to other persons or entities who can
obtain economic value from its disclosure or use and (ii) information required
to be disclosed by the Executive pursuant to a subpoena or court order, or
pursuant to a requirement of a governmental agency or law of the United States
of America or a state thereof or any governmental
8
<PAGE> 9
or political subdivision thereof; provided, however, that the Executive shall
take all reasonable steps to prohibit disclosure pursuant to subsection (ii)
above.
(b) The Executive agrees (i) to hold such Confidential
Information in confidence and (ii) not to release such information to any
person (other than Company employees and other persons to whom the Company has
authorized the Executive to disclose such information and then only to the
extent that such Company employees and other persons authorized by the Company
have a need for such knowledge).
(c) The Executive further agrees not to use any Confidential
Information for the benefit of any person or entity other than the Company.
7. SURRENDER OF MATERIALS UPON TERMINATION. Upon any termination of
the Executive's employment, the Executive shall immediately return to the
Company all copies, in whatever form, of any and all Confidential Information
and other properties of the West Coast Group, the Company and their affiliates
which are in the Executive's possession, custody or control.
8. SUCCESSORS.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
9. NON-COMPETITION.
(a) The term of Non-Competition (herein so called) shall be
for a term beginning on the date hereof and continuing until the first
anniversary of the Date of Termination.
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<PAGE> 10
(b) During the term of Non-Competition, the Executive will not
(other than for the benefit of the Company pursuant to this Agreement) directly
or indirectly, individually or as an officer, director, employee, shareholder,
consultant, contractor, partner, joint venturer, agent, equity owner or in any
capacity whatsoever, (i) engage in any radio broadcasting business that
transmits a primary or city-grade signal within a Metro Survey Area (as
currently defined by The Arbitron Company in its Radio Markets Reports) in
which a station directly operated by the Company transmits a primary or city-
grade signal (1), with respect to the term of Non-Competition that is during
the Executive's employment, during such term of employment, and (2), with
respect to the term of Non-Competition that is after the term of the
Executive's employment, on the Date of Termination (all such areas being
collectively called the "Geographic Area") (a "Competing Business"), (ii) hire,
attempt to hire, or contact or solicit with respect to hiring any employee of
the Company, or (iii) divert or take away any customers or suppliers of the
Company in the Geographic Area. Notwithstanding the foregoing, the Company
agrees that the Executive may own less than five percent of the outstanding
voting securities of any publicly traded company that is a Competing Business
so long as the Executive does not otherwise participate in such competing
business in any way prohibited by the preceding clause. As used in this
Section 9(b) (and in Section 6), "Company" shall include the Company, Capstar
and any subsidiaries of Capstar.
(c) During the term of Non-Competition, the Executive will not
use the Executive's access to, knowledge of, or application of Confidential
Information to perform any duty for any Competing Business; it being understood
and agreed to that this Section 9(c) shall be in addition to and not be
construed as a limitation upon the covenants in Section 9(b) hereof.
(d) The Executive acknowledges that the geographic boundaries,
scope of prohibited activities, and time duration of the preceding paragraphs
are reasonable in nature and are no broader than are necessary to maintain the
confidentiality and the goodwill of the Company's proprietary information,
plans and services and to protect the other legitimate business interests of
the Company.
10. EFFECT OF AGREEMENT ON OTHER BENEFITS. The existence of this
Agreement shall not prohibit or restrict the Executive's entitlement to full
participation in the executive compensation, employee benefit and other plans
or programs in which executives of the Company are eligible to participate.
11. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. Whenever the terms
"hereof", "hereby", "herein", or words of similar import are used in this
Agreement they shall be construed as referring to this Agreement in its
entirety rather than to a particular section or
10
<PAGE> 11
provision, unless the context specifically indicates to the contrary. Any
reference to a particular "Section" or "paragraph" shall be construed as
referring to the indicated section or paragraph of this Agreement unless the
context indicates to the contrary. The use of the term "including" herein
shall be construed as meaning "including without limitation." This Agreement
may not be amended or modified otherwise than by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: Claude C. Turner
2550 Fifth Avenue
11th Floor
San Diego, California 92103
Facsimile: (619) 233-6517
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
Attention: Joe Sullivan
Facsimile: (202) 637-2201
If to the Company: Pacific Star Communications, Inc.
c/o Capstar Broadcasting Partners, Inc.
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr.
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
of this Agreement, such provision shall be fully severable; this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a portion of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall
not be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement.
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<PAGE> 12
Furthermore, in lieu of such illegal, invalid or unenforceable provision there
shall be added automatically as part of this Agreement a provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid and enforceable.
(d) The Company agrees to attempt to obtain and maintain a
director's and officer's liability insurance policy during the term of the
Executive's employment covering the Executive on commercially reasonable terms,
and the amount of coverage shall be reasonable in relation to the Executive's
position and responsibilities hereunder; provided, however, that such coverage
may be reduced or eliminated to the extent that the Company reduces or
eliminates coverage for its directors and executives generally.
(e) The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(g) The Executive acknowledges that money damages would be
both incalculable and an insufficient remedy for a breach of Section 6 or 9 by
the Executive and that any such breach would cause the Company irreparable
harm. Accordingly, the Company, in addition to any other remedies at law or in
equity it may have, shall be entitled, without the requirement of posting of
bond or other security, to equitable relief, including injunctive relief and
specific performance, in connection with a breach of Section 6 or 9 by the
Executive.
(h) The provisions of this Agreement constitute the complete
understanding and agreement between the parties with respect to the subject
matter hereof.
(i) This Agreement may be executed in two or more
counterparts.
(j) In the event any dispute or controversy arises under this
Agreement and is not resolved by mutual written agreement between the Executive
and the Company within 30 days after notice of the dispute is first given,
then, upon the written request of the Executive or the Company, such dispute or
controversy shall be submitted to arbitration to be conducted in accordance
with the rules of the American Arbitration Association. Judgment may be
entered thereon and the results of the arbitration will be binding and
conclusive on the parties hereto. Any arbitrator's award or finding or any
judgment or verdict thereon will be final and unappealable. All parties agree
that venue for arbitration will be in Dallas, Texas, and that any arbitration
commenced in any other venue will be
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<PAGE> 13
transferred to Dallas, Texas, upon the written request of any party to this
Agreement. All arbitrations will have three individuals acting as arbitrators:
one arbitrator will be selected by the Executive, one arbitrator will be
selected by the Company, and the two arbitrators so selected will select a
third arbitrator. Any arbitrator selected by a party will not be affiliated,
associated or related to the party selecting that arbitrator in any matter
whatsoever. The decision of the majority of the arbitrators will be binding on
all parties. The Company shall be responsible for paying its own and the
Executive's attorneys fees, costs and other expenses pertaining to any such
arbitration and enforcement regardless of whether an arbitrator's award or
finding or any judgment or verdict thereon is entered against the Executive.
The Company shall promptly (and in no event after ten days following its
receipt from the Executive of each written request therefor) reimburse the
Executive for his reasonable attorneys fees, costs and other expenses
pertaining to any such arbitration and the enforcement thereof.
(k) Sections 6 and 9 of this Agreement shall survive the
termination of this Agreement.
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<PAGE> 14
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
EXECUTIVE
/s/ CLAUDE C. TURNER
-----------------------------------
Claude C. Turner
(also known as Dex Allen)
PACIFIC STAR COMMUNICATIONS, INC.
/s/ WILLIAM S. BANOWSKY, JR.
-----------------------------------
By: William S. Banowsky, Jr.
--------------------------------
Title: Executive Vice President
-----------------------------
<PAGE> 1
EXHIBIT 10.18.1
CAPSTAR BROADCASTING PARTNERS, INC.
1996 STOCK OPTION PLAN
1. Purpose.
Capstar Broadcasting Partners, Inc., a Delaware corporation (herein,
together with its successors, referred to as the "Company"), by means of this
1996 Stock Option Plan (the "Plan"), desires to afford certain individuals and
key employees of the Company and any parent corporation or subsidiary
corporation thereof now existing or hereafter formed or acquired (such parent
and subsidiary corporations sometimes referred to herein as "Related Entities")
who are responsible for the continued growth of the Company an opportunity to
acquire a proprietary interest in the Company, and thus to create in such
persons an increased interest in and a greater concern for the welfare of the
Company and any Related Entities. As used in the Plan, the terms "parent
corporation" and "subsidiary corporation" shall mean, respectively, a
corporation within the definition of such terms contained in Sections 424(e)
and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the
"Code").
The stock options described in Sections 6 and 7 (the "Options"), and the
shares of Common Stock (as hereinafter defined) acquired pursuant to the
exercise of such Options are a matter of separate inducement and are not in
lieu of any salary or other compensation for services.
2. Administration.
The Plan shall be administered by the Option Committee, or any successor
thereto, of the Board of Directors of the Company (the "Board of Directors"),
or by any other committee appointed by the Board of Directors to administer
this Plan (the "Committee"); provided, the entire Board of Directors may act as
the Committee if it chooses to do so. The number of individuals that shall
constitute the Committee shall be determined from time to time by a majority of
all the members of the Board of Directors, and, unless that majority of the
Board of Directors determines otherwise, shall be no less than two individuals;
provided, however, that unless the Plan and the Options granted thereunder
otherwise comply with Rule 16b-3 (or any successor rule) under the Exchange Act
(or any successor law) the Committee shall be composed of either (a) the entire
Board of Directors or (b) persons who are "Non-Employee Directors under Rule
16b-3. The Chairman of the Board of Directors of the Company shall be a member
of the Committee at all times. A majority of the Committee shall constitute a
quorum (or if the Committee consists of only two members, then both members
shall constitute a quorum), and subject to the provisions of Section 5, the
acts of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by all members of the Committee, shall be
the acts of the Committee.
The members of the Committee shall serve at the pleasure of the Board of
Directors, which shall have the power, at any time and from time to time, to
remove members from or add members to the Committee. Removal from the
Committee may be with or without cause. Any individual serving as a member of
the Committee shall have the right to resign from membership in the Committee
by written notice to the Board of Directors. The Board of Directors, and not
the
<PAGE> 2
remaining members of the Committee, shall have the power and authority to fill
vacancies on the Committee, however caused. The Board of Directors shall
promptly fill any vacancy that causes the number of members of the Committee to
be below two or, if the Company has a class of equity securities registered
pursuant to Section 12 of the Exchange Act, any other number that Rule 16b-3
may require from time to time.
3. Shares Available.
Subject to the adjustments provided in Section 10, the maximum aggregate
number of shares of Common Stock, par value $0.01 per share, of the Company
("Common Stock") in respect of which Options may be granted for all purposes
under the Plan shall be 4,100,000 shares. If, for any reason, any shares as to
which Options have been granted cease to be subject to purchase thereunder,
including the expiration of such Option, the termination of such Option prior
to exercise, or the forfeiture of such Option, such shares shall thereafter be
available for grants under the Plan. Options granted under the Plan may be
fulfilled in accordance with the terms of the Plan with (i) authorized and
unissued shares of the Common Stock, (ii) issued shares of such Common Stock
held in the Company's treasury, or (iii) issued shares of Common Stock
reacquired by the Company in each situation as the Board of Directors or the
Committee may determine from time to time.
4. Eligibility and Bases of Participation.
Grants of Incentive Options (as hereinafter defined) and Non-Qualified
Options (as hereinafter defined) may be made under the Plan, subject to and in
accordance with Section 6, to Key Employees. As used herein, the term "Key
Employee" shall mean any employee of the Company or any Related Entity,
including officers and directors of the Company or any Related Entity who are
also employees of the Company or any Related Entity, who is regularly employed
on a salaried basis and who is so employed on the date of such grant, whom the
Committee identifies as having a direct and significant effect on the
performance of the Company or any Related Entity.
Grants of Non-Qualified Options may be made, subject to and in
accordance with Section 7, to any Eligible Non-Employee. As used herein, the
term "Eligible Non-Employee" shall mean any person or entity of any nature
whatsoever, specifically including an individual, a firm, a company, a
corporation, a partnership, a trust, or other entity (collectively, a
"Person"), that the Committee designates as eligible for a grant of Options
pursuant to this Plan because such Person performs bona fide consulting,
advisory, or other services for the Company or any Related Entity (other than
services in connection with the offer or sale of securities in a capital-
raising transaction) and the Board of Directors or the Committee determines
that the Person has a direct and significant effect on the financial
development of the Company or any Related Entity.
The adoption of this Plan shall not be deemed to give any Person a right
to be granted any Options.
Notwithstanding any other provision of this Plan to the contrary, with
respect to the grant of any Options to any Key Employee or Eligible Non-
Employee, the Committee shall first determine
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<PAGE> 3
the number of shares in respect of which Options are to be granted to such Key
Employee or Eligible Non-Employee and shall then cause to be granted to such
Key Employee or Eligible Non-Employee an Option exercisable for such shares.
The exercise price per share of Common Stock under each Option shall be fixed
by the Committee at the time of grant of the Option and shall equal at least
100% of the Fair Market Value of a share of Common Stock on the date of grant.
5. Authority of Committee.
Subject to and not inconsistent with the express provisions of the Plan,
the Code and, if applicable, Rule 16b-3, the Committee shall have plenary
authority to:
a. determine the Key Employees and Eligible Non-Employees to whom
Options shall be granted, the time when such Options shall be
granted, the number of shares covered by the Options, the
purchase price or exercise price under each Option, the period(s)
during which such Options shall be exercisable (whether in whole
or in part, including whether such Options shall become
immediately exercisable upon the consummation of a "Sale of the
Company" or a "Qualifying Public Offering"), the restrictions to
be applicable to Options and all other terms and provisions
thereof (which need not be identical);
b. require, if determined necessary or appropriate by the Committee
in order to comply with Rule 16b-3, as a condition to the
granting of any Option, that the Person receiving such Option
agree not to sell or otherwise dispose of such Option, any Common
Stock acquired pursuant to such Option, or any other "derivative
security" (as defined by Rule 16a-l(c) under the Exchange Act)
for a period of six months following the later of the date of the
grant of such Option or (ii) the date when the exercise price of
such Option is fixed if such exercise price is not fixed at the
date of grant of such Option, or for such other period as the
Committee may determine;
c. provide an arrangement through registered broker-dealers whereby
temporary financing may be made available to an optionee by the
broker-dealer, under the rules and regulations of the Board of
Governors of the Federal Reserve, for the purpose of assisting
the optionee in the exercise of an Option, such authority to
include the payment by the Company of the commissions of the
broker-dealer;
d. provide the establishment of procedures for an optionee (i) to
have withheld from the total number of shares of Common Stock to
be acquired upon the exercise of an Option that number of shares
having a Fair Market Value which, together with such cash as
shall be paid in respect of fractional shares, shall equal the
aggregate exercise price under such Option for the number of
shares then being acquired (including the shares to be so
withheld), and (ii) to exercise a portion of an Option by
delivering that number of shares of Common Stock already owned by
such optionee having an aggregate Fair Market Value which shall
equal the partial Option exercise price and to deliver the shares
thus acquired by such optionee in payment of shares to be
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<PAGE> 4
received pursuant to the exercise of additional portions of such
Option, the effect of which shall be that such optionee can in
sequence utilize such newly acquired shares in payment of the
exercise price of the entire Option, together with such cash as
shall be paid in respect of fractional shares;
e. provide (in accordance with Section 13 or otherwise) the
establishment of a procedure whereby a number of shares of Common
Stock or other securities may be withheld from the total number
of shares of Common Stock or other securities to be issued upon
exercise of an Option to meet the obligation of withholding for
income, social security and other taxes incurred by an optionee
upon such exercise or required to be withheld by the Company or a
Related Entity in connection with such exercise;
f. prescribe, amend, modify and rescind rules and regulations
relating to the Plan;
g. make all determinations permitted or deemed necessary,
appropriate or advisable for the administration of the Plan,
interpret any Plan or Option provision, perform all other acts,
exercise all other powers, and establish any other procedures
determined by the Committee to be necessary, appropriate, or
advisable in administering the Plan or for the conduct of the
Committee's business. Any act of the Committee, including
interpretations of the provisions of the Plan or any Option and
determinations under the Plan or any Option shall be final,
conclusive and binding on all parties.
The Committee may delegate to one or more of its members, or to one or
more agents, such administrative duties as it may deem advisable, and the
Committee or any Person to whom it has delegated duties as aforesaid may employ
one or more Persons to render advice with respect to any responsibility the
Committee or such Person may have under the Plan. The Committee may employ
attorneys, consultants, accountants, or other Persons and the Committee, the
Company, and its officers and directors shall be entitled to rely upon the
advice, opinions, or valuations of any such Persons. No member or agent of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan and all members and
agents of the Committee shall be fully protected by the Company in respect of
any such action, determination or interpretation.
6. Stock Options for Key Employees.
Subject to the express provisions of this Plan, the Committee shall have
the authority to grant incentive stock options pursuant to Section 422 of the
Code ("Incentive Options"), to grant non-qualified stock options (options which
do not qualify under Section 422 of the Code) ("Non-Qualified Options"), and to
grant both types of Options to Key Employees. No Incentive Option shall be
granted pursuant to this Plan after the earlier of ten years from the date of
adoption of the Plan or ten years from the date of approval of the Plan by the
stockholders of the Company. Notwithstanding anything in this Plan to the
contrary, Incentive Options may be granted only to Key Employees. The terms
and conditions of the Options granted under this Section 6 shall be determined
from time to time by the Committee; provided, however, that the Options granted
under
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<PAGE> 5
this Section 6 shall be subject to all terms and provisions of the Plan (other
than Section 7), including the following:
a. Option Exercise Price. Subject to Section 4, the Committee shall
establish the Option exercise price at the time any Option is
granted at such amount as the Committee shall determine;
provided, that in the case of an Incentive Option granted to a
person who, at the time such Incentive Option is granted, owns
shares of the Company or any Related Entity which possess more
than 10% of the total combined voting power of all classes of
shares of the Company or of any Related Entity, the option
exercise price shall not be less than 110% of the Fair Market
Value per share of Common Stock at the date the Option is
granted. The Option exercise price shall be subject to
adjustment in accordance with the provisions of Section 10 of the
Plan.
b. Payment. The price per share of Common Stock with respect to
each Option exercise shall be payable at the time of such
exercise. Such price shall be payable in cash or by any other
means acceptable to the Committee, including delivery to the
Company of shares of Common Stock owned by the optionee or by the
delivery or withholding of shares pursuant to a procedure created
pursuant to Section 5.d. of the Plan. Shares delivered to or
withheld by the Company in payment of the Option exercise price
shall be valued at the Fair Market Value of the Common Stock on
the day preceding the date of the exercise of the Option.
c. Continuation of Employment. Each Incentive Option shall require
the optionee to remain in the continuous employ of the Company or
any Related Entity from the date of grant of the Incentive Option
until no more than three months prior to the date of exercise of
the Incentive Option.
d. Exercisability of Stock Option. Subject to Section 8, each
Option shall be exercisable in one or more installments as the
Committee may determine at the time of the grant. No Option by
its terms shall be exercisable after the expiration of ten years
from the date of grant of the Option, unless, as to any Non-
Qualified Option, otherwise expressly provided in such Option;
provided, however, that no Incentive Option granted to a person
who, at the time such Option is granted, owns stock of the
Company, or any Related Entity, possessing more than 10% of the
total combined voting power of all classes of stock of the
Company, or any Related Entity, shall be exercisable after the
expiration of five years from the date such Option is granted.
e. Death. If any optionee's employment with the Company or a
Related Entity terminates due to the death of such optionee, the
estate of such optionee, or a Person who acquired the right to
exercise such Option by bequest or inheritance or by reason of
the death of the optionee, shall have the right to exercise such
Option in accordance with its terms at any time and from time to
time within 180 days after the date of death unless a longer
period is expressly provided in such Option or a shorter
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<PAGE> 6
period is established by the Committee pursuant to Section 8 (but
in no event after the expiration date of such Option).
f. Disability. If the employment of any optionee terminates because
of his Disability (as defined in Section 18), such optionee or
his legal representative shall have the right to exercise the
Option in accordance with its terms at any time and from time to
time within 180 days after the date of such termination unless a
longer period is expressly provided in such Option or a shorter
period is established by the Committee pursuant to Section 8 (but
not after the expiration date of the Option); provided, however,
that in the case of an Incentive Option, the optionee or his
legal representative shall in any event be required to exercise
the Incentive Option within one year after termination of the
optionee's employment due to his Disability.
g. Termination for Cause. Unless an optionee's Option expressly
provides otherwise, such optionee shall immediately forfeit all
rights under his Option, except as to the shares of stock already
purchased thereunder, if the employment of such optionee with the
Company or a Related Entity is terminated by the Company or any
Related Entity for Good Cause (as defined below). The
determination that there exists Good Cause for termination shall
be made by the Option Committee (unless otherwise agreed to in
writing by the Company and the optionee).
h. Voluntary Termination; Other Termination of Employment. If the
employment of an optionee with the Company or a Related Entity
terminates for any reason (including if such optionee voluntarily
terminates employment with or without consent of the Company or
any Related Entity) other than those specified in subsections
6(e), (f) or (g) above, such optionee shall have the right to
exercise his Option in accordance with its terms, within 30 days
after the date of such termination, unless a longer period is
expressly provided in such Option or a shorter period is
established by the Committee pursuant to Section 8 (but not after
the expiration date of the Option); provided, that no Incentive
Option shall be exercisable more than three months after such
termination.
i. Maximum Exercise. The aggregate Fair Market Value of stock
(determined at the time of the grant of the Option) with respect
to which Incentive Options are exercisable for the first time by
an optionee during any calendar year under all plans of the
Company and any Related Entity shall not exceed $100,000.
7. Stock Option Grants to Eligible Non-Employees.
Subject to the express provisions of this Plan, the Committee shall have
the authority to grant Non-Qualified Options to Eligible Non-Employees. The
terms and conditions of the Options granted under this Section 7 shall be
determined from time to time by the Committee; provided, however, that the
Options granted under this Section 7 shall be subject to all terms and
provisions of the Plan (other than Section 6), including the following:
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<PAGE> 7
a. Option Exercise Price. Subject to Section 4, the Committee shall
establish the Option exercise price at the time any Non-Qualified
Option is granted at such amount as the Committee shall
determine. The Option exercise price shall be subject to
adjustment in accordance with the provisions of Section 10 of the
Plan.
b. Payment. The price per share of Common Stock with respect to
each Option exercise shall be payable at the time of such
exercise. Such price shall be payable in cash or by any other
means acceptable to the Committee, including delivery to the
Company of shares of Common Stock owned by the optionee or by the
delivery or withholding of shares pursuant to a procedure created
pursuant to Section 5.d. of the Plan. Shares delivered to or
withheld by the Company in payment of the Option exercise price
shall be valued at the Fair Market Value of the Common Stock on
the day preceding the date of the exercise of the Option.
c. Exercisability of Stock Option. Subject to Section 8, each
Option shall be exercisable in one or more installments as the
Committee may determine at the time of the grant. No Option
shall be exercisable after the expiration of ten years from the
date of grant of the Option, unless otherwise expressly provided
in such Option.
d. Death. If the retention by the Company or any Related Entity of
the services of any Eligible Non-Employee terminates because of
his death, the estate of such optionee, or a Person who acquired
the right to exercise such Option by bequest or inheritance or by
reason of the death of the optionee, shall have the right to
exercise such Option in accordance with its terms, at any time
and from time to time within 180 days after the date of death
unless a longer period is expressly provided in such Option or a
shorter period is established by the Committee pursuant to
Section 8 (but in no event after the expiration date of such
Option).
e. Disability. If the retention by the Company or any Related
Entity of the services of any Eligible Non-Employee terminates
because of his Disability, such optionee or his legal
representative shall have the right to exercise the Option in
accordance with its terms at any time and from time to time
within 180 days after the date of the optionee's termination
unless a longer or shorter period is expressly provided in such
Option or established by the Committee pursuant to Section 8 (but
not after the expiration of the Option).
f. Termination for Cause; Voluntary Termination. If the retention
by the Company or any Related Entity of the services of any
Eligible Non-Employee is terminated (i) for Good Cause, (ii) as a
result of removal of the optionee from office as a director of
the Company or of any Related Entity for cause by action of the
stockholders of the Company or such Related Entity in accordance
with the by-laws of the Company or such Related Entity, as
applicable, and the corporate law of the Jurisdiction of
incorporation of the Company or such Related Entity, or (iii) as
a result of the voluntarily termination by optionee of optionee's
service without the consent of the
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<PAGE> 8
Company or any Related Entity, then such optionee shall
immediately forfeit his rights under his Option except as to the
shares of stock already purchased. The determination that there
exists Good Cause for termination shall be made by the Option
Committee (unless otherwise agreed to in writing by the Company
and the optionee).
g. Other Termination of Relationship. If the retention by the
Company or any Related Entity of the services of any Eligible
Non-Employee terminates for any reason other than those specified
in subsections 7(d), (e) or (f) above, such optionee shall have
the right to exercise his or its Option in accordance with its
terms within 30 days after the date of such termination, unless a
longer period is expressly provided in such Option or a shorter
period is established by the Committee pursuant to Section 8 (but
not after the expiration date of the Option).
h. Ineligibility for Other Grants. Any Eligible Non-Employee who
receives an Option pursuant to this Section 7 shall be ineligible
to receive any Options under any other Section of the Plan.
8. Change of Control; Sale of the Company.
If (i) a Change of Control or a Sale of the Company shall occur, (ii)
the Company shall enter into an agreement providing for a Change of Control or
a Sale of the Company, or (iii) any member of the HMC Group shall enter into an
agreement providing for a Sale of the Company, then the Committee may declare
any or all Options outstanding under the Plan to be exercisable in full at such
time or times as the Committee shall determine, notwithstanding the express
provisions of such Options. Each Option accelerated by the Committee pursuant
to the preceding sentence shall terminate, notwithstanding any express
provision thereof or any other provision of the Plan, on such date (not later
than the stated exercise date) as the Committee shall determine; provided,
however, that such termination shall not occur prior to the date on which the
Option becomes fully exercisable pursuant to such acceleration.
9. Purchase Option.
a. Except as otherwise expressly provided in any particular Option,
if (i) any optionee's employment (or, in the case of any Option
granted under Section 7, the optionee's relationship) with the
Company or a Related Entity terminates for any reason at any time
or (ii) a Change of Control occurs, the Company (and/or its
designees) shall have the option (the "Purchase Option") to
purchase, and if the option is exercised, the optionee (or the
optionee's executor or the administrator of the optionee's
estate, in the event of the optionee's death, or the optionee's
legal representative in the event of the optionee's incapacity)
(hereinafter, collectively with such optionee, the "Grantor")
shall sell to the Company and/or its assignee(s), all or any
portion (at the Company's option) of the shares of Common Stock
and/or Options held by the Grantor (such shares of Common Stock
and Options collectively being referred to as
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<PAGE> 9
the "Purchasable Shares"), subject to the Company's compliance
with the conditions hereinafter set forth.
b. The Company shall give notice in writing to the Grantor of the
exercise of the Purchase Option within one year from the date of
the termination of the optionee's employment or engagement or
such Change of Control. Such notice shall state the number of
Purchasable Shares to be purchased and the determination of the
Board of Directors of the Fair Market Value per share of such
Purchasable Shares. If no notice is given within the time limit
specified above, the Purchase Option shall terminate.
c. The purchase price to be paid for the Purchasable Shares
purchased pursuant to the Purchase Option shall be, in the case
of any Common Stock, the Fair Market Value per share as of the
date of the notice of exercise of the Purchase Option times the
number of shares being purchased, and in the case of any Option,
the Fair Market Value per share times the number of vested shares
subject to such Option which are being purchased, less the
applicable per share Option exercise price. The purchase price
shall be paid in cash. The closing of such purchase shall take
place at the Company's principal executive offices within ten
days after the purchase price has been determined. At such
closing, the Grantor shall deliver or shall cause to be delivered
to the purchasers the certificates or instruments evidencing the
Purchasable Shares being purchased, duly endorsed (or accompanied
by duly executed stock powers) and otherwise in good form for
delivery, against payment of the purchase price by check of the
purchasers). In the event that, notwithstanding the foregoing,
the Grantor shall have failed to obtain the release of any pledge
or other encumbrance on any Purchasable Shares by or upon the
scheduled closing date (at the option of the purchasers), the
closing shall nevertheless occur on such scheduled closing date,
with the cash purchase price being reduced to the extent of all
unpaid indebtedness for which such Purchasable Shares are then
pledged or encumbered.
d. To assure the enforceability of the Company's rights under this
Section 9, each certificate or instrument representing Common
Stock or an Option held by him or it shall bear a conspicuous
legend in substantially the following form:
THE SHARES (REPRESENTED BY THIS CERTIFICATE] [ISSUABLE PURSUANT
TO THIS AGREEMENT] ARE SUBJECT TO AN OPTION TO REPURCHASE
PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S 1996 STOCK OPTION
PLAN AND A STOCK OPTION AGREEMENT ENTERED INTO PURSUANT THERETO.
A COPY OF SUCH OPTION PLAN AND OPTION AGREEMENT ARE AVAILABLE
UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE
OFFICES.
The Company's rights under this Section 9 shall terminate upon the
consummation of a Qualifying Public Offering.
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<PAGE> 10
10. Adjustment of Shares.
Unless otherwise expressly provided in a particular Option, in the event
that, by reason of any merger, consolidation, combination, liquidation,
reorganization, recapitalization, stock dividend, stock split, split-up, split-
off, spin-off, combination of shares, exchange of shares or other like change
in capital structure of the Company (collectively, a "Reorganization"), the
Common Stock is substituted, combined, or changed into any cash, property, or
other securities, or the shares of Common Stock are changed into a greater or
lesser number of shares of Common Stock, the number and/or kind of shares
and/or interests subject to an Option and the per share price or value thereof
shall be appropriately adjusted by the Committee to give appropriate effect to
such Reorganization, such that the Option shall thereafter be exercisable for
such securities, cash, and/or other property as would have been received in
respect of the Common Stock subject to the Option had the Option been exercised
in full immediately prior to such event. Any fractional shares or interests
resulting from such adjustment shall be eliminated. Notwithstanding the
foregoing, (i) each such adjustment with respect to an Incentive Option shall
comply with the rules of Section 424(a) of the Code, and (ii) in no event shall
any adjustment be made which would render any Incentive Option granted
hereunder other than an "incentive stock option" for purposes of Section 422 of
the Code.
In the event the Company is not the surviving entity of a Reorganization
and, following such Reorganization, any optionee will hold Options issued
pursuant to this Plan which have not been exercised, canceled, or terminated in
connection therewith, the Company shall cause such Options to be assumed (or
canceled and replacement Options of equivalent value issued) by the surviving
entity or a Related Entity.
11. Assignment or Transfer.
a. Except as otherwise expressly provided in any Nonqualified
Option, no Option granted under the Plan or any rights or
interests therein shall be assignable or transferable by an
optionee except by will or the laws of descent and distribution,
and during the lifetime of an optionee, Options granted to him or
her hereunder shall be exercisable only by the optionee or, in
the event that a legal representative has been appointed in
connection with the Disability of an optionee, such legal
representative.
b. At least ninety (90) days prior to selling, pledging,
hypothecating, transferring or otherwise disposing ("Transfer")
of any interest in Common Stock issued upon exercise of an
Option, the optionee proposing such Transfer shall deliver a
written notice (the "Sale Notice") to the Company. The Sale
Notice will disclose in reasonable detail the identity of the
prospective transferee(s) and the terms and conditions of the
proposed transfer. Such optionee (and such optionee's
transferees) shall not consummate any such Transfer until ninety
(90) days after the Sale Notice has been delivered to the
Company, unless the Company has notified such optionee in writing
that it will not exercise its rights under this Section 11.b.
(The date of the first to occur of such events is referred to
herein as the "Authorization Date"). The Company or its designee
may elect to purchase all (but not less than all) of the shares
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<PAGE> 11
of Common Stock to be Transferred upon the same terms and
conditions as those set forth in the Sale Notice ("Right of First
Refusal") by delivering a written notice of such election to such
optionee within thirty (30) days after the receipt of the Sale
Notice by the Company (the "Election Notice"). If the Company
has not elected to purchase all of the shares of Common Stock
specified in the Sale Notice, such optionee may Transfer the
shares of Common Stock to the prospective transferee(s) as
specified in the Sale Notice, at a price and on terms no more
favorable to the transferee(s) thereof than specified in the Sale
Notice, during the 90-day period immediately following the
Authorization Date and in the event of any such Transfer of
shares the provisions of the Plan (including, without limitation,
the provisions of this Section 11) shall no longer apply to the
shares thus transferred. Any Option Shares not so transferred
within such 90-day period must be reoffered to the Company in
accordance with the provisions of this Section 11.b. The Right
of First Refusal will not apply with respect to Transfers of such
shares of Common Stock (i) by will or pursuant to applicable laws
of descent and distribution or (ii) among the optionee's family
group; provided that the restrictions contained in this Section
11.b. will continue to be applicable to the shares of Common
Stock after any such Transfer and provided further that the
transferees of such shares of Common Stock have agreed in writing
to be bound by the terms and provisions of this Plan and the
applicable Option Agreement as each may be amended from time to
time. In addition, upon any transfer to a member of the
optionee's family group, the optionee shall be required to give
notice to the Company and as a condition to such Transfer to a
member of the optionee's family group, the optionee will maintain
all voting control over all of the shares of Common Stock. The
optionee's, "family group" means the optionee's spouse and lineal
descendants (whether natural or adopted) and any trust solely for
the benefit of the optionee and/or the optionee's spouse and/or
lineal descendants. In addition, with the prior approval of the
Committee, notwithstanding the provisions of this Section 11.b.,
an optionee may pledge such shares of Common Stock creating a
security interest therein; provided, that the pledgee agrees in
writing to be bound, and that such shares of Common Stock remain
bound, by the terms and provisions of this Plan and the
applicable Option Agreement, as each may be amended from time to
time. The rights and obligations pursuant to this Section 11.b.
hereof will terminate upon the consummation of a Qualified Public
Offering.
To assure the enforceability of the Company's rights under
this Section 11.b., each certificate or instrument representing
Common Stock or an Option held by him or it shall bear a
conspicuous legend in substantially the following form:
THE SHARES [REPRESENTED BY THIS CERTIFICATE] [ISSUABLE PURSUANT
TO THIS AGREEMENT] ARE SUBJECT TO A RIGHT OF FIRST REFUSAL
PROVIDED UNDER THE COMPANY'S 1996 STOCK OPTION PLAN AND A STOCK
OPTION AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF SUCH
OPTION PLAN AND OPTION AGREEMENT
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<PAGE> 12
ARE AVAILABLE UPON WRITTEN REQUEST TO THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICES.
12. Compliance with Securities Laws.
The Company shall not in any event be obligated to file any registration
statement under the Securities Act or any applicable state securities law to
permit exercise of any option or to issue any Common Stock in violation of the
Securities Act or any applicable state securities law. Each optionee (or, in
the event of his death or, in the event a legal representative has been
appointed in connection with his Disability, the Person exercising the Option)
shall, as a condition to his right to exercise any Option, deliver to the
Company an agreement or certificate containing such representations, warranties
and covenants as the Company may deem necessary or appropriate to ensure that
the issuance of shares of Common Stock pursuant to such exercise is not
required to be registered under the Securities Act or any applicable state
securities law.
Certificates for shares of Common Stock, when issued, may have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL THE
HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER
(WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE,
PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE
FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Common Stock issued
pursuant to an effective registration statement under the Securities Act and in
accordance with applicable state securities laws.
13. Withholding Taxes.
By acceptance of the Option, the optionee will be deemed to (i) agree to
reimburse the Company or Related Entity by which the optionee is employed for
any federal, state, or local taxes required by any government to be withheld or
otherwise deducted by such corporation in respect of the optionee's exercise of
all or a portion of the Option; (ii) authorize the Company or any Related
Entity by which the optionee is employed to withhold from any cash compensation
paid to the optionee or in the optionee's behalf, an amount sufficient to
discharge any federal, state, and local taxes imposed on the Company, or the
Related Entity by which the optionee is employed, and which otherwise has not
been reimbursed by the optionee, in respect of the optionee's exercise of all
or a portion of the Option; and (iii) agree that the Company may, in its
discretion, hold the stock
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<PAGE> 13
certificate to which the optionee is entitled upon exercise of the Option as
security for the payment of the aforementioned withholding tax liability, until
cash sufficient to pay that liability has been accumulated, and may, in its
discretion, effect such withholding by retaining shares issuable upon the
exercise of the Option having a Fair Market Value on the date of exercise which
is equal to the amount to be withheld.
14. Costs and Expenses.
The costs and expenses of administering the Plan shall be borne by the
Company and shall not be charged against any Option nor to any employee
receiving an Option.
15. Funding of Plan.
The Plan shall be unfunded. The Company shall not be required to make
any segregation of assets to assure the payment of any Option under the Plan.
16. Other Incentive Plans.
The adoption of the Plan does not preclude the adoption by appropriate
means of any other incentive plan for employees.
17. Effect on Employment.
Nothing contained in the Plan or any agreement related hereto or
referred to herein shall affect, or be construed as affecting, the terms of
employment of any Key Employee except to the extent specifically provided
herein or therein. Nothing contained in the Plan or any agreement related
hereto or referred to herein shall impose, or be construed as imposing, an
obligation on (i) the Company or any Related Entity to continue the employment
of any Key Employee, and (ii) any Key Employee to remain in the employ of the
Company or any Related Entity.
18. Definitions.
In addition to the terms specifically defined elsewhere in the Plan, as
used in the Plan, the following terms shall have the respective meanings
indicated:
a. "Affiliate" shall mean, as to any Person, a Person that directly,
or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.
b. "Authorization Date" shall have the meaning set forth in Section
11.b. hereof.
c. "Board of Directors" shall have the meaning set forth in Section
2 hereof.
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<PAGE> 14
d. "Change of Control" shall mean the first to occur of the
following events: (i) any sale, lease, exchange, or other
transfer (in one transaction or series of related transactions)
of all or substantially all of the assets of the Company
(including, the capital stock or assets of its operating
subsidiaries) to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group"), other
than one or more members of the HMC Group, (ii) a majority of the
Board of Directors of the Company shall consist of Persons who
are not Continuing Directors; or (iii) the acquisition by any
Person or Group (other than one or more members of the HMC
Group), together with their associates and Affiliates, of the
power, directly or indirectly, to vote or direct the voting of
securities having more than 50% of the ordinary voting power for
the election of directors of the Company.
e. "Code" shall have the meaning set forth in Section 1 hereof.
f. "Committee" shall have the meaning set forth in Section 2 hereof.
g. "Common Stock" shall have the meaning set forth in Section 3
hereof.
h. "Company" shall have the meaning set forth in Section 1 hereof.
i. "Continuing Director" shall mean, as of the date of
determination, any Person who (i) was a member of the Board of
Directors of the Company on the date of adoption of this Plan,
(ii) was nominated for election or elected to the Board of
Directors of the Company with the affirmative vote of a majority
of the Continuing Directors who were members of such Board of
Directors at the time of such nomination or election, or (iii) is
a member of the HMC Group.
j. "Designated Date" means the first date on which each of the
following conditions shall have been met: (i) the Company shall
have consummated a Qualifying Public Offering and (ii) the
Company shall have ceased to be an Equity Fund Company.
k. "Disability" shall mean permanent disability as defined under the
appropriate provisions of the long-term disability plan
maintained for the benefit of employees of the Company or any
Related Entity who are regularly employed on a salaried basis
unless another meaning shall be agreed to in writing by the
Committee and the optionee; provided, however, that in the case
of an Incentive Option "disability" shall have the meaning
specified in Section 22(e)(3) of the Code.
l. "Election Notice" shall have the meaning set forth in Section
11.b. hereof.
m. "Eligible Non-Employee" shall have the meaning set forth in
Section 4 hereof.
n. "Equity Fund Company" means any Person in which one or more
Equity Fund Investment Vehicles own(s), directly or indirectly,
more than 10% of the fully-
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<PAGE> 15
diluted common stock or has an unrecovered investment of
$1,000,000 or more, and each Subsidiary thereof.
o. "Equity Fund Investment Vehicle" means HMTF/CH Holdings, L.P.,
Hicks, Muse, Tate & Furst Equity Fund II, L.P., Hicks, Muse, Tate
& Furst Equity Fund III, L.P., or any other similar investment
entity formed by Hicks, Muse, Tate & Furst Incorporated.
p. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
q. "Fair Market Value", shall, as it relates to the Common Stock,
mean the average of the high and low prices of such Common Stock
as reported on the principal national securities exchange on
which the shares of Common Stock are then listed on the date
specified herein, or if there were no sales on such date, on the
next preceding day on which there were sales, or if such Common
Stock is not listed on a national securities exchange, the last
reported bid price in the over-the-counter market, or if such
shares are not traded in the over-the-counter market, the per
share cash price for which all of the outstanding Common Stock
could be sold to a willing purchaser in an arms length
transaction (without regard to minority discount, absence of
liquidity, or transfer restrictions imposed by any applicable law
or agreement) at the date of the event giving rise to a need for
a determination. Except as may be otherwise expressly provided
in a particular Option, Fair Market Value shall be determined in
good faith by the Committee.
r. "Good Cause", with respect to any Key Employee, shall mean
(unless another definition is agreed to in writing by the Company
and the optionee) termination by action of the Board of Directors
because of: (A) the optionee's conviction of, or plea of nolo
contendere to, a felony or a crime involving moral turpitude; (B)
the optionee's personal dishonesty, incompetence, willful
misconduct, willful violation of any law, rule, or regulation
(other than minor traffic violations or similar offenses) or
breach of fiduciary duty which involves personal profit; (C) the
optionee's commission of material mismanagement in the conduct of
his duties as assigned to him by the Board of Directors or the
optionee's supervising officer or officers of the Company or any
Related Entity; (D) the optionee's willful failure to execute or
comply with the policies of the Company or any Related Entity or
his stated duties as established by the Board of Directors or the
optionee's supervising officer or officers of the Company or any
Related Entity, or the optionee's intentional failure to perform
the optionee's stated duties; or (E) substance abuse or addiction
on the part of the optionee. "Good Cause", with respect to any
Eligible Non-Employee, shall mean (unless another definition is
agreed to in writing by the Company and the optionee) termination
by action of the Board of Directors because of: (A) the
optionee's conviction of, or plea of nolo contendere to, a felony
or a crime involving moral turpitude; (B) the optionee's personal
dishonesty, incompetence, willful misconduct, willful violation
of any law, rule, or regulation (other than minor traffic
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<PAGE> 16
violations or similar offenses) or breach of fiduciary duty which
involves personal profit; (C) the optionee's commission of
material mismanagement in providing services to the Company or
any Related Entity; (D) the optionee's willful failure to comply
with the policies of the Company in providing services to the
Company or any Related Entity, or the optionee's intentional
failure to perform the services for which the optionee has been
engaged; (E) substance abuse or addiction on the part of the
optionee; or (F) the optionee's willfully making any material
misrepresentation or willfully omitting to disclose any material
fact to the board of directors of the Company or any Related
Entity with respect to the business of the Company or any Related
Entity. Notwithstanding the foregoing, in the case of each
optionee listed on Schedule A hereto, who as of the effective
date of the Plan, has an employment agreement with the Company or
any Related Entity that contains a definition of "Good Cause" (or
any similar definition), then during the term of such employment
agreement the definition contained in such employment agreement
shall be the applicable definition of "Good Cause" under the Plan
as to such optionee.
s. "Grantor" has the meaning set forth in Section 9 hereof.
t. "Hicks Muse Company" shall mean any Person in which the HMC Group
beneficially owns more than 25% of the fully-diluted common stock
or has an unrecovered investment of $1,000,000 or more, and each
Subsidiary thereof.
u. "HMC Group" shall mean Hicks, Muse, Tate & Furst Incorporated,
its Affiliates and their respective employees, officers, and
directors (and members of their respective families and trusts
for the primary benefit of such family members).
v. "Incentive Options" shall have the meaning set forth in Section 6
hereof.
w. The term "included" when used herein shall mean "including, but
not limited to".
x. "Key Employee" shall have the meaning set forth in Section 4
hereof.
y. "Marketable Securities" shall mean securities (i) of a class or
series listed or traded on the New York Stock Exchange, American
Stock Exchange, or NASDAQ National Market and (ii) which, as a
matter of law, shall at the time of acquisition be (or which at
the date of acquisition are legally committed to become within
six months after the date of acquisition) freely saleable in
unlimited quantities by the HMC Group to the public, either
pursuant to an effective registration statement under the
Securities Act as amended (including a current prospectus which
is available for delivery) or without the necessity of such
registration.
z. "Non-Qualified Options" shall have the meaning set forth in
Section 6 hereof.
aa. "Options" shall have the meaning set forth in Section 1 hereof.
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<PAGE> 17
ab. "Person" shall have the meaning set forth in Section 4 hereof,
ac. "Plan" shall have the meaning set forth in Section 1 hereof.
ad. "Purchasable Shares" shall have the meaning set forth in Section
9 hereof.
ae. "Purchase Option" shall have the meaning set forth in Section 9
hereof.
af. "Qualifying Public Offering" shall mean a firm commitment
underwritten public offering of Common Stock for cash and the
shares of Common Stock registered under the Securities Act are
listed on a national securities exchange or traded on the NASDAQ
National Market; provided, however, that such a public offering
shall not constitute a "Qualifying Public Offering" unless the
aggregate proceeds to the Company (prior to deducting any
underwriters' discounts and commissions) from such offering and
any similar prior public offerings exceed $10 million..
ag. "Related Entities" shall have the meaning set forth in Section 1
hereof.
ah. "Reorganization" shall have the meaning set forth in Section 10
hereof.
ai. "Right of First Refusal" shall have the meaning set forth in
Section 11.b. hereof.
aj. "Rule 16b-3" shall mean Rule 16b-3 as amended, or other
applicable rules, under Section 16(b) of the Exchange Act.
ak. "Sale of the Company" shall mean the first to occur of (i) any
sale, lease, exchange, or other transfer (in one transaction or
series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act, other
than one or more members of the HMC Group (a "Clause 1 Event"),
(ii) the Company's ceasing to be a Hicks Muse Company in a
transaction or series of related transactions initiated or agreed
to by the HMC Group (other than the distribution by one or more
Equity Fund Investment Vehicles, following a Qualifying Public
Offering, of equity securities of the Company to the investors in
such Equity Fund Investment Vehicle(s)) (a "Clause 2 Event"), or
(iii) the consummation of a transaction or series of related
transactions initiated or agreed to by the HMC Group pursuant to
which the HMC Group receives, in respect of its shares of Common
Stock, cash and/or which have an aggregate value equal to at
least 75%; of the total value of all Common Stock owned by the
HMC Group immediately prior to such transaction, as determined by
the Board of Directors in good faith (a "Clause 3 Event");
provided, however, that the occurrence of a Clause 1 Event, a
Clause 2 Event or a Clause 3 Event on any date after the
Designated Date shall not constitute a "Sale of the Company".
al. "Sale Notice" shall have the meaning set forth in Section 11.b
hereof.
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<PAGE> 18
am. "Securities Act" shall mean the Securities Act of 1933, as
amended.
an. "Subsidiary" shall mean, with respect to any Person, any other
Person of which such first Person owns or has the power to vote,
directly or indirectly, securities representing a majority of the
votes ordinarily entitled to be cast for the election of
directors or other governing Persons.
ao. "Transfer" shall have the meaning set forth in Section 11.b.
hereof.
19. Amendment of Plan.
The Board of Directors shall have the right to amend, modify, suspend or
terminate the Plan at any time; provided, that no amendment shall be made which
shall increase the total number of shares of the Common Stock which may be
issued and sold pursuant to Options granted under the Plan or decrease the
minimum Option exercise price in the case of an Incentive Option, or modify the
provisions of the Plan relating to eligibility with respect to Incentive
Options unless such amendment is made by or with the approval of the
stockholders. The Board of Directors shall have the right to amend the Plan
and the Options outstanding thereunder, without the consent or joinder of any
optionee or other Person, in such manner as may be determined necessary or
appropriate by the Board of Directors in order to cause the Plan and the
Options outstanding thereunder (i) to qualify as "incentive stock options"
within the meaning of Section 422 of the Code, (ii) to comply with Rule 16b-3
(or any successor rule) under the Exchange Act (or any successor law) and the
regulations (including any temporary regulations) promulgated thereunder, or
(iii) to comply with Section 162(m) of the Code (or any successor section) and
the regulations (including any temporary regulations) promulgated thereunder.
Except as provided above, no amendment, modification, suspension or termination
of the Plan shall alter or impair any Options previously granted under the
Plan, without the consent of the holder thereof.
20. Effective Date.
The Plan shall become effective on October 16, 1996, the date on which
it was approved by the Board of Directors of the Company and the stockholders
of the Company.
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<PAGE> 1
EXHIBIT 10.18.2
CAPSTAR BROADCASTING PARTNERS, INC.
FIRST AMENDMENT TO THE
CAPSTAR BROADCASTING PARTNER, INC.
1996 STOCK OPTION PLAN
THIS FIRST AMENDMENT TO THE CAPSTAR BROADCASTING PARTNERS, INC. 1996
STOCK OPTION PLAN (this "Amendment") is made and adopted by Capstar
Broadcasting Partners, Inc., a Delaware corporation (the "Corporation"),
effective as of February 20, 1997.
RECITALS
WHEREAS, on October 16, 1996 the stockholders of the Corporation
approved, and the Corporation adopted, the Capstar Broadcasting Partners, Inc.
1996 Stock Option Plan (the "Plan"); and
WHEREAS, the Board approved that the Chairman of the Board no longer be
required, pursuant to the terms of the Plan, to serve as a member of the
committee that is appointed by the Board to administer the Plan (the
"Administration Amendment"); and
WHEREAS, the Board of Directors of the Corporation (the "Board")
approved and recommended to the stockholders of the Corporation an increase
(the "Increase") in the number of shares of the Corporation's common stock, par
value $0.01 per share (the "Common Stock"), in respect of which stock options
may be granted under the Plan by an additional 4,900,000 shares, such that the
total number of shares of Common Stock in respect of which options may be
granted under the Plan shall be 9,000,000 shares; and
WHEREAS, on February 20, 1997, the stockholders of the Corporation
approved the Increase and the Administration Amendment.
AMENDMENT
NOW, THEREFORE, the Plan is hereby amended to read as follows:
1. Section 2. The third sentence of the first paragraph of Section
2 is hereby deleted in its entirety.
2. Section 3. The first sentence of Section 3 is hereby amended to
read, in its entirety, as follows:
<PAGE> 2
"Subject to the adjustments provided in Section 10, the maximum
aggregate number of shares of Common Stock, par value $0.01 per share,
of the Company ("Common Stock") in respect of which Options may be
granted for all purposes under the Plan shall be 9,000,000 shares."
Except as expressly set forth herein, the Plan shall remain in full
force and effect without further amendment or modification.
IN WITNESS WHEREOF, the Corporation, acting by and through its officer
hereunto duly authorized, has executed this Amendment effective as of the date
first written above.
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ R. STEVEN HICKS
----------------------------
R. Steven Hicks
President and Chief Executive
Officer
<PAGE> 1
EXHIBIT 10.20.1
CAPSTAR BROADCASTING PARTNERS, INC.
1996 STOCK PURCHASE PLAN
----------------
PART I
PURPOSES; DEFINITIONS; RESERVATION OF SHARES;
AND PARTICIPATION IN PLAN
ARTICLE I
PURPOSES
1.1 Purposes of Plan. The purpose of this Capstar Broadcasting
Partners, Inc. 1996 Stock Purchase Plan the (the "Plan") is to afford certain
Key Employees (as hereinafter defined) of Capstar Broadcasting Partners, Inc.,
a Delaware corporation (the "Company"), and any parent corporation or
subsidiary corporation thereof now existing or hereafter formed or acquired
(such parent and subsidiary corporations sometimes referred to herein as
"Related Entities") who are expected to contribute materially to the success of
the Company and any Related Entities an opportunity to acquire a proprietary
interest in the Company, and thus to retain such persons and create in such
persons an increased interest in and a greater concern for the welfare of the
Company and any Related Entities.
ARTICLE II
DEFINITIONS
2.1 Certain terms used herein shall have the meaning stated below,
subject to the provisions of Section 7.1.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
"Committee" has the meaning set forth in Section 7.1 hereto.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Company" has the meaning set forth in Section 1.1 hereto.
"Exercise Price" has the meaning set forth in Section 5.1 hereto.
<PAGE> 2
"Key Employee" has the meaning set forth in Section 4.1 hereto.
"Plan" has the meaning set forth in Section 1.1 hereto.
"Related Entity" has the meaning set forth in Section 1.1 hereto.
"Securities Act" means The Securities Act of 1933, as amended.
"Stock Purchase Right" means an award of a right to purchase a share of
Common Stock at the Exercise Price which is granted by the Company to a Key
Employee pursuant to Section 5.1 hereof.
"Stockholders Agreement" means that certain Stockholders Agreement
between the Company and each of the Key Employees in substantially the form
attached hereto as Exhibit A.
"Subsidiary" means, with respect to any person, any other person of
which such first person owns or has the power to vote, directly or indirectly,
securities representing a majority of the votes ordinarily entitled to be cast
for the election of directors or other governing persons.
ARTICLE III
SHARES AVAILABLE
3.1 Shares Available Under Plan. Subject to the adjustments provided
in Section 9.2, the maximum number of shares of Common Stock in respect of
which Stock Purchase Rights may be granted for all purposes under the Plan
shall be 3,155,000 shares. If, for any reason, any shares as to which Stock
Purchase Rights have been granted cease to be subject to purchase hereunder,
including the expiration of such Stock Purchase Right, the termination of such
Stock Purchase Right, or the forfeiture of such Stock Purchase Right, such
shares shall thereafter be available for grants under the Plan. Stock Purchase
Rights granted under the Plan may be fulfilled in accordance with the terms of
the Plan with (i) authorized and unissued shares of Common Stock, (ii) issued
shares of such Common Stock held in the Company's treasury, or (iii) issued
shares of Common Stock reacquired by the Company, in each situation as the
Board of Directors or the Committee may determine from time to time.
ARTICLE IV
PARTICIPATION IN PLAN
4.1 Eligibility to Receive Stock Purchase Rights. Stock Purchase
Rights under the Plan may be granted only to Key Employees. As used herein,
the term "Key Employee" shall mean any
2
<PAGE> 3
employee of the Company or any Related Entity, including officers and directors
of the Company or any Related Entity who are also employees of the Company or
any Related Entity, who is regularly employed on a salaried basis and who is so
employed on the date of such grant, whom the Committee identifies as having a
direct and significant effect on the performance of the Company or any Related
Entity.
4.2 Effect on Employment. Nothing contained in the Plan or any
agreement related hereto or referred to herein shall affect, or be construed as
affecting, the terms of employment of any Key Employee except to the extent
specifically provided herein or therein. Nothing contained in the Plan or any
agreement related hereto or referred to herein shall impose, or be construed as
imposing, an obligation on (i) the Company or any of its Subsidiaries to
continue the employment of any Key Employee, and (ii) any Key Employee to
remain in the employ of the Company or any of its Subsidiaries.
PART II
STOCK PURCHASE RIGHTS
ARTICLE V
STOCK PURCHASE RIGHTS
5.1 Grant of Stock Purchase Rights.
(a) Award Rights. The Committee shall determine the number of
shares of Common Stock covered by each Stock Purchase Right granted to each Key
Employee and shall then cause to be granted to such Key Employee a Stock
Purchase Right exercisable for such shares.
(b) Term of Rights. Every Stock Purchase Right granted
hereunder shall be valid for a period of no less than 30 days after the date of
grant and may be valid for such longer period as the Committee may determine.
(c) Exercise Price. The purchase price per share of Common
Stock under each Stock Purchase Right shall be $1.00 per share, or such other
purchase price as may be determined by the Committee (the "Exercise Price").
(d) Form of Instrument. Each award of a Stock Purchase Right
shall be made pursuant to an instrument substantially in the form attached
hereto as Exhibit B. Such instrument shall specify the number of shares
covered by such Stock Purchase Right, the Exercise Price, the term of such
grant, and the restrictions set forth in Article VI.
3
<PAGE> 4
5.2 Exercise of Stock Purchase Right. The price per share of Common
Stock with respect to each exercise of a Stock Purchase Right shall be payable
at the time of such exercise. Such price shall be payable in cash by a
cashier's or bank certified check or by any other means acceptable to the
Committee. Stock certificates evidencing any shares of Common Stock will be
issued and delivered to the person entitled thereto upon payment of the
Exercise Price.
5.3 Rights of Key Employee Prior to Exercise. A Key Employee shall
not have any rights as a stockholder with respect to any share of Common Stock
issuable upon exercise of a Stock Purchase Right unless and until such Key
Employee shall have become the holder of record of such share by exercise of
such Stock Purchase Right.
ARTICLE VI
RESTRICTIONS APPLICABLE TO STOCK PURCHASE RIGHTS
6.1 Restrictions. Each Stock Purchase Right granted under the Plan
shall contain the following terms, conditions and restrictions and such
additional terms, conditions and restrictions as may be determined by the
Committee:
(a) No Stock Purchase Right granted under the Plan may be
assigned, transferred, sold, pledged, hypothecated or otherwise disposed of by
a Key Employee, and any Stock Purchase Right granted to such Key Employee shall
be exercisable only by such Key Employee.
(b) No shares of Common Stock will be issued upon exercise of
any Stock Purchase Right unless such Key Employee shall, at the time of such
exercise, execute and deliver to the Company the Stockholders Agreement,
subject to the Company's execution and delivery thereof.
(c) Each Stock Purchase Right shall terminate by its terms and
without any further action or obligation of the Company if, prior to exercise,
the Key Employee's employment with the Company or any Subsidiary shall
terminate for any reason.
PART III
ADMINISTRATION, AMENDMENT AND TERMINATION
OF PLAN; MISCELLANEOUS
ARTICLE VII
ADMINISTRATION OF PLAN
4
<PAGE> 5
7.1 The Committee. The Plan shall be administered by the Committee,
or any successor thereto, of the Board of Directors, or by any other committee
appointed by the Board of Directors to administer the Plan (the "Committee");
provided, the entire Board of Directors may act as the Committee if it chooses
to do so. The number of individuals that shall constitute the Committee shall
be determined from time to time by a majority of all the members of the Board
of Directors, and, unless that majority of the Board of Directors determines
otherwise, shall be no less than two individuals. The Chairman of the Board
shall be a member of the Committee at all times. A majority of the Committee
shall constitute a quorum (or if the Committee consists of only two members,
then both members shall constitute a quorum), and the acts of a majority of the
members present at any meeting at which a quorum is present, or acts approved
in writing by all members of the Committee, shall be the acts of the Committee.
The members of the Committee shall serve at the pleasure of the Board,
which shall have the power, at any time and from time to time, to remove
members from or add members to the Committee. Removal from the Committee may
be with or without cause. Any individual serving as a member of the Committee
shall have the right to resign from membership in the Committee by written
notice to the Board of Directors, The Board of Directors, and not the
remaining members of the Committee, shall have the power and authority to fill
vacancies on the Committee, however caused.
7.2 Authority of Committee. The Committee shall have full and final
authority to (i) prescribe, amend, modify and rescind rules and regulations
relating to the Plan, (ii) make all determinations permitted or deemed
necessary, appropriate or advisable for the administration of the Plan,
interpret any Plan or Stock Purchase Right provision, perform all other acts,
exercise all other powers, and establish any other procedures determined by the
Committee to be necessary, appropriate, or advisable in administering the Plan
or for the conduct of the Committee's business. Any act of the Committee,
including interpretations of the provisions of the Plan or any Stock Purchase
Right and determinations under the Plan or any Stock Purchase Right shall be
final, conclusive and binding on all parties. The Committee may delegate to
one or more of its members, or to one or more agents, such administrative
duties as it may deem advisable, and the Committee or any person to whom it has
delegated duties as aforesaid may employ one or more persons to render advice
with respect to any responsibility the Committee or such person may have under
the Plan. The Committee may employ attorneys, consultants, accountants, or
other persons and the Committee, the Company, and its officers and directors
shall be entitled to rely upon the advice, opinions, or valuations of any such
persons. No member or agent of the Committee shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan and all members and agents of the Committee shall be fully protected
by the Company in respect to the Plan and all members and agents of the
Committee shall be fully protected by the Company in respect of any such
action, determination or interpretation.
5
<PAGE> 6
ARTICLE VIII
AMENDMENT OF PLAN
8.1 Amendment of Plan. The Board of Directors shall have the right
to amend, modify, suspend or terminate the Plan at any time. Except as
otherwise provided above, no amendment, modification, suspension or termination
of the Plan shall alter or impair any Stock Purchase Rights previously granted
under the Plan, without the consent of the holder thereof.
ARTICLE IX
MISCELLANEOUS PROVISIONs
9.1 Compliance with Securities Laws. The Company shall not in any
event be obligated to file any registration statement under the Securities Act
or any applicable state securities law to permit exercise of any Stock Purchase
Right or to issue any Common Stock in violation of the Securities Act or any
applicable state securities law. Each grantee shall, if requested by the
Committee and as a condition to his right to exercise any Stock Purchase Right,
deliver to the Company an agreement in substantially the form attached hereto
as Exhibit C, containing such representations, warranties and covenants as the
Company may deem necessary or appropriate to ensure that the issuance of shares
of Common Stock pursuant to such exercise is not required to be registered
under the Securities Act or any applicable state securities law.
Certificates for shares of Common Stock, when issued, may have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL THE
HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER
(WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE,
PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE
FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Common Stock issued
pursuant to an effective registration statement under the Securities Act and in
accordance with applicable state securities laws.
6
<PAGE> 7
9.2 Adjustment of Shares. Unless otherwise expressly provided in a
particular Stock Purchase Right, in the event that, by reason of any merger,
consolidation, combination, liquidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares or other like change in capital structure of the
Company (collectively, a "Reorganization"), the Common Stock is substituted,
combined, or changed into any cash, property, or other securities, or the
shares of Common Stock are changed into a greater or lesser number of shares of
Common Stock, the number and/or kind of shares and/or interests subject to a
Stock Purchase Right and the per share price or value thereof shall be
appropriately adjusted by the Committee to give appropriate effect to such
Reorganization, such that the Stock Purchase Right shall thereafter be
exercisable for such securities, cash, and/or other property as would have been
received in respect of the Common Stock subject to the Stock Purchase Right had
the Stock Purchase Right been exercised in full immediately prior to such
event. Any fractional shares or interests resulting from such adjustment shall
be eliminated.
In the event the Company is not the surviving entity of a Reorganization
and, following such Reorganization, any grantee will hold a Stock Purchase
Right issued pursuant to the Plan which has not been exercised, canceled, or
terminated in connection therewith, the Company shall cause such Stock Purchase
Right to be assumed (or canceled and a replacement Stock Purchase Right of
equivalent value issued) by the surviving entity.
9.3 Use of Proceeds. The proceeds from the sale of Common Stock
pursuant to Stock Purchase Rights granted under the Plan shall constitute
general funds of the Company and may be used for such corporate purposes as the
Company may determine.
9.4 Costs and Expenses. The costs and expenses of administering the
Plan shall be borne by the Company and shall not be charged against any Stock
Purchase Right nor to any Key Employee.
9.5 Other Incentive Plans. The adoption of the Plan does not
preclude the adoption by appropriate means of any other incentive plan for
employees.
9.6 Effective Date. The Plan shall become effective on November 26,
1996, the date on which it was approved by the Board of Directors.
7
<PAGE> 8
[See EXHIBIT 10.22.1.]
<PAGE> 9
EXHIBIT B
FORM OF NOTICE OF STOCK PURCHASE RIGHT GRANT
<PAGE> 10
C O N F I D E N T I A L
Interoffice
CAPSTAR BROADCASTING PARTNERS, INC. Memorandum
- --------------------------------------------------------------------------------
NOTICE OF STOCK PURCHASE RIGHT GRANT
TO:
--------------------
FROM: R. Steven Hicks
Chief Executive Officer and President
DATE:
--------------------
At the direction of the Committee (the "Committee") of the Board of
Directors of Capstar Broadcasting Partners, Inc. (the "Company") which
administers the Capstar Broadcasting Partners, Inc. 1996 Stock Purchase Plan
(the "Plan"), I am pleased to notify you that the Committee has granted to you,
pursuant to the Plan, a Stock Purchase Right to purchase _____________ shares
of Common Stock, par value $.01 per share (the "Common Stock"), of the Company
at the price of $1.00 per share (for a total purchase price of
$______________). This Stock Purchase Right, granted to you as of
, 199 , expires if not exercised by 5:00 p.m., New York City time, on
, 199 or such later time as the Approvals (defined hereinafter) have been
obtained or made.
Enclosed please find the 1996 Stock Purchase Plan and two (2) copies of
each of the following:
(i) Exercise Agreement; and
(ii) Stockholders Agreement.
In order to exercise your Stock Purchase Right, you must:
1. Complete and sign two copies of the enclosed Exercise Agreement.
2. Sign two copies of the enclosed Stockholders Agreement.
3. Deliver prior to 5:00 p.m., New York City time, on
____________________, 199__ or such later time as the Approvals
have been obtained or made, the signed copies of
<PAGE> 11
the Exercise Agreement and the Stockholders Agreement and the
purchase price payable in cash by a cashier's or bank certified
check, or by such other means acceptable to the Committee, in the
full amount of the purchase price of the shares you wish to
purchase to:
Capstar Broadcasting Partners, Inc.
600 Congress Avenue
Suite 1270
Austin, Texas 78701
Attention: R. Steven Hicks
Your Stock Purchase Right is limited and conditioned as provided in the
Plan including, but not limited to, the following:
A. Your Stock Purchase Right may not be assigned, transferred, sold,
pledged, hypothecated or otherwise disposed of, and is
exercisable only by you;
B. You must execute and deliver to the Company copies of the
Exercise Agreement and the Stockholders Agreement for your shares
of the Common Stock to be issued;
C. Your Stock Purchase Right may not be exercised until such time as
the Company has obtained the requisite approval or made the
requisite filings under applicable federal and state securities
laws (the "Approvals"); and
D. Your Stock Purchase Right shall terminate without any further
action (including notice) if, prior to exercise, your employment
with the Company or any of its subsidiaries terminates for any
reason.
Review the enclosed materials carefully before determining whether to
exercise your Stock Purchase Right. If you have any questions, please call me
at (512) 469-7998.
Enclosures
2
<PAGE> 12
EXHIBIT C
FORM OF EXERCISE AGREEMENT
<PAGE> 13
Name:
--------------------------------
No. of Shares:
-----------------------
Total Amount Due
(Purchase Price):
--------------------
EXERCISE AGREEMENT
Capstar Broadcasting Partners, Inc.
600 Congress Avenue
Suite 1270
Austin, Texas 78701
Attention: R. Steven Hicks
Ladies and Gentlemen:
The undersigned understands that Capstar Broadcasting Partners, Inc., a
Delaware corporation (the "Company"), is offering for sale to the undersigned
pursuant to the exercise of stock purchase rights granted to the undersigned
under its 1996 Stock Purchase Plan (the "Plan"), a copy of which has been
received and reviewed by the undersigned, up to an aggregate of ___________
shares (the "Acquired Shares") of its Common Stock, $.01 par value per share
(the "Common Stock"), at an exercise price of $1.00 per share.
1. Exercise. Subject to the terms and conditions of this Exercise
Agreement (the "Agreement"), the undersigned hereby irrevocably exercises his
stock purchase right and agrees to purchase the number of shares of Common
Stock set forth above having an aggregate purchase price (the "Purchase Price")
as set forth above.
2. Payment. A cashier's or bank certified check made payable to
"Capstar Broadcasting Partners, Inc." accompanies this Agreement in payment of
the Purchase Price, net of any amount due and owing by the Company to the
undersigned. The undersigned understands that no interest shall accrue on such
payment pending delivery of the stock certificate(s) evidencing the
undersigned's shares purchased pursuant to this Agreement.
3. Delivery of Stock Certificates. The undersigned hereby
irrevocably directs the Company to deliver the stock certificate(s) evidencing
the undersigned's shares purchased pursuant to this Agreement to the
undersigned at the address set forth below the undersigned's signature hereto.
<PAGE> 14
4. Adoption of Stockholders Agreement. Two signed copies of the
Stockholders Agreement accompany this Agreement. The Company agrees that it
shall execute and deliver one original signed copy of the Stockholders
Agreement to the undersigned.
5. Representations and Warranties of the Undersigned. The
undersigned hereby represents and warrants to the Company as follows:
(a) The undersigned is acquiring the Acquired Shares for his own
account for investment, and not with a view to distribution, resale,
subdivision, or fractionalization thereof; and the undersigned has no present
plans to enter into any contract, undertaking, agreement, or arrangement for
the distribution, resale, subdivision, or fractionalization of any of the
Acquired Shares. In order to induce the Company to issue and sell the Acquired
Stock, it is agreed that the Company will have no obligation to recognize the
ownership, beneficial or otherwise, of the shares comprising such Acquired
Shares by anyone but the undersigned, unless and until the undersigned sells or
otherwise transfers such Acquired Shares, subject to compliance with the terms
hereof and the Stockholders Agreement.
(b) (i) The undersigned can bear the economic risk of losing his
entire investment; (ii) his overall commitment to investments which are not
readily marketable is not disproportionate to his net worth, and his investment
in the Acquired Shares will not cause such overall commitment to become
excessive; (iii) he has adequate means of providing for his current needs and
personal contingencies and has no need for liquidity in his investment in the
Acquired Shares; (iv) he has such knowledge and experience in financial and
business matters that he is capable of evaluating the risks and merits of this
investment, or has retained advisors who have such knowledge and experience;
and (v) he is familiar with the business and financial condition, properties,
operations and prospects of the Company.
(c) The undersigned and/or his attorney and/or his accountant have
had an opportunity to ask questions of and receive answers from the Company, or
a person or persons acting on its behalf, concerning (i) the terms and
conditions of this investment and (ii) the Company and the business and
prospects of the Company, and answers have been provided to his satisfaction to
all of his questions related thereto.
(d) The undersigned recognizes that an investment in the Company
involves certain risks, and he has taken full cognizance of and understands all
of the risks related to the purchase of the Acquired Shares.
(e) The address set forth below the undersigned's signature is his
true and correct residence or principal place of business, and the undersigned
has no present intention of becoming a resident of any other state or
jurisdiction or moving his principal place of business.
2
<PAGE> 15
(f) The undersigned understands and agrees, and acknowledges that (i)
it has been disclosed to him, that the Acquired Shares have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
applicable state securities laws and that the economic risk of the investment
must be borne indefinitely by the undersigned, and the Acquired Shares cannot
be sold, pledged, hypothecated, or otherwise transferred unless subsequently
registered under the Securities Act and such laws, or an exemption from such
registration is available, and there is compliance with the requirements of the
Stockholders Agreement; (ii) such registration under the Securities Act and
such laws is unlikely at any time in the future; (iii) the Company is not
obligated to file a notification under Regulation A of the Securities Act or a
registration statement under the Securities Act or any state securities laws
except as provided in the Stockholders Agreement; (iv) the benefits of Rule 144
under the Securities Act governing the possible disposition of the Acquired
Shares are not currently available or anticipated to be available in the
future, and the Company has not covenanted to take any action necessary to make
such Rule 144 available for a limited resale of the Acquired Shares; and (v) it
is not anticipated that there will be any market for resale of the Acquired
Shares.
(g) The undersigned understands and agrees, and acknowledges that the
following restrictions and limitations are applicable to the undersigned's
purchase and resales, pledges, hypothecations, or other transfers of the
Acquired Shares, and, therefore, that the undersigned must bear the economic
risk of investment in the Acquired Shares for an indefinite period of time as
described in Section 5(f):
(i) A legend will be placed on the certificates representing
the Acquired Shares in substantially the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD, PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE
HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER
(WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE,
PLEDGE, TRANSFER, OR OTHER DISPOSITION WILL NOT VIOLATE
APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
(ii) Stop transfer instructions have been or will be placed
with respect to the Acquired Shares so as to restrict the resale,
pledge, hypothecation, or other transfer thereof in accordance with the
above legend.
3
<PAGE> 16
(iii) The legend and stop transfer instructions described in
Sections 5(g)(i) and (ii) above will be placed with respect to any new
certificate issued upon presentment by the undersigned of a certificate
for transfer.
(iv) Any applicable blue sky or state securities laws legends
shall also be placed on the certificates representing the Acquired
Shares.
(h) The undersigned understands and agrees that his Acquired Shares
shall be subject to the terms and conditions of the Stockholders Agreement.
6. Representations and Warranties of the Company. The Company
hereby represents and warrants to the undersigned as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
(b) The Acquired Shares, when issued, will be duly authorized,
validly issued, fully paid and nonassessable and will not be issued in
violation of any preemptive or similar rights.
7. Indemnification. The undersigned acknowledges and understands
the meaning and legal consequences of the representations and warranties set
forth in Section 5 hereof and that the Company has relied or will rely upon
such representations, warranties, and covenants of the undersigned, and the
undersigned hereby agrees to indemnify and hold harmless the Company and its
officers, directors, controlling persons, agents, and employees, from and
against any and all loss, claim, damage, liability, or expense, and any action
in respect thereof, joint or several, to which any such person may become
subject, due to or arising out of a breach of any such representation or
warranty, together with all reasonable costs and expenses (including attorneys'
fees) incurred by any such person in connection with any action, suit,
proceeding, demand, assessment, or judgment incident to any of the matters so
indemnified against. All representations and warranties contained in this
Agreement, and the indemnification contained herein, shall survive the sale of
the Common Stock.
8. Plan. This Agreement is subject to all the terms, conditions,
limitations and restrictions contained in the Plan. In the event of any
conflict or inconsistency between the terms hereof and the terms of the Plan,
the terms of the Plan shall be controlling.
9. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in multiple counterparts, and by the
different parties hereto in separate counterparts,
4
<PAGE> 17
each of which when executed and delivered (including by facsimile
transmission) shall be deemed to be an original but all of which taken
together shall constitute one and the same Agreement.
5
<PAGE> 18
IN WITNESS WHEREOF, the undersigned has executed this Agreement this
____ day of __________________, 199___.
- -------------------------------------------
Investor Signature
- -------------------------------------------
Investor's Printed Name
- -------------------------------------------
- -------------------------------------------
- -------------------------------------------
- -------------------------------------------
Telephone No.:
-----------------------------
Accepted as of ________________, 199___.
CAPSTAR BROADCASTING PARTNERS, INC.
By:
----------------------------------------
Name: R. Steven Hicks
Title: Chief Executive Officer and President
6
<PAGE> 1
EXHIBIT 10.20.2
CAPSTAR BROADCASTING PARTNERS, INC.
FIRST AMENDMENT TO THE
CAPSTAR BROADCASTING PARTNER, INC.
1996 STOCK PURCHASE PLAN
THIS FIRST AMENDMENT TO THE CAPSTAR BROADCASTING PARTNERS, INC. 1996
STOCK PURCHASE PLAN (this "Amendment") is made and adopted by Capstar
Broadcasting Partners, Inc., a Delaware corporation (the "Corporation"),
effective as of January 27, 1997.
RECITALS
WHEREAS, on October 16, 1996 the Corporation adopted the Capstar
Broadcasting Partners, Inc. 1996 Stock Purchase Plan (the "Plan"); and
WHEREAS, the Board approved that the Chairman of the Board no longer be
required, pursuant to the terms of the Plan, to serve as a member of the
committee that is appointed by the Board to administer the Plan (the
"Administration Amendment");
AMENDMENT
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section 7.1. The third sentence of Section 7.1 is hereby deleted
in its entirety.
Except as expressly set forth herein, the Plan shall remain in full
force and effect without further amendment or modification.
IN WITNESS WHEREOF, the Corporation, acting by and through its officer
hereunto duly authorized, has executed this Amendment effective as of the date
first written above.
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ R. STEVEN HICKS
----------------------------
R. Steven Hicks
President and Chief Executive
Officer
<PAGE> 1
EXHIBIT 10.21.1
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Stockholders Agreement") dated as of
October 16, 1996, is entered into by and among Capstar Broadcasting Partners,
Inc., a Delaware corporation (the "Company"), and the securityholders listed on
the signature pages hereof (collectively, the "Holders"), and Hicks, Muse, Tate
& Furst Incorporated, a Texas corporation ("HMTF").
In consideration of the premises, mutual covenants and agreements
hereinafter contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions.
"Accredited Investor" means an "Accredited Investor," as defined in
Regulation D, or any successor rule then in effect.
"Additional Securities" shall have the meaning set forth in Section 7.1
hereof.
"Advice" shall have the meaning provided in Section 3.5 hereof.
"Affiliate, means, with respect to any Person, any Person who, directly
or indirectly, controls, is controlled by or is under common control with that
Person.
"Appraised Value" means, as to any Securities, the fair market value of
such Securities at the date of the Purchase Notice as determined by an
Independent Financial Expert selected by HMTF; provided, however, if R. Steven
Hicks shall object to such determination within 10 days after being notified
thereof by HMTF, R. Steven Hicks shall within such ten-day period select an
Independent Financial Expert to determine the fair market value of such
Securities on behalf of R. Steven Hicks. In the event that the Independent
Financial Experts selected by each of HMTF and R. Steven Hicks cannot agree on
the fair market value of such Securities, then the two Independent Financial
Experts shall mutually select a third Independent Financial Expert to determine
the fair market value of such Securities, and the value selected by such third
firm shall be binding on all the parties hereto. Each such Independent
Financial Expert may use any customary method of determining fair market value.
The cost of the Independent Financial Expert selected by HMTF shall be paid by
HMTF, the cost of the Independent Financial Expert, if any, selected by R.
Steven Hicks shall be paid by R. Steven Hicks, and the cost of the Independent
Financial Expert, if any, mutually selected by the two Independent Financial
Experts appointed by each of HMTF and R. Steven Hicks shall be paid one-half by
HMTF and one-half by R. Steven Hicks.
"Authorization Date" shall have the meaning set forth in Section 5.3
hereof.
"Business Day" means a day that is not a Legal Holiday.
"Capstar L.P." means Capstar Broadcasting Partners, L.P., a Delaware
limited partnership.
"Change of Control" means the first to occur of the following events:
(i) any sale, lease, exchange, or other transfer (in one transaction or series
of related transactions) of all or substantially all of the assets
<PAGE> 2
of the Company to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group"), other than one or more members
of the HMC Group, (ii) a majority of the Board of Directors of the Company
shall consist of Persons who are not Continuing Directors; or (iii) the
acquisition by any Person or Group (other than one or more members of the HMC
Group) of the power, directly or indirectly, to vote or direct the voting of
securities having more than 50% of the ordinary voting power for the election
of directors of the Company.
"Common Stock" means shares of the Common Stock, $0.01 par value per
share, of the Company, and any capital stock into which such Common Stock
thereafter may be changed.
"Common Stock Equivalents" means, other than the Warrant, without
duplication with any other Common Stock or Common Stock Equivalents, any
rights, warrants, options, convertible securities or indebtedness, exchangeable
securities or indebtedness, or other rights, exercisable for or convertible or
exchangeable into, directly or indirectly, Common Stock of the Company and
securities convertible or exchangeable into Common Stock of the Company,
whether at the time of issuance or upon the passage of time or the occurrence
of some future event.
"Company" shall have the meaning set forth in the introductory paragraph
hereof.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the Board of Directors of the Company on October 17,
1996, (ii) was nominated for election or elected to the Board of Directors of
the Company with the affirmative vote of a majority of the Continuing Directors
who were members of such Board of Directors at the time of such nomination or
election, or (iii) is a member of the HMC Group.
"Co-Seller" shall have the meaning set forth in Section 4.1 hereof.
"Demand Registration" shall have the meaning set forth in Section 3.1.1
hereof.
"Demand Request" shall have the meaning set forth in Section 3.1.1.
hereof.
"Disqualifying Event" shall mean the removal of R. Steven Hicks as a
director of the Company or any of its Subsidiaries for cause under the General
Corporation Law of the State of Delaware.
"Election Notice" shall have the meaning set forth in Section 5.3
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Excluded Registration" means a registration under the Securities Act of
(i) a registration to effect a Qualified IPO if such registration only includes
equity securities to be issued by the Company and does not include any equity
securities for the account of any other securityholder of the Company, (ii)
securities pursuant to one or more Demand Registrations pursuant to Section 3
hereof, (iii) securities registered on Form S-8 or any similar successor form
and (iv) securities registered to effect the acquisition of or combination with
another Person.
"Fully-Diluted Common Stock" means, at any time, the then outstanding
Common Stock of the Company plus (without duplication) all shares of Common
Stock issuable, whether at such time or upon the
-2-
<PAGE> 3
passage of time or the occurrence of future events, upon the exercise,
conversion, or exchange of (i) all then outstanding Common Stock Equivalents
and (ii) the Warrant.
"HMC Group" means HMTF and its Affiliates (including Capstar L.P.) and
its and their respective officers, directors, and employees (and members of
their respective families (other than R. Steven Hicks) and trusts for the
primary benefit of such family members).
"HMC Group Designee" shall have the meaning set forth in Section 2.1.1
hereof.
"HMTF" shall have the meaning set forth in the introductory paragraph
hereof.
"Holders" shall have the meaning set forth in the introductory paragraph
hereof and shall include any direct or indirect transferee of any such Holder
who shall become a party to this Stockholders Agreement.
"Independent Financial Expert" means any investment bank which is
registered as a broker dealer under the Exchange Act and has aggregate net
capital of at least $50 million.
"Inspectors" shall have the meaning provided in Section 3.4 hereof.
"Legal Holiday" shall have the meaning provided in Section 9.2 hereof.
"Material Adverse Effect" shall have the meaning provided in Section
3.1.4 hereof.
"NASD" shall have the meaning provided in Section 3.4 hereof.
"New Shares" shall have the meaning set forth in Section 8.1 hereof.
"New Warrant" shall have the meaning set forth in Section 8.1 hereof.
"Non-HMC Group Holder" means each Holder other than Capstar L.P.
"Offer Notice" shall have the meaning set forth in Section 7.1 hereof.
"Offered Securities" shall have the meaning provided in Section 5.3
hereof.
"Participation Offer" shall have the meaning provided in Section 4.2
hereof.
"Permitted Transfer" means (i) a transfer upon the death of a Holder to
such Holder's executors, administrators, testamentary trustees, legatees or
beneficiaries, (ii) a gift made by a Holder to the spouse or natural or
adoptive children or stepchildren of such Holder, or to a trust established for
the benefit of one or more of such persons, (iii) a transfer made by Holder to
a corporation at least 80% of the capital stock of which is owned by such
Holder, or (iv) a pledge or hypothecation of shares of Common Stock by a Holder
to a bank or other financial institution in connection with financing for the
Company; provided that in each case the proposed transferee (x) shall execute
and deliver to the Company and HMTF a written agreement pursuant to which such
transferee agrees to be bound by this Agreement and (y) except in the case of
clause (i) or (ii) above, certifies to the reasonable satisfaction of the
Company that such transferee is an Accredited Investor.
-3-
<PAGE> 4
"Person" or "person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Preemptive Rights Offer" shall have the meaning set forth in Section
7.1 hereof.
"Preemptive Rights Transaction" shall have the meaning set forth in
Section 7.1 hereof.
"Purchase Option" shall have the meaning provided in Section 6.1.
"Qualified IPO" means a firm commitment underwritten public offering of
Common Stock for cash pursuant to a registration statement under the Securities
Act where the aggregate proceeds to the Company prior to deducting any
underwriters' discounts and commissions from such offering and any similar
prior public offerings exceed $10 million.
"Records" shall have the meaning provided in Section 3.4 hereof.
"Registrable Shares" means at any time (i) the Common Stock of the
Company owned by the HMC Group or the Holders, whether owned on the date hereof
or acquired hereafter and (ii) the Warrant Shares; provided, however, that
Registrable Shares shall not include any shares (x) the sale of which has been
registered pursuant to the Securities Act and which shares have been sold
pursuant to such registration, or (y) which have been sold to the public
pursuant to Rule 144 of the SEC under the Securities Act.
"Registration Expenses" shall have the meaning provided in Section 3.6
hereof.
"Regulation D" means Regulation D promulgated under the Securities Act
by the SEC.
"Requesting Holder" shall have the meaning provided in Section 3.1.5
hereof.
"Required Filing Date, shall have the meaning provided in Section
3.1.1(b) hereof.
"Required Holders" means Holders who then own beneficially more than 66-
2/3% of the aggregate number of Registrable Shares.
"Rights Holder" shall have the meaning set forth in Section 7.1 hereof.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Common Stock, the Warrant Shares, the Warrant and
any New Warrant.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Seller Affiliates" shall have the meaning provided in Section 3.7.1
hereof.
"Significant Sale" shall have the meaning provided in Section 4.1
hereof.
"Stockholders Agreement" means this Stockholders Agreement, as such from
time to time may be amended.
-4-
<PAGE> 5
"Subsidiary" of any Person means (i) a corporation a majority of whose
outstanding shares of capital stock or other equity interests with voting
power, under ordinary circumstances, to elect directors, is at the time,
directly or indirectly, owned by such Person, by one or more subsidiaries of
such Person or by such Person and one or more subsidiaries of such Person, and
(ii) any other Person (other than a corporation) in which such Person, a
subsidiary of such Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has (x)
at least a majority ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person.
"Suspension Notice" shall have the meaning provided in Section 3.5
hereof.
"Transfer" means any disposition of any Security or any interest therein
that would constitute a "sale" thereof within the meaning of the Securities
Act.
"Transfer Notice" shall have the meaning provided in Section 5.3 hereof.
"Warrant" means that certain Warrant dated October 16, 1996, for
9,300,000 shares of Common Stock, issued by the Company to R. Steven Hicks.
"Warrant Shares" means shares of Common Stock issuable to a Holder upon
the exercise of the Warrant or any New Warrant.
Section 1.2 Rules of Construction. Unless the context otherwise
requires
(1) a term has the meaning assigned to it;
(2) "or" is not exclusive;
(3) words in the singular include the plural, and words in the
plural include the singular;
(4) provisions apply to successive events and transactions;
and
(5) "herein," "thereof" and other words of similar import
refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE 2
MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES
Section 2.1 Board of Directors.
2.1.1 Board Representation. Subject to Section 2.1.3, the Board of
Directors of the Company shall consist of such individuals as may be designated
from time to time by the HMC Group (an "HMC Group Designee"); provided,
however, that so long as (A) no Disqualifying Event shall have occurred and (3)
either (i) R. Steven Hicks shall be serving as President and Chief Executive
Officer of the Company or (ii) R. Steven Hicks and his Affiliates (provided
that R. Steven Hicks shall have all voting rights with respect to the shares of
Common Stock held by such Affiliates) shall own of record and beneficiary
Common Stock and Warrant Shares equal to not less than 3% of the Fully-Diluted
Common Stock, appropriately adjusted for stock splits, stock dividends and
stock combinations, one of the HMC Group Designees shall be R. Steven Hicks.
Each Holder shall vote his or its shares of Common Stock at any regular or
special meeting
-5-
<PAGE> 6
of stockholders of the Company or in any written consent executed in lieu of
such a meeting of stockholders and shall take all other actions necessary to
give effect to the agreements contained in this Agreement (including without
limitation the election of persons designated by the HMC Group to be elected as
directors as described in the preceding sentence) and to ensure that the
certificate of incorporation and bylaws as in effect immediately following the
date hereof do not, at any time thereafter, conflict in any respect with the
provisions of this Agreement. In order to effectuate the provisions of this
Section 2, each Holder hereby agrees that when any action or vote is required
to be taken by such Holder pursuant to this Agreement, such Holder shall use
his or its best efforts to call, or cause the appropriate officers and
directors of the Company to call, a special or annual meeting of stockholders
of the Company, as the case may be, or execute or cause to be executed a
consent in writing in lieu of any such meetings pursuant to Section 228(a) of
the General Corporation Law of the State of Delaware.
2.1.2 Vacancies. If, prior to his election to the Board of Directors
of the Company pursuant to Section 2.1.1 hereof, any HMC Group Designee shall
be unable or unwilling to serve as a director of the Company, the HMC Group
shall be entitled to nominate a replacement who shall then be an HMC Group
Designee for purposes of this Section 2. If, following an election to the Board
of Directors of the Company pursuant to Section 2.1.1 hereof, any HMC Group
Designee shall resign or be removed or be unable to serve for any reason prior
to the expiration of his term as a director of the Company, the HMC Group
shall, within 30 days of such event, notify the Board of Directors of the
Company in writing of a replacement HMC Group Designee, and either (i) the
Holders shall vote their shares of Common Stock, at any regular or special
meeting called for the purpose of filling positions on the Board of Directors
of the Company or in any written consent executed in lieu of such a meeting of
stockholders, and shall take all such other actions necessary to ensure the
election to the Board of Directors of the Company of such replacement HMC Group
Designee to fill the unexpired term of the HMC Group Designee who such new HMC
Group Designee is replacing or (ii) the Board of Directors shall elect such
replacement HMC Group Designee to fill the unexpired term of the HMC Group
Designee who such new HMC Group Designee is replacing. If the HMC Group
requests that any HMC Group Designee be removed as a Director (with or without
cause) by written notice thereof to the Company, then the Company shall take
all actions necessary to effect, and each of the Holders shall vote all its or
his capital stock in favor of, such removal upon such request; provided,
however, that R. Steven Hicks may not be removed as a Director without cause so
long as (i) the right of the HMC Group to designate directors under Section
2.1.1 shall not have been terminated pursuant to Section 2.1.3 and (ii) he is
entitled to be an HMC Group Designee under Section 2.1.1.
2.1.3 Termination of Rights. The right of the HMC Group to designate
directors under Section 2.1.1, and the obligation of the Holders to vote their
shares as provided herein, shall terminate upon the first to occur of (i) the
termination or expiration of this Stockholders Agreement or this Article 2,
(ii) such time as the HMC Group elects in writing to terminate its rights under
this Article 2, or (iii) such time as the HMC Group cease to own any shares of
Common Stock.
2.1.4 Costs and Expenses. The Company will pay all reasonable out-of-
pocket expenses incurred by the designees of the HMC Group in connection with
their participation in meetings of the Board of Directors (and committees
thereof) of the Company and the Boards of Directors (and committees thereof) of
the Subsidiaries of the Company.
Section 2.2 Other Activities of the Holders; Fiduciary Duties. It is
understood and accepted that the Holders and their Affiliates have interests in
other business ventures which may be in conflict with the activities of the
Company and its Subsidiaries and that, subject to applicable law, nothing in
this Stockholders Agreement shall limit the current or future business
activities of the Holders whether or not such activities are competitive with
those of the Company and its Subsidiaries. Nothing in this Agreement,
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express or implied, shall relieve any officer or director of the Company or any
of its Subsidiaries, or any Holder, of any fiduciary or other duties or
obligations they may have to the Company's stockholders.
ARTICLE 3
REGISTRATION RIGHTS
Section 3.1 Demand Registration.
3.1.1 Request for Registration.
(a) At any time after the consummation of a Qualified IPO, any
Holder or Holders may request the Company, in writing (a "Demand
Request"), to effect the registration under the Securities Act of all or
part of its or their Registrable Shares (a "Demand Registration");
provided that the Registrable Shares proposed to be sold by the Holders
requesting a Demand Registration (the "Requesting Holders," which term
shall include parties deemed "Requesting Holders" pursuant to Section
3.1.5 hereof) represent, in the aggregate, more than 35% of the total
number of Registrable Shares held by all Holders.
(b) Each Demand Request shall specify the number of
Registrable Shares proposed to be sold. Subject to Section 3.1.6, the
Company shall file the Demand Registration within 90 days after
receiving a Demand Request (the "Required Filing Date") and shall use
all commercially reasonable efforts to cause the same to be declared
effective by the SEC as promptly as practicable after such filing;
provided, that the Company need effect only three Demand Registrations;
provided, further, that if any Registrable Shares requested to be
registered pursuant to a Demand Request under this Section 3.1 are
excluded from a registration pursuant to Section 3.1.4 below, the
Holders shall have the right, with respect to each such exclusion, to
one additional Demand Registration under this Section 3.1 with respect
to such excluded Registrable Shares.
3.1.2 Effective Registration and Expenses. A registration will not
count as a Demand Registration until it has become effective (unless the
Requesting Holders withdraw all their Registrable Shares and the Company has
performed its obligations hereunder in all material respects, in which case
such demand will count as a Demand Registration unless the Requesting Holders
pay all Registration Expenses, as hereinafter defined, in connection with such
withdrawn registration); provided, that if, after it has become effective, an
offering of Registrable Shares pursuant to a registration is interfered with by
any stop order, injunction, or other order or requirement of the SEC or other
governmental agency or court, such registration will be deemed not to have been
effected and will not count as a Demand Registration.
3.1.3 Selection of Underwriters. The offering of Registrable Shares
pursuant to a Demand Registration shall be in the form of a "firm commitment"
underwritten offering. The Requesting Holders of a majority of the Registrable
Shares to be registered in a Demand Registration shall select the investment
banking firm or firms to manage the underwritten offering; provided that such
selection shall be subject to the consent of the Company, which consent shall
not be unreasonably withheld.
3.1.4 Priority on Demand Registrations. No securities to be sold for
the account of any Person (including the Company) other than a Requesting
Holder shall be included in a Demand Registration unless the managing
underwriter or underwriters shall advise the Company or the Requesting Holders
in writing
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that the inclusion of such securities will not materially and adversely affect
the price or success of the offering (a "Material Adverse Effect").
Furthermore, in the event the managing underwriter or underwriters shall advise
the Company or the Requesting Holders that even after exclusion of all
securities of other Persons pursuant to the immediately preceding sentence, the
amount of Registrable Shares proposed to be included in such Demand
Registration by Requesting Holders is sufficiently large to cause a Material
Adverse Effect, the Registrable Shares of the Requesting Holders to be included
in such Demand Registration shall equal the number of shares which the Company
is so advised can be sold in such offering without a Material Adverse Effect
and such shares shall be allocated pro rata among the Requesting Holders on the
basis of the number of Registrable Shares requested to be included in such
registration by each such Requesting Holder.
3.1.5 Rights of Nonrequesting Holders. Upon receipt of any Demand
Request, the Company shall promptly (but in any event within 10 days) give
written notice of such proposed Demand Registration to all other Holders, who
shall have the right, exercisable by written notice to the Company within 20
days of their receipt of the Company's notice, to elect to include in such
Demand Registration such portion of their Registrable Securities as they may
request. All Holders requesting to have their Registrable Shares included in a
Demand Registration in accordance with the preceding sentence shall be deemed
to be "Requesting Holders" for purposes of this Section 3.1.
3.1.6 Deferral of Filing. The Company may defer the filing (but not
the preparation) of a registration statement required by Section 3.1 until a
date not later than 180 days after the Required Filing Date (or, if longer, 180
days after the effective date of the registration statement contemplated by
clause (ii) below) if (i) at the time the Company receives the Demand Request,
the Company or any of its Subsidiaries are engaged in confidential negotiations
or other confidential business activities, disclosure of which would be
required in such registration statement (but would not be required if such
registration statement were not filed), and the Board of Directors of the
Company determines in good faith that such disclosure would be materially
detrimental to the Company and its stockholders or would have a material
adverse effect on any such confidential negotiations or other confidential
business activities, or (ii) prior to receiving the Demand Request, the Board
of Directors had determined to effect a registered underwritten public offering
of the Company's securities for the Company's account and the Company had taken
substantial steps (including, but not limited to, selecting a managing
underwriter for such offering) and is proceeding with reasonable diligence to
effect such offering. A deferral of the filing of a registration statement
pursuant to this Section 3.1.6 shall be lifted, and the requested registration
statement shall be filed forthwith, if, in the case of a deferral pursuant to
clause (i) of the preceding sentence, the negotiations or other activities are
disclosed or terminated, or, in the case of a deferral pursuant to clause (ii)
of the preceding sentence, the proposed registration for the Company's account
is abandoned. In order to defer the filing of a registration statement
pursuant to this Section 3.1.6, the Company shall promptly (but in any event
within 10 days), upon determining to seek such deferral, deliver to each
Requesting Holder a certificate signed by an executive officer of the Company
stating that the Company is deferring such filing pursuant to this Section
3.1.6 and a general statement of the reason for such deferral and an
approximation of the anticipated delay. Within 20 days after receiving such
certificate, the holders of a majority of the Registrable Shares held by the
Requesting Holders and for which registration was previously requested may
withdraw such Demand Request by giving notice to the Company; if withdrawn, the
Demand Request shall be deemed not to have been made for all purposes of this
Agreement. The Company may defer the filing of a particular registration
statement pursuant to this Section 3.1.6 only once.
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Section 3.2 Piggyback Registrations.
3.2.1 Right to Piggyback. Each time the Company proposes to
register any of its equity securities (other than pursuant to an Excluded
Registration) under the Securities Act for sale to the public (whether for the
account of the Company or the account of any securityholder of the Company) and
the form of registration statement to be used permits the registration of
Registrable Shares, the Company shall give prompt written notice to each Holder
of Registrable Shares (which notice shall be given not less than 30 days prior
to the effective date of the Company's registration statement), which notice
shall offer each such Holder the opportunity to include any or all of its or
his Registrable Shares in such registration statement, subject to the
limitations contained in Section 3.2.2 hereof. Each Holder who desires to have
its or his Registrable Shares included in such registration statement shall so
advise the Company in writing (stating the number of shares desired to be
registered) within 20 days after the date of such notice from the Company. Any
Holder shall have the right to withdraw such Holder's request for inclusion of
such Holder's Registrable Shares in any registration statement pursuant to this
Section 3.2.1 by giving written notice to the Company of such withdrawal.
Subject to Section 3.2.2 below, the Company shall include in such registration
statement all such Registrable Shares so requested to be included therein;
provided, however, that the Company may at any time withdraw or cease
proceeding with any such registration if it shall at the same time withdraw or
cease proceeding with the registration of all other equity securities
originally proposed to be registered.
3.2.2 Priority on Registrations. If the Registrable Shares requested
to be included in the registration statement by any Holder differ from the type
of securities proposed to be registered by the Company and the managing
underwriter advises the Company that due to such differences the inclusion of
such Registrable Shares would cause a Material Adverse Effect, then (i) the
number of such Holder's or Holders' Registrable Shares to be included in the
registration statement shall be reduced to an amount which, in the judgment of
the managing underwriter, would eliminate such Material Adverse Effect or (ii)
if no such reduction would, in the judgment of the managing underwriter,
eliminate such Material Adverse Effect, then the Company shall have the right
to exclude all such Registrable Shares from such registration statement
provided no other securities of such type are included and offered for the
account of any other Person in such registration statement. Any partial
reduction in number of Registrable Shares to be included in the registration
statement pursuant to clause (i) of the immediately preceding sentence shall be
effected pro rata based on the ratio which such Holder's requested shares bears
to the total number of shares requested to be included in such registration
statement by all Persons who have requested that their shares be included in
such registration statement. If the Registrable Shares requested to be
included in the registration statement are of the same type as the securities
being registered by the Company and the managing underwriter advises the
Company that the inclusion of such Registrable Shares would cause a Material
Adverse Effect, the Company will be obligated to include in such registration
statement, as to each Holder, only a portion of the shares such Holder has
requested be registered equal to the ratio which such Holder's requested shares
bears to the total number of shares requested to be included in such
registration statement by all Persons who have requested that their shares be
included in such registration statement. If as a result of the provisions of
this Section 3.2.2 any Holder shall not be entitled to include all Registrable
Securities in a registration that such Holder has requested to be so included,
such Holder may withdraw such Holder's request to include Registrable Shares in
such registration statement. No Person may participate in any registration
statement hereunder unless such Person (x) agrees to sell such person's
Registrable Shares on the basis provided in any underwriting arrangements
approved by the Company and (y) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements, and other documents
reasonably required under the terms of such underwriting arrangements;
provided, however, that no such Person shall be required to make any
representations or warranties in connection with any such registration other
than representations and warranties as to (i) such Person's ownership of his or
its Registrable Shares to be sold or transferred free and clear of all liens,
claims, and encumbrances, (ii) such Person's power and authority to effect such
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<PAGE> 10
transfer, and (iii) such matters pertaining to compliance with securities laws
as may be reasonably requested; provided further, however, that the obligation
of such Person to indemnify pursuant to any such underwriting arrangements
shall be several, not joint and several, among such Persons selling Registrable
Shares, and the liability of each such Person will be in proportion to, and
provided further that such liability will be limited to, the net amount
received by such Person from the sale of his or its Registrable Shares pursuant
to such registration.
3.3 Holdback Agreement. Unless the managing underwriter otherwise
agrees, each of the Company and the Holders agrees, and the Company agrees, in
connection with any underwritten registration, to use its reasonable efforts to
cause its Affiliates to agree, not to effect any public sale or private offer
or distribution of any Common Stock or Common Stock Equivalents during the ten
business days prior to the effectiveness under the Securities Act of any
underwritten registration and during such time period after the effectiveness
under the Securities Act of any underwritten registration (not to exceed 120
days) (except, if applicable, as part of such underwritten registration) as the
Company and the managing underwriter may agree.
3.4 Registration Procedures. Whenever any Holder has requested that
any Registrable Shares be registered pursuant to this Stockholders Agreement,
the Company will use its commercially reasonable efforts to effect the
registration and the sale of such Registrable Shares in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will
as expeditiously as possible:
(i) prepare and file with the SEC a registration statement on any
appropriate form under the Securities Act with respect to such Registrable
Shares and use its commercially reasonable efforts to cause such registration
statement to become effective;
(ii) prepare and file with the SEC such amendments, post-effective
amendments, and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 180 days (or such lesser
period as is necessary for the underwriters in an underwritten offering to sell
unsold allotments) and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(iii) furnish to each seller of Registrable Shares and the underwriters
of the securities being registered such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus), any
documents incorporated by reference therein and such other documents as such
seller or underwriters may reasonably request in order to facilitate the
disposition of the Registrable Shares owned by such seller or the sale of such
securities by such underwriters (it being understood that, subject to Section
3.5 and the requirements of the Securities Act and applicable State securities
laws, the Company consents to the use of the prospectus and any amendment or
supplement thereto by each seller and the underwriters in connection with the
offering and sale of the Registrable Shares covered by the registration
statement of which such prospectus, amendment or supplement is a part);
(iv) use its commercially reasonable efforts to register or qualify
such Registrable Shares under such other securities or blue sky laws of such
jurisdictions as the managing underwriter reasonably requests; use its
commercially reasonable efforts to keep each such registration or qualification
(or exemption therefrom) effective during the period in which such registration
statement is required to be kept effective; and do any and all other acts and
things which may be reasonably necessary or advisable to enable each
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<PAGE> 11
seller to consummate the disposition of the Registrable Shares owned by such
seller in such jurisdictions (provided, however, that the Company will not be
required to (A) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph or (B)
consent to general service of process in any such jurisdiction);
(v) promptly notify each seller and each underwriter and (if
requested by any such Person) confirm such notice in writing (A) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed and, with respect to a registration statement or any post-effective
amendment, when the same has become effective, (B) of the issuance by any state
securities or other regulatory authority of any order suspending the
qualification or exemption from qualification of any of the Registrable Shares
under state securities or "blue sky" laws or the initiation of any proceedings
for that purpose, and (C) of the happening of any event which makes any
statement made in a registration statement or related prospectus untrue or
which requires the making of any changes in such registration statement,
prospectus or documents so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and, as promptly as
practicable thereafter, prepare and file with the SEC and furnish a supplement
or amendment to such prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Shares, such prospectus will not contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading;
(vi) make generally available to the Company's securityholders an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act no later than 30 days after the end of the 12-month period beginning with
the first day of the Company's first fiscal quarter commencing after the
effective date of a registration statement, which earnings statement shall
cover said 12-month period, and which requirement will be deemed to be
satisfied if the Company timely files complete and accurate information on
Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with
Rule 158 under the Securities Act;
(vii) if requested by the managing underwriter or any seller promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or any seller reasonably requests to be
included therein, including, without limitation, with respect to the
Registrable Shares being sold by such seller, the purchase price being paid
therefor by the underwriters and with respect to any other terms of the
underwritten offering of the Registrable Shares to be sold in such offering,
and promptly make all required filings of such prospectus supplement or post-
effective amendment;
(viii) as promptly as practicable after filing with the SEC of any
document which is incorporated by reference into a registration statement (in
the form in which it was incorporated), deliver a copy of each such document to
each seller;
(ix) cooperate with the sellers and the managing underwriter to
facilitate the timely preparation and delivery of certificates (which shall not
bear any restrictive legends unless required under applicable law) representing
securities sold under any registration statement, and enable such securities to
be in such denominations and registered in such names as the managing
underwriter or such sellers may request and keep available and make available
to the Company's transfer agent prior to the effectiveness of such registration
statement a supply of such certificates;
(x) promptly make available for inspection by any seller, any
underwriter participating in any disposition pursuant to any registration
statement, and any attorney, accountant or other agent or representative
retained by any such seller or underwriter (collectively, the "Inspectors"),
all financial and
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other records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information requested by any
such Inspector in connection with such registration statement; provided, that,
unless the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, the Company shall not be required to provide any
information under this subparagraph (x) if (A) the Company believes, after
consultation with counsel for the Company, that to do so would cause the
Company to forfeit an attorney-client privilege that was applicable to such
information or (B) if either (1) the Company has requested and been granted
from the SEC confidential treatment of such information contained in any filing
with the SEC or documents provided supplementally or otherwise or (2) the
Company reasonably determines in good faith that such Records are confidential
and so notifies the Inspectors in writing unless prior to furnishing any such
information with respect to (A) or (B) such Holder of Registrable Securities
requesting such information agrees to enter into a confidentiality agreement in
customary form and subject to customary exceptions; and provided, further that
each Holder of Registrable Securities agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company at its expense, to undertake
appropriate action and to prevent disclosure of the Records deemed
confidential;
(xi) furnish to each seller underwriter a signed counterpart of (A) an
opinion or opinions of counsel to the Company, and (B) a comfort letter or
comfort letters from the Company's independent public accountants, each in
customary form and covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as the sellers or managing
underwriter reasonably requests;
(xii) cause the Registrable Shares included in any registration
statement to be (A) listed on each securities exchange, if any, on which
similar securities issued by the Company are then listed, or (B) authorized to
be quoted and/or listed (to the extent applicable) on the National Association
of Securities Dealers, Inc. Automated Quotation ("NASDAQ") or the NASDAQ
National Market System if the Registrable Shares so qualify;
(xiii) provide a CUSIP number for the Registrable Shares included in any
registration statement not later than the effective date of such registration
statement;
(xiv) cooperate with each seller and each underwriter participating in
the disposition of such Registrable Shares and their respective counsel in
connection with any filings required to be made with the National Association
of Securities Dealers, Inc. ("NASD");
(xv) during the period when the prospectus is required to be delivered
under the Securities Act, promptly file all documents required to be filed with
the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act;
(xvi) notify each seller of Registrable Shares promptly of any request
by the SEC for the amending or supplementing of such registration statement or
prospectus or for additional information;
(xvii) prepare and file with the SEC promptly any amendments or
supplements to such registration statement or prospectus which, in the opinion
of counsel for the Company or the managing underwriter, is required in
connection with the distribution of the Registrable Shares;
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(xviii) enter into such agreements (including underwriting agreements
in the managing underwriter's customary form) as are customary in connection
with an underwritten registration; and
(xix) advise each seller of such Registrable Shares, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for such purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued.
3.5 Suspension of Dispositions. Each Holder agrees by acquisition of
any Registrable Shares that, upon receipt of any notice (a "Suspension Notice")
from the Company of the happening of any event of the kind described in Section
3.4(v)(C), such Holder will forthwith discontinue disposition of Registrable
Shares until such Holder's receipt of the copies of the supplemented or amended
prospectus, or until it is advised in writing (the "Advice") by the Company
that the use of the prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in the
prospectus, and, if so directed by the Company, such Holder will deliver to the
Company all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Shares current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of registration statements
set forth in Section 3.4(ii) hereof shall be extended by the number of days
during the period from and including the date of the giving of the Suspension
Notice to and including the date when each seller of Registrable Shares covered
by such registration statement shall have received the copies of the
supplemented or amended prospectus or the Advice. The Company shall use its
commercially reasonable efforts and take such actions as are reasonably
necessary to render the Advice as promptly as practicable.
3.6 Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Article 3 including, without limitation,
all registration and filing fees, all fees and expenses associated with filings
required to be made with the NASD (including, if applicable, the fees and
expenses of any "qualified independent underwriter" as such term is defined in
Schedule E of the By-Laws of the NASD, and of its counsel), as may be required
by the rules and regulations of the NASD, fees and expenses of compliance with
securities or "blue sky" laws (including reasonable fees and disbursements of
counsel in connection with "blue sky" qualifications of the Registrable
Shares), rating agency fees, printing expenses (including expenses of printing
certificates for the Registrable Shares in a form eligible for deposit with
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by a holder of Registrable Shares), messenger and
delivery expenses, the Company's internal expenses (including without
limitation all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
any listing of the Registrable Shares, fees and expenses of counsel for the
Company and its independent certified public accountants (including the
expenses of any special audit or "cold comfort" letters required by or incident
to such performance), securities acts liability insurance (if the Company
elects to obtain such insurance), the fees and expenses of any special experts
retained by the Company in connection with such registration, and the fees and
expenses of other persons retained by the Company and reasonable fees and
expenses of one firm of counsel for the sellers (which shall be selected by the
holders of a majority of the Registrable Shares being included in any
particular registration statement) (all such expenses being herein called
"Registration Expenses") will be borne by the Company whether or not any
registration statement becomes effective; provided that, except as expressed
otherwise provided above, in no event shall Registration Expenses include any
underwriting discounts, commissions, or fees attributable to the sale of the
Registrable Shares or any counsel, accountants, or other persons retained or
employed by the Holders.
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3.7 Indemnification.
3.7.1 The Company agrees to indemnify and reimburse, to the fullest
extent permitted by law, each seller of Registrable Shares, and each of its
employees, advisors, agents, representatives, partners, officers, and directors
and each Person who controls such seller (within the meaning of the Securities
Act or the Exchange Act) and any agent or investment advisor thereof
(collectively, the "Seller Affiliates") (A) against any and all losses, claims,
damages, liabilities, and expenses, joint or several (including, without
limitation, attorneys' fees and disbursements except as limited by 3.7.3) based
upon, arising out of, related to or resulting from any untrue or alleged untrue
statement of a material fact contained in any registration statement,
prospectus, or preliminary prospectus or any amendment thereof or supplement
thereto, or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, (B)
against any and all loss, liability, claim, damage, and expense whatsoever, as
incurred, to the extent of the aggregate amount paid in settlement of any
litigation or investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon, arising out of,
related to or resulting from any such untrue statement or omission or alleged
untrue statement or omission, and (C) against any and all costs and expenses
(including reasonable fees and disbursements of counsel) as may be reasonably
incurred in investigating, preparing, or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon, arising out of, related to or
resulting from any such untrue statement or omission or alleged untrue
statement or omission, to the extent that any such expense or cost is not paid
under subparagraph (A) or (B) above; except insofar as the same are made in
reliance upon and in strict conformity with information furnished in writing to
the Company by such seller or any Seller Affiliate for use therein or arise
from such seller's or any Seller Affiliate's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such seller or Seller Affiliate with a
sufficient number of copies of the same. The reimbursements required by this
Section 3.7.1 will be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred.
3.7.2 In connection with any registration statement in which a seller
of Registrable Shares is participating, each such seller will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the fullest extent permitted by law, each such seller will
indemnify the Company and its directors and officers and each Person who
controls the Company (within the meaning of the Securities Act or the Exchange
Act) against any and all losses, claims, damages, liabilities, and expenses
(including, without limitation, reasonable attorneys' fees and disbursements
except as limited by Section 3.7.3) resulting from any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement, prospectus, or any preliminary prospectus or any amendment thereof
or supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission is contained in any information or
affidavit so furnished in writing by such seller or any of its Seller
Affiliates specifically for inclusion in the registration statement; provided
that the obligation to indemnify will be several, not joint and several, among
such sellers of Registrable Shares, and the liability of each such seller of
Registrable Shares will be in proportion to, and provided further that such
liability will be limited to, the net amount received by such seller from the
sale of Registrable Shares pursuant to such registration statement; provided,
however, that such seller of Registrable Shares shall not be liable in any such
case to the extent that prior to the filing of any such registration statement
or prospectus or amendment thereof or supplement thereto, such seller has
furnished in writing to the Company information expressly for use in such
registration statement or prospectus or any amendment thereof or
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supplement thereto which corrected or made not misleading information
previously furnished to the Company.
3.7.3 Any Person entitled to indemnification hereunder will (A) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give such notice
shall not limit the rights of such Person) and (B) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such person unless (X) the
indemnifying party has agreed to pay such fees or expenses, or (Y) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person. If such defense is not
assumed by the indemnifying party as permitted hereunder, the indemnifying
party will not be subject to any liability for any settlement made by the
indemnified party without its consent (but such consent will not be
unreasonably withheld). If such defense is assumed by the indemnifying party
pursuant to the provisions hereof, such indemnifying party shall not settle or
otherwise compromise the applicable claim unless (1) such settlement or
compromise contains a full and unconditional release of the indemnified party
or (2) the indemnified party otherwise consents in writing. An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party, a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the reasonable fees and disbursements of such
additional counsel or counsels.
3.7.4 Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 3.7.1 or Section 3.7.2 are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages, liabilities, or expenses (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, liabilities, or expenses (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and the indemnified party in connection with the actions
which resulted in the losses, claims, damages, liabilities or expenses as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, 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 such indemnifying party or indemnified party, and
the parties, relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this
Section 3.7.4 were determined by pro rata allocation (even if the Holders or
any underwriters or all of them were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in this Section 3.7.4. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages, liabilities,
or expenses (or actions in respect thereof) referred to above shall be deemed
to include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or, except as provided in
Section 3.7.3, defending any such action or claim. Notwithstanding the
provisions of this Section 3.7.4, no Holder shall be required to contribute an
amount greater than the dollar amount by which the proceeds received by such
Holder with respect to the sale of any Registrable Shares exceeds the amount of
damages which such Holder has otherwise been required to pay by reason of such
statement or omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section
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11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations in this Section 3.7.4 to contribute shall be several in proportion
to the amount of Registrable Shares registered by them and not joint.
If indemnification is available under this Section 3.7, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 3.7.1 and Section 3.7.2 without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 3.7.4.
3.7.5 The indemnification and contribution provided for under this
Stockholders Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director, or controlling Person of such indemnified party and will survive the
transfer of securities.
ARTICLE 4
TRANSFERS OF SECURITIES
Section 4.1 Drag Along Rights.
4.1.1 Applicability. In connection with any Transfer by members of the
HMC Group of shares of Common Stock representing more than 50% of the shares of
Common Stock then held by the HMC Group (a "Significant Sale"), the HMC Group
shall have the right to require each non-selling Holder (each, a "Co-Seller")
to Transfer a portion of its Common Stock which represents the same percentage
of the Fully-Diluted Common Stock held by such Co-Seller as the shares being
disposed of by the HMC Group represent of the Fully-Diluted Common Stock held
by the HMC Group. (For example, if the HMC Group is selling 50% of their Fully-
Diluted Common Stock position, each Co-Seller shall be required to sell 50% of
its Fully-Diluted Common Stock position.) All Common Stock Transferred by
Holders pursuant to this Section 4.1 shall be sold at the same price and
otherwise treated identically with the Common Stock being sold by the HMC Group
in all respects; provided, that the Co-Seller shall not be required to make any
representations or warranties in connection with such Transfer other than
representations and warranties as to (i) such Co-Seller's ownership of his or
its Common Stock to be Transferred free and clear of all liens, claims and
encumbrances, (ii) such Co-Seller's power and authority to effect such
transfer, and (iii) such matters pertaining to compliance with securities laws
as the transferee may reasonably require except that the transferee may not
require that each Transferring Co-Seller be an Accredited Investor.
4.1.2 Notice of Significant Sale. HMTF, on behalf of the HMC Group,
shall give each Co-Seller at least 30 days' prior written notice of any
Significant Sale as to which the HMC Group intends to exercise its rights under
Section 4.1. If the HMC Group elects to exercise its rights under Section 4.1,
the Co-Sellers shall take such actions as may be reasonably required and
otherwise cooperate in good faith with the HMC Group in connection with
consummating the Significant Sale (including, without limitation, the voting of
any Common Stock or other voting capital stock of the Company to approve such
Significant Sale). At the closing of such Significant Sale, each Co-Seller
shall deliver certificates for all shares of Common Stock to be sold by such
Co-Seller, duly endorsed for transfer, with the signature guaranteed, to the
purchaser against payment of the appropriate purchase price.
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Section 4.2 Tag Along Rights.
4.2.1 Applicability. If the HMC Group desires to effect a Significant
Sale and it does not elect to exercise its rights under Section 4.1 hereof,
then at least 30 days prior to the closing of such Significant Sale, HMTF shall
cause the HMC Group to make an offer (the "Participation Offer") to each Co-
Seller to include in the proposed Significant Sale a portion of its Common
Stock which represent the same percentage of such Co-Seller's Fully Diluted
Common Stock as the shares being sold by the HMC Group represent of its Fully-
Diluted Common Stock; provided that, if the consideration to be received by the
HMC Group includes any securities, only Co-Sellers who have certified to the
reasonable satisfaction of HMTF that they are Accredited Investors shall be
entitled to participate in such transfer, unless the transferee consents
otherwise.
4.2.2 Terms of Participation Offer. The Participation Offer shall
describe the terms and conditions of the proposed Significant Sale and shall be
conditioned upon (i) the consummation of the transactions contemplated in the
Participation Offer with the transferee named therein, and (ii) each Co-
Seller's execution and delivery of all agreements and other documents as the
members of the HMC Group are required to execute and deliver in connection with
such Significant Sale (provided that the Co-Seller shall not be required to
make any representations or warranties in connection with such sale or transfer
other than representations and warranties as to (A) such Co-Seller's ownership
of his Common Stock to be sold or transferred free and clear of all liens,
claims, and encumbrances, (B) such Co-Seller's power and authority to effect
such transfer and (C) such matters pertaining to compliance with securities
laws as the transferee may reasonably require). If any Co-Seller shall accept
the Participation Offer, HMTF shall cause the HMC Group to reduce, to the
extent necessary, the number of shares of Common Stock it otherwise would have
sold in the proposed transfer so as to permit those Co-Sellers who have
accepted the Participation Offer to sell the number of shares of Common Stock
that they are entitled to sell under this Section 4.2, and HMTF shall cause the
HMC Group to transfer and such Co-Sellers shall transfer the number of shares
Common Stock specified in the Participation Offer to the proposed transferee in
accordance with the terms of such transfer as set forth in the Participation
Offer.
Section 4.3 Certain Events Not Deemed Transfers. In no event shall
any exchange, reclassification, or other conversion of shares into any cash,
securities, or other property pursuant to a merger or consolidation of the
Company or any Subsidiary with, or any sale or transfer by the Company or any
Subsidiary of all or substantially all its assets to, any Person constitute a
Significant Sale of shares of Common Stock by the HMC Group for purposes of
Section 4.1 or 4.2. In addition, Sections 4.1 and 4.2 hereof shall not apply
to any transfer, sale, or disposition of shares of Common Stock solely among
members of the HMC Group.
Section 4.4 Transfer and Exchange. When Securities are presented to
the Company with a request to register the transfer of such Securities or to
exchange such Securities for Securities of other authorized denominations, the
Company shall register the transfer or make the exchange as requested if the
requirements of this Stockholders Agreement for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company, duly executed by the Holder thereof or its
attorney and duly authorized in writing. No service charge shall be made for
any registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith.
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<PAGE> 18
Section 4.5 Replacement Securities. If a mutilated Security is
surrendered to the Company or if the Holder of a Security claims and submits an
affidavit or other evidence, satisfactory to the Company, to the effect that
the Security has been lost, destroyed or wrongfully taken, the Company shall
issue a replacement Security if the Company's requirements are met. If
required by the Company, such Securityholder must provide an indemnity bond, or
other form of indemnity, sufficient in the judgment of the Company to protect
the Company against any loss which may be suffered. The Company may charge
such Securityholder for its reasonable out-of-pocket expenses in replacing a
Security which has been mutilated, lost, destroyed or wrongfully taken.
ARTICLE 5
LIMITATION ON TRANSFERS
Section 5.1 Restrictions on Transfer. The Securities shall not be
Transferred or otherwise conveyed, assigned or hypothecated before satisfaction
of (i) the conditions specified in this Section 5.1 and Sections 5.2 through
5.3, which conditions are intended to ensure compliance with the provisions of
the Securities Act with respect to the Transfer of any Security and (ii) if
applicable, Article 4 hereof. Any purported Transfer in violation of this
Article 5 and/or, if applicable, Article 4 hereof shall be void ab initio and
of no force or effect. Except for Transfers subject to Sections 4.1 or 4.2 (it
being understood that transactions pursuant to such Sections are not subject to
this Article 5) hereof and except for Transfers to the public pursuant to an
effective registration statement or sales to the public pursuant to Rule 144
under the Securities Act otherwise permitted hereunder, each Holder will cause
any proposed transferee of any Security or any interest therein held by it to
agree to take and hold such securities subject to the provisions and upon the
conditions specified in this Stockholders Agreement. R. Steven Hicks shall not
Transfer, convey, assign or hypothecate any Securities to any Affiliate of R.
Steven Hicks or any member of R. Steven Hicks' family unless R. Steven Hicks
shall have and retain all voting rights with respect to such Securities.
Section 5.2 Restrictive Legends.
5.2.1 Securities Act Legend. Except as otherwise provided in Section
5.4 hereof, each Security held by a Holder, and each Security issued to any
subsequent transferee of such Security, shall be stamped or otherwise imprinted
with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, TRANSFERRED, OR
OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO
THE ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR
OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
5.2.2 Other Legends. Each Security issued to each Holder or a
subsequent transferee shall include a legend in substantially the following
form:
THIS SECURITY IS SUBJECT TO RESTRICTIONS ON TRANSFER, VOTING AND OTHER
TERMS AND CONDITIONS SET FORTH IN THE STOCKHOLDERS AGREEMENT DATED AS OF
OCTOBER ___, 1996, A COPY OF WHICH MAY BE OBTAINED FROM CAPSTAR BROADCASTING
PARTNERS, INC. AT ITS PRINCIPAL EXECUTIVE OFFICES.
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<PAGE> 19
Section 5.3 Right of First Refusal.
5.3.1 Right of First Refusal. Prior to any Transfer or attempted
Transfer by any Non-HMC Group Holder of any Securities or Common Stock
Equivalents (the "Offered Securities") other than pursuant to a registration
under the Securities Act or a Permitted Transfer, the Non-HMC Group Holder of
such Offered Securities shall (i) give prior written notice (a "Transfer
Notice") to HMTF of such Non-HMC Group Holder's intention to effect such
Transfer, describing the terms and conditions of the proposed Transfer,
including the identity of the prospective transferee(s), the number of shares
of Offered Securities such Non-HMC Group Holder desires to sell and the
purchase price. After receipt of the Transfer Notice, HMTF (or as provided in
Section 5.3.3, an assignee of HMTF who is a member of the HMC Group) shall have
the option for 15 days from the date of receipt of the Transfer Notice to elect
to purchase all, but not less than all, of the Offered Securities upon the same
terms and conditions as those set forth in the Transfer Notice by delivering a
written notice (the "Election Notice") of such election to such Non-HMC Group
Holder within such 15-day period. The Non-HMC Group Holder shall not
consummate such Transfer until the earlier to occur of the lapse of the 15-day
period or the date on which HMTF (acting for itself or if applicable, its
assignee) notifies such Non-HMC Group Holder in writing that it will not
exercise its rights under this Section 5.3 (the "Authorization Date"). If
neither HMTF (nor any assignee) has elected to purchase all of the Offered
Securities or has failed to make a timely election, such Non-HMC Group Holder
may Transfer all, but not less than all, of the Offered Securities to the
prospective transferee(s) thereof specified in the Transfer Notice, at a price
and on terms no more favorable to such prospective transferee(s) than as
specified in the Transfer Notice, during the 30-day period immediately
following the Authorization Date, provided that, if required by the Company,
such Non-HMC Group Holder shall either (i) provide to the Company an opinion
reasonably satisfactory to the Company (or supply such other evidence
reasonably satisfactory to the Company) that the proposed Transfer may be
effected without registration under the Securities Act, or (ii) certify to the
Company that the Non-HMC Group Holder reasonably believes that each proposed
transferee is a "qualified institutional buyer" and that such Non-HMC Group
Holder has taken reasonable steps to make each proposed transferee aware that
such Holder may rely on Rule 144A under the Securities Act in effecting such
Transfer. Each Security issued upon such Transfer shall bear the restrictive
legend set forth in Section 5.2, unless in the reasonable judgment of counsel
for the Company such legend is not required in order to ensure compliance with
the Securities Act. If the Offered Securities are not so transferred within
such 30-day period, such Offered Securities must be reoffered to HMTF in
accordance with the provisions of this Section 5.3 if such Non-HMC Group Holder
still desires to Transfer the Offered Securities.
5.3.2 Closing. If HMTF (or an assignee) exercises the right to
purchase the Offered Securities by timely delivery of the Election Notice,
unless otherwise agreed by the Non-HMC Group Holder of the Offered Securities
and HMTF, (acting for itself, or if applicable, its assignee) the closing will
take place at the offices of the Company in Dallas, Texas on the fifth business
day after the date of the Election Notice. At the closing, HMTF (or, if
applicable, its assignee) will pay the purchase price set forth in the Transfer
Notice in cash (by certified or cashier's check) solely upon such Holder's
delivery to HMTF (or, if applicable, its assignee), of valid certificates or
agreements evidencing all of the Offered Securities then being purchased
pursuant to the Election Notice. Certificates or agreements representing the
Offered Securities will be duly endorsed (with signature guaranteed) for
transfer to HMTF (or, if applicable, its assignee). By delivery of such
certificates or agreements to HMTF (or, if applicable, its assignee) such Non-
HMC Group Holder will be deemed to represent and warrant to HMTF (or, if
applicable, its assignee) that the transferred Offered Securities are owned by
such Non-HMC Group Holder free and clear of all liens, adverse claims, and
other encumbrances other than as provided in this Stockholders Agreement. The
Non-HMC Group Holder will promptly perform, whether before or after any such
closing, such additional acts (including without
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limitation executing and delivering additional documents) as are reasonably
required by either such party to effect more fully the transactions
contemplated by this Section 5.3.
5.3.3 Assignment. The rights of HMTF under this Section 5.3 may be
assigned or transferred in whole or in part by HMTF, without any consent or
other action on the part of any other party hereto, to any one or more members
of the HMC Group.
Section 5.4 Termination of Certain Restrictions. Notwithstanding the
foregoing provisions of this Section 5, the restrictions imposed by Section
5.3.1 upon the transferability of the Securities and the legend requirements of
Section 5.2.1 shall terminate as to any Security (i) when and so long as such
Security shall have been effectively registered under the Securities Act and
disposed of pursuant thereto or disposed pursuant to the provision of Rule 144
or (ii) when the Company shall have received an opinion of counsel reasonably
satisfactory to it that such Security may be transferred without registration
thereof under the Securities Act and that such legend may be removed. Whenever
the restrictions imposed by Section 5.2 shall terminate as to any Security, the
Holder thereof shall be entitled to receive from the Company, at the Company's
expense, a new Security not bearing the restrictive legend set forth in Section
5.2.
ARTICLE 6
PURCHASE OPTION
Section 6.1. Purchase Option.
6.1.1 Purchase Option. Unless Section 4.1 or 4.2 is otherwise
applicable, if (i), and at such time as, R. Steven Hicks' is no longer a
director, officer or employee of the Company or any Subsidiary of the Company,
for any reason at any time or (ii) a Change of Control occurs, the Company
shall have the option (the "Purchase Option") to purchase, and if the Purchase
Option is exercised, R. Steven Hicks (or the executor or administrator of R.
Steven Hicks' estate, in the event of R. Steven Hicks' death, or R. Steven
Hicks' legal representative in the event of his incapacity) (hereinafter,
collectively with R. Steven Hicks, the "Grantor") shall sell to HMTF, (or as
provided in Section 6.1.4 an assignee of HMTF) all or any portion (at the
option of HMTF acting for itself or, if applicable, its assignee) of the shares
of Common Stock, Warrants and/or Common Stock Equivalents held by the Grantor
(such shares of Common Stock, Warrants and/or Common Stock Equivalents
collectively being referred to as the "Purchasable Securities"), subject to
HMTF's (or, if applicable, its assignee) compliance with the conditions
hereinafter set forth. HMTF (acting for itself or, if applicable, its
assignee) shall give notice (the "Purchase Notice") in writing to the Grantor
of the exercise of the Purchase Option within 120 days from the date R. Steven
Hicks is no longer a director, officer or employee of the Company or any
Subsidiary of the Company or such Change of Control. Such Purchase Notice
shall state the number of Purchasable Securities to be purchased and the
exercise price for each Purchasable Security (on a per share basis or, in the
case of securities other than capital stock, other applicable denomination).
If no notice is given within the time limit specified above, the Purchase
Option shall terminate.
6.1.2 Closing. Unless otherwise agreed by the Grantor and HMTF,
(acting for itself or, if applicable, its assignee) the closing of each
exercise of the Purchase Option will take place at the offices of the Company
in Dallas, Texas, on the fifth business day after the Purchase Notice is mailed
or delivered in accordance with this Section 6.1. At the closing, HMTF (of, if
applicable, its assignee) will pay the exercise price to the Grantor in cash
(by certified or cashier's check) solely upon such Grantor's delivering to HMTF
(or, if applicable, its assignee) valid certificates or agreements evidencing
all Purchasable Securities then being purchased pursuant to the exercise of the
Purchase Option. Certificates or agreements representing
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<PAGE> 21
the Purchasable Securities will be duly endorsed (with signature guaranteed)
for transfer to HMTF (or, if applicable, its assignee). Upon delivery of such
certificates or agreements to HMTF(or, if applicable, its assignee) , the
Grantor will be deemed to represent and warrant to HMTF (or, if applicable, its
assignee) that the transferred Purchasable Securities are owned by the Grantor
free and clear of all liens, adverse claims, and other encumbrances other than
as provided in this Stockholders Agreement. In the event that, notwithstanding
the foregoing, the Grantor shall have failed to obtain the release of any lien,
adverse claim or other encumbrance on any Purchasable Securities by the
scheduled closing date (at the option of HMTF acting for itself or, if
applicable, its assignee) the closing shall nevertheless occur on such
scheduled closing date, with the exercise price being reduced to the extent of
all unpaid indebtedness for which such Purchasable Securities are then
encumbered. Payment of the exercise price for the Purchasable Securities is
not required in order to effect the timely exercise of the Purchase Option. In
order to ensure the transfer of the Purchasable Securities purchased upon
exercise of the Purchase Option, the Grantor hereby appoints HMTF as his or its
attorney in fact for the purpose of effecting any such transfer, and the
Grantor acknowledges and agrees that such power of attorney is coupled with an
interest and is irrevocable. Moreover, HMTF (or, if applicable, its assignee)
and the Grantor will promptly perform, whether before or after any Purchase
Option closing, such additional acts (including without limitation executing
and delivering additional documents) as are reasonably required by either such
party to effect more fully the transactions contemplated hereby.
6.1.3 Exercise Price. The exercise price for each Purchasable Security
will equal the Appraised Value per share (or, in the case of securities other
than capital stock, other applicable denomination) to be paid in connection
with the exercise of the Purchase Option.
6.1.4 Assignment of Purchase Option. The Purchase Option may be
assigned or transferred in whole or in part by HMTF to any one or more members
of the HMC Group without any consent or other action on the part of any other
party hereto.
ARTICLE 7
PREEMPTIVE RIGHTS
7.1 Rights to Participate in Future Sales. In case the Company
proposes to issue or sell any shares of Common Stock to any member of the HMC
Group (the "Additional Securities"), the Company shall, no later than twenty
days prior to the consummation of such transaction (a "Preemptive Rights
Transaction"), give notice in writing (the "Offer Notice") to R. Steven Hicks
(the "Rights Holder") of such Preemptive Rights Transaction. The Offer Notice
shall describe the proposed Preemptive Rights Transaction and contain an offer
(the "Preemptive Rights Offer") to sell to Rights Holder if he certifies (to
the reasonable satisfaction of the Company) that the Rights Holder is an
Accredited Investor, at the same price and for the same consideration to be
paid by the proposed purchaser, all of the Rights Holder's pro rata portion of
the Additional Securities (which shall be based on the ratio that the
Fully-Diluted Common Stock held by the Rights Holder, excluding, for the
purposes of such calculation, any shares of Common Stock issuable upon exercise
of any Common Stock Equivalents granted pursuant to any employee, officer or
director benefit plan or arrangement, bears to the Fully-Diluted Common Stock
held by the HMC Group). If the Rights Holder fails to accept such offer by
written notice five days after his receipt of the Offer Notice, the Company may
proceed with the proposed issue or sale of the Additional Securities, free of
any right on the part of the Rights Holder under this Section 7.1 in respect
thereof. Notwithstanding any provision contained herein to the contrary, the
rights of the Rights Holder arising under this Section 7.1 shall not be
transferable and any attempted transfer or assignment shall render such right
void.
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7.2 Exceptions to Preemptive Rights. Section 7.2 shall not apply to
(i) issuances or sales of Common Stock to any member of the HMC Group who is an
employee, officer, and/or director of the Company and/or any of its
Subsidiaries pursuant to employee benefit or similar plans or arrangements of
the Company and/or its Subsidiaries, (ii) issuances or sales of Common Stock
upon exercise of any Common Stock Equivalent, (iii) securities distributed or
set aside ratably to all holders of Common Stock on a per share equivalent
basis, or (iv) issuances or sales of Common Stock pursuant to a registered
underwritten public offering, a merger of the Company or a subsidiary of the
Company into or with another entity or an acquisition by the Company of a
subsidiary of the Company or another business or corporation.
ARTICLE 8
ADDITIONAL WARRANTS
8.1 HMC Group Investment. If after the date of this Stockholders
Agreement, the HMC Group should purchase additional shares of Common Stock from
the Company, other than shares of Common Stock issued upon the exercise of any
Common Stock Equivalents granted pursuant to any employee, officer or director
benefit plan of arrangement ("New Shares"), then the Rights Holder shall be
entitled to receive from the Company for no additional consideration a warrant
(a "New Warrant") in the same form and substance as the Warrant except that
each New Warrant shall provide:
(a) for an initial Exercise Price (as such term is defined and
used in the Warrant) equal to the price per share of Common Stock paid
by the HMC Group in connection with such purchase, with such initial
Exercise Price being increased at the rate of interest provided for in
the Warrant;
(b) for a term of ten years from the date of grant;
(c) for a number of shares subject thereto equal to an amount
of (i) 10% of the New Shares so purchased by the HMC Group up to an
aggregate purchase price of $10,000,000 and (ii) 7.5% of the New Shares
so purchased by the HMC Group at an aggregate purchase price that is in
excess of that provided in clause (i) above; and
(d) that the number of shares of Common Stock subject to each
New Warrant shall be allocated 80% to the A Warrant and 20% to the B
Warrant (as such terms are defined and used in the Warrant).
Notwithstanding any provision contained herein to the contrary, the
rights of the Rights Holder arising under this Section 8.1 shall not be
transferable and any attempted transfer or assignment shall render such right
void.
ARTICLE 9
TERMINATION
The provisions of this Agreement shall terminate on the tenth
anniversary of the date of this Stockholders Agreement; provided, however, that
Sections 4.1 and 4.2 and Articles 5 (other than Sections 5.2 and 5.4), 6, 7 and
8 of this Agreement shall terminate upon the consummation prior to the
expiration of such 10-year period of a Qualified IPO.
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ARTICLE 10
MISCELLANEOUS
Section 10.1 Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telex, by telecopier or registered or certified mail,
postage prepaid, return receipt requested, addressed as follows (or at such
other address as may be substituted by notice given as herein provided):
If to the Company:
Capstar Broadcasting Partners, Inc.
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: President
Copies to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Michael D. Wortley
If to HMTF:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Thomas 0. Hicks
John R. Muse
Jack D. Furst
Lawrence D. Stuart, Jr.
Hicks, Muse, Tate & Furst Incorporated
1325 Avenue of the Americas
25th Floor
New York, New York 10019
Attention: Charles W. Tate
Alan B. Menkes
Michael J. Levitt
Copies to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Michael D. Wortley
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<PAGE> 24
If to any Holder, at its address listed on the signature pages hereof.
Any notice or communication hereunder shall be deemed to have been given
or made as of the date so delivered if personally delivered; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and five
calendar days after mailing if sent by registered or certified mail (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 10.2 Legal Holidays. A "Legal Holiday" used with respect to a
particular place of payment is a Saturday, a Sunday or a day on which banking
institutions at such place are not required to be open. If a payment date is a
Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest on the amount of
such payment shall accrue for the intervening period.
Section 10.3 Governing Law; Jurisdiction. THIS STOCKHOLDERS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
Section 10.4 Successors and Assigns. Whether or not an express
assignment has been made pursuant to the provisions of this Stockholders
Agreement, provisions of this Stockholders Agreement that are for the Holders'
benefit as the holders of any Securities are also for the benefit of, and
enforceable by, all subsequent holders of Securities, except as otherwise
expressly provided herein. This Stockholders Agreement shall be binding upon
the Company, each Holder, and their respective successors and assigns.
Section 10.5 Duplicate Originals. All parties may sign any number of
copies of this Stockholders Agreement. Each signed copy shall be an original,
but all of them together shall represent the same agreement.
Section 10.6 Severability. In case any provision in this Stockholders
Agreement shall be held invalid, illegal or unenforceable in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and the remaining provisions shall not in any way be
affected or impaired thereby.
Section 10.7 No Waivers; Amendments.
10.7.1 No failure or delay on the part of the Company or any Holder in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
any Holder at law or in equity or otherwise.
10.7.2 Any provision of this Stockholders Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Company and the Required Holders; provided that no such amendment or waiver
shall, (i) unless signed by all of the Holders, amend the provisions of Section
2.1, (ii) unless signed by all of the Holders affected, (A) amend the
provisions of this Section 10.7.2 or (B) change the number of Holders which
shall be required for the Holders or any of them to take any
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<PAGE> 25
action under this Section 10.7.2 or any other provision of this Stockholders
Agreement, and (iii) unless signed by a majority of the Holders who are not
members of the HMC Group, amend Article 3, Section 4.1, Section 4.2 or Article
5, or grant a waiver thereunder, so as to (A) impose additional obligations on
or modify existing obligations in a manner adverse to such Holder who is not a
member of the HMC Group, Holders who are not members of the HMC Group that are
not imposed on Holders who are members of the HMC Group or (B) adversely affect
the rights granted to the Holders who are not members of the HMC Group where
such amendment or waiver does not apply to the same extent to the rights
granted thereunder to the Holders who are members of the HMC Group.
Section 10.8 Third Parties. Each member of the HMC Group is an
intended third party beneficiary of this Stockholders Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 26
SIGNATURES TO STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Stockholders
Agreement to be duly executed, all as of the date first written above.
CAPSTAR BROADCASTING PARTNERS,
INC.
By: /s/ R. STEVEN HICKS
---------------------------
Name: R. Steven Hicks
-------------------------
Title: President
------------------------
HICKS, MUSE, TATE & FURST
INCORPORATED
By: /s/ THOMAS O. HICKS
---------------------------
Name: Thomas O. Hicks
-------------------------
Title: President
------------------------
<PAGE> 27
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
CAPSTAR BROADCASTING PARTNERS, L.P.
By: HM3/Capstar Partners, L.P.,
its General Partner
By: HM3/Capstar, Inc.,
its General Partner
By: /s/ THOMAS O. HICKS
-----------------------------
Name: Thomas O. Hicks
---------------------------
Title: President
--------------------------
<PAGE> 28
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
/s/ R. STEVEN HICKS
-------------------------------
R. Steven Hicks
Address:
600 Congress Ave.
-------------------------------
Suite 1270
-------------------------------
Austin, TX 78701
-------------------------------
-------------------------------
<PAGE> 1
EXHIBIT 10.21.2
FIRST AMENDMENT AND
SUPPLEMENT TO STOCKHOLDERS AGREEMENT
THIS FIRST AMENDMENT AND SUPPLEMENT (the "Supplement") to the
Stockholders Agreement dated as of October 16, 1996, by and among Capstar
Broadcasting Partners, Inc., a Delaware corporation ("the "Company"), the
securityholders listed on the signature pages thereto, and Hicks, Muse, Tate &
Furst Incorporated, a Texas corporation ("HMTF"), as amended or supplemented
(the "Stockholders Agreement"), is entered into effective as of January 27,
1997, by and among the Company, the Holders (as such term is defined in the
Stockholders Agreement) and Jason Mabry, Kristen Lea Hicks, Shelly Mabry
Ellard, Larry Taylor as Custodian for Robert S. Hicks, Jr. under the Texas
Uniform Gifts to Minors Act (the "UGMA") and Larry Taylor as Custodian for
Brandon Vaughan Hicks under the UGMA (collectively, the "New Holders") pursuant
to the terms of the Stockholders Agreement.
RECITALS:
WHEREAS, the Company and the Holders desire to amend Section 8.1 of the
Stockholders Agreement;
WHEREAS, R. Steven Hicks, a Holder, desires to make a gift of a total of
100,000 shares of Common Stock, par value $0.01 per share (the "Shares"), of
the Company to the New Holders;
WHEREAS, the Company, the Holders and the New Holders desire to
supplement the Stockholders Agreement as provided therein in order to effect
such gift; and
WHEREAS, any capitalized term used herein, and not otherwise defined
herein, shall have the meaning set forth in the Stockholders Agreement.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing and the agreements
herein contained, the parties hereto covenant and agree as follows:
1. Amendment to Section 8.1. Section 8.1 of the Stockholders
Agreement is hereby amended and restated to read in its entirety to read as
follows:
"8.1 HMC Group Investment. If after the date of this
Stockholders Agreement, the HMC Group or the Rights Holder should
purchase additional shares of Common Stock from the Company, other than
shares of Common Stock issued upon the exercise of any Common Stock
Equivalents granted pursuant to any employee, officer or director
benefit plan of arrangement ("New Shares"), then the Rights Holder shall
be entitled to receive from the Company for no additional
<PAGE> 2
consideration a warrant (a "New Warrant") in the same form and substance
as the Warrant except that each New Warrant shall provide:
(a) for an initial Exercise Price (as such term is
defined and used in the Warrant) equal to the price per share of
Common Stock paid by the HMC Group in connection with such
purchase, with such initial Exercise Price being increased at the
rate of interest provided for in the Warrant;
(b) for a term of ten years from the date of grant;
(c) for a number of shares subject thereto equal to an
amount of (i) 10% of the New Shares so purchased by the HMC Group
or the Rights Holder up to an aggregate purchase price of
$10,000,000 and (ii) 7.5% of the New Shares so purchased by the
HMC Group or the Rights Holder at an aggregate purchase price
that is in excess of that provided in clause (i) above; and
(d) that the number of shares of Common Stock subject
to each New Warrant shall be allocated 80% to the A Warrant and
20% to the B Warrant (as such terms are defined and used in the
Warrant).
Notwithstanding any provision contained herein to the contrary,
the rights of the Rights Holder arising under this Section 8.1 shall not
be transferable and any attempted transfer or assignment shall render
such right void."
2. Permitted Transfer Status. Each New Holder hereby agrees to take
and hold the Shares subject to the provisions and upon the conditions specified
in the Stockholders Agreement.
3. Holder Status. Each New Holder hereby agrees and is deemed to be
a "Holder" for all purposes under the terms of the Stockholder Agreement.
4. Grantor Status. Each Holder hereby agrees and is deemed to be a
"Grantor" for all purposes pursuant to Section 6.1 of the Stockholders
Agreement.
5. Voting Rights. Each New Holder hereby agrees that, during the
term of the Stockholders Agreement, such New Holder will cause his or her
Shares, whether such Shares are owned by a New Holder or any subsequent
transferee of a New Holder (including without limitation, a New Holder's
estate, executors, administrators, heirs or devisees), (a) to be represented by
each such New Holder, in person or by proxy, at any validly called meeting of
the stockholders of the Company in order for such Shares to be counted as a
part of the quorum of the stockholders of the Company, and (b) to be voted in
any manner as R. Steven Hicks so designates, so long as R. Steven Hicks owns
any voting securities of the Company or is serving as an officer of the
Company.
2
<PAGE> 3
6. Notices. Any notices or other communications required or
permitted under Section 10.1 of the Stockholders Agreement shall be addressed
to each New Holder at his or her address set forth on the signature pages
hereto.
7. Except as herein specifically amended, the Stockholders Agreement
shall continue in full force and effect in accordance with its terms.
[Remainder of page intentionally left blank]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have duly executed the Supplement
effective as of the date first written above.
COMPANY:
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ R. STEVEN HICKS
-------------------------------------
Name: R. Steven Hicks
Title: President and Chief Executive Officer
REQUIRED HOLDERS:
/s/ R. STEVEN HICKS
---------------------------------------------
Name: R. Steven Hicks
CAPSTAR BROADCASTING PARTNERS, L.P.
By: HM3/Capstar Partners, L.P.,
Its General Partner
By: HM3/Capstar, Inc.,
Its General Partner
By: /s/ THOMAS O. HICKS
-------------------------------------
Name: Thomas O. Hicks
Title: President and Chief Executive Officer
<PAGE> 5
NEW HOLDERS:
/s/ JASON MABRY
---------------------------------------------
Name: Jason Mabry
Address:
------------------------------
------------------------------
------------------------------
/s/ KRISTEN LEA HICKS
---------------------------------------------
Name: Kristen Lea Hicks
Address:
------------------------------
------------------------------
------------------------------
/s/ SHELLY MABRY ELLARD
---------------------------------------------
Name: Shelly Mabry Ellard
Address:
------------------------------
------------------------------
------------------------------
/s/ LARRY TAYLOR
---------------------------------------------
Name: Larry Taylor as Custodian for Robert
S. Hicks, Jr. under the Texas Uniform
Gifts to Minors Act
Address:
------------------------------
------------------------------
------------------------------
/s/ LARRY TAYLOR
---------------------------------------------
Name: Larry Taylor as Custodian for Brandon
Vaughan Hicks under the Texas Uniform
Gifts to Minors Act
Address:
------------------------------
------------------------------
------------------------------
<PAGE> 1
EXHIBIT 10.22.1
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Stockholders Agreement") dated as of
November 26, 1996, is entered into by and among Capstar Broadcasting Partners,
Inc., a Delaware corporation (the "Company"), the securityholders listed on the
signature pages hereof (collectively, the "Holders"), and Hicks, Muse, Tate &
Furst Incorporated, a Texas corporation ("HMTF").
In consideration of the premises, mutual covenants and agreements
hereinafter contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions.
"Accredited Investor" means an "Accredited Investor," as defined in
Regulation D, or any successor rule then in effect.
"Advice" shall have the meaning provided in Section 3.4 hereof.
"Affiliate, means, with respect to any Person, any Person who, directly
or indirectly, controls, is controlled by or is under common control with that
Person.
"Appraised Value" means, as to any Securities, the fair market value of
such Securities at the date of the Purchase Notice as determined by an
Independent Financial Expert selected by HMTF; provided, however, if a Holder
shall object to such determination within 10 days after being notified thereof
by HMTF, such Holder shall within such ten-day period select an Independent
Financial Expert to determine the fair market value of such Securities on
behalf of such Holder. In the event that the Independent Financial Experts
selected by each of HMTF and such Holder cannot agree on the fair market value
of such Securities, then the two Independent Financial Experts shall mutually
select a third Independent Financial Expert to determine the fair market value
of such Securities, and the value selected by such third firm shall be binding
on all the parties hereto. Each such Independent Financial Expert may use any
customary method of determining fair market value. The cost of the Independent
Financial Expert selected by HMTF shall be paid by HMTF, the cost of the
Independent Financial Expert, if any, selected by such Holder shall be paid by
such Holder, and the cost of the Independent Financial Expert, if any, mutually
selected by the two Independent Financial Experts appointed by each of HMTF and
such Holder shall be paid one-half by HMTF and one-half by such Holder.
"Authorization Date" shall have the meaning set forth in Section 5.3
hereof.
"Business Day" means a day that is not a Legal Holiday.
"Change of Control" means the first to occur of the following events:
(i) any sale, lease, exchange, or other transfer (in one transaction or series
of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), other than one or more members of the HMC
Group, (ii) a majority of the Board of Directors of the Company shall consist
of Persons who are not Continuing Directors; or (iii) the acquisition by any
Person or Group (other than one or more members of the HMC Group) of the power,
directly or indirectly,
<PAGE> 2
to vote or direct the voting of securities having more than 50% of the ordinary
voting power for the election of directors of the Company.
"Common Stock" means shares of the Common Stock, $0.01 par value per
share, of the Company, and any capital stock into which such Common Stock
thereafter may be changed.
"Common Stock Equivalents" means, without duplication with any other
Common Stock or Common Stock Equivalents, any rights, warrants, options,
convertible securities or indebtedness, exchangeable securities or
indebtedness, or other rights, exercisable for or convertible or exchangeable
into, directly or indirectly, Common Stock of the Company and securities
convertible or exchangeable into Common Stock of the Company, whether at the
time of issuance or upon the passage of time or the occurrence of some future
event; provided, however, Common Stock Equivalents shall not include any
options awarded under the Company's 1996 Stock Option Plan or any shares of
Common Stock issued upon exercise of such options or any securities into which
such shares may be converted pursuant to such Plan.
"Company" shall have the meaning set forth in the introductory paragraph
hereof.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the Board of Directors of the Company on October 17,
1996, (ii) was nominated for election or elected to the Board of Directors of
the Company with the affirmative vote of a majority of the Continuing Directors
who were members of such Board of Directors at the time of such nomination or
election, or (iii) is a member of the HMC Group.
"Co-Seller" shall have the meaning set forth in Section 4.1 hereof.
"Demand Registration" means a registration of Common Stock under the
Securities Act requested by a Person pursuant to a contractual right of such
Person to demand that the Company initiate such a registration.
"Election Notice" shall have the meaning set forth in Section 5.3
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Excluded Registration" means a registration under the Securities Act of
(i) a registration to effect a Qualified IPO if such registration only includes
equity securities to be issued by the Company and does not include any equity
securities for the account of any other securityholder of the Company, (ii)
securities registered on Form S-8 or any similar successor form and (iii)
securities registered to effect the acquisition of or combination with another
Person.
"Fully-Diluted Common Stock" means, at any time, the then outstanding
Common Stock of the Company plus (without duplication) all shares of Common
Stock issuable, whether at such time or upon the passage of time or the
occurrence of future events, upon the exercise, conversion, or exchange of all
then outstanding Common Stock Equivalents.
"HMC Group" means HMTF and its Affiliates (including Capstar L.P.) and
its and their respective officers, directors, and employees (and members of
their respective families and trusts for the primary benefit of such family
members).
-2-
<PAGE> 3
"HMC Group Designee" shall have the meaning set forth in Section 2.1.1
hereof.
"HMTF" shall have the meaning set forth in the introductory paragraph
hereof.
"Holders" shall have the meaning set forth in the introductory paragraph
hereof and shall include any direct or indirect transferee of any such Holder
who shall become a party to this Stockholders Agreement.
"Independent Financial Expert" means any investment bank which is
registered as a broker dealer under the Exchange Act and has aggregate net
capital of at least $50 million.
"Inspectors" shall have the meaning provided in Section 3.3 hereof.
"Legal Holiday" shall have the meaning provided in Section 9.2 hereof.
"Material Adverse Effect" shall have the meaning provided in Section
3.1.2 hereof.
"NASD" shall have the meaning provided in Section 3.3 hereof.
"Offered Securities" shall have the meaning provided in Section 5.3
hereof.
"Option" shall have the meaning provided in Section 6.2.1 hereof.
"Option Securities" shall have the meaning provided in Section 6.2.1
hereof.
"Option Transaction" shall have the meaning provided in Section 6.2.2
hereof.
"Participation Offer" shall have the meaning provided in Section 4.2
hereof.
"Person" or "person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Purchase Option" shall have the meaning provided in Section 6.1.
"Qualified IPO" means a firm commitment underwritten public offering of
Common Stock for cash pursuant to a registration statement under the Securities
Act where the aggregate proceeds to the Company (prior to deducting any
underwriters' discounts and commissions from such offering and any similar
prior public offerings exceed $10 million.
"Records" shall have the meaning provided in Section 3.3 hereof.
"Registrable Shares" means at any time the Common Stock of the Company
owned by the Holders owned on the date hereof or on the date that any Holder
executes this Stockholders Agreement; provided, however, that Registrable
Shares shall not include any shares (i) the sale of which has been registered
pursuant to the Securities Act and which shares have been sold pursuant to such
registration, (ii) which have been sold to the public pursuant to Rule 144 of
the SEC under the Securities Act, or (iii) issued upon the exercise of any
options awarded under the Company's 1996 Stock Option Plan.
-3-
<PAGE> 4
"Registration Expenses" shall have the meaning provided in Section 3.5
hereof.
"Regulation D" means Regulation D promulgated under the Securities Act
by the SEC.
"Required Holders" means Holders who then own beneficially more than 66-
2/3% of the aggregate number of Registrable Shares.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Common Stock; provided, however, that Securities
shall not include any shares of Common Stock issued upon the exercise of any
options awarded under the Company's 1996 Stock Option Plan.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Seller Affiliates" shall have the meaning provided in Section 3.6.1
hereof.
"Significant Sale" shall have the meaning provided in Section 4.1
hereof.
"Stockholders Agreement" means this Stockholders Agreement, as such from
time to time may be amended.
"Subsidiary" of any Person means (i) a corporation a majority of whose
outstanding shares of capital stock or other equity interests with voting
power, under ordinary circumstances, to elect directors, is at the time,
directly or indirectly, owned by such Person, by one or more subsidiaries of
such Person or by such Person and one or more subsidiaries of such Person, and
(ii) any other Person (other than a corporation) in which such Person, a
subsidiary of such Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has (x)
at least a majority ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person.
"Suspension Notice" shall have the meaning provided in Section 3.4
hereof.
"Transfer" means any disposition of any Security or any interest therein
that would constitute a "sale" thereof within the meaning of the Securities
Act.
"Transfer Notice" shall have the meaning provided in Section 5.3 hereof.
"Unaccredited Holder" shall have the meaning provided in Section 6.2.3
hereof.
Section 1.2 Rules of Construction. Unless the context otherwise
requires
(1) a term has the meaning assigned to it;
(2) "or" is not exclusive;
(3) words in the singular include the plural, and words in the
plural include the singular;
(4) provisions apply to successive events and transactions;
and
-4-
<PAGE> 5
(5) "herein," "thereof" and other words of similar import
refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE 2
MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES
Section 2.1 Board of Directors.
2.1.1 Board Representation. Subject to Section 2.1.3, the Board of
Directors of the Company shall consist of such individuals as may be designated
from time to time by the HMC Group (an "HMC Group Designee"). Each Holder
shall vote his or its shares of Common Stock at any regular or special meeting
of stockholders of the Company or in any written consent executed in lieu of
such a meeting of stockholders and shall take all other actions necessary to
give effect to the agreements contained in this Agreement (including without
limitation the election of persons designated by the HMC Group to be elected as
directors as described in the preceding sentence) and to ensure that the
certificate of incorporation and bylaws as in effect immediately following the
date hereof do not, at any time thereafter, conflict in any respect with the
provisions of this Agreement.
2.1.2 Vacancies. If, prior to his election to the Board of Directors
of the Company pursuant to Section 2.1.1 hereof, any HMC Group Designee shall
be unable or unwilling to serve as a director of the Company, the HMC Group
shall be entitled to nominate a replacement who shall then be an HMC Group
Designee for purposes of this Section 2. If, following an election to the Board
of Directors of the Company pursuant to Section 2.1.1 hereof, any HMC Group
Designee shall resign or be removed or be unable to serve for any reason prior
to the expiration of his term as a director of the Company, the HMC Group
shall, within 30 days of such event, notify the Board of Directors of the
Company in writing of a replacement HMC Group Designee, and either (i) the
Holders shall vote their shares of Common Stock, at any regular or special
meeting called for the purpose of filling positions on the Board of Directors
of the Company or in any written consent executed in lieu of such a meeting of
stockholders, and shall take all such other actions necessary to ensure the
election to the Board of Directors of the Company of such replacement HMC Group
Designee to fill the unexpired term of the HMC Group Designee who such new HMC
Group Designee is replacing or (ii) the Board of Directors shall elect such
replacement HMC Group Designee to fill the unexpired term of the HMC Group
Designee who such new HMC Group Designee is replacing. If the HMC Group
requests that any HMC Group Designee be removed as a Director (with or without
cause) by written notice thereof to the Company, then the Company shall take
all actions necessary to effect, and each of the Holders shall vote all its or
his capital stock in favor of, such removal upon such request.
2.1.3 Termination of Rights. The right of the HMC Group to designate
directors under Section 2.1.1, and the obligation of the Holders to vote their
shares as provided herein, shall terminate upon the first to occur of (i) the
termination or expiration of this Stockholders Agreement or this Article 2,
(ii) such time as the HMC Group elects in writing to terminate its rights under
this Article 2, or (iii) such time as the HMC Group cease to own any shares of
Common Stock.
2.1.4 Costs and Expenses. The Company will pay all reasonable out-of-
pocket expenses incurred by the designees of the HMC Group in connection with
their participation in meetings of the Board of Directors (and committees
thereof) of the Company and the Boards of Directors (and committees thereof) of
the Subsidiaries of the Company.
-5-
<PAGE> 6
Section 2.2 Other Activities of the Holders; Fiduciary Duties. It is
understood and accepted that the Holders and their Affiliates have interests in
other business ventures which may be in conflict with the activities of the
Company and its Subsidiaries and that, subject to applicable law, nothing in
this Stockholders Agreement shall limit the current or future business
activities of the Holders whether or not such activities are competitive with
those of the Company and its Subsidiaries. Nothing in this Agreement, express
or implied, shall relieve any officer or director of the Company or any of its
Subsidiaries, or any Holder, of any fiduciary or other duties or obligations
they may have to the Company's stockholders.
Section 2.3 Grant of Proxy. Each Holder hereby constitutes and
appoints HMTF with full power of substitution, as its true and lawful proxy and
attorney-in-fact to vote any and all shares of any class or series of capital
stock of the Company or any Subsidiary of the Company held by such Holder in
accordance with the provisions of Section 2.1 of this Stockholders Agreement.
Each Holder acknowledges that the proxy granted hereby is irrevocable, being
coupled with an interest, and that such proxy will continue until the
termination of such Holder's obligation to vote any shares in accordance with
this Article 2.
ARTICLE 3
REGISTRATION RIGHTS
Section 3.1 Piggyback Registrations.
3.1.1 Right to Piggyback. Each time the Company proposes to register
any of its equity securities (other than pursuant to an Excluded Registration)
under the Securities Act for sale to the public (whether for the account of the
Company, pursuant to a Demand Registration, or otherwise for the account of any
securityholder of the Company) and the form of registration statement to be
used permits the registration of Registrable Shares, the Company shall give
prompt written notice to each Holder of Registrable Shares (which notice shall
be given not less than 30 days prior to the effective date of the Company's
registration statement), which notice shall offer each such Holder the
opportunity to include any or all of its or his Registrable Shares in such
registration statement, subject to the limitations contained in Section 3.1.2
hereof. Each Holder who desires to have its or his Registrable Shares included
in such registration statement shall so advise the Company in writing (stating
the number of shares desired to be registered) within 20 days after the date of
such notice from the Company. Any Holder shall have the right to withdraw such
Holder's request for inclusion of such Holder's Registrable Shares in any
registration statement pursuant to this Section 3.1.1 by giving written notice
to the Company of such withdrawal. Subject to Section 3.1.2 below, the Company
shall include in such registration statement all such Registrable Shares so
requested to be included therein; provided, however, that the Company may at
any time withdraw or cease proceeding with any such registration if it shall at
the same time withdraw or cease proceeding with the registration of all other
equity securities originally proposed to be registered.
3.1.2 Priority on Registrations. If the Registrable Shares requested
to be included in the registration statement by any Holder differ from the type
of securities proposed to be registered by the Company and the managing
underwriter advises the Company that due to such differences the inclusion of
such Registrable Shares would materially and adversely affect the price or
success of the offering (a "Material Adverse Effect"), then (i) the number of
such Holder's or Holders' Registrable Shares to be included in the registration
statement shall be reduced to an amount which, in the judgment of the managing
underwriter, would eliminate such Material Adverse Effect or (ii) if no such
reduction would, in the judgment of the managing underwriter, eliminate such
Material Adverse Effect, then the Company shall have the right to exclude all
such Registrable Shares from such registration statement provided no other
securities of such type are included and offered for the account of any other
Person in such registration statement. Any
-6-
<PAGE> 7
partial reduction in number of Registrable Shares to be included in the
registration statement pursuant to clause (i) of the immediately preceding
sentence shall be effected pro rata based on the ratio which such Holder's
requested shares bears to the total number of shares requested to be included
in such registration statement by all Persons who have requested that their
shares be included in such registration statement. If the Registrable Shares
requested to be included in the registration statement are of the same type as
the securities being registered by the Company and the managing underwriter
advises the Company that the inclusion of such Registrable Shares would cause a
Material Adverse Effect, the Company will be obligated to include in such
registration statement, as to each Holder, only a portion of the shares such
Holder has requested be registered equal to the ratio which such Holder's
requested shares bears to the total number of shares requested to be included
in such registration statement by all Persons (other than (i) the Company, if
such registration has been initiated by the Company for securities to be
offered by the Company and (ii) by Persons exercising their right to cause a
Demand Registration) who have requested that their shares be included in such
registration statement. It is acknowledged by the Holders, that pursuant to
the foregoing provision, the securities to be included in such registration
shall be allocated (x) first, to the Company, if such registration has been
initiated by the Company for securities to be offered by the Company, (y)
second, to securities offered by Persons exercising their right to cause a
Demand Registration, if such registration is a Demand Registration and (z)
third, to the Holders and all other persons requesting securities to be
included therein in accordance with the above described ratio. If as a result
of the provisions of this Section 3.1.2 any Holder shall not be entitled to
include all Registrable Securities in a registration that such Holder has
requested to be so included, such Holder may withdraw such Holder's request to
include Registrable Shares in such registration statement. No Person may
participate in any registration statement hereunder unless such Person (x)
agrees to sell such person's Registrable Shares on the basis provided in any
underwriting arrangements approved by the Company and (y) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements, and other documents reasonably required under the terms of such
underwriting arrangements; provided, however, that no such Person shall be
required to make any representations or warranties in connection with any such
registration other than representations and warranties as to (i) such Person's
ownership of his or its Registrable Shares to be sold or transferred free and
clear of all liens, claims, and encumbrances, (ii) such Person's power and
authority to effect such transfer, and (iii) such matters pertaining to
compliance with securities laws as may be reasonably requested; provided
further, however, that the obligation of such Person to indemnify pursuant to
any such underwriting arrangements shall be several, not joint and several,
among such Persons selling Registrable Shares, and the liability of each such
Person will be in proportion to, and provided further that such liability will
be limited to, the net amount received by such Person from the sale of his or
its Registrable Shares pursuant to such registration.
3.2 Holdback Agreement. Unless the managing underwriter otherwise
agrees, each of the Company and the Holders agrees, and the Company agrees, in
connection with any underwritten registration, to use its reasonable efforts to
cause its Affiliates to agree, not to effect any public sale or private offer
or distribution of any Common Stock or Common Stock Equivalents during the ten
business days prior to the effectiveness under the Securities Act of any
underwritten registration and during such time period after the effectiveness
under the Securities Act of any underwritten registration (not to exceed 120
days) (except, if applicable, as part of such underwritten registration) as the
Company and the managing underwriter may agree.
3.3 Registration Procedures. Whenever any Holder has requested that
any Registrable Shares be registered pursuant to this Stockholders Agreement,
the Company will use its commercially reasonable efforts to effect the
registration and the sale of such Registrable Shares in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will
as expeditiously as possible:
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(i) prepare and file with the SEC a registration statement on any
appropriate form under the Securities Act with respect to such Registrable
Shares and use its commercially reasonable efforts to cause such registration
statement to become effective;
(ii) prepare and file with the SEC such amendments, post-effective
amendments, and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 180 days (or such lesser
period as is necessary for the underwriters in an underwritten offering to sell
unsold allotments) and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(iii) furnish to each seller of Registrable Shares and the underwriters
of the securities being registered such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus), any
documents incorporated by reference therein and such other documents as such
seller or underwriters may reasonably request in order to facilitate the
disposition of the Registrable Shares owned by such seller or the sale of such
securities by such underwriters (it being understood that, subject to Section
3.4 and the requirements of the Securities Act and applicable State securities
laws, the Company consents to the use of the prospectus and any amendment or
supplement thereto by each seller and the underwriters in connection with the
offering and sale of the Registrable Shares covered by the registration
statement of which such prospectus, amendment or supplement is a part);
(iv) use its commercially reasonable efforts to register or qualify
such Registrable Shares under such other securities or blue sky laws of such
jurisdictions as the managing underwriter reasonably requests; use its
commercially reasonable efforts to keep each such registration or qualification
(or exemption therefrom) effective during the period in which such registration
statement is required to be kept effective; and do any and all other acts and
things which may be reasonably necessary or advisable to enable each seller to
consummate the disposition of the Registrable Shares owned by such seller in
such jurisdictions (provided, however, that the Company will not be required to
(A) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph or (B) consent to
general service of process in any such jurisdiction);
(v) promptly notify each seller and each underwriter and (if
requested by any such Person) confirm such notice in writing (A) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed and, with respect to a registration statement or any post-effective
amendment, when the same has become effective, (B) of the issuance by any state
securities or other regulatory authority of any order suspending the
qualification or exemption from qualification of any of the Registrable Shares
under state securities or "blue sky" laws or the initiation of any proceedings
for that purpose, and (C) of the happening of any event which makes any
statement made in a registration statement or related prospectus untrue or
which requires the making of any changes in such registration statement,
prospectus or documents so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and, as promptly as
practicable thereafter, prepare and file with the SEC and furnish a supplement
or amendment to such prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Shares, such prospectus will not contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading;
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<PAGE> 9
(vi) make generally available to the Company's securityholders an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act no later than 30 days after the end of the 12-month period beginning with
the first day of the Company's first fiscal quarter commencing after the
effective date of a registration statement, which earnings statement shall
cover said 12-month period, and which requirement will be deemed to be
satisfied if the Company timely files complete and accurate information on
Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with
Rule 158 under the Securities Act;
(vii) if requested by the managing underwriter or any seller promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or any seller reasonably requests to be
included therein, including, without limitation, with respect to the
Registrable Shares being sold by such seller, the purchase price being paid
therefor by the underwriters and with respect to any other terms of the
underwritten offering of the Registrable Shares to be sold in such offering,
and promptly make all required filings of such prospectus supplement or post-
effective amendment;
(viii) as promptly as practicable after filing with the SEC of any
document which is incorporated by reference into a registration statement (in
the form in which it was incorporated), deliver a copy of each such document to
each seller;
(ix) cooperate with the sellers and the managing underwriter to
facilitate the timely preparation and delivery of certificates (which shall not
bear any restrictive legends unless required under applicable law) representing
securities sold under any registration statement, and enable such securities to
be in such denominations and registered in such names as the managing
underwriter or such sellers may request and keep available and make available
to the Company's transfer agent prior to the effectiveness of such registration
statement a supply of such certificates;
(x) promptly make available for inspection by any seller, any
underwriter participating in any disposition pursuant to any registration
statement, and any attorney, accountant or other agent or representative
retained by any such seller or underwriter (collectively, the "Inspectors"),
all financial and other records, pertinent corporate documents and properties
of the Company (collectively, the "Records"), as shall be reasonably necessary
to enable them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information requested
by any such Inspector in connection with such registration statement; provided,
that, unless the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, the Company shall not be required to provide any
information under this subparagraph (x) if (A) the Company believes, after
consultation with counsel for the Company, that to do so would cause the
Company to forfeit an attorney-client privilege that was applicable to such
information or (B) if either (1) the Company has requested and been granted
from the SEC confidential treatment of such information contained in any filing
with the SEC or documents provided supplementally or otherwise or (2) the
Company reasonably determines in good faith that such Records are confidential
and so notifies the Inspectors in writing unless prior to furnishing any such
information with respect to (A) or (B) such Holder of Registrable Securities
requesting such information agrees to enter into a confidentiality agreement in
customary form and subject to customary exceptions; and provided, further that
each Holder of Registrable Securities agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company at its expense, to undertake
appropriate action and to prevent disclosure of the Records deemed
confidential;
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<PAGE> 10
(xi) furnish to each seller underwriter a signed counterpart of (A) an
opinion or opinions of counsel to the Company, and (B) a comfort letter or
comfort letters from the Company's independent public accountants, each in
customary form and covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as the sellers or managing
underwriter reasonably requests;
(xii) cause the Registrable Shares included in any registration
statement to be (A) listed on each securities exchange, if any, on which
similar securities issued by the Company are then listed, or (B) authorized to
be quoted and/or listed (to the extent applicable) on the National Association
of Securities Dealers, Inc. Automated Quotation ("NASDAQ") or the NASDAQ
National Market System if the Registrable Shares so qualify;
(xiii) provide a CUSIP number for the Registrable Shares included in any
registration statement not later than the effective date of such registration
statement;
(xiv) cooperate with each seller and each underwriter participating in
the disposition of such Registrable Shares and their respective counsel in
connection with any filings required to be made with the National Association
of Securities Dealers, Inc. ("NASD");
(xv) during the period when the prospectus is required to be delivered
under the Securities Act, promptly file all documents required to be filed with
the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act;
(xvi) notify each seller of Registrable Shares promptly of any request
by the SEC for the amending or supplementing of such registration statement or
prospectus or for additional information;
(xvii) prepare and file with the SEC promptly any amendments or
supplements to such registration statement or prospectus which, in the opinion
of counsel for the Company or the managing underwriter, is required in
connection with the distribution of the Registrable Shares;
(xviii) enter into such agreements (including underwriting agreements in
the managing underwriter's customary form) as are customary in connection with
an underwritten registration; and
(xix) advise each seller of such Registrable Shares, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for such purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued.
3.4 Suspension of Dispositions. Each Holder agrees by acquisition of
any Registrable Shares that, upon receipt of any notice (a "Suspension Notice")
from the Company of the happening of any event of the kind described in Section
3.3(v)(C), such Holder will forthwith discontinue disposition of Registrable
Shares until such Holder's receipt of the copies of the supplemented or amended
prospectus, or until it is advised in writing (the "Advice") by the Company
that the use of the prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in the
prospectus, and, if so directed by the Company, such Holder will deliver to the
Company all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Shares current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of registration statements
set forth in Section 3.3(ii) hereof shall be extended by the number of days
during the period from and including the date of the giving of the
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<PAGE> 11
Suspension Notice to and including the date when each seller of Registrable
Shares covered by such registration statement shall have received the copies of
the supplemented or amended prospectus or the Advice. The Company shall use
its commercially reasonable efforts and take such actions as are reasonably
necessary to render the Advice as promptly as practicable.
3.5 Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Article 3 including, without limitation,
all registration and filing fees, all fees and expenses associated with filings
required to be made with the NASD (including, if applicable, the fees and
expenses of any "qualified independent underwriter" as such term is defined in
Schedule E of the By-Laws of the NASD, and of its counsel), as may be required
by the rules and regulations of the NASD, fees and expenses of compliance with
securities or "blue sky" laws (including reasonable fees and disbursements of
counsel in connection with "blue sky" qualifications of the Registrable
Shares), rating agency fees, printing expenses (including expenses of printing
certificates for the Registrable Shares in a form eligible for deposit with
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by a holder of Registrable Shares), messenger and
delivery expenses, the Company's internal expenses (including without
limitation all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
any listing of the Registrable Shares, fees and expenses of counsel for the
Company and its independent certified public accountants (including the
expenses of any special audit or "cold comfort" letters required by or incident
to such performance), securities acts liability insurance (if the Company
elects to obtain such insurance), the fees and expenses of any special experts
retained by the Company in connection with such registration, and the fees and
expenses of other persons retained by the Company and reasonable fees and
expenses of one firm of counsel for the sellers (which shall be selected by the
holders of a majority of the Registrable Shares being included in any
particular registration statement) (all such expenses being herein called
"Registration Expenses") will be borne by the Company whether or not any
registration statement becomes effective; provided that, except as expressly
otherwise provided above, in no event shall Registration Expenses include any
underwriting discounts, commissions, or fees attributable to the sale of the
Registrable Shares or any counsel, accountants, or other persons retained or
employed by the Holders.
3.6 Indemnification.
3.6.1 The Company agrees to indemnify and reimburse, to the fullest
extent permitted by law, each seller of Registrable Shares, and each of its
employees, advisors, agents, representatives, partners, officers, and directors
and each Person who controls such seller (within the meaning of the Securities
Act or the Exchange Act) and any agent or investment advisor thereof
(collectively, the "Seller Affiliates") (A) against any and all losses, claims,
damages, liabilities, and expenses, joint or several (including, without
limitation, attorneys' fees and disbursements except as limited by 3.6.3) based
upon, arising out of, related to or resulting from any untrue or alleged untrue
statement of a material fact contained in any registration statement,
prospectus, or preliminary prospectus or any amendment thereof or supplement
thereto, or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, (B)
against any and all loss, liability, claim, damage, and expense whatsoever, as
incurred, to the extent of the aggregate amount paid in settlement of any
litigation or investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon, arising out of,
related to or resulting from any such untrue statement or omission or alleged
untrue statement or omission, and (C) against any and all costs and expenses
(including reasonable fees and disbursements of counsel) as may be reasonably
incurred in investigating, preparing, or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon, arising out of, related to or
resulting from any such untrue statement or omission or alleged untrue
statement or omission, to the extent that any such expense or cost
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<PAGE> 12
is not paid under subparagraph (A) or (B) above; except insofar as the same are
made in reliance upon and in strict conformity with information furnished in
writing to the Company by such seller or any Seller Affiliate for use therein
or arise from such seller's or any Seller Affiliate's failure to deliver a copy
of the registration statement or prospectus or any amendments or supplements
thereto after the Company has furnished such seller or Seller Affiliate with a
sufficient number of copies of the same. The reimbursements required by this
Section 3.6.1 will be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred.
3.6.2 In connection with any registration statement in which a seller
of Registrable Shares is participating, each such seller will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the fullest extent permitted by law, each such seller will
indemnify the Company and its directors and officers and each Person who
controls the Company (within the meaning of the Securities Act or the Exchange
Act) against any and all losses, claims, damages, liabilities, and expenses
(including, without limitation, reasonable attorneys' fees and disbursements
except as limited by Section 3.6.3) resulting from any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement, prospectus, or any preliminary prospectus or any amendment thereof
or supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission is contained in any information or
affidavit so furnished in writing by such seller or any of its Seller
Affiliates specifically for inclusion in the registration statement; provided
that the obligation to indemnify will be several, not joint and several, among
such sellers of Registrable Shares, and the liability of each such seller of
Registrable Shares will be in proportion to, and provided further that such
liability will be limited to, the net amount received by such seller from the
sale of Registrable Shares pursuant to such registration statement; provided,
however, that such seller of Registrable Shares shall not be liable in any such
case to the extent that prior to the filing of any such registration statement
or prospectus or amendment thereof or supplement thereto, such seller has
furnished in writing to the Company information expressly for use in such
registration statement or prospectus or any amendment thereof or supplement
thereto which corrected or made not misleading information previously furnished
to the Company.
3.6.3 Any Person entitled to indemnification hereunder will (A) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give such notice
shall not limit the rights of such Person) and (B) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such person unless (x) the
indemnifying party has agreed to pay such fees or expenses, or (y) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person. If such defense is not
assumed by the indemnifying party as permitted hereunder, the indemnifying
party will not be subject to any liability for any settlement made by the
indemnified party without its consent (but such consent will not be
unreasonably withheld). If such defense is assumed by the indemnifying party
pursuant to the provisions hereof, such indemnifying party shall not settle or
otherwise compromise the applicable claim unless (1) such settlement or
compromise contains a full and unconditional release of the indemnified party
or (2) the indemnified party otherwise consents in writing. An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless
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in the reasonable judgment of any indemnified party, a conflict of interest may
exist between such indemnified party and any other of such indemnified parties
with respect to such claim, in which event the indemnifying party shall be
obligated to pay the reasonable fees and disbursements of such additional
counsel or counsels.
3.6.4 Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 3.6.1 or Section 3.6.2 are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages, liabilities, or expenses (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, liabilities, or expenses (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and the indemnified party in connection with the actions
which resulted in the losses, claims, damages, liabilities or expenses as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, 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 such indemnifying party or indemnified party, and
the parties, relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this
Section 3.6.4 were determined by pro rata allocation (even if the Holders or
any underwriters or all of them were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in this Section 3.6.4. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages, liabilities,
or expenses (or actions in respect thereof) referred to above shall be deemed
to include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or, except as provided in
Section 3.6.3, defending any such action or claim. Notwithstanding the
provisions of this Section 3.6.4, no Holder shall be required to contribute an
amount greater than the dollar amount by which the proceeds received by such
Holder with respect to the sale of any Registrable Shares exceeds the amount of
damages which such Holder has otherwise been required to pay by reason of such
statement or 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 Holders' obligations in this Section 3.6.4 to
contribute shall be several in proportion to the amount of Registrable Shares
registered by them and not joint.
If indemnification is available under this Section 3.6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 3.6.1 and Section 3.6.2 without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 3.6.4.
3.6.5 The indemnification and contribution provided for under this
Stockholders Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director, or controlling Person of such indemnified party and will survive the
transfer of securities.
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ARTICLE 4
TRANSFERS OF SECURITIES
Section 4.1 Drag Along Rights.
4.1.1 Applicability. In connection with any Transfer by members of the
HMC Group of shares of Common Stock representing more than 50% of the shares of
Common Stock then held by the HMC Group (a "Significant Sale"), the HMC Group
shall have the right to require each non-selling Holder (each, a "Co-Seller")
to Transfer a portion of its Common Stock which represents the same percentage
of the Fully-Diluted Common Stock held by such Co-Seller as the shares being
disposed of by the HMC Group represent of the Fully-Diluted Common Stock held
by the HMC Group. (For example, if the HMC Group is selling 50% of their Fully-
Diluted Common Stock position, each Co-Seller shall be required to sell 50% of
its Fully-Diluted Common Stock position.) All Common Stock Transferred by
Holders pursuant to this Section 4.1 shall be sold at the same price and
otherwise treated identically with the Common Stock being sold by the HMC Group
in all respects; provided, that the Co-Seller shall not be required to make any
representations or warranties in connection with such Transfer other than
representations and warranties as to (i) such Co-Seller's ownership of his or
its Common Stock to be Transferred free and clear of all liens, claims and
encumbrances, (ii) such Co-Seller's power and authority to effect such
transfer, and (iii) such matters pertaining to compliance with securities laws
as the transferee may reasonably require except that the transferee may not
require that each Transferring Co-Seller be an Accredited Investor.
4.1.2 Notice of Significant Sale. HMTF, on behalf of the HMC Group,
shall give each Co-Seller at least 30 days' prior written notice of any
Significant Sale as to which the HMC Group intends to exercise its rights under
Section 4.1. If the HMC Group elects to exercise its rights under Section 4.1,
the Co-Sellers shall take such actions as may be reasonably required and
otherwise cooperate in good faith with the HMC Group in connection with
consummating the Significant Sale (including, without limitation, the voting of
any Common Stock or other voting capital stock of the Company to approve such
Significant Sale). At the closing of such Significant Sale, each Co-Seller
shall deliver certificates for all shares of Common Stock to be sold by such
Co-Seller, duly endorsed for transfer, with the signature guaranteed, to the
purchaser against payment of the appropriate purchase price.
Section 4.2 Tag Along Rights.
4.2.1 Applicability. If the HMC Group desires to effect a Significant
Sale and it does not elect to exercise its rights under Section 4.1 hereof,
then at least 30 days prior to the closing of such Significant Sale, HMTF and
the Company shall cause the HMC Group to make an offer (the "Participation
Offer") to each Co-Seller to include in the proposed Significant Sale a portion
of its Common Stock which represent the same percentage of such Co-Seller's
Fully Diluted Common Stock as the shares being sold by the HMC Group represent
of its Fully-Diluted Common Stock; provided that, if the consideration to be
received by the HMC Group includes any securities, then, unless HMTF and the
transferee both reasonably determine that an exemption is otherwise available
under the Securities Act and all applicable state securities laws for such
transaction, only Co-Sellers who have certified to the reasonable satisfaction
of HMTF that they are Accredited Investors shall be entitled to participate in
such transaction, unless the transferee consents otherwise.
4.2.2 Terms of Participation Offer. The Participation Offer shall
describe the terms and conditions of the proposed Significant Sale and shall be
conditioned upon (i) the consummation of the transactions contemplated in the
Participation Offer with the transferee named therein, and (ii) each Co-
Seller's execution
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<PAGE> 15
and delivery of all agreements and other documents as the members of the HMC
Group are required to execute and deliver in connection with such Significant
Sale (provided that the Co-Seller shall not be required to make any
representations or warranties in connection with such sale or transfer other
than representations and warranties as to (A) such Co-Seller's ownership of his
Common Stock to be sold or transferred free and clear of all liens, claims, and
encumbrances, (B) such Co-Seller's power and authority to effect such transfer
and (C) such matters pertaining to compliance with securities laws as the
transferee may reasonably require). If any Co-Seller shall accept the
Participation Offer, HMTF and the Company shall cause the HMC Group to reduce,
to the extent necessary, the number of shares of Common Stock it otherwise
would have sold in the proposed transfer so as to permit those Co-Sellers who
have accepted the Participation Offer to sell the number of shares of Common
Stock that they are entitled to sell under this Section 4.2, and HMTF shall
cause the HMC Group to transfer and such Co-Sellers shall transfer the number
of shares Common Stock specified in the Participation Offer to the proposed
transferee in accordance with the terms of such transfer as set forth in the
Participation Offer.
Section 4.3 Certain Events Not Deemed Transfers. In no event shall
any exchange, reclassification, or other conversion of shares into any cash,
securities, or other property pursuant to a merger or consolidation of the
Company or any Subsidiary with, or any sale or transfer by the Company or any
Subsidiary of all or substantially all its assets to, any Person constitute a
Significant Sale of shares of Common Stock by the HMC Group for purposes of
Section 4.1 or 4.2. In addition, Sections 4.1 and 4.2 hereof shall not apply
to any transfer, sale, or disposition of shares of Common Stock solely among
members of the HMC Group.
Section 4.4 Transfer and Exchange. When Securities are presented to
the Company with a request to register the transfer of such Securities or to
exchange such Securities for Securities of other authorized denominations, the
Company shall register the transfer or make the exchange as requested if the
requirements of this Stockholders Agreement for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company, duly executed by the Holder thereof or its
attorney and duly authorized in writing. No service charge shall be made for
any registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith.
Section 4.5 Replacement Securities. If a mutilated Security is
surrendered to the Company or if the Holder of a Security claims and submits an
affidavit or other evidence, satisfactory to the Company, to the effect that
the Security has been lost, destroyed or wrongfully taken, the Company shall
issue a replacement Security if the Company's requirements are met. If
required by the Company, such Securityholder must provide an indemnity bond, or
other form of indemnity, sufficient in the judgment of the Company to protect
the Company against any loss which may be suffered. The Company may charge
such Securityholder for its reasonable out-of-pocket expenses in replacing a
Security which has been mutilated, lost, destroyed or wrongfully taken.
ARTICLE 5
LIMITATION ON TRANSFERS
Section 5.1 Restrictions on Transfer. The Securities shall not be
Transferred or otherwise conveyed, assigned or hypothecated before satisfaction
of (i) the conditions specified in this Section 5.1 and Sections 5.2 through
5.3, which conditions are intended to ensure compliance with the provisions of
the Securities Act with respect to the Transfer of any Security and (ii) if
applicable, Article 4 hereof. Any
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<PAGE> 16
purported Transfer in violation of this Article 5 and/or, if applicable,
Article 4 hereof shall be void ab initio and of no force or effect. Except for
Transfers made pursuant to Sections 4.1 or 4.2 hereof (it being understood that
transactions pursuant to such Sections are not subject to this Article 5) and
except for Transfers to the public pursuant to an effective registration
statement or sales to the public pursuant to Rule 144 under the Securities Act
otherwise permitted hereunder, each Holder will cause any proposed transferee
of any Security or any interest therein held by it to agree to take and hold
such securities subject to the provisions and upon the conditions specified in
this Stockholders Agreement. Each Holder shall not Transfer, convey, assign or
hypothecate any Securities to any Affiliate of such Holder or any member of
such Holder's family unless such Holder shall have and retain all voting rights
with respect to such Securities.
Section 5.2 Restrictive Legends.
5.2.1 Securities Act Legend. Except as otherwise provided in Section
5.4 hereof, each Security held by a Holder, and each Security issued to any
subsequent transferee of such Security, shall be stamped or otherwise imprinted
with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, TRANSFERRED, OR
OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO
THE ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR
OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
5.2.2 Other Legends. Each Security issued to each Holder or a
subsequent transferee shall include a legend in substantially the following
form:
THIS SECURITY IS SUBJECT TO RESTRICTIONS ON TRANSFER, VOTING AND OTHER
TERMS AND CONDITIONS SET FORTH IN THE STOCKHOLDERS AGREEMENT DATED AS OF
OCTOBER 16, 1996, A COPY OF WHICH MAY BE OBTAINED FROM CAPSTAR BROADCASTING
PARTNERS, INC. AT ITS PRINCIPAL EXECUTIVE OFFICES.
Section 5.3 Right of First Refusal.
5.3.1 Right of First Refusal. Prior to any Transfer or attempted
Transfer by any Holder of any Securities or Common Stock Equivalents (the
"Offered Securities") other than pursuant to a registration under the
Securities Act, the Holder of such Offered Securities shall (i) give prior
written notice (a "Transfer Notice") to HMTF of such Holder's intention to
effect such Transfer, describing the terms and conditions of the proposed
Transfer, including the identity of the prospective transferee(s), the number
of shares of Offered Securities such Holder desires to sell and the purchase
price. After receipt of the Transfer Notice, HMTF (or as provided in Section
5.3.3, an assignee of HMTF who is a member of the HMC Group) shall have the
option for 15 days from the date of receipt of the Transfer Notice to elect to
purchase all, but not less than all, of the Offered Securities upon the same
terms and conditions as those set forth in the Transfer Notice by delivering a
written notice (the "Election Notice") of such election to such Holder within
such 15-day period. The Holder shall not consummate such Transfer until the
earlier to occur of the lapse of the 15-day period or the date on which HMTF
(acting for itself or if applicable, its assignee) notifies such Holder in
writing that it will not exercise its rights under this Section 5.3 (the
"Authorization Date"). If neither HMTF (nor any assignee) has elected to
purchase all of the Offered Securities or has failed to make a timely
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<PAGE> 17
election, such Holder may Transfer all, but not less than all, of the Offered
Securities to the prospective transferee(s) thereof specified in the Transfer
Notice, at a price and on terms no more favorable to such prospective
transferee(s) than as specified in the Transfer Notice, during the 30-day
period immediately following the Authorization Date, provided that, if required
by the Company, such Holder shall either (i) provide to the Company an opinion
reasonably satisfactory to the Company (or supply such other evidence
reasonably satisfactory to the Company) that the proposed Transfer may be
effected without registration under the Securities Act, or (ii) certify to the
Company that the Holder reasonably believes that each proposed transferee is a
"qualified institutional buyer" and that such Holder has taken reasonable steps
to make each proposed transferee aware that such Holder may rely on Rule 144A
under the Securities Act in effecting such Transfer. Each Security issued upon
such Transfer shall bear the restrictive legend set forth in Section 5.2,
unless in the reasonable judgment of counsel for the Company such legend is not
required in order to ensure compliance with the Securities Act. If the Offered
Securities are not so transferred within such 30-day period, such Offered
Securities must be reoffered to HMTF in accordance with the provisions of this
Section 5.3 if such Holder still desires to Transfer the Offered Securities.
5.3.2 Closing. If HMTF (or an assignee) exercises the right to
purchase the Offered Securities by timely delivery of the Election Notice,
unless otherwise agreed by the Holder of the Offered Securities and HMTF,
(acting for itself, or if applicable, its assignee) the closing will take place
at the offices of the Company in Dallas, Texas on the fifth business day after
the date of the Election Notice. At the closing, HMTF (or, if applicable, its
assignee) will pay the purchase price set forth in the Transfer Notice in cash
(by certified or cashier's check) solely upon such Holder's delivery to HMTF
(or, if applicable, its assignee), of valid certificates or agreements
evidencing all of the Offered Securities then being purchased pursuant to the
Election Notice. Certificates or agreements representing the Offered
Securities will be duly endorsed (with signature guaranteed) for transfer to
HMTF (or, if applicable, its assignee). By delivery of such certificates or
agreements to HMTF (or, if applicable, its assignee) such Holder will be deemed
to represent and warrant to HMTF (or, if applicable, its assignee) that the
transferred Offered Securities are owned by such Holder free and clear of all
liens, adverse claims, and other encumbrances other than as provided in this
Stockholders Agreement. The Holder will promptly perform, whether before or
after any such closing, such additional acts (including without limitation
executing and delivering additional documents) as are reasonably required by
either such party to effect more fully the transactions contemplated by this
Section 5.3.
5.3.3 Assignment. The rights of HMTF under this Section 5.3 may be
assigned or transferred in whole or in part by HMTF, without any consent or
other action on the part of any other party hereto, to any one or more members
of the HMC Group.
Section 5.4 Termination of Certain Restrictions. Notwithstanding the
foregoing provisions of this Section 5, the restrictions imposed by Section
5.3.1 upon the transferability of the Securities and the legend requirements of
Section 5.2.1 shall terminate as to any Security (i) when and so long as such
Security shall have been effectively registered under the Securities Act and
disposed of pursuant thereto or disposed pursuant to the provisions of Rule 144
or (ii) when the Company shall have received an opinion of counsel reasonably
satisfactory to it that such Security may be transferred without registration
thereof under the Securities Act and that such legend may be removed. Whenever
the restrictions imposed by Section 5.2 shall terminate as to any Security, the
Holder thereof shall be entitled to receive from the Company, at the Company's
expense, a new Security not bearing the restrictive legend set forth in Section
5.2.
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<PAGE> 18
ARTICLE 6
PURCHASE OPTION
Section 6.1. Purchase Option.
6.1.1 Purchase Option. If (i), and at such time as, a Holder is no
longer a director, officer or employee of the Company or any Subsidiary of the
Company, for any reason at any time or (ii) a Change of Control occurs, the
Company shall have the option (the "Purchase Option") to purchase, and if the
Purchase Option is exercised, such Holder (or the executor or administrator of
such Holder's estate, in the event of such Holder's death, or such Holder's
legal representative in the event of his incapacity) (hereinafter, collectively
with such Holder, the "Grantor") shall sell to HMTF, (or as provided in Section
6.1.4 an assignee of HMTF) all or any portion (at the option of HMTF acting for
itself or, if applicable, its assignee) of the shares of Common Stock and/or
Common Stock Equivalents held by the Grantor (such shares of Common Stock
and/or Common Stock Equivalents collectively being referred to as the
"Purchasable Securities"), subject to HMTF's (or, if applicable, its assignee)
compliance with the conditions hereinafter set forth. HMTF (acting for itself
or, if applicable, its assignee) shall give notice (the "Purchase Notice") in
writing to the Grantor of the exercise of the Purchase Option within one year
from the date such Holder is no longer a director, officer or employee of the
Company or any Subsidiary of the Company or such Change of Control. Such
Purchase Notice shall state the number of Purchasable Securities to be
purchased and the exercise price for each Purchasable Security (on a per share
basis or, in the case of securities other than capital stock, other applicable
denomination). If no notice is given within the time limit specified above,
the Purchase Option shall terminate.
6.1.2 Closing. Unless otherwise agreed by the Grantor and HMTF,
(acting for itself or, if applicable, its assignee) the closing of each
exercise of the Purchase Option will take place at the offices of the Company
in Dallas, Texas, on the fifth business day after the Purchase Notice is mailed
or delivered in accordance with this Section 6.1. At the closing, HMTF (of, if
applicable, its assignee) will pay the exercise price to the Grantor in cash
(by certified or cashier's check) solely upon such Grantor's delivering to HMTF
(or, if applicable, its assignee) valid certificates or agreements evidencing
all Purchasable Securities then being purchased pursuant to the exercise of the
Purchase Option. Certificates or agreements representing the Purchasable
Securities will be duly endorsed (with signature guaranteed) for transfer to
HMTF (or, if applicable, its assignee). Upon delivery of such certificates or
agreements to HMTF(or, if applicable, its assignee) , the Grantor will be
deemed to represent and warrant to HMTF (or, if applicable, its assignee) that
the transferred Purchasable Securities are owned by the Grantor free and clear
of all liens, adverse claims, and other encumbrances other than as provided in
this Stockholders Agreement. In the event that, notwithstanding the foregoing,
the Grantor shall have failed to obtain the release of any lien, adverse claim
or other encumbrance on any Purchasable Securities by the scheduled closing
date (at the option of HMTF acting for itself or, if applicable, its assignee)
the closing shall nevertheless occur on such scheduled closing date, with the
exercise price being reduced to the extent of all unpaid indebtedness for which
such Purchasable Securities are then encumbered. Payment of the exercise price
for the Purchasable Securities is not required in order to effect the timely
exercise of the Purchase Option. In order to ensure the transfer of the
Purchasable Securities purchased upon exercise of the Purchase Option, the
Grantor hereby appoints HMTF as his or its attorney in fact for the purpose of
effecting any such transfer, and the Grantor acknowledges and agrees that such
power of attorney is coupled with an interest and is irrevocable. Moreover,
HMTF (or, if applicable, its assignee) and the Grantor will promptly perform,
whether before or after any Purchase Option closing, such additional acts
(including without limitation executing and delivering additional documents) as
are reasonably required by either such party to effect more fully the
transactions contemplated hereby.
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<PAGE> 19
6.1.3 Exercise Price. The exercise price for each Purchasable Security
will equal the Appraised Value per share (or, in the case of securities other
than capital stock, other applicable denomination) to be paid in connection
with the exercise of the Purchase Option.
6.1.4 Assignment of Purchase Option. The Purchase Option may be
assigned or transferred in whole or in part by HMTF to any one or more members
of the HMC Group without any consent or other action on the part of any other
party hereto.
Section 6.2 Option by Certain Unaccredited Holders.
6.2.1 Grant of Option. Upon the occurrence of an Option Transaction
(as defined in Section 6.2.2 hereof) with respect to the Company, each Holder
shall be deemed to have granted to HMTF, an option ("Option") to purchase, upon
the terms and conditions set forth herein, all Securities held by such Holder
and all shares, notes, or other securities now or hereafter issued or issuable
in respect of any such Securities (whether issued or issuable by the Company or
any other person or entity) (collectively, the "Option Securities").
6.2.2 Option Transaction. The Option may be exercised only if (a) the
Company is engaged in or proposes to engage in a transaction in which any
shares, notes, or other securities will be issued to such Holder in a
transaction constituting a "sale" within the meaning of Section 2(3) of the
Securities Act (whether through a merger, consolidation, exchange, or
purchase), (b) the Holder is not an Accredited Investor at the time of the
respective transaction (an "Unaccredited Holder"), (c) no security holder
(except for such Unaccredited Holder or any other person granting a similar
option to HMTF) of the Company involved in the respective transaction fails at
the time of such transaction to qualify as an Accredited Investor, and (d) the
issuer of the shares, notes, or other securities involved in such transaction
(as conclusively evidenced by any notice signed in good faith by an executive
officer or other authorized representative of HMTF) has not prepared and is not
expected to prepare in connection with such transaction appropriate disclosure
documents that are sufficient to register such shares, notes, or other
securities under the Securities Act or to exempt such registration in
accordance with Regulation D. Each transaction for which the Option may be
exercised as provided in this Section 6.2.2 is herein referred to as an "Option
Transaction."
6.2.3 Exercise of Option. HMTF may exercise the Option solely with
respect to all, but not less than all, of such Unaccredited Holder's Option
Securities involved in the respective Option Transaction. The Option may be
exercised with respect to such Option Securities at any time before the
consummation of the respective Option Transaction for which the Option is then
exercisable. The exercise of the Option will be timely and effectively made if
HMTF provides written notice of such exercise to such Unaccredited Holder
before such consummation of the respective Option Transaction. The earliest
date on which such notice is so mailed or delivered will constitute the
respective exercise date of the Option to which such notice relates.
6.2.4 Closing. Unless otherwise agreed by HMTF and such Unaccredited
Holder, the closing of each exercise of the Option will take place at the
offices of the Company in Dallas, Texas, on the fifth business day after notice
of the Option's exercise is mailed or delivered in accordance with Section
6.2.3. At the closing, HMTF will pay the exercise price to such Unaccredited
Holder in cash (by certified or cashier's check) solely upon such Unaccredited
Holder's delivering to HMTF valid certificates evidencing all Option Securities
then being purchased pursuant to the exercise of the Option. Such certificates
will be duly endorsed (with signature guaranteed) for transfer to HMTF, and
upon delivery of such certificates to HMTF, such Unaccredited Holder will be
deemed to represent and warrant to HMTF that the transferred Option Securities
are owned by such Unaccredited Holder free and clear of all liens, adverse
claims, and
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<PAGE> 20
other encumbrances other than as provided in this Stockholders Agreement.
Payment of the exercise price for the Option Securities is not required in
order to effect the timely exercise of the Option. In order to ensure the
transfer of the Option Securities purchased upon exercise of the Option, each
Unaccredited Holder hereby severally appoints HMTF as his or its attorney in
fact for the purpose of effecting any such transfer, and each Unaccredited
Holder acknowledges and agrees that such power of attorney is coupled with an
interest and is irrevocable. Moreover, HMTF and each Unaccredited Holder will
promptly perform, whether before or after any Option closing, such additional
acts (including without limitation executing and delivering additional
documents) as are reasonably required by either such party to effect more fully
the transactions contemplated hereby.
6.2.5 Exercise Price. The exercise price for each Option Security will
equal the Appraised Value per share (or, in the case of securities other than
capital stock, other applicable denomination) to be paid in connection with the
Option Transaction.
6.2.6 Assignment of Option. The Option may be assigned or transferred
in whole or in part by HMTF to any one or more members of the HMC Group without
any consent or other action on the part of any Holder, and all references
herein to "HMTF" will include without limitation each assignee or transferee of
all or any part of the Option.
ARTICLE 7
TERMINATION
The provisions of this Agreement shall terminate on the tenth
anniversary of the date of this Stockholders Agreement; provided, however, that
Sections 4.1 and 4.2 and Articles 2, 5 (other than Sections 5.2 and 5.4) and 6
of this Agreement shall terminate upon the consummation prior to the expiration
of such 10-year period of a Qualified IPO.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telex, by telecopier or registered or certified mail,
postage prepaid, return receipt requested, addressed as follows (or at such
other address as may be substituted by notice given as herein provided):
If to the Company:
Capstar Broadcasting Partners, Inc.
600 Congress Avenue, Suite 1270
Austin, Texas 78701
Attention: R. Steven Hicks
Copies to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
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<PAGE> 21
Dallas, Texas 75201
Attention: Michael D. Wortley
If to HMTF:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Thomas 0. Hicks
John R. Muse
Jack D. Furst
Lawrence D. Stuart, Jr.
Hicks, Muse, Tate & Furst Incorporated
1325 Avenue of the Americas
25th Floor
New York, New York 10019
Attention: Charles W. Tate
Alan B. Menkes
Michael J. Levitt
Copies to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Michael D. Wortley
If to any Holder, at its address listed on the signature pages hereof.
Any notice or communication hereunder shall be deemed to have been given
or made as of the date so delivered if personally delivered; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and five
calendar days after mailing if sent by registered or certified mail (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 8.2 Legal Holidays. A "Legal Holiday" used with respect to a
particular place of payment is a Saturday, a Sunday or a day on which banking
institutions at such place are not required to be open. If a payment date is a
Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest on the amount of
such payment shall accrue for the intervening period.
Section 8.3 Governing Law; Jurisdiction. THIS STOCKHOLDERS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
-21-
<PAGE> 22
Section 8.4 Successors and Assigns. Whether or not an express
assignment has been made pursuant to the provisions of this Stockholders
Agreement, provisions of this Stockholders Agreement that are for the Holders'
benefit as the holders of any Securities are also for the benefit of, and
enforceable by, all subsequent holders of Securities, except as otherwise
expressly provided herein. This Stockholders Agreement shall be binding upon
the Company, each Holder, and their respective successors and assigns.
Section 8.5 Duplicate Originals. All parties may sign any number of
copies of this Stockholders Agreement. Each signed copy shall be an original,
but all of them together shall represent the same agreement.
Section 8.6 Severability. In case any provision in this Stockholders
Agreement shall be held invalid, illegal or unenforceable in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and the remaining provisions shall not in any way be
affected or impaired thereby.
Section 8.7 No Waivers; Amendments.
8.7.1 No failure or delay on the part of the Company or any Holder in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
any Holder at law or in equity or otherwise.
8.7.2 Any provision of this Stockholders Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Company and the Required Holders; provided that no such amendment or waiver
shall, (i) unless signed by all of the Holders, amend the provisions of Section
2.1, (ii) unless signed by all of the Holders affected, (A) amend the
provisions of this Section 8.7.2 or (B) change the number of Holders which
shall be required for the Holders or any of them to take any action under this
Section 8.7.2 or any other provision of this Stockholders Agreement, and (iii)
unless signed by a majority in interest of the Holders who are not members of
the HMC Group, amend Article 3, Section 4.1, Section 4.2 or Articles 5 or 6, or
grant a waiver thereunder.
Section 8.8 Third Parties. Each member of the HMC Group is an
intended third party beneficiary of this Stockholders Agreement and, to the
extent applicable, bound by the provisions thereof including without limitation
Article III and Section 4.2 hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 23
SIGNATURES TO STOCKHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Stockholders
Agreement to be duly executed, all as of the date first written above.
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ R. STEVEN HICKS
---------------------------------
Name: R. Steven Hicks
Title: Chief Executive Officer and President
HICKS, MUSE, TATE & FURST INCORPORATED
By: /s/ MICHAEL D. SALIM
----------------------------------
Name: Michael D. Salim
Title: Chief Financial Officer
<PAGE> 24
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
/s/ CHARLES DITORO
---------------------------------
Charles DiToro
Address:
1758 SW Crane Creek Circle
Palm City, FL 34990
<PAGE> 25
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
/s/ JUDY JENNINGS
---------------------------------
Judy Jennings
Address:
15934 Lone Oak Drive
Catlettsburg, KY 40129-9017
<PAGE> 26
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
/s/ HANK KESTENBAUM
---------------------------------
Hank Kestenbaum
Address:
4812 Peregrine Point Circle West
Sarasota, FL 34231
<PAGE> 27
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
/s/ PATIA GAUGH
---------------------------------
Patia Gaugh
Address:
22-11 36th Street
Astoria, NY 11105
<PAGE> 28
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
/s/ SHARON CHAMBERS
---------------------------------
Sharon Chambers
Address:
95 Oakey Drive
Kenell Park, NJ 08824
<PAGE> 29
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
/s/ JAY STERIN
---------------------------------
Jay Sterin
Address:
95 Beach Hill Drive
Newark, DE 19711
<PAGE> 30
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
/s/ JAMES T. SHEA
---------------------------------
James T. Shea
Address:
3755 Fox Run Drive
Allentown, PA 18103
<PAGE> 31
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
/s/ RICH LEWIS
---------------------------------
Rich Lewis
Address:
3363 Coville Road
Allentown, PA 18104
<PAGE> 32
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
/s/ JAMES J. SULLIVAN
---------------------------------
James J. Sullivan
Address:
9 Lakeside Avenue
Darien, CT 06820
<PAGE> 33
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
/s/ SCOTT BACHERMAN
---------------------------------
Scott Bacherman
Address:
71 Wright Street
Westport, CT 06880
<PAGE> 34
SIGNATURES TO STOCKHOLDERS AGREEMENT
NAME OF HOLDER:
/s/ MARC BERMAN
---------------------------------
Marc Berman
Address:
39 High Ridge Road
Redding, CT 06896
<PAGE> 1
EXHIBIT 10.22.2
FIRST AMENDMENT
TO
STOCKHOLDERS AGREEMENT
THIS FIRST AMENDMENT (the "First Amendment") to the Stockholders
Agreement dated as of November 26, 1996, by and among Capstar Broadcasting
Partners, Inc., a Delaware corporation ("the "Company"), the securityholders
listed on the signature pages thereto, and Hicks, Muse, Tate & Furst
Incorporated, a Texas corporation ("HMTF") (the "Stockholders Agreement"), is
entered into as of January 27, 1997, by and among the Company and the Holders
(as defined in the Stockholders Agreement).
RECITALS:
WHEREAS, the Company and the Holders desire to amend the Stockholders
Agreement as provided herein pursuant to Section 8.7.2 of the Stockholders
Agreement; and
WHEREAS, any capitalized term used herein, and not otherwise defined
herein, shall have the meaning set forth in the Stockholders Agreement.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing and the agreements
herein contained, the parties hereto covenant and agree as follows:
1. A new Section 8.9 is hereby added to the Stockholders Agreement
to read as follows:
Section 8.9. Additional Holders. From time to time, additional
securityholders of the Company may become "Holders" under this
Stockholders Agreement, without the consent of any other Holder, upon
the execution by the President of the Company (the "President") and such
party of a supplement to this Stockholders Agreement in substantially
the same form as Exhibit A attached hereto (each, a "SUPPLEMENT"). Each
Holder and HMTF hereby consents to the execution of Supplements by the
President and irrevocably agrees that the President's execution of a
Supplement shall be binding on each of the Holders and HMTF as if it had
executed such Supplement.
2. Article 6 is hereby amended and restated as follows:
<PAGE> 2
ARTICLE 6
PURCHASE OPTION
Section 6.1 Purchase Option.
6.1.1 Purchase Option. Unless Section 4.1 or 4.2 is otherwise
applicable, if (i), and at such time as, R. Steven Hicks' is no longer a
director, officer or employee of the Company or any Subsidiary of the
Company, for any reason at any time or (ii) a Change of Control occurs,
the HMTF shall have the option (the "Purchase Option") to purchase, and
if the Purchase Option is exercised, R. Steven Hicks (or the executor or
administrator of R. Steven Hicks' estate, in the event of R. Steven
Hicks' death, or R. Steven Hicks' legal representative in the event of
his incapacity) (hereinafter, collectively with R. Steven Hicks, the
"Grantor") shall sell to HMTF, (or as provided in Section 6.1.4 an
assignee of HMTF) all or any portion (at the option of HMTF acting for
itself or, if applicable, its assignee) of the shares of Common Stock,
Warrants and/or Common Stock Equivalents held by the Grantor (such
shares of Common Stock, Warrants and/or Common Stock Equivalents
collectively being referred to as the "Purchasable Securities"), subject
to HMTF's (or, if applicable, its assignee) compliance with the
conditions hereinafter set forth. HMTF (acting for itself or, if
applicable, its assignee) shall give notice (the "Purchase Notice") in
writing to the Grantor of the exercise of the Purchase Option within 120
days from the date R. Steven Hicks is no longer a director, officer or
employee of the Company or any Subsidiary of the Company or such Change
of Control. Such Purchase Notice shall state the number of Purchasable
Securities to be purchased and the exercise price for each Purchasable
Security (on a per share basis or, in the case of securities other than
capital stock, other applicable denomination). If no notice is given
within the time limit specified above, the Purchase Option shall
terminate.
6.1.2 Closing. Unless otherwise agreed by the Grantor and HMTF,
(acting for itself or, if applicable, its assignee) the closing of each
exercise of the Purchase Option will take place at the offices of the
Company in Dallas, Texas, on the fifth business day after the Purchase
Notice is mailed or delivered in accordance with this Section 6.1. At
the closing, HMTF (of, if applicable, its assignee) will pay the
exercise price to the Grantor in cash (by certified or cashier's check)
solely upon such Grantor's delivering to HMTF (or, if applicable, its
assignee) valid certificates or agreements evidencing all Purchasable
Securities then being purchased pursuant to the exercise of the Purchase
Option. Certificates or agreements representing the Purchasable
Securities will be duly endorsed (with signature guaranteed) for
transfer to HMTF (or, if applicable, its assignee). Upon delivery of
such certificates or agreements to HMTF(or, if applicable, its assignee)
, the Grantor will be deemed to represent and warrant to HMTF (or, if
applicable, its assignee) that the transferred Purchasable Securities
are owned by the Grantor free and clear of all liens, adverse claims,
and other encumbrances other than as provided in this Stockholders
Agreement. In the event that, notwithstanding the foregoing, the
Grantor shall have failed to obtain the release of any lien, adverse
claim or other encumbrance on any Purchasable Securities by the
scheduled closing date (at the option of HMTF acting for itself or, if
applicable, its assignee) the closing shall nevertheless occur on such
scheduled closing date,
2
<PAGE> 3
with the exercise price being reduced to the extent of all unpaid
indebtedness for which such Purchasable Securities are then encumbered.
Payment of the exercise price for the Purchasable Securities is not
required in order to effect the timely exercise of the Purchase Option.
In order to ensure the transfer of the Purchasable Securities purchased
upon exercise of the Purchase Option, the Grantor hereby appoints HMTF
as his or its attorney in fact for the purpose of effecting any such
transfer, and the Grantor acknowledges and agrees that such power of
attorney is coupled with an interest and is irrevocable. Moreover, HMTF
(or, if applicable, its assignee) and the Grantor will promptly perform,
whether before or after any Purchase Option closing, such additional
acts (including without limitation executing and delivering additional
documents) as are reasonably required by either such party to effect
more fully the transactions contemplated hereby.
6.1.3 Exercise Price. The exercise price for each Purchasable
Security will equal the Appraised Value per share (or, in the case of
securities other than capital stock, other applicable denomination).
6.1.4 Assignment of Purchase Option. The Purchase Option may be
assigned or transferred in whole or in part by HMTF to any one or more
members of the HMC Group without any consent or other action on the part
of any other party hereto.
3. Except as herein specifically amended, the Stockholders Agreement
shall continue in full force and effect in accordance with its terms.
[Remainder of page intentionally left blank]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment effective as of the date first written above.
COMPANY:
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ R. STEVEN HICKS
-------------------------------------
Name: R. Steven Hicks
Title: President and Chief Executive Officer
HOLDERS:
/s/ JAMES T. SHEA
--------------------------------------------
James T. Shea
/s/ JAMES J. SULLIVAN
--------------------------------------------
James J. Sullivan
/s/ CHARLES DITORO
--------------------------------------------
Charles DiToro
/s/ JUDY JENNINGS
--------------------------------------------
Judy Jennings
/s/ HANK KESTENBAUM
--------------------------------------------
Hank Kestenbaum
/s/ PATIA GAUGH
--------------------------------------------
Patia Gaugh
/s/ SHARON CHAMBERS
--------------------------------------------
Sharon Chambers
/s/ JAY STERIN
--------------------------------------------
Jay Sterin
/s/ RICH LEWIS
--------------------------------------------
Rich Lewis
/s/ MARC BERMAN
--------------------------------------------
Marc Berman
/s/ SCOTT BACHERMAN
--------------------------------------------
Scott Bacherman
<PAGE> 5
EXHIBIT A
SUPPLEMENT TO STOCKHOLDERS AGREEMENT
This Supplement (this "SUPPLEMENT") to the Stockholders Agreement dated
as of November 26, 1996, by and among Capstar Broadcasting Partners, Inc., a
Delaware corporation (the "COMPANY"), the securityholders listed on the
signature pages thereto, and Hicks, Muse, Tate & Furst Incorporated, a Texas
corporation, as amended or supplemented (the "STOCKHOLDERS AGREEMENT"), is
entered into as of _________________, 199__, between ________________________
(the "NEW HOLDER"), and the President of the Company, pursuant to the terms of
the Stockholders Agreement.
AGREEMENTS
For valuable consideration, whose receipt and sufficiency are hereby
acknowledged, New Holder is added as a "Holder" under the Stockholders
Agreement and New Holder hereby agrees that it shall be bound by the terms
thereof.
Executed as of the date first written above.
NEW HOLDER:
-------------------------------------
-------------------------------------
Address:
-------------------------------------
-------------------------------------
PRESIDENT:
-------------------------------------
---------------------------,President
<PAGE> 1
EXHIBIT 10.23.1
STOCK PLEDGE, SECURITY
AGREEMENT AND POWER OF ATTORNEY
THIS STOCK PLEDGE, SECURITY AGREEMENT and POWER OF ATTORNEY (this
"Agreement"), is entered into as of February 20, 1997, by Claude C. Turner
(otherwise known as Dex Allen) ("Pledgor"), in favor of Capstar Broadcasting
Partners, Inc., a Delaware corporation ("Pledgee"), whose principal place of
business for notice hereunder is 600 Congress Avenue, Suite 1400, Austin, Texas
78701.
RECITALS:
Pledgor desires to purchase and Pledgee desires to sell 363,636 shares
of Class A Common Stock, par value $0.01 per share (the "Common Stock"), of
Pledgee.
Pledgee has loaned $200,000 to Pledgor, as evidenced by that certain
promissory note of even date herewith (the "Note") in order to purchase the
181,818 shares of Common Stock; and
It is a condition to the making of such loan that Pledgor deliver to
Pledgee this Agreement for the purpose of securing the repayment of the Note;
AGREEMENTS:
In order to induce Pledgee to loan monies to Pledgor and for other
good and valuable consideration, whose receipt and sufficiency are hereby
acknowledged, Pledgor agrees as follows:
Section 1. PLEDGE. Pledgor hereby pledges to Pledgee and grants to
Pledgee a security interest in 181,818 shares of the Common Stock (the
"Pledged Shares"), and all dividends, cash, instruments, securities and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any of the Pledged Shares.
Section 2. SECURITY FOR OBLIGATIONS. This Agreement secures the
payment of all principal from time to time outstanding under the Note and all
interest thereon and all other obligations of Pledgor now or hereafter existing
thereunder (collectively, the "Obligations").
Section 3. DELIVERY OF PLEDGED SHARES. All certificates or
instruments representing or evidencing the Pledged Shares shall be delivered to
and held by or on behalf of Pledgee pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank. Pledgee shall have the right
to register in the name of Pledgee or any of Pledgee's nominees any or all of
the Pledged Shares, subject only to
<PAGE> 2
the revocable rights specified in Section 6(a). Pledgee shall have the right
at any time to exchange certificates or instruments representing or evidencing
Pledged Shares for certificates or instruments of smaller or larger
denominations.
Section 4. REPRESENTATIONS AND WARRANTIES. Except as pursuant to
that certain Stockholders Agreement dated as of November 26, 1996, as such may
be amended, to which Pledgor is a party as of the date hereof (the
"Stockholders Agreement"), Pledgor represents and warrants that he is the legal
and beneficial owner of the Pledged Shares free and clear of any lien, security
interest, restriction on transfer, voting rights restriction, option or other
charge or encumbrance, and that Pledgor has full right and power to transfer
the Pledged Shares to the Pledgee free and clear of any interests described
herein.
Section 5. FURTHER ASSURANCES. Pledgor agrees that at any time and
from time to time, at the expense of Pledgor, Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action, as
may be reasonably requested by Pledgee in order to perfect and protect any
security interest granted hereby or to enable Pledgee to exercise and enforce
its rights and remedies hereunder with respect to any Pledged Shares.
Section 6. VOTING RIGHTS; DIVIDENDS; ETC.
a. So long as no Event of Default (as hereinafter
defined) shall have occurred and be continuing and in accordance with the terms
and conditions of the Stockholders Agreement, Pledgor shall be entitled to
exercise any and all voting and other consensual rights pertaining to the
Pledged Shares or any part thereof for any purpose not inconsistent with the
terms of this Agreement, and Pledgee shall execute and deliver (or cause to be
executed and delivered) to Pledgor all such proxies and other instruments as
Pledgor may reasonably request for the purpose of enabling Pledgor to exercise
such voting and other rights.
b. Upon the occurrence of any Event of Default, all the
rights of Pledgor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to Section 6.(a) hereof shall
cease, and all such rights shall thereupon become vested in Pledgee who shall
thereupon have the sole right to exercise such voting and other consensual
rights.
c. Any and all dividends, distributions and interest
paid in respect of the Pledged Shares, including without limitation any and all
i. dividends and interest paid or payable other
than in cash in respect of, any instruments and other property
received, receivable or otherwise distributed in respect of,
or in exchange for, any Pledged Shares,
ii. dividends and other distributions paid or
payable in cash in respect of any Pledged Shares in connection
with a partial or total liquidation or dissolution or in
connection with the reduction of capital, capital surplus or
paid-in surplus, and
<PAGE> 3
iii. cash paid, payable or otherwise distributed
in respect of principal, or in the redemption of, or in exchange for, any
Pledged Shares, shall be, and shall be forthwith delivered to Pledgee to be
held by Pledgee as, Pledged Shares and shall, if received by Pledgor, be
received in trust for the benefit of Pledgee, be segregated from the other
property or funds of Pledgor and be forthwith delivered to Pledgee as Pledged
Shares in the same form as so received (with any necessary endorsement).
Section 7. TRANSFERS AND OTHER LIENS. Except as set forth below,
Pledgor agrees that it will not sell or otherwise dispose of, or grant any
option with respect to, any of the Pledged Shares or create or permit to exist
any lien, security interest, or other charge or encumbrance upon or with
respect to any of the Pledged Shares, except for the security interest created
by this Agreement. Pledgor may sell, upon the prior written consent of Pledgee,
any or all of the Pledged Shares free and clear of the lien created hereby (and
Pledgee will release such lien and deliver certificates representing the
Pledged Shares to be so sold) if such sale is pursuant to the terms and
conditions of the Stockholders Agreement, sale is a bona fide arms' length
transaction with a party unrelated to Pledgor, such sale is for all cash and
the proceeds of such sale are applied in payment of the Obligations (with any
proceeds remaining after payment in full of all the Obligations to be retained
by Pledgor). The foregoing provision shall not operate to relieve Pledgor from
compliance with any right of first refusal in favor of Pledgee that may exist
in connection with such sale.
Section 8. EVENTS OF DEFAULT. Any of the following events shall
constitute an event of default ("Event of Default") under this Agreement:
a. the default by Pledgor in the payment of any
principal of or interest on the Note when the same shall become due, either by
the terms thereof or as otherwise provided herein, and such default is not
cured by Pledgor within any applicable grace period;
b. the default by Pledgor in the performance of any
other covenant, condition or term of the Obligations in accordance with the
terms thereof, and such default is not cured by Pledgor within any applicable
grace period;
c. the default by Pledgor in the performance of any
covenant, condition or term of this Agreement, the Note or of any other
instrument evidencing, securing or relating to the Obligations, and such
default is not cured by Pledgor within any applicable grace period;
d. any representation or warranty made in writing by
Pledgor in this Agreement or in the Note or any other instrument evidencing,
securing or relating to the Obligations shall be false or misleading in any
material respect on the date as of which made;
e. any petition in bankruptcy is filed by or against
Pledgor or any proceeding in bankruptcy or similar proceeding under the laws or
regulations of any applicable jurisdiction relating to the relief of debtors is
commenced by or against Pledgor, or any action is taken in furtherance of the
foregoing;
3
<PAGE> 4
f. if Pledgor makes any assignment for the benefit of
her or its creditors;
g. any receiver or other court or government official is
appointed to take possession or control of any of Pledgor's property; or
h. any order of attachment, lien, distraint, garnishment
or other levy is issued against any of Pledgor's funds or other property and
remains unstayed for a period of 30 days.
Section 9. REASONABLE CARE. Pledgee shall be deemed to have
exercised reasonable care in the custody and the preservation of the Pledged
Shares in Pledgee's possession, if the Pledged Shares are accorded treatment
substantially equal to that which Pledgee accords Pledgee's own property, it
being understood that Pledgee shall have no responsibility for ascertaining or
taking action with respect to costs, conversions, changes, maturities, tenders
or other matters relative to any Pledged Shares, whether or not Pledgee has or
is deemed to have knowledge of such matters, or taking any necessary steps to
preserve rights against any parties with respect to any Pledged Shares.
Section 10. REMEDIES UPON DEFAULT. If any Event of Default shall have
occurred and be continuing:
a. Pledgee may elect to declare all or any part of the
Obligations secured hereby immediately due and payable in full, without notice,
demand, presentment, notice of intent to accelerate, notice of acceleration or
any other notice, all of which Pledgor hereby expressly waives (except such
notice as may be required by law and cannot be waived).
b. Pledgee may exercise in respect of the Pledged
Shares, in addition to other rights and remedies provided for herein or
otherwise available to Pledgee, all the rights and remedies of a secured party
in default under all applicable laws in effect in the State of Texas at that
time and Pledgee may also, without notice except as specified below, sell the
Pledged Shares or any part thereof in one or more parcels in a public or
private sale, at any exchange, broker's board, for cash, on credit or for
future delivery and upon such other terms as Pledgee may deem commercially
reasonable period. Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten days notice to Pledgor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Pledgee shall not be obligated to make any
sale of the Pledged Shares regardless of notice of sale having been given.
Pledgee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
c. Any cash held by Pledgee as Pledged Shares and all
cash proceeds received by Pledgee in respect of any sale of, collection from,
or other realization of all or any part of Pledged Shares, may, in the
discretion of Pledgee, be held by Pledgee as collateral for, and/or then or at
any time thereafter applied in whole or in part by Pledgee against all or any
part of the Obligations. Any surplus of such cash or cash proceeds held by
Pledgee and remaining after payment in full of all the
4
<PAGE> 5
Obligations shall be paid over to Pledgor or to whomsoever may be lawfully
entitled to receive such surplus.
Section 11. EXPENSES. Pledgor shall upon demand pay to Pledgee any
and all reasonable expenses (including reasonable attorneys' fees and legal
expenses) incurred by Pledgee in connection with protecting Pledgee against the
claims or interests of any third person with respect to the Pledged Shares, and
in exercising any right or remedy conferred by this Agreement or by law.
Section 12. AMENDMENTS. No amendment or waiver of any provision of
this Agreement shall in any event be effective unless the same shall be in
writing and signed by both Pledgor and Pledgee.
Section 13. RETURN OF THE PLEDGED SHARES. Upon the full payment and
performance of the Obligations, this Agreement and the pledge effected hereby
shall be null and void and the Pledged Shares shall promptly be returned to
Pledgor by Pledgee.
Section 14. CONTINUING SECURITY AGREEMENT. This Agreement shall
create a continuing security interest in the Pledged Shares and shall remain
in full force and effect until payment in full of the Obligations and be
binding upon Pledgor, his successors and assigns.
Section 15. GOVERNING LAW; TERMS. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Texas.
Executed as of the date first written above.
PLEDGOR:
/s/ Claude C. Turner
----------------------------------------
Claude C. Turner
(otherwise known as Dex Allen)
PLEDGEE:
By: /s/ William S. Banowsky, Jr.
------------------------------------
William S. Banowsky, Jr.
Executive Vice President
5
<PAGE> 1
EXHIBIT 10.23.2
PROMISSORY NOTE
$200,000 Austin, Texas February 20, 1997
FOR VALUE RECEIVED, Claude C. Turner (otherwise known as Dex Allen)
("Maker") promises to pay to the order of Capstar Broadcasting Partners, Inc.
("Payee") at such address in Austin, Texas as specified below, the principal
sum of TWO HUNDRED THOUSAND AND 00/100 DOLLARS ($200,000) together with
interest thereon at the rate of nine percent (9.0%) per annum, payable as
hereinafter provided.
Accrued interest is due and payable on March 31, 1997 and on the last
day of each and every succeeding calendar month thereafter during the term
hereof and at maturity; provided, however, that if the principal of this Note
is prepaid in whole or in part, at any time after the date hereof, all accrued
and unpaid interest with respect to such principal amount prepaid is due and
payable on the date of such prepayment.
Principal and any unpaid accrued interest is due and payable at the
time of maturity, which shall be the earlier to occur of (i) the Closing Date
(as such term is defined in that certain Asset Purchase Agreement between
Commonwealth Broadcasting of Arizona, L.L.C. and Community Acquisition Company,
Inc. dated January 27, 1997) or (ii) October 31, 1997.
Maker shall have the right to prepay this Note in whole or in part at
any time without penalty or premium.
All amounts paid hereunder shall be applied first to all interest then
accrued and unpaid hereunder, and the balance, if any, to principal. All past
due principal and interest on this Note shall bear interest at the maximum rate
permitted by law from maturity until paid. All sums called for, payable or to
be paid hereunder shall be paid in lawful money of the United States of America
which at the time of payment is legal tender for the payment of public and
private debts therein.
If default is made in the payment of this Note at maturity (regardless
of how its maturity may be brought about) or the same is placed in the hands of
an attorney for collection, or if suit is filed hereon, or proceedings are had
in bankruptcy, probate, receivership, reorganization, or other judicial
proceedings for the establishment or collection of any amount called for
hereunder, or any amount payable or to be payable hereunder is collected
through any such proceedings, Maker agrees to pay the holder of this Note a
reasonable amount as attorney's or collection fees.
<PAGE> 2
Maker hereby waives presentment and demand for payment, notice of
intent to accelerate maturity, notice of acceleration of maturity, protest or
notice of protest and non-payment, bringing of suit and diligence in taking any
action to collect any sums owing hereunder and in proceeding against any of the
rights and properties securing payment hereof, and agrees that its liability on
this Note shall not be affected by any release of or change in any security for
the payment of this Note.
In the event of a default in the performance of any agreement or
covenant contained in any instrument securing payment hereof, without the
giving of any notice of any kind, the holder of this Note shall have the right
and option, to declare the unpaid balance of principal and accrued interest on
this Note at once due and payable and to foreclose or require foreclosure of
any and all liens securing payment hereof, and to exercise any and all other
rights and remedies it may have. Failure to exercise this option upon any
default shall not constitute a waiver of the right to exercise it in the event
of any subsequent default.
Payment of this Note is secured by a Stock Pledge Agreement between
Maker and Payee of even date herewith pursuant to which Maker pledges to Payee
and grants to Payee a security interest in 181,818 shares of Class A Common
Stock, par value $0.01 per share (the "Pledged Shares"), of Payee, and all
dividends, cash, instruments, securities and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any of the Pledged Shares.
All notices permitted hereunder shall be given to the addressee at the
following address: if to Payee, at the address provided below; if to Maker,
600 Congress Avenue, Suite 1400, Austin, Texas 78701. All notices given
hereunder shall be in writing and shall be considered properly given if mailed
by first-class United States mail, postage prepaid, registered or certified
with return receipt requested, or by delivering same in person to the
addressee, or by prepaid telegram. Any notice given in accordance herewith
shall be effective upon receipt at the address of the addressee.
It is expressly stipulated and agreed to be the intent of Maker and
Payee to at all times comply with the usury and other laws applicable to this
Note and the instruments securing the payment hereof (the "Security
Instruments") and any subsequent revisions, repeals, or judicial
interpretations thereof, to the extent any of the same are applicable hereto.
If such laws are ever revised, repealed, or judicially interpreted so as to
render usurious any amount called for under this Note or under any of the
Security Instruments, or contracted for, charged, or received with respect to
the indebtedness evidenced by this Note, or if Payee's exercise of the option
herein contained to accelerate the maturity of this Note or if any prepayment
by Maker results in Maker having paid any interest in excess of that permitted
by law, then it is Maker's and Payee's express intent that all excess amounts
theretofore collected by Payee be credited on the principal balance of this
Note (or, if the Note has been paid in full, refunded to Maker), and the
provisions of this Note and the Security Instruments immediately be deemed
reformed and the amounts thereafter collectable hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the then applicable law, but so as to permit the recovery of the
fullest amount otherwise called for hereunder and thereunder.
<PAGE> 3
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EXECUTED as of the date first written above.
/s/ Claude C. Turner
---------------------------------------
Claude C. Turner (otherwise known as
Dex Allen)
Address: Commonwealth Broadcasting
2550 Fifth Avenue, 11th Floor
San Diego, CA 92103
3
<PAGE> 1
EXHIBIT 10.24.1
PROMISSORY NOTE
$396,363.64 Austin, Texas February 20, 1997
FOR VALUE RECEIVED, David J. Benjamin, III ("Maker") promises to pay
to the order of Capstar Broadcasting Partners, Inc. ("Payee") at its banking
quarters in New York, New York, the principal sum of THREE HUNDRED NINETY SIX
THOUSAND THREE HUNDRED SIXTY THREE AND 64/100 DOLLARS ($396,363.64) together
with interest thereon at the rate of nine percent (9.0%) per annum, payable as
hereinafter provided.
Principal and accrued interest is due and payable in full at the time
of maturity which shall be the earlier to occur of (i) the Closing Date (as
such term is defined in that certain Asset Purchase Agreement between Community
Pacific Broadcasting Company L.P. and Community Acquisition Company, Inc. dated
December 26, 1996, as amended) or (ii) November 10, 1997.
Maker shall have the right to prepay this Note in whole or in part at
any time without penalty or premium.
All amounts paid hereunder shall be applied first to all interest then
accrued and unpaid hereunder, and the balance, if any, to principal. All past
due principal and interest on this Note shall bear interest at the maximum rate
permitted by law from maturity until paid. All sums called for, payable or to
be paid hereunder shall be paid in lawful money of the United States of America
which at the time of payment is legal tender for the payment of public and
private debts therein.
If default is made in the payment of this Note at maturity (regardless
of how its maturity may be brought about) or the same is placed in the hands of
an attorney for collection, or if suit is filed hereon, or proceedings are had
in bankruptcy, probate, receivership, reorganization, or other judicial
proceedings for the establishment or collection of any amount called for
hereunder, or any amount payable or to be payable hereunder is collected
through any such proceedings, Maker agrees to pay the holder of this Note a
reasonable amount as attorney's or collection fees.
Maker hereby waives presentment and demand for payment, notice of
intent to accelerate maturity, notice of acceleration of maturity, protest or
notice of protest and non-payment, bringing of suit and diligence in taking any
action to collect any sums owing hereunder and in proceeding against any of the
rights and properties securing payment hereof, and agrees that its liability on
this Note shall not be affected by any release of or change in any security for
the payment of this Note.
In the event of a default in the performance of any agreement or
covenant contained in any instrument securing payment hereof, without the
giving of any notice of any kind, the holder of this
<PAGE> 2
Note shall have the right and option, to declare the unpaid balance of
principal and accrued interest on this Note at once due and payable and to
foreclose or require foreclosure of any and all liens securing payment hereof,
and to exercise any and all other rights and remedies it may have. Failure to
exercise this option upon any default shall not constitute a waiver of the
right to exercise it in the event of any subsequent default.
Payment of this Note is secured by a Stock Pledge Agreement between
Maker and Payee of even date herewith pursuant to which Maker pledges to Payee
and grants to Payee a security interest in 363,636 shares of common stock, par
value $0.01 per share (the "Pledged Shares"), of Payee, and all dividends,
cash, instruments, securities and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any of the
Pledged Shares.
All notices permitted hereunder shall be given to the addressee at the
following address: if to Payee, at the address provided below; if to Maker,
600 Congress Avenue, Suite 1400, Austin, Texas 78701. All notices given
hereunder shall be in writing and shall be considered properly given if mailed
by first-class United States mail, postage prepaid, registered or certified
with return receipt requested, or by delivering same in person to the
addressee, or by prepaid telegram. Any notice given in accordance herewith
shall be effective upon receipt at the address of the addressee.
It is expressly stipulated and agreed to be the intent of Maker and
Payee to at all times comply with the usury and other laws applicable to this
Note and the instruments securing the payment hereof (the "Security
Instruments") and any subsequent revisions, repeals, or judicial
interpretations thereof, to the extent any of the same are applicable hereto.
If such laws are ever revised, repealed, or judicially interpreted so as to
render usurious any amount called for under this Note or under any of the
Security Instruments, or contracted for, charged, or received with respect to
the indebtedness evidenced by this Note, or if Payee's exercise of the option
herein contained to accelerate the maturity of this Note or if any prepayment
by Maker results in Maker having paid any interest in excess of that permitted
by law, then it is Maker's and Payee's express intent that all excess amounts
theretofore collected by Payee be credited on the principal balance of this
Note (or, if the Note has been paid in full, refunded to Maker), and the
provisions of this Note and the Security Instruments immediately be deemed
reformed and the amounts thereafter collectable hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the then applicable law, but so as to permit the recovery of the
fullest amount otherwise called for hereunder and thereunder.
EXECUTED as of the date first written above.
/s/ David J. Benjamin, III
--------------------------------
David J. Benjamin, III
Address: Community Pacific
Broadcasting 2511 Garden Road
Suite A-104
Monterey, CA 93940
<PAGE> 1
EXHIBIT 10.24.2
STOCK PLEDGE, SECURITY
AGREEMENT AND POWER OF ATTORNEY
THIS STOCK PLEDGE, SECURITY AGREEMENT and POWER OF ATTORNEY (this
"Agreement"), is entered into as of February 20, 1997, by David J. Benjamin,
III ("Pledgor"), in favor of Capstar Broadcasting Partners, Inc., a Delaware
corporation ("Pledgee"), whose principal place of business for notice hereunder
is 600 Congress Avenue, Suite 1400, Austin, Texas 78701.
RECITALS:
Pledgor desires to purchase and Pledgee desires to sell 363,636 shares
of Class A Common Stock, par value $0.01 per share (the "Common Stock"), of
Pledgee.
Pledgee has loaned $396,363.64 to Pledgor, as evidenced by that
certain promissory note of even date herewith (the "Note") in order to purchase
the 363,636 shares of Common Stock; and
It is a condition to the making of such loan that Pledgor deliver to
Pledgee this Agreement for the purpose of securing the repayment of the Note;
AGREEMENTS:
In order to induce Pledgee to loan monies to Pledgor and for other
good and valuable consideration, whose receipt and sufficiency are hereby
acknowledged, Pledgor agrees as follows:
Section 1. PLEDGE. Pledgor hereby pledges to Pledgee and grants to
Pledgee a security interest in 363,636 shares of the Common Stock (the
"Pledged Shares"), and all dividends, cash, instruments, securities and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any of the Pledged Shares.
Section 2. SECURITY FOR OBLIGATIONS. This Agreement secures the
payment of all principal from time to time outstanding under the Note and all
interest thereon and all other obligations of Pledgor now or hereafter existing
thereunder (collectively, the "Obligations").
Section 3. DELIVERY OF PLEDGED SHARES. All certificates or
instruments representing or evidencing the Pledged Shares shall be delivered to
and held by or on behalf of Pledgee pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly
<PAGE> 2
executed instruments of transfer or assignment in blank. Pledgee shall have
the right to register in the name of Pledgee or any of Pledgee's nominees any
or all of the Pledged Shares, subject only to the revocable rights specified in
Section 6(a). Pledgee shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Shares for
certificates or instruments of smaller or larger denominations.
Section 4. REPRESENTATIONS AND WARRANTIES. Except as pursuant to
that certain Stockholders Agreement dated as of November 26, 1996, as such may
be amended, to which Pledgor is a party as of the date hereof (the
"Stockholders Agreement"), and that certain Mandatory Buyback Agreement of even
date herewith (the "Buyback Agreement"), Pledgor represents and warrants that
he is the legal and beneficial owner of the Pledged Shares free and clear of
any lien, security interest, restriction on transfer, voting rights
restriction, option or other charge or encumbrance, and that Pledgor has full
right and power to transfer the Pledged Shares to the Pledgee free and clear of
any interests described herein.
Section 5. FURTHER ASSURANCES. Pledgor agrees that at any time and
from time to time, at the expense of Pledgor, Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action, as
may be reasonably requested by Pledgee in order to perfect and protect any
security interest granted hereby or to enable Pledgee to exercise and enforce
its rights and remedies hereunder with respect to any Pledged Shares.
Section 6. VOTING RIGHTS; DIVIDENDS; ETC.
(a) So long as no Event of Default (as hereinafter
defined) shall have occurred and be continuing and in accordance with the terms
and conditions of the Stockholders Agreement, Pledgor shall be entitled to
exercise any and all voting and other consensual rights pertaining to the
Pledged Shares or any part thereof for any purpose not inconsistent with the
terms of this Agreement, and Pledgee shall execute and deliver (or cause to be
executed and delivered) to Pledgor all such proxies and other instruments as
Pledgor may reasonably request for the purpose of enabling Pledgor to exercise
such voting and other rights.
(b) Upon the occurrence of any Event of Default, all the
rights of Pledgor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to Section 6.(a) hereof shall
cease, and all such rights shall thereupon become vested in Pledgee who shall
thereupon have the sole right to exercise such voting and other consensual
rights.
(c) Any and all dividends, distributions and interest
paid in respect of the Pledged Shares, including without limitation any and all
(1) dividends and interest paid or payable other
than in cash in respect of, any instruments and other property
received, receivable or otherwise distributed in respect of,
or in exchange for, any Pledged Shares,
<PAGE> 3
(2) dividends and other distributions paid or
payable in cash in respect of any Pledged Shares in connection
with a partial or total liquidation or dissolution or in
connection with the reduction of capital, capital surplus or
paid-in surplus, and
(3) cash paid, payable or otherwise distributed
in respect of principal, or in the redemption of, or in
exchange for, any Pledged Shares, shall be, and shall be
forthwith delivered to Pledgee to be held by Pledgee as,
Pledged Shares and shall, if received by Pledgor, be received
in trust for the benefit of Pledgee, be segregated from the
other property or funds of Pledgor and be forthwith delivered
to Pledgee as Pledged Shares in the same form as so received
(with any necessary endorsement).
Section 7. TRANSFERS AND OTHER LIENS. Except as set forth below,
Pledgor agrees that it will not (a) sell or otherwise dispose of, or grant any
option with respect to, any of the Pledged Shares or (b) create or permit to
exist any lien, security interest, or other charge or encumbrance upon or with
respect to any of the Pledged Shares, except for the security interest created
by this Agreement. Pledgor may sell, upon the prior written consent of Pledgee,
any or all of the Pledged Shares free and clear of the lien created hereby (and
Pledgee will release such lien and deliver certificates representing the
Pledged Shares to be so sold) if (1) such sale is pursuant to the terms and
conditions of the Stockholders Agreement, (2) sale is a bona fide arms' length
transaction with a party unrelated to Pledgor, (3) such sale is for all cash
and (4) the proceeds of such sale are applied in payment of the Obligations
(with any proceeds remaining after payment in full of all the Obligations to be
retained by Pledgor). The foregoing provision shall not operate to relieve
Pledgor from compliance with any right of first refusal in favor of Pledgee
that may exist in connection with such sale.
Section 8. EVENTS OF DEFAULT. Any of the following events shall
constitute an event of default ("Event of Default") under this Agreement:
(a) the default by Pledgor in the payment of any
principal of or interest on the Note when the same shall become due, either by
the terms thereof or as otherwise provided herein, and such default is not
cured by Pledgor within any applicable grace period;
(b) the default by Pledgor in the performance of any
other covenant, condition or term of the Obligations in accordance with the
terms thereof, and such default is not cured by Pledgor within any applicable
grace period;
(c) the default by Pledgor in the performance of any
covenant, condition or term of this Agreement, the Note or of any other
instrument evidencing, securing or relating to the Obligations, and such
default is not cured by Pledgor within any applicable grace period;
(d) the default by Pledgor in the performance of any
covenant, condition or term of the Buyback Agreement;
3
<PAGE> 4
(e) any representation or warranty made in writing by
Pledgor in this Agreement or in the Note or any other instrument evidencing,
securing or relating to the Obligations shall be false or misleading in any
material respect on the date as of which made;
(f) any petition in bankruptcy is filed by or against
Pledgor or any proceeding in bankruptcy or similar proceeding under the laws or
regulations of any applicable jurisdiction relating to the relief of debtors is
commenced by or against Pledgor, or any action is taken in furtherance of the
foregoing;
(g) if Pledgor makes any assignment for the benefit of
her or its creditors;
(h) any receiver or other court or government official is
appointed to take possession or control of any of Pledgor's property; or
(i) any order of attachment, lien, distraint, garnishment
or other levy is issued against any of Pledgor's funds or other property and
remains unstayed for a period of 30 days.
Section 9. REASONABLE CARE. Pledgee shall be deemed to have
exercised reasonable care in the custody and the preservation of the Pledged
Shares in Pledgee's possession, if the Pledged Shares are accorded treatment
substantially equal to that which Pledgee accords Pledgee's own property, it
being understood that Pledgee shall have no responsibility for (a) ascertaining
or taking action with respect to costs, conversions, changes, maturities,
tenders or other matters relative to any Pledged Shares, whether or not Pledgee
has or is deemed to have knowledge of such matters, or (b) taking any necessary
steps to preserve rights against any parties with respect to any Pledged
Shares.
Section 10. REMEDIES UPON DEFAULT. If any Event of Default shall
have occurred and be continuing:
(a) Pledgee may elect to declare all or any part of the
Obligations secured hereby immediately due and payable in full, without notice,
demand, presentment, notice of intent to accelerate, notice of acceleration or
any other notice, all of which Pledgor hereby expressly waives (except such
notice as may be required by law and cannot be waived).
(b) Pledgee may exercise in respect of the Pledged
Shares, in addition to other rights and remedies provided for herein or
otherwise available to Pledgee, all the rights and remedies of a secured party
in default under all applicable laws in effect in the State of Texas at that
time and Pledgee may also, without notice except as specified below, sell the
Pledged Shares or any part thereof in one or more parcels in a public or
private sale, at any exchange, broker's board, for cash, on credit or for
future delivery and upon such other terms as Pledgee may deem commercially
reasonable period. Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten days notice to Pledgor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Pledgee shall not be obligated to make any
sale of the Pledged Shares regardless of notice of sale having been given.
Pledgee may adjourn
4
<PAGE> 5
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
(c) Any cash held by Pledgee as Pledged Shares and all
cash proceeds received by Pledgee in respect of any sale of, collection from,
or other realization of all or any part of Pledged Shares, may, in the
discretion of Pledgee, be held by Pledgee as collateral for, and/or then or at
any time thereafter applied in whole or in part by Pledgee against all or any
part of the Obligations. Any surplus of such cash or cash proceeds held by
Pledgee and remaining after payment in full of all the Obligations shall be
paid over to Pledgor or to whomsoever may be lawfully entitled to receive such
surplus.
Section 11. EXPENSES. Pledgor shall upon demand pay to Pledgee any
and all reasonable expenses (including reasonable attorneys' fees and legal
expenses) incurred by Pledgee in connection with protecting Pledgee against the
claims or interests of any third person with respect to the Pledged Shares, and
in exercising any right or remedy conferred by this Agreement or by law.
Section 12. AMENDMENTS. No amendment or waiver of any provision of
this Agreement shall in any event be effective unless the same shall be in
writing and signed by both Pledgor and Pledgee.
Section 13. RETURN OF THE PLEDGED SHARES. Upon the full payment and
performance of the Obligations, this Agreement and the pledge effected hereby
shall be null and void and the Pledged Shares shall promptly be returned to
Pledgor by Pledgee.
Section 14. CONTINUING SECURITY AGREEMENT. This Agreement shall
create a continuing security interest in the Pledged Shares and shall (a)
remain in full force and effect until payment in full of the Obligations and
(b) be binding upon Pledgor, his successors and assigns.
Section 15. GOVERNING LAW; TERMS. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Texas.
5
<PAGE> 6
Executed as of the date first written above.
PLEDGOR:
/s/ David J. Benjamin, III
--------------------------------------------
David J. Benjamin, III
PLEDGEE:
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ William S. Banowsky, Jr.
-----------------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
6
<PAGE> 1
EXHIBIT 10.25
CAPSTAR BROADCASTING PARTNERS, INC.
600 CONGRESS AVENUE, SUITE 1400
AUSTIN, TEXAS 78701
February 20, 1997
Mr. David J. Benjamin, III
Community Pacific Broadcasting
2511 Garden Road, Suite A-104
Monterey, CA 93940
Re: MANDATORY BUYBACK AGREEMENT
Dear Mr. Benjamin:
This letter will confirm the understanding that David J. Benjamin, III
and Capstar Broadcasting Partners, Inc., a Delaware corporation ("Capstar"),
have reached with respect to the purchase by Benjamin and the sale by Capstar
of 363,636 shares of Class A Common Stock, par value $0.01 per share (the
"Acquired Stock"), of Capstar pursuant to that certain Subscription Agreement
For Capstar Broadcasting Partners, Inc. of even date herewith.
1. MANDATORY BUYBACK OF ACQUIRED STOCK.
1.1 Mandatory Buyback of Acquired Stock. In the event that (a)
the Asset Purchase Agreement between Community Pacific Broadcasting Company
L.P. and Community Acquisition Company, Inc. dated December 26, 1996, as such
may be amended (the "Asset Purchase Agreement"), is terminated for any reason
by any party or (b) the Closing (as such term is defined in the Asset Purchase
Agreement) does not occur on or before November 10, 1997 (unless such date is
otherwise extended by the mutual agreement of parties hereto), Benjamin agrees
to sell and Capstar agrees to purchase the Acquired Stock (x) on the fifth
business day from the date of the occurrence of the event described in (a) or
(y) on the date of the occurrence of the event described in (b) above (the
"Closing Date"). In the event that the parties hereto agree to extend the
November 10, 1997 date provided in clause (b) above, then the parties shall
also amend the Promissory Note (as hereinafter defined) as may be necessary to
reflect such extended date.
1.2. Purchase Price. The purchase price of the Acquired Stock
shall be (a) the release and forgiveness of the obligations evidenced by that
certain promissory note of even date herewith
<PAGE> 2
executed by Benjamin and payable to Capstar in the principal sum of $396,363.64
(the "Promissory Note") and (b) the payment to Benjamin of $3,636.36..
1.3 Closing. The closing will take place on the Closing Date at
the offices of Capstar in Dallas, Texas. At the closing, (a) Benjamin will
duly endorse the certificate(s) evidencing all of the Acquired Stock for
transfer to Capstar (or, if applicable, its assignee) and (b) Capstar will
deliver the Promissory Note to Benjamin marked "canceled" and will tender
payment of the cash portion of the purchase price in immediately available
funds. At the closing, Benjamin will be deemed to represent and warrant to
Capstar (or, if applicable, its assignee) that the transferred Acquired Stock
is owned by Benjamin free and clear of all liens, adverse claims and other
encumbrances other then as provided in (i) that certain Stockholders Agreement
dated November 26, 1996, as amended (the "Stockholders Agreement"), to which
Benjamin is a party and (ii) that certain Stock Pledge, Security Agreement and
Power of Attorney of even date herewith between Benjamin and Capstar. Benjamin
agrees to promptly perform, whether before or after any such closing, such
additional act (including without limitation executing and delivering
additional documents) as are reasonably required by Capstar to effect more
fully the transactions effected by this Section 1.
2. ASSIGNMENT. The rights of Capstar under this letter agreement
may be assigned or transferred in whole or in part by Capstar, without any
consent or other action on the part of Benjamin, to any one or more affiliates
of Capstar. All references herein to "Capstar" will include without limitation
each such assignee or transferee.
3. PURCHASE OPTION. Capstar and Benjamin mutually agree that the
provisions of Article 6 of the Stockholders Agreement shall be held in abeyance
until such time as Benjamin becomes a director, officer or employee of Capstar
as of the Closing.
<PAGE> 3
4. GOVERNING LAW; JURISDICTION. THIS LETTER AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THIS STATE OF TEXAS,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ William S. Banowsky, Jr.
-----------------------------------
William S. Banowsky, Jr.
Executive Vice President
Accepted and agreed to in all respects
as of the 20th day of February, 1997
/s/ David J. Benjamin, III
- --------------------------------------
David J. Benjamin, III
<PAGE> 1
EXHIBIT 10.26
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
February 20, 1997, is entered into by and among Capstar Broadcasting Partners,
Inc., a Delaware corporation (the "Company") and Frank D. Osborn ("Osborn").
In consideration of the premises, mutual covenants and agreements
hereinafter contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions.
"Advice" shall have the meaning provided in Section 2.3 hereof.
"Affiliate, means, with respect to any Person, any Person who, directly
or indirectly, controls, is controlled by or is under common control with that
Person.
"Agreement" means this Registration Rights Agreement, as such from time
to time may be amended.
"Appraised Value" means, as to any Purchasable Securities, the fair
market value of such Purchasable Securities at the date of the Purchase Notice
as determined by an Independent Financial Expert selected by the Company within
10 days after the giving of a Purchase Notice; provided, however, if Osborn
shall object to such determination within 10 days after being notified thereof
by the Company, Osborn shall within 10 days of such notice select an
Independent Financial Expert to determine the fair market value of such
Purchasable Securities on behalf of Osborn. In the event that the Independent
Financial Experts selected by each of the Company and Osborn cannot agree on
the fair market value of such Purchasable Securities, then the two Independent
Financial Experts shall promptly mutually select a third Independent Financial
Expert to determine the fair market value of such Purchasable Securities, and
the value selected by such third firm shall be binding on all the parties
hereto. Each such Independent Financial Expert may use any customary method of
determining fair market value. The cost of the Independent Financial Expert
selected by the Company shall be paid by the Company, the cost of the
Independent Financial Expert, if any, selected by Osborne shall be paid by
Osborn, and the cost of the Independent Financial Expert, if any, mutually
selected by the two Independent Financial Experts appointed by each of the
Company and Osborn shall be paid one-half by the Company and one-half by
Osborn. In determining the Appraised Value, the Independent Financial Expert
may assume that the Common Stock of the Company is publicly traded and that the
Common Stock constituting the Purchasable Securities is freely tradable and no
minority position discount shall be made.
"Business Day" means a day that is not a Legal Holiday.
"Capstar L.P." means Capstar Broadcasting Partners, L.P., a Delaware
limited partnership.
"Change of Control" means the first to occur of the following events:
(i) any sale, lease, exchange, or other transfer (in one transaction or series
of related transactions) of all or substantially all of the assets
<PAGE> 2
of the Company to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group"), other than one or more members
of the HMC Group, (ii) a majority of the Board of Directors of the Company
shall consist of Persons who are not Continuing Directors; or (iii) the
acquisition by any Person or Group (other than one or more members of the HMC
Group) of the power, directly or indirectly, to vote or direct the voting of
securities having more than 50% of the ordinary voting power for the election
of directors of the Company.
"Common Stock" means shares of the Common Stock, $0.01 par value per
share, of the Company, and any capital stock into which such Common Stock
thereafter may be changed.
"Common Stock Equivalents" means without duplication with any other
Common Stock or Common Stock Equivalents, any rights, warrants, options,
convertible securities or indebtedness, exchangeable securities or
indebtedness, or other rights, exercisable for or convertible or exchangeable
into, directly or indirectly, Common Stock of the Company and securities
convertible or exchangeable into Common Stock of the Company, whether at the
time of issuance or upon the passage of time or the occurrence of some future
event.
"Company" shall have the meaning set forth in the introductory paragraph
hereof.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the Board of Directors of the Company as of the date of
this Agreement, (ii) was nominated for election or elected to the Board of
Directors of the Company with the affirmative vote of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election, or (iii) is a member of the HMC Group.
"Demand Registration" shall have the meaning set forth in Section 2.1.1
hereof.
"Demand Request" shall have the meaning set forth in Section 2.1.1.
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"HMC Group" means HMTF and its Affiliates (including Capstar L.P.) and
its and their respective officers, directors, and employees (and members of
their respective families and trusts for the primary benefit of such family
members).
"HMTF" means Hicks, Muse, Tate & Furst Incorporated, a Texas
corporation.
"Independent Financial Expert" means any investment bank which is
registered as a broker dealer under the Exchange Act and has aggregate net
capital of at least $50 million.
"Inspectors" shall have the meaning provided in Section 2.2 hereof.
"Legal Holiday" shall have the meaning provided in Section 4.2 hereof.
"NASD" shall have the meaning provided in Section 2.2 hereof.
"Option Shares" means at any time shares of Common Stock issuable to
Osborn under any Common Stock Equivalents then owned by Osborn.
-2-
<PAGE> 3
"Person" or "person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Purchasable Securities" shall have the meaning in Section 3.1.1.
"Purchase Option" shall have the meaning provided in Section 3.1.1.
"Purchase Notice" shall have the meaning in Section 3.1.1.
"Qualified IPO" means a firm commitment underwritten public offering of
Common Stock for cash pursuant to a registration statement under the Securities
Act; provided that the term "Qualified IPO" shall not include a public offering
made pursuant to a Demand Request.
"Records" shall have the meaning provided in Section 2.2 hereof.
"Registrable Shares" means at any time (i) the Common Stock of the
Company then owned by Osborn, whether owned on the date hereof or acquired
hereafter and (ii) the Option Shares; provided, however, that Registrable
Shares shall not include any shares that have been assigned or transferred by
Osborn to any other Person.
"Registration Expenses" shall have the meaning provided in Section 2.4
hereof.
"Required Filing Date, shall have the meaning provided in Section
2.1.1(b) hereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Seller Affiliates" shall have the meaning provided in Section 2.5.1
hereof.
"Suspension Notice" shall have the meaning provided in Section 2.3
hereof.
Section 1.2 Rules of Construction. Unless the context otherwise
requires
(1) a term has the meaning assigned to it;
(2) "or" is not exclusive;
(3) words in the singular include the plural, and words in the
plural include the singular;
(4) provisions apply to successive events and transactions;
and
(5) "herein," "thereof" and other words of similar import
refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision.
-3-
<PAGE> 4
ARTICLE 2
REGISTRATION RIGHTS
Section 2.1 Demand Registration.
2.1.1 Request for Registration.
(a) At any time within 30 days after the tenth anniversary of
the date of this Agreement, Osborn may request the Company, in writing
(a "Demand Request"), to effect the registration under the Securities
Act of all or part of his Registrable Shares (a "Demand Registration");
provided that the right of Osborn to make a Demand Request shall
terminate upon the first to occur of a Qualified IPO, or a Change of
Control.
(b) The Demand Request shall specify the number of Registrable
Shares proposed to be sold. Subject to Section 2.1.5 and Section 2.1.6,
the Company shall file the Demand Registration within 90 days after
receiving a Demand Request (the "Required Filing Date") and shall use
all commercially reasonable efforts to cause the same to be declared
effective by the SEC as promptly as practicable after such filing;
provided, that the Company need effect only one Demand Registration.
2.1.2 Effective Registration and Expenses. A registration will not
count as a Demand Registration until it has become effective (unless Osborn has
withdrawn all of his Registrable Shares and the Company has performed its
obligations hereunder in all material respects, in which case such demand will
count as a Demand Registration); provided, that if, after it has become
effective, an offering of Registrable Shares pursuant to a registration is
interfered with by any stop order, injunction, or other order or requirement of
the SEC or other governmental agency or court, such registration will be deemed
not to have been effected and will not count as a Demand Registration and
Osborn shall thereafter have the right at any time within 30 days after such
interference shall have been resolved to make a second Demand Request for a
Demand Registration.
2.1.3 Selection of Underwriters. The offering of Registrable Shares
pursuant to a Demand Registration shall be in the form of a "firm commitment"
underwritten offering. Osborn shall select the investment banking firm or
firms to manage the underwritten offering; provided that such selection shall
be subject to the consent of the Company, which consent shall not be
unreasonably withheld.
2.1.4 Priority on Demand Registrations. No securities to be sold for
the account of any Person (including the Company) other than Osborn shall be
included in a Demand Registration unless the managing underwriter or
underwriters shall advise the Company or Osborn in writing that the inclusion
of such securities will not materially and adversely affect the price or
success of the Demand Registration.
2.1.5 Deferral of Filing. The Company may defer the filing (but not
the preparation) of a registration statement required by Section 2.1 until a
date not later than 180 days after the Required Filing Date (or, if longer, 180
days after the effective date of the registration statement contemplated by
clause (ii) below) if (i) at the time the Company receives the Demand Request,
the Company or any of its Subsidiaries are engaged in confidential negotiations
or other confidential business activities, disclosure of which would be
required in such registration statement (but would not be required if such
registration statement were not filed), and the Board of Directors of the
Company determines in good faith that such disclosure would be materially
detrimental to the Company and its stockholders or would have a material
adverse effect on any
-4-
<PAGE> 5
such confidential negotiations or other confidential business activities, or
(ii) prior to receiving the Demand Request, the Board of Directors had
determined to effect a registered underwritten public offering of the Company's
securities for the Company's account and the Company had taken substantial
steps (including, but not limited to, selecting a managing underwriter for such
offering) and is proceeding with reasonable diligence to effect such offering.
A deferral of the filing of a registration statement pursuant to this Section
2.1.5 shall be lifted, and the requested registration statement shall be filed
forthwith, if, in the case of a deferral pursuant to clause (i) of the
preceding sentence, the negotiations or other activities are disclosed or
terminated, or, in the case of a deferral pursuant to clause (ii) of the
preceding sentence, the proposed registration for the Company's account is
abandoned. In order to defer the filing of a registration statement pursuant
to this Section 2.1.5, the Company shall promptly (but in any event within 10
days), upon determining to seek such deferral, deliver to Osborn a certificate
signed by an executive officer of the Company stating that the Company is
deferring such filing pursuant to this Section 2.1.5 and a general statement of
the reason for such deferral and an approximation of the anticipated delay.
The Company may defer the filing of the registration statement pursuant to this
Section 2.1.5 only once.
Section 2.1.6 No Obligation to Proceed. Notwithstanding any provision
contained herein to the contrary, the Company's obligations hereunder to effect
a Demand Registration pursuant to a Demand Request made hereunder shall
terminate in full upon the giving of a Purchase Notice pursuant to Section 3.1
or upon the Company effecting a Qualified IPO after the receipt of the Demand
Request within the deferral period as contemplated by clause (ii) of Section
2.1.5.
2.2 Registration Procedures. Whenever Osborn has requested that any
Registrable Shares be registered pursuant to this Agreement, the Company will
use its commercially reasonable efforts to effect the registration and the sale
of such Registrable Shares in accordance with the intended method of
disposition thereof, and pursuant thereto the Company will as expeditiously as
possible:
(i) prepare and file with the SEC a registration statement on any
appropriate form under the Securities Act with respect to such Registrable
Shares and use its commercially reasonable efforts to cause such registration
statement to become effective;
(ii) prepare and file with the SEC such amendments, post-effective
amendments, and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 180 days (or such lesser
period as is necessary for the underwriters in an underwritten offering to sell
unsold allotments) and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(iii) furnish to the seller of Registrable Shares and the underwriters
of the securities being registered such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus), any
documents incorporated by reference therein and such other documents as the
seller or underwriters may reasonably request in order to facilitate the
disposition of the Registrable Shares owned by the seller or the sale of such
securities by such underwriters (it being understood that, subject to Section
2.3 and the requirements of the Securities Act and applicable State securities
laws, the Company consents to the use of the prospectus and any amendment or
supplement thereto by each seller and the underwriters in connection with the
offering and sale of the Registrable Shares covered by the registration
statement of which such prospectus, amendment or supplement is a part);
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<PAGE> 6
(iv) use its commercially reasonable efforts to register or qualify
such Registrable Shares under such other securities or blue sky laws of such
jurisdictions as the managing underwriter reasonably requests; use its
commercially reasonable efforts to keep each such registration or qualification
(or exemption therefrom) effective during the period in which such registration
statement is required to be kept effective; and do any and all other acts and
things which may be reasonably necessary or advisable to enable the seller to
consummate the disposition of the Registrable Shares owned by the seller in
such jurisdictions (provided, however, that the Company will not be required to
(A) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph or (B) consent to
general service of process in any such jurisdiction);
(v) promptly notify the seller and each underwriter and (if requested
by any such Person) confirm such notice in writing (A) when a prospectus or any
prospectus supplement or post-effective amendment has been filed and, with
respect to a registration statement or any post-effective amendment, when the
same has become effective, (B) of the issuance by any state securities or other
regulatory authority of any order suspending the qualification or exemption
from qualification of any of the Registrable Shares under state securities or
"blue sky" laws or the initiation of any proceedings for that purpose, and (C)
of the happening of any event which makes any statement made in a registration
statement or related prospectus untrue or which requires the making of any
changes in such registration statement, prospectus or documents so that they
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and, as promptly as practicable thereafter, prepare and
file with the SEC and furnish a supplement or amendment to such prospectus so
that, as thereafter deliverable to the purchasers of such Registrable Shares,
such prospectus will not contain any untrue statement of a material fact or
omit a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(vi) make generally available to the Company's securityholders an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act no later than 30 days after the end of the 12-month period beginning with
the first day of the Company's first fiscal quarter commencing after the
effective date of a registration statement, which earnings statement shall
cover said 12-month period, and which requirement will be deemed to be
satisfied if the Company timely files complete and accurate information on
Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with
Rule 158 under the Securities Act;
(vii) if requested by the managing underwriter or the seller promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or the seller reasonably requests to be
included therein, including, without limitation, with respect to the
Registrable Shares being sold by the seller, the purchase price being paid
therefor by the underwriters and with respect to any other terms of the
underwritten offering of the Registrable Shares to be sold in such offering,
and promptly make all required filings of such prospectus supplement or post-
effective amendment;
(viii) as promptly as practicable after filing with the SEC of any
document which is incorporated by reference into a registration statement (in
the form in which it was incorporated), deliver a copy of each such document to
the seller;
(ix) cooperate with the seller and the managing underwriter to
facilitate the timely preparation and delivery of certificates (which shall not
bear any restrictive legends unless required under applicable law) representing
securities sold under any registration statement, and enable such securities to
be in such denominations and registered in such names as the managing
underwriter or the seller may request and keep
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<PAGE> 7
available and make available to the Company's transfer agent prior to the
effectiveness of such registration statement a supply of such certificates;
(x) promptly make available for inspection by the seller, any
underwriter participating in any disposition pursuant to any registration
statement, and any attorney, accountant or other agent or representative
retained by any such seller or underwriter (collectively, the "Inspectors"),
all financial and other records, pertinent corporate documents and properties
of the Company (collectively, the "Records"), as shall be reasonably necessary
to enable them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information requested
by any such Inspector in connection with such registration statement; provided,
that, unless the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, the Company shall not be required to provide any
information under this subparagraph (x) if (A) the Company believes, after
consultation with counsel for the Company, that to do so would cause the
Company to forfeit an attorney-client privilege that was applicable to such
information or (B) if either (1) the Company has requested and been granted
from the SEC confidential treatment of such information contained in any filing
with the SEC or documents provided supplementally or otherwise or (2) the
Company reasonably determines in good faith that such Records are confidential
and so notifies the Inspectors in writing unless prior to furnishing any such
information with respect to (A) or (B) such holder of Registrable Securities
requesting such information agrees to enter into a confidentiality agreement in
customary form and subject to customary exceptions; and provided, further that
each holder of Registrable Securities agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company at its expense, to undertake
appropriate action and to prevent disclosure of the Records deemed
confidential;
(xi) furnish to the underwriter a signed counterpart of (A) an opinion
or opinions of counsel to the Company, and (B) a comfort letter or comfort
letters from the Company's independent public accountants, each in customary
form and covering such matters of the type customarily covered by opinions or
comfort letters, as the case may be, as the managing underwriter reasonably
requests;
(xii) cause the Registrable Shares included in any registration
statement to be (A) listed on each securities exchange, if any, on which any
securities issued by the Company are then listed, or (B) authorized to be
quoted and/or listed (to the extent applicable) on the National Association of
Securities Dealers, Inc. Automated Quotation ("NASDAQ") or the NASDAQ National
Market System if the Registrable Shares so qualify;
(xiii) provide a CUSIP number for the Registrable Shares included in any
registration statement not later than the effective date of such registration
statement;
(xiv) cooperate with the seller and each underwriter participating in
the disposition of such Registrable Shares and their respective counsel in
connection with any filings required to be made with the National Association
of Securities Dealers, Inc. ("NASD");
(xv) during the period when the prospectus is required to be delivered
under the Securities Act, promptly file all documents required to be filed with
the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act;
(xvi) notify the seller of Registrable Shares promptly of any request
by the SEC for the amending or supplementing of such registration statement or
prospectus or for additional information;
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<PAGE> 8
(xvii) prepare and file with the SEC promptly any amendments or
supplements to such registration statement or prospectus which, in the opinion
of counsel for the Company or the managing underwriter, is required in
connection with the distribution of the Registrable Shares;
(xviii) enter into such agreements (including underwriting agreements
in the managing underwriter's customary form) as are customary in connection
with an underwritten registration; and
(xix) advise the seller of such Registrable Shares, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for such purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued.
2.3 Suspension of Dispositions. Upon receipt of any notice (a
"Suspension Notice") from the Company of the happening of any event of the kind
described in Section 2.2(v)(C), Osborn will forthwith discontinue disposition
of Registrable Shares until such Osborn's receipt of the copies of the
supplemented or amended prospectus, or until he is advised in writing (the
"Advice") by the Company that the use of the prospectus may be resumed, and has
received copies of any additional or supplemental filings which are
incorporated by reference in the prospectus, and, if so directed by the
Company, Osborn will deliver to the Company all copies, other than permanent
file copies then in Osborn's possession, of the prospectus covering such
Registrable Shares current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of registration statements set forth in Section 2.2(ii) hereof
shall be extended by the number of days during the period from and including
the date of the giving of the Suspension Notice to and including the date when
each seller of Registrable Shares covered by such registration statement shall
have received the copies of the supplemented or amended prospectus or the
Advice. The Company shall use its commercially reasonable efforts and take
such actions as are reasonably necessary to render the Advice as promptly as
practicable.
2.4 Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Article 2 including, without limitation,
all registration and filing fees, all fees and expenses associated with filings
required to be made with the NASD (including, if applicable, the fees and
expenses of any "qualified independent underwriter" as such term is defined in
Schedule E of the By-Laws of the NASD, and of its counsel), as may be required
by the rules and regulations of the NASD, fees and expenses of compliance with
securities or "blue sky" laws (including reasonable fees and disbursements of
counsel in connection with "blue sky" qualifications of the Registrable
Shares), rating agency fees, printing expenses (including expenses of printing
certificates for the Registrable Shares in a form eligible for deposit with
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by Osborn), messenger and delivery expenses, the
Company's internal expenses (including without limitation all salaries and
expenses of its officers and employees performing legal or accounting duties),
the fees and expenses incurred in connection with any listing of the
Registrable Shares, fees and expenses of counsel for the Company and its
independent certified public accountants (including the expenses of any special
audit or "cold comfort" letters required by or incident to such performance),
securities acts liability insurance (if the Company elects to obtain such
insurance), the fees and expenses of any special experts retained by the
Company in connection with such registration, and the reasonable fees and
expenses of one firm of counsel for Osborn (all such expenses being herein
called "Registration Expenses") will be borne by the Company whether or not any
registration statement becomes effective; provided that, except as expressed
otherwise provided above, in no event shall Registration Expenses include any
underwriting discounts, commissions, or fees attributable to the sale of the
Registrable Shares or any counsel, accountants, or other persons retained or
employed by Osborn.
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<PAGE> 9
2.5 Indemnification.
2.5.1 The Company agrees to indemnify and reimburse, to the fullest
extent permitted by law, Osborn as a seller of Registrable Shares, and each of
his employees, advisors, agents and representatives and any agent or investment
advisor thereof (collectively, the "Seller Affiliates") (A) against any and all
losses, claims, damages, liabilities, and expenses, joint or several
(including, without limitation, attorneys' fees and disbursements except as
limited by 2.5.3) based upon, arising out of, related to or resulting from any
untrue or alleged untrue statement of a material fact contained in any
registration statement, prospectus, or preliminary prospectus or any amendment
thereof or supplement thereto, or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (B) against any and all loss, liability, claim, damage,
and expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon, arising out of, related to or resulting from any such
untrue statement or omission or alleged untrue statement or omission, and (C)
against any and all costs and expenses (including reasonable fees and
disbursements of counsel) as may be reasonably incurred in investigating,
preparing, or defending against any litigation, or investigation or proceeding
by any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon, arising out of, related to or resulting from any such
untrue statement or omission or alleged untrue statement or omission, to the
extent that any such expense or cost is not paid under subparagraph (A) or (B)
above; except insofar as the same are made in reliance upon and in strict
conformity with information furnished in writing to the Company by Osborn or
any Seller Affiliate for use therein or arise from Osborn's or any Seller
Affiliate's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished Osborn or Seller Affiliate with a sufficient number of copies of the
same. The reimbursements required by this Section 2.5.1 will be made by
periodic payments during the course of the investigation or defense, as and
when bills are received or expenses incurred.
2.5.2 In connection with any registration statement of Registrable
Shares, Osborn will furnish to the Company in writing such information and
affidavits as the Company reasonably requests for use in connection with any
such registration statement or prospectus and, to the fullest extent permitted
by law, Osborn will indemnify the Company and its directors and officers and
each Person who controls the Company (within the meaning of the Securities Act
or the Exchange Act) against any and all losses, claims, damages, liabilities,
and expenses (including, without limitation, reasonable attorneys' fees and
disbursements except as limited by Section 2.5.3) resulting from any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement, prospectus, or any preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission is
contained in any information or affidavit so furnished in writing by Osborn or
any of his Seller Affiliates specifically for inclusion in the registration
statement; provided that the liability of Osborn will be limited to, the net
amount received by Osborn from the sale of Registrable Shares pursuant to such
registration statement; provided, however, that Osborn shall not be liable in
any such case to the extent that prior to the filing of any such registration
statement or prospectus or amendment thereof or supplement thereto, Osborn has
furnished in writing to the Company information expressly for use in such
registration statement or prospectus or any amendment thereof or supplement
thereto which corrected or made not misleading information previously furnished
to the Company.
2.5.3 Any Person entitled to indemnification hereunder will (A) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to
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<PAGE> 10
give such notice shall not limit the rights of such Person) and (B) unless in
such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided, however, that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless (X)
the indemnifying party has agreed to pay such fees or expenses, or (Y) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person. If such defense is not
assumed by the indemnifying party as permitted hereunder, the indemnifying
party will not be subject to any liability for any settlement made by the
indemnified party without its consent (but such consent will not be
unreasonably withheld). If such defense is assumed by the indemnifying party
pursuant to the provisions hereof, such indemnifying party shall not settle or
otherwise compromise the applicable claim unless (1) such settlement or
compromise contains a full and unconditional release of the indemnified party
or (2) the indemnified party otherwise consents in writing. An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party, a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the reasonable fees and disbursements of such
additional counsel or counsels.
2.5.4 Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 2.5.1 or Section 2.5.2 are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages, liabilities, or expenses (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, liabilities, or expenses (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and the indemnified party in connection with the actions
which resulted in the losses, claims, damages, liabilities or expenses as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, 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 such indemnifying party or indemnified party, and
the parties, relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this
Section 2.5.4 were determined by pro rata allocation (even if Osborn or any
underwriters or all of them were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the equitable
considerations referred to in this Section 2.5.4. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages, liabilities,
or expenses (or actions in respect thereof) referred to above shall be deemed
to include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or, except as provided in
Section 2.5.3, defending any such action or claim. Notwithstanding the
provisions of this Section 2.5.4, Osborn shall not be required to contribute an
amount greater than the dollar amount by which the proceeds received by Osborn
with respect to the sale of any Registrable Shares exceeds the amount of
damages which Osborn has otherwise been required to pay by reason of such
statement or 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.
If indemnification is available under this Section 2.5, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 2.5.1 and Section 2.5.2 without regard to the relative
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<PAGE> 11
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 2.5.4.
2.5.5 The indemnification and contribution provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director, or
controlling Person of such indemnified party and will survive the transfer of
the Registrable Shares.
ARTICLE 3
PURCHASE OPTION
Section 3.1. Purchase Option.
3.1.1 Purchase Option. After the Company's receipt of a Demand
Request, the Company shall have the option (the "Purchase Option") to purchase,
and if the Purchase Option is exercised, Osborn (or the executor or
administrator of Osborn's estate, in the event of his death, or Osborn's legal
representative in the event of his incapacity) (hereinafter, collectively with
Osborn, the "Grantor") shall sell to the Company, (or as provided in Section
3.1.4 an assignee of the Company) all of the shares of Common Stock and Common
Stock Equivalents held by the Grantor (such shares of Common Stock and Common
Stock Equivalents collectively being referred to as the "Purchasable
Securities"), subject to the Company's (or, if applicable, its assignee)
compliance with the conditions hereinafter set forth. The Company (acting for
itself or, if applicable, its assignee) shall give notice (the "Purchase
Notice") in writing to the Grantor of the exercise of the Purchase Option
within 30 days after the Company' receipt of a Demand Request. If no Purchase
Notice is given within the time limit specified above, the Purchase Option
shall terminate.
3.1.2 Closing. Unless otherwise agreed by the Grantor and the Company,
(acting for itself or, if applicable, its assignee) the closing of an exercise
of the Purchase Option will take place at the offices of the Company in Dallas,
Texas, on the fifth Business Day after the purchase price has been established
as contemplated by Section 3.1.3. At the closing, the Company (of, if
applicable, its assignee) will pay the purchase price to the Grantor in cash
(by certified or cashier's check) upon the Grantor's delivering to the Company
(or, if applicable, its assignee) valid certificates or agreements evidencing
all Purchasable Securities being purchased pursuant to the exercise of the
Purchase Option. Certificates or agreements representing the Purchasable
Securities will be duly endorsed (with signature guaranteed) for transfer to
the Company (or, if applicable, its assignee). Upon delivery of such
certificates or agreements to the Company if applicable, its assignee) , the
Grantor will be deemed to represent and warrant to the Company (or, if
applicable, its assignee) that the transferred Purchasable Securities are owned
by the Grantor free and clear of all liens, adverse claims, and other
encumbrances other than those arising under any Stockholders Agreement or
similar agreement between Osborn and the Company. The occurrence of the
closing shall be conditioned upon such representation and warranty being true
and correct as of the closing date. The Company (or, if applicable, its
assignee) and the Grantor will promptly perform, whether before or after any
Purchase Option closing, such additional acts (including without limitation
executing and delivering additional documents) as are reasonably required by
either such party to effect more fully the transactions contemplated hereby.
3.1.3 Exercise Price. Unless the Company (or, if applicable, its
assignee) and Grantor otherwise agree, the purchase price for the Purchasable
Securities will equal the Appraised Value thereof.
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<PAGE> 12
3.1.4 Assignment of Purchase Option. The Purchase Option may be
assigned or transferred in whole or in part by the Company to any one or more
members of the HMC Group without any consent or other action on the part of any
other party hereto.
ARTICLE 4
MISCELLANEOUS
Section 4.1 Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telex, by telecopier or registered or certified mail,
postage prepaid, return receipt requested, addressed as follows (or at such
other address as may be substituted by notice given as herein provided):
If to the Company:
Capstar Broadcasting Partners, Inc.
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: President
Copies to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Michael D. Wortley
If to Osborn:
Frank D. Osborn
174 Hamlock Hill Road
New Canaan, Connecticut
Any notice or communication hereunder shall be deemed to have been given
or made as of the date so delivered if personally delivered; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and five
calendar days after mailing if sent by registered or certified mail (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
If a notice or communication is mailed in the manner provided above, it
is duly given, whether or not the addressee receives it.
Section 4.2 Legal Holidays. A "Legal Holiday" used with respect to a
particular place of payment is a Saturday, a Sunday or a day on which banking
institutions at such place are not required to be open. If a payment date is a
Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest on the amount of
such payment shall accrue for the intervening period.
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<PAGE> 13
Section 4.3 Governing Law; Jurisdiction. THIS STOCKHOLDERS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
Section 4.4 Successors and Assigns of Osborn. The provisions of this
Agreement that are for Osborn's benefit are personal in nature and shall not be
assignable but may be enforced by the executor or administrator of Osborn's
estate, in the event of his death or Osborn's legal representative in the event
of his incapacity. Except as otherwise provided in this Section 4.4, this
Agreement shall be binding upon the parties hereto and their respective
successors and assigns.
Section 4.5 Duplicate Originals. All parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of
them together shall represent the same agreement.
Section 4.6 Severability. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable in any respect for any reason,
the validity, legality and enforceability of any such provision in every other
respect and the remaining provisions shall not in any way be affected or
impaired thereby.
Section 4.7 No Waivers; Amendments.
4.7.1 No failure or delay on the part of the Company or Osborne in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
Osborn at law or in equity or otherwise.
4.7.2 Any provision of this Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by the Company
and Osborn.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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SIGNATURES TO AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the date first written above.
CAPSTAR BROADCASTING PARTNERS,
INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
------------------------------
Name: William S. Banowsky, Jr.
----------------------------
Title: Executive Vice President
---------------------------
/s/ FRANK D. OSBORN
---------------------------------
Frank D. Osborn
<PAGE> 1
EXHIBIT 10.27
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED
FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION
OF COUNSEL IN REASONABLY ACCEPTABLE FORM AND SCOPE REASONABLY SATISFACTORY TO
THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT
REQUIRED UNDER ANY SUCH LAWS. THE OFFERING OF THIS SECURITY HAS NOT BEEN
REVIEWED OR APPROVED BY ANY STATE'S SECURITIES ADMINISTRATOR. THIS WARRANT AND
THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER ARE ALSO SUBJECT TO A
STOCKHOLDERS AGREEMENT, DATED AS OF OCTOBER 16, 1996, BY AND AMONG THE COMPANY
AND THE OTHER PARTIES LISTED THEREIN, COPIES OF WHICH ARE ON FILE WITH THE
COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
Dated: October 16, 1996
WARRANT
To Purchase 9,300,000 Shares of Common Stock
CAPSTAR BROADCASTING PARTNERS, INC.
EXPIRING OCTOBER 16, 2006.
THIS IS TO CERTIFY THAT, for value received, R. Steven Hicks, or
registered assigns as a holder of this Warrant (the "Holder") is entitled to
purchase from Capstar Broadcasting Partners, Inc., a Delaware corporation (the
"Company") at any time or from time to time prior to 5:00 p.m., Dallas, Texas
time, October 16, 2006 at the place where the Warrant Agency (as hereinafter
defined) is located, at the Exercise Price (as hereinafter defined) 7,440,000
shares of common stock, par value $.01 per share, (the "Common Stock") of the
Company (the "A Warrant") and at the Exercise Price 1,860,000 shares of the
Common Stock (the "B Warrant", and, collectively with the A Warrant, the
"Warrant"), all subject to adjustment and upon the terms and conditions as
hereinafter provided; provided, however, in no event may the B Warrant be
exercised by the Holder prior to the occurrence of a Triggering Event (as
hereinafter defined). The Holder shall designate at the time of exercise
whether the Holder is exercising an A Warrant or a B Warrant and the number of
shares of Common Stock to be purchased respectively thereunder.
Certain terms used in this Warrant are defined in Article V.
<PAGE> 2
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise. To exercise this Warrant in whole or in part,
the Holder shall deliver to the Company, at the Warrant Agency, (a) this
Warrant, (b) a written notice, in substantially the form of the Subscription
Notice attached hereto as Annex A, of such Holder's election to exercise this
Warrant, which notice shall specify (i) whether the Holder is exercising an A
Warrant and/or a B Warrant, (ii) the number of shares of Common Stock to be
purchased under an A Warrant and/or a B Warrant, as applicable, (iii) the
denominations of the share certificate or certificates desired, and (iv) the
name or names in which such certificates are to the registered, (c) if the
Common Stock to be received upon the exercise of this Warrant has not been
registered under the Securities Act, a written certification in substantially
the form of the Certification attached hereto as Annex B, and (d) payment of
the Exercise Price with respect to such shares. Such payment may be made, at
the option of the Holder, by cash, money order, certified or bank cashier's
check or wire transfer.
The Company shall, as promptly as practicable and in any event within
five Business Days thereafter, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in said
notice. The share certificate or certificates so delivered shall be in such
denominations as may be specified in such notice or, if such notice shall not
specify denominations, shall be in the amount of the number of shares of Common
Stock for which the Warrant is being exercised, and shall be issued in the name
of the Holder or such other name or names as shall be designated in such
notice. Such certificate or certificates shall be deemed to have been issued,
and such Holder or any other Person so designated to be named therein shall be
deemed for all purposes to have become a holder of record of such shares, as of
the date the aforementioned notice is received by the Company. If this Warrant
shall have been exercised only in part, the Company shall, at the time of
delivery of the certificate or certificates, deliver to the Holder a new
Warrant evidencing the rights to purchase the remaining shares of Common Stock
called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant, or, at the request of the Holder, appropriate
notation may be made on this Warrant which shall then be returned to the
Holder. The Company shall pay all expenses, taxes (if any) and other charges
payable in connection with the preparation, issuance and delivery of share
certificates and new Warrant, except that, if share certificates or new Warrant
shall be registered in a name or names other than the name of the Holder, funds
sufficient to pay all transfer taxes payable as a result of such transfer shall
be paid by the Holder at the time of delivering the aforementioned notice of
exercise or promptly upon receipt of a written request of the Company for
payment.
1.2 Shares To Be Fully Paid and Nonassessable. All shares of Common
Stock issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable and free from all preemptive rights of any stockholder,
and from all taxes.
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1.3 No Fractional Shares To Be Issued. The Company shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the Company
shall pay to the Holder, in cash, an amount equal to such fraction of the Fair
Market Value per share of Common Stock of the Company on the Business Day
immediately prior to the date of such exercise.
1.4 Share Legend. Each certificate for shares of Common Stock issued
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of
1933, as amended, or under the securities laws of any state or other
jurisdiction and may not be sold, offered for sale or otherwise
transferred unless registered or qualified under said Act and applicable
state securities laws or unless the Company receives an opinion of
counsel in reasonably acceptable form and scope reasonably satisfactory
to the Company that registration, qualification or other such actions
are not required under any such laws. The offering of this security has
not been reviewed or approved by any state securities administrator.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act) shall also bear such legend unless, in the opinion of
counsel selected by the holder of such certificate and reasonably acceptable to
the Company, the securities represented thereby are no longer subject to
restrictions on resale under the Securities Act.
1.5 Reservation; Authorization. The Company has reserved and will keep
available for issuance upon exercise of this Warrant the total number of shares
of Common Stock deliverable upon exercise of this Warrant from time to time
outstanding. The issuance of such shares has been duly and validly authorized
and, when issued and sold in accordance with this Warrant, such shares will be
duly and validly issued, fully paid and nonassessable.
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ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
2.1 Warrant Agency. At any time after a public offering of Common
Stock registered under the Securities Act, the Company may promptly appoint and
thereafter maintain, at its own expense, an agency in New York, New York, which
agency may be the Company's then existing transfer agent (the "Warrant
Agency"), for certain purposes specified herein, and shall give prompt notice
of such appointment (and appointment of any successor Warrant Agency) to the
Holder. Until an independent Warrant Agency is so appointed, the Company shall
perform the obligations of the Warrant Agency provided herein at its address as
specified on the signature page hereto or such other address as the Company
shall specify by notice to the Holder.
2.2 Ownership of Warrant. The Company may deem and treat the Person in
whose name this Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any
Person other than the Warrant Agency) for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant for
registration of transfer as provided in this Article II.
2.3 Transfer of Warrant. The Company agrees to maintain at the Warrant
Agency books for the registration of transfers of the Warrants, and transfer of
this Warrant and all rights hereunder shall be registered, in whole or in part,
on such books, upon surrender of this Warrant at the Warrant Agency, together
with a written assignment of this Warrant duly executed by the Holder or his
duly authorized agent or attorney, with (unless the Holder is the original
Holder or another institutional investor) signatures guaranteed by a bank or
trust company or a broker or dealer registered with the NASD, and funds
sufficient to pay any transfer taxes payable upon such transfer. Upon
surrender the Company shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denominations specified in the
instrument of assignment, and this Warrant shall promptly be canceled. The
Warrant Agency shall not be required to register any transfers if the Holder
fails to furnish to the Company, after a request therefor, an opinion of
counsel (who may be an employee of such Holder) reasonably satisfactory to the
Company that such transfer is exempt from the registration requirements of the
Securities Act and applicable blue sky laws.
2.4 Division of Warrant. This Warrant may be divided upon surrender
hereof to the Warrant Agency, together with a written notice specifying the
names and denominations in which the new Warrants are to be issued, signed by
the Holder. Subject to compliance with Section 2.3 as to any transfer which
may be involved in the division, the Company shall execute and deliver new
Warrants in exchange for the Warrant or Warrants to be divided in accordance
with such notice.
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2.5 Loss, Theft, Destruction or Mutilation of Warrants. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and representing the right to purchase the same aggregate number of shares of
Common Stock as provided for in such lost, stolen, destroyed or mutilated
Warrant.
2.6 Expenses of Delivery of Warrants. The Company shall pay all
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of this Warrant and the
Common Stock issuable hereunder.
ARTICLE III
CERTAIN RIGHTS
3.1 Stockholders Agreement. This Warrant and the Common Stock issuable
upon exercise of this Warrant is subject to a Stockholders Agreement dated as
of October 16, 1996, by and among the Company and the other parties listed
therein (the "Stockholders Agreement"). The Company shall keep a copy of the
Stockholders Agreement, and any amendments thereto, at the Warrant Agency and
shall furnish copies thereof to the Holder upon request.
3.2 Notice of Fair Market Value. Upon each determination of Fair
Market Value hereunder (other than a determination relating solely to setting
the value of fractional shares), the Company shall promptly give notice thereof
to the Holder.
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1 Adjustments Generally. The Exercise Price and the number of shares
of Common Stock (or other securities or property) issuable upon exercise of
this warrant shall be subject to adjustment from time to time upon the
occurrence of certain events, as provided in this Article IV.
4.2 Common Stock Reorganization. If the Company shall after the date
of issuance of this Warrant subdivide its outstanding shares of Common Stock
into a greater number of shares or consolidate its outstanding shares of Common
Stock into a smaller number of shares (any such event being called a "Common
Stock Reorganization"), then (a) the Exercise Price shall each be adjusted,
effective immediately after the record date at which the holders of shares of
Common Stock are determined for purposes of such Common Stock Reorganization,
to a price determined by
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<PAGE> 6
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date before giving effect to such Common Stock
Reorganization and the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such Common Stock
Reorganization, and (b) the number of shares of Common Stock subject to
purchase upon exercise of the A Warrant and the B Warrant shall each be
adjusted, effective at such time, to a number determined by multiplying the
number of shares of Common Stock subject to purchase immediately before such
Common Stock Reorganization by a fraction, the numerator of which shall be the
number of shares outstanding after giving effect to such Common Stock
Reorganization and the denominator of which shall be the number of shares of
Common Stock outstanding immediately before such Common Stock Reorganization.
4.3 Capital Reorganization. If after the date of issuance of this
Warrant there shall be any consolidation or merger to which the Company is a
party, other than a consolidation or a merger in which the Company is a
continuing corporation and which does not result in any reclassification of, or
change (other than a Common Stock Reorganization or a change in par value), in,
outstanding shares of Common Stock, or any sale or conveyance of the property
of the Company as an entirety or substantially as an entirety (any such event
being called a "Capital Reorganization"), then, effective upon the effective
date of such Capital Reorganization, the Holder shall have the right to
purchase, upon exercise of this Warrant, the kind and amount of shares of stock
and other securities and property (including cash) which the Holder would have
owned or have been entitled to receive after such Capital Reorganization if
this Warrant had been exercised immediately prior to such Capital
Reorganization. As a condition to effecting any Capital Reorganization, the
Company or the successor or surviving corporation, as the case may be, shall
execute and deliver to the Holder an agreement as to the Holder's rights in
accordance with this Section 4.2, providing for subsequent adjustments as
nearly equivalent as may be practicable to the adjustments provided for in this
Article IV. The provisions of this Section 4.2 shall similarly apply to
successive Capital Reorganizations.
4.4 Certain Other Events. If any event occurs after the date of
issuance of this Warrant as to which the foregoing provisions of this Article
IV are not strictly applicable or, if strictly applicable, would not, in the
good faith judgment of the Board of Directors of the Company (the "Board"),
fairly protect the purchase rights of the Holder in accordance with the
essential intent and principles of such provisions, then the Board shall make
such adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board, to protect such purchase rights as aforesaid.
4.5 Adjustment Rules. (a) Any adjustments pursuant to this Article IV
shall be made successively whenever an event referred to herein shall occur.
(b) If the Company shall set a record date to determine the holders
of shares of Common Stock for purposes of a Common Stock Reorganization or
Capital Reorganization, and shall legally
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<PAGE> 7
abandon such action prior to effecting such action, then no adjustment shall be
made pursuant to this Article IV in respect of such action.
(c) No adjustment in the amount of shares purchasable upon exercise
of this Warrant or in the Exercise Price shall be made hereunder unless such
adjustment increases or decreases such amount or price by one percent or more,
but any such lesser adjustment shall be carried forward and shall be made at
the time and together with the next subsequent adjustment which together with
any adjustments so carried forward shall serve to adjust such amount or price
by one percent or more.
(d) No adjustment in the Exercise Price shall be made hereunder if
such adjustment would reduce the exercise price to an amount below par value of
the Common Stock, which par value shall initially be $.01 per share of Common
Stock.
4.6 Notice of Adjustment. The Company shall give the Holder reasonable
notice of the record date or effective date, as the case may be, of any action
which requires or might require an adjustment or readjustment pursuant to this
Article IV. Such notice shall describe such event in reasonable detail and
specify the record date or effective date, as the case may be, and, if
determinable, the required adjustment and the computation thereof. If the
required adjustment is not determinable at the time of such notice, the Company
shall give reasonable notice to the Holder of such adjustment and computation
promptly after such adjustment becomes determinable.
ARTICLE V
DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"Affiliate", means, with respect to any Person, any Person who, directly
or indirectly, controls, is controlled by or is under common control with that
Person.
"Business Day" shall mean (a) if any class of Common Stock is listed or
admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which the New York Stock
Exchange is open for business.
"Capital Reorganization" shall have the meaning set forth in Section
4.3.
"Closing Price" with respect to any security on any day means (a) if
such security is listed or admitted for trading on a national securities
exchange, the reported last sales price regular way or, if no such reported
sale occurs on such day, the average of the closing bid and asked prices
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<PAGE> 8
regular way on such day, in each case as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which such class of security is listed or
admitted to trading, or (b) if such security is not listed or admitted to
trading on any national securities exchange, the last quoted sales price, or,
if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market on such day as reported by NASDAQ or any comparable
system then in use or, if not so reported, as reported by any New York Stock
Exchange member firm reasonably selected by the Company for such purpose.
"Common Stock" shall have the meaning set forth in the first paragraph
of this Warrant.
"Common Stock Reorganization" shall have the meaning set forth in
Section 4.2.
"Company" shall have the meaning set forth in the first paragraph of
this Warrant.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as
the same shall be in effect at the time.
"Exercise Price" means a per share price of $1.00 as increased by an
annual rate of interest equal to 8% per year (calculated on the basis of a 365
day year and actual days lapsed) calculated commencing as of October 16, 1996
and as of and including the last calendar day immediately prior to the date of
such exercise of the Warrant.
"Fair Market Value" means the fair market value of the business or
property in question, as determined in good faith by the Board, provided,
however, that the Fair Market Value of any security for which a Closing Price
is available shall be the Market Price of such security.
"Holder" shall have the meaning set forth in the first paragraph of this
Warrant. The term Holders shall refer to all Holders of Warrants.
"HMC Group" means HMTF and its Affiliates and its and their respective
officers, directors, and employees (and members of their respective families
(other than R. Steven Hicks) and trusts for the primary benefit of such family
members).
"HMTF" means Hicks, Muse, Tate & Furst Incorporated.
"Initial Investment" means the 90,000,000 shares of Common Stock held by
Capstar Broadcasting Partners, L.P. on October 16, 1996.
"Initial Investment Amount" means $90,000,000 paid by Capstar
Broadcasting Partners, L.P. to the Company in connection with its Initial
Investment.
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"Market Price", with respect to any security on any day means the
average of the daily Closing-Prices of a share or unit of such security for the
20 consecutive Business Days ending on the most recent Business Day for which a
Closing Price is available; provided, however, that in the event that, in the
case of Common Stock, the Market Price is determined during a period following
the announcement by the Company of any subdivision, combination or
reclassification of Common Stock or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Market Price
shall be appropriately adjusted to reflect the current market price per share
equivalent of Common Stock.
"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Person" or "person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Readily Marketable Securities" means any securities listed or traded on
the New York Stock Exchange, American Stock Exchange, NASDAQ National Market
which, as a matter of law, shall, at the time of acquisition, be freely
saleable in unlimited quantities by the HMC Group to the public, either
pursuant to an effective registration statement under the Securities Act or
without the necessity of such registration or subject to a contractual demand
registration right which is exercisable within a period of one year from the
date of acquisition.
"Securities Act,, shall mean the Securities Act of 1933, as amended, and
any similar or successor federal statute, and the rules and regulations of the
Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
"Shareholders Agreement" shall have the meaning set forth in Section
3.1.
"Target IRR" means that the HMC Group has received distributions from,
and/or consideration realized from the sale, exchange or other disposition to a
non-Affiliate of, the Initial Investment, in the form of cash and/or Readily
Marketable Securities, in such amount as may be necessary to result in an
internal rate of return of at least 30%, calculated in accordance with
generally accepted financial practice, on the Initial Investment Amount
determined commencing as of October 16, 1996.
"Triggering Event" means a date upon which the Target IRR is achieved.
"Warrant Agency" shall have the meaning set forth in Section 2.1.
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"Warrant" shall have the meaning set forth in the first paragraph of
this Warrant. The term Warrants shall refer to the Warrants resulting in any
subdivision of this Warrant.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices, requests, consents and other communications
provided for herein shall be in writing and shall be effective upon delivery in
person, faxed or telecopied, or mailed by certified or registered mail, return
receipt requested, postage pre-paid, to the addresses specified on the
signature pages hereto or, in any case, at such other address or addresses as
shall have been furnished in writing to the Company (in the case of a Holder)
or to the Holder (in the case of the Company) in accordance with the provisions
of this paragraph.
6.2 Waivers; Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and Holders who collectively hold
Warrants to purchase a majority of the Common Stock subject to purchase upon
exercise of such Warrants at the time outstanding.
Any such amendment, modification or waiver effected pursuant to this
Section shall be binding upon the Holders, upon each future Holder thereof and
upon the Company. In the event of any such amendment, modification or waiver
the Company shall give prompt notice thereof to all Holders and, if
appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
No notice or demand on the Company in any case shall entitle the Company
to any other or further notice or demand in similar or other circumstances.
6.3 Governing Law. This Warrant shall be construed in accordance with
and governed by the laws of the State of Delaware.
6.4 Severability. In case any one or more of the provisions contained
in this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality or enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect
of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
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6.5 Section Headings. The sections headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
6.6 No Rights as Stockholder. This Warrant shall not entitle the
Holder to any rights as a stockholder of the Company.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, all as
of the day and year first above written.
CAPSTAR BROADCASTING PARTNERS, INC.
Address: By: /s/ ERIC C. NEUMAN
----------------------------------
Name:
- ------------------------------------ --------------------------------
Title:
- ------------------------------------ -------------------------------
- ------------------------------------
ACCEPTED AND AGREED TO:
/s/ R. STEVEN HICKS
- ------------------------------------
Name: R. Steven Hicks
Address: 600 Congress Avenue
Suite 1270
Austin, TX 78701
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ANNEX A
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
TO CAPSTAR BROADCASTING PARTNERS, L.P.:
The undersigned hereby irrevocably elects to exercise the attached
Warrant and to purchase thereunder, in exercise of the [ ] A Warrant for _____
shares of Common Stock and/or [ ] B Warrant for _________ shares of Common
Stock in payment of an Exercise Price in an amount equal to $__________.
Please issue a certificate or certificates for such shares of Common
Stock in the following name or names and denominations:
If said number of shares shall not be all the shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated: ___________________, ______
-------------------------------------
Note: The above signature should
correspond exactly with the
name on the face of the
attached Warrant or with the
name of the assignee appearing
in the assignment form below.
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ANNEX B
CERTIFICATION
The undersigned hereby certifies to Capstar Broadcasting Partners, L.P.
that he, she or it is:
a. an "accredited investor" as that term is defined in
Regulation D promulgated pursuant to the Securities Act or
any successor regulation, as such provisions may be in
effect on the date hereof, and is an "accredited investor"
pursuant to Section of such provision; and
b. is knowledgeable, sophisticated and experienced in
business and financial matters and in securities similar
to the Common Stock; is aware of the limitation on the
transfer of the Common Stock imposed by applicable
securities laws and any limitations on transfer imposed by
contracts with the Company or others; and has had access
to, or been furnished with, all information about the
Common Stock and the Company deemed necessary to conclude
that he, she or it has the ability to bear the economic
risk of the investment in the Common Stock and to afford
the complete loss of such investment.
IN WITNESS WHEREOF, the undersigned has executed this CERTIFICATION this
_____ day of ________________, _____.
For Individuals: For Entities:
- --------------------------------- ------------------------------
Signature Printed Name of Entity
By:
- --------------------------------- ---------------------------
Printed Name Name:
-------------------------
Title:
------------------------
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<PAGE> 1
EXHIBIT 10.28
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED
FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION
OF COUNSEL IN REASONABLY ACCEPTABLE FORM AND SCOPE REASONABLY SATISFACTORY TO
THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT
REQUIRED UNDER ANY SUCH LAWS. THE OFFERING OF THIS SECURITY HAS NOT BEEN
REVIEWED OR APPROVED BY ANY STATE'S SECURITIES ADMINISTRATOR. THIS WARRANT AND
THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER ARE ALSO SUBJECT TO A
STOCKHOLDERS AGREEMENT, DATED AS OF OCTOBER 16, 1996, BY AND AMONG THE COMPANY
AND THE OTHER PARTIES LISTED THEREIN, COPIES OF WHICH ARE ON FILE WITH THE
COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
Dated: February 20, 1997
WARRANT
To Purchase 2,553,182 Shares of Common Stock
CAPSTAR BROADCASTING PARTNERS, INC.
EXPIRING FEBRUARY 20, 2007
THIS IS TO CERTIFY THAT, for value received, R. Steven Hicks, or
registered assigns as a holder of this Warrant (the "Holder") is entitled to
purchase from Capstar Broadcasting Partners, Inc., a Delaware corporation (the
"Company") at any time or from time to time prior to 5:00 p.m., Dallas, Texas
time, February 20, 2007 at the place where the Warrant Agency (as hereinafter
defined) is located, at the Exercise Price (as hereinafter defined) 2,042,546
shares of common stock, par value $.01 per share, (the "Common Stock") of the
Company (the "A Warrant") and at the Exercise Price 510,636 shares of the
Common Stock (the "B Warrant", and, collectively with the A Warrant, the
"Warrant"), all subject to adjustment and upon the terms and conditions as
hereinafter provided; provided, however, in no event may the B Warrant be
exercised by the Holder prior to the occurrence of a Triggering Event (as
hereinafter defined). The Holder shall designate at the time of exercise
whether the Holder is exercising an A Warrant or a B Warrant and the number of
shares of Common Stock to be purchased respectively thereunder.
Certain terms used in this Warrant are defined in Article V.
<PAGE> 2
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise. To exercise this Warrant in whole or in
part, the Holder shall deliver to the Company, at the Warrant Agency, (a) this
Warrant, (b) a written notice, in substantially the form of the Subscription
Notice attached hereto as Annex A, of such Holder's election to exercise this
Warrant, which notice shall specify (i) whether the Holder is exercising an A
Warrant and/or a B Warrant, (ii) the number of shares of Common Stock to be
purchased under an A Warrant and/or a B Warrant, as applicable, (iii) the
denominations of the share certificate or certificates desired, and (iv) the
name or names in which such certificates are to the registered, (c) if the
Common Stock to be received upon the exercise of this Warrant has not been
registered under the Securities Act, a written certification in substantially
the form of the Certification attached hereto as Annex B, and (d) payment of
the Exercise Price with respect to such shares. Such payment may be made, at
the option of the Holder, by cash, money order, certified or bank cashier's
check or wire transfer.
The Company shall, as promptly as practicable and in any event within
five Business Days thereafter, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in said
notice. The share certificate or certificates so delivered shall be in such
denominations as may be specified in such notice or, if such notice shall not
specify denominations, shall be in the amount of the number of shares of Common
Stock for which the Warrant is being exercised, and shall be issued in the name
of the Holder or such other name or names as shall be designated in such
notice. Such certificate or certificates shall be deemed to have been issued,
and such Holder or any other Person so designated to be named therein shall be
deemed for all purposes to have become a holder of record of such shares, as of
the date the aforementioned notice is received by the Company. If this Warrant
shall have been exercised only in part, the Company shall, at the time of
delivery of the certificate or certificates, deliver to the Holder a new
Warrant evidencing the rights to purchase the remaining shares of Common Stock
called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant, or, at the request of the Holder, appropriate
notation may be made on this Warrant which shall then be returned to the
Holder. The Company shall pay all expenses, taxes (if any) and other charges
payable in connection with the preparation, issuance and delivery of share
certificates and new Warrant, except that, if share certificates or new Warrant
shall be registered in a name or names other than the name of the Holder, funds
sufficient to pay all transfer taxes payable as a result of such transfer shall
be paid by the Holder at the time of delivering the aforementioned notice of
exercise or promptly upon receipt of a written request of the Company for
payment.
1.2 Shares To Be Fully Paid and Nonassessable. All shares of Common
Stock issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable and free from all preemptive rights of any stockholder,
and from all taxes.
1.3 No Fractional Shares To Be Issued. The Company shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, in lieu of such fractional share the Company
shall pay to the Holder, in cash, an amount equal to such fraction of the Fair
Market Value per share of Common Stock of the Company on the Business Day
immediately prior to the date of such exercise.
2
<PAGE> 3
1.4 Share Legend. Each certificate for shares of Common Stock issued
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of
1933, as amended, or under the securities laws of any state or other
jurisdiction and may not be sold, offered for sale or otherwise
transferred unless registered or qualified under said Act and applicable
state securities laws or unless the Company receives an opinion of
counsel in reasonably acceptable form and scope reasonably satisfactory
to the Company that registration, qualification or other such actions
are not required under any such laws. The offering of this security has
not been reviewed or approved by any state securities administrator.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act) shall also bear such legend unless, in the opinion of
counsel selected by the holder of such certificate and reasonably acceptable to
the Company, the securities represented thereby are no longer subject to
restrictions on resale under the Securities Act.
1.5 Reservation; Authorization. The Company has reserved and will
keep available for issuance upon exercise of this Warrant the total number of
shares of Common Stock deliverable upon exercise of this Warrant from time to
time outstanding. The issuance of such shares has been duly and validly
authorized and, when issued and sold in accordance with this Warrant, such
shares will be duly and validly issued, fully paid and nonassessable.
ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
2.1 Warrant Agency. At any time after a public offering of Common
Stock registered under the Securities Act, the Company may promptly appoint and
thereafter maintain, at its own expense, an agency in New York, New York, which
agency may be the Company's then existing transfer agent (the "Warrant
Agency"), for certain purposes specified herein, and shall give prompt notice
of such appointment (and appointment of any successor Warrant Agency) to the
Holder. Until an independent Warrant Agency is so appointed, the Company shall
perform the obligations of the Warrant Agency provided herein at its address as
specified on the signature page hereto or such other address as the Company
shall specify by notice to the Holder.
2.2 Ownership of Warrant. The Company may deem and treat the Person
in whose name this Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any
Person other than the Warrant Agency) for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant for
registration of transfer as provided in this Article II.
2.3 Transfer of Warrant. The Company agrees to maintain at the
Warrant Agency books for the registration of transfers of the Warrants, and
transfer of this Warrant and all rights hereunder shall be registered, in whole
or in part, on such books, upon surrender of this Warrant at the Warrant
3
<PAGE> 4
Agency, together with a written assignment of this Warrant duly executed by the
Holder or his duly authorized agent or attorney, with (unless the Holder is the
original Holder or another institutional investor) signatures guaranteed by a
bank or trust company or a broker or dealer registered with the NASD, and funds
sufficient to pay any transfer taxes payable upon such transfer. Upon
surrender the Company shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denominations specified in the
instrument of assignment, and this Warrant shall promptly be canceled. The
Warrant Agency shall not be required to register any transfers if the Holder
fails to furnish to the Company, after a request therefor, an opinion of
counsel (who may be an employee of such Holder) reasonably satisfactory to the
Company that such transfer is exempt from the registration requirements of the
Securities Act and applicable blue sky laws.
2.4 Division of Warrant. This Warrant may be divided upon surrender
hereof to the Warrant Agency, together with a written notice specifying the
names and denominations in which the new Warrants are to be issued, signed by
the Holder. Subject to compliance with Section 2.3 as to any transfer which
may be involved in the division, the Company shall execute and deliver new
Warrants in exchange for the Warrant or Warrants to be divided in accordance
with such notice.
2.5 Loss, Theft, Destruction or Mutilation of Warrants. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and representing the right to purchase the same aggregate number of shares of
Common Stock as provided for in such lost, stolen, destroyed or mutilated
Warrant.
2.6 Expenses of Delivery of Warrants. The Company shall pay all
expenses, taxes (other than transfer taxes) and other charges payable in
connection with the preparation, issuance and delivery of this Warrant and the
Common Stock issuable hereunder.
ARTICLE III
CERTAIN RIGHTS
3.1 Stockholders Agreement. This Warrant and the Common Stock
issuable upon exercise of this Warrant is subject to a Stockholders Agreement
dated as of October 16, 1996, as amended, by and among the Company and the
other parties listed therein (the "Stockholders Agreement"). The Company shall
keep a copy of the Stockholders Agreement, and any amendments thereto, at the
Warrant Agency and shall furnish copies thereof to the Holder upon request.
3.2 Notice of Fair Market Value. Upon each determination of Fair
Market Value hereunder (other than a determination relating solely to setting
the value of fractional shares), the Company shall promptly give notice thereof
to the Holder.
4
<PAGE> 5
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1 Adjustments Generally. The Exercise Price and the number of
shares of Common Stock (or other securities or property) issuable upon exercise
of this warrant shall be subject to adjustment from time to time upon the
occurrence of certain events, as provided in this Article IV.
4.2 Common Stock Reorganization. If the Company shall after the date
of issuance of this Warrant subdivide its outstanding shares of Common Stock
into a greater number of shares or consolidate its outstanding shares of Common
Stock into a smaller number of shares (any such event being called a "Common
Stock Reorganization"), then (a) the Exercise Price shall each be adjusted,
effective immediately after the record date at which the holders of shares of
Common Stock are determined for purposes of such Common Stock Reorganization,
to a price determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on such record date before giving
effect to such Common Stock Reorganization and the denominator of which shall
be the number of shares of Common Stock outstanding after giving effect to such
Common Stock Reorganization, and (b) the number of shares of Common Stock
subject to purchase upon exercise of the A Warrant and the B Warrant shall each
be adjusted, effective at such time, to a number determined by multiplying the
number of shares of Common Stock subject to purchase immediately before such
Common Stock Reorganization by a fraction, the numerator of which shall be the
number of shares outstanding after giving effect to such Common Stock
Reorganization and the denominator of which shall be the number of shares of
Common Stock outstanding immediately before such Common Stock Reorganization.
4.3 Capital Reorganization. If after the date of issuance of this
Warrant there shall be any consolidation or merger to which the Company is a
party, other than a consolidation or a merger in which the Company is a
continuing corporation and which does not result in any reclassification of, or
change (other than a Common Stock Reorganization or a change in par value), in,
outstanding shares of Common Stock, or any sale or conveyance of the property
of the Company as an entirety or substantially as an entirety (any such event
being called a "Capital Reorganization"), then, effective upon the effective
date of such Capital Reorganization, the Holder shall have the right to
purchase, upon exercise of this Warrant, the kind and amount of shares of stock
and other securities and property (including cash) which the Holder would have
owned or have been entitled to receive after such Capital Reorganization if
this Warrant had been exercised immediately prior to such Capital
Reorganization. As a condition to effecting any Capital Reorganization, the
Company or the successor or surviving corporation, as the case may be, shall
execute and deliver to the Holder an agreement as to the Holder's rights in
accordance with this Section 4.2, providing for subsequent adjustments as
nearly equivalent as may be practicable to the adjustments provided for in this
Article IV. The provisions of this Section 4.2 shall similarly apply to
successive Capital Reorganizations.
4.4 Certain Other Events. If any event occurs after the date of
issuance of this Warrant as to which the foregoing provisions of this Article
IV are not strictly applicable or, if strictly applicable, would not, in the
good faith judgment of the Board of Directors of the Company (the "Board"),
fairly protect the purchase rights of the Holder in accordance with the
essential intent and principles of such provisions, then the Board shall make
such adjustments in the application of such
5
<PAGE> 6
provisions, in accordance with such essential intent and principles, as shall
be reasonably necessary, in the good faith opinion of the Board, to protect
such purchase rights as aforesaid.
4.5 Adjustment Rules. (a) Any adjustments pursuant to this Article
IV shall be made successively whenever an event referred to herein shall occur.
(b) If the Company shall set a record date to determine the holders
of shares of Common Stock for purposes of a Common Stock Reorganization or
Capital Reorganization, and shall legally abandon such action prior to
effecting such action, then no adjustment shall be made pursuant to this
Article IV in respect of such action.
(c) No adjustment in the amount of shares purchasable upon exercise
of this Warrant or in the Exercise Price shall be made hereunder unless such
adjustment increases or decreases such amount or price by one percent or more,
but any such lesser adjustment shall be carried forward and shall be made at
the time and together with the next subsequent adjustment which together with
any adjustments so carried forward shall serve to adjust such amount or price
by one percent or more.
(d) No adjustment in the Exercise Price shall be made hereunder if
such adjustment would reduce the exercise price to an amount below par value of
the Common Stock, which par value shall initially be $.01 per share of Common
Stock.
4.6 Notice of Adjustment. The Company shall give the Holder
reasonable notice of the record date or effective date, as the case may be, of
any action which requires or might require an adjustment or readjustment
pursuant to this Article IV. Such notice shall describe such event in
reasonable detail and specify the record date or effective date, as the case
may be, and, if determinable, the required adjustment and the computation
thereof. If the required adjustment is not determinable at the time of such
notice, the Company shall give reasonable notice to the Holder of such
adjustment and computation promptly after such adjustment becomes determinable.
ARTICLE V
DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"Affiliate", means, with respect to any Person, any Person who, directly
or indirectly, controls, is controlled by or is under common control with that
Person.
"Business Day" shall mean (a) if any class of Common Stock is listed or
admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which the New York Stock
Exchange is open for business.
"Capital Reorganization" shall have the meaning set forth in Section
4.3.
"Closing Price" with respect to any security on any day means (a) if
such security is listed or admitted for trading on a national securities
exchange, the reported last sales price regular way
6
<PAGE> 7
or, if no such reported sale occurs on such day, the average of the closing bid
and asked prices regular way on such day, in each case as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which such class of
security is listed or admitted to trading, or (b) if such security is not
listed or admitted to trading on any national securities exchange, the last
quoted sales price, or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market on such day as reported by NASDAQ
or any comparable system then in use or, if not so reported, as reported by any
New York Stock Exchange member firm reasonably selected by the Company for such
purpose.
"Common Stock" shall have the meaning set forth in the first paragraph
of this Warrant.
"Common Stock Reorganization" shall have the meaning set forth in
Section 4.2.
"Company" shall have the meaning set forth in the first paragraph of
this Warrant.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as
the same shall be in effect at the time.
"Exercise Price" means a per share price of $1.10 as increased by an
annual rate of interest equal to 8% per year (calculated on the basis of a 365
day year and actual days lapsed) calculated commencing as of February 20, 1997
and as of and including the last calendar day immediately prior to the date of
such exercise of the Warrant.
"Fair Market Value" means the fair market value of the business or
property in question, as determined in good faith by the Board, provided,
however, that the Fair Market Value of any security for which a Closing Price
is available shall be the Market Price of such security.
"Holder" shall have the meaning set forth in the first paragraph of this
Warrant. The term Holders shall refer to all Holders of Warrants.
"HMC Group" means HMTF and its Affiliates and its and their respective
officers, directors, and employees (and members of their respective families
(other than R. Steven Hicks) and trusts for the primary benefit of such family
members).
"HMTF" means Hicks, Muse, Tate & Furst Incorporated.
"Market Price", with respect to any security on any day means the
average of the daily Closing-Prices of a share or unit of such security for the
20 consecutive Business Days ending on the most recent Business Day for which a
Closing Price is available; provided, however, that in the event that, in the
case of Common Stock, the Market Price is determined during a period following
the announcement by the Company of any subdivision, combination or
reclassification of Common Stock or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Market Price
shall be appropriately adjusted to reflect the current market price per share
equivalent of Common Stock.
"NASD" means The National Association of Securities Dealers, Inc.
7
<PAGE> 8
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Person" or "person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Readily Marketable Securities" means any securities listed or traded on
the New York Stock Exchange, American Stock Exchange, NASDAQ National Market
which, as a matter of law, shall, at the time of acquisition, be freely
saleable in unlimited quantities by the HMC Group to the public, either
pursuant to an effective registration statement under the Securities Act or
without the necessity of such registration or subject to a contractual demand
registration right which is exercisable within a period of one year from the
date of acquisition.
"Second Investment" means the 31,818,181 shares of Common Stock acquired
and held by Capstar Broadcasting Partners, L.P. on February 20, 1997.
"Second Investment Amount" means $35,000,000 paid by Capstar
Broadcasting Partners, L.P. to the Company in connection with its Second
Investment.
"Securities Act,, shall mean the Securities Act of 1933, as amended, and
any similar or successor federal statute, and the rules and regulations of the
Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
"Stockholders Agreement" shall have the meaning set forth in Section
3.1.
"Target IRR" means that the HMC Group has received distributions from,
and/or consideration realized from the sale, exchange or other disposition to a
non-Affiliate of, the Second Investment, in the form of cash and/or Readily
Marketable Securities, in such amount as may be necessary to result in an
internal rate of return of at least 30%, calculated in accordance with
generally accepted financial practice, on the Second Investment Amount
determined commencing as of February 20, 1997.
"Triggering Event" means a date upon which the Target IRR is achieved.
"Warrant Agency" shall have the meaning set forth in Section 2.1.
"Warrant" shall have the meaning set forth in the first paragraph of
this Warrant. The term Warrants shall refer to the Warrants resulting in any
subdivision of this Warrant.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices, requests, consents and other
communications provided for herein shall be in writing and shall be effective
upon delivery in person, faxed or telecopied, or mailed by certified or
registered mail, return receipt requested, postage pre-paid, to the addresses
specified on the signature pages hereto or, in any case, at such other address
or addresses as shall
8
<PAGE> 9
have been furnished in writing to the Company (in the case of a Holder) or to
the Holder (in the case of the Company) in accordance with the provisions of
this paragraph.
6.2 Waivers; Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and Holders who collectively hold
Warrants to purchase a majority of the Common Stock subject to purchase upon
exercise of such Warrants at the time outstanding.
Any such amendment, modification or waiver effected pursuant to this
Section shall be binding upon the Holders, upon each future Holder thereof and
upon the Company. In the event of any such amendment, modification or waiver
the Company shall give prompt notice thereof to all Holders and, if
appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
No notice or demand on the Company in any case shall entitle the Company
to any other or further notice or demand in similar or other circumstances.
6.3 Governing Law. This Warrant shall be construed in accordance
with and governed by the laws of the State of Delaware.
6.4 Severability. In case any one or more of the provisions
contained in this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality or enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
6.5 Section Headings. The sections headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
6.6 No Rights as Stockholder. This Warrant shall not entitle the
Holder to any rights as a stockholder of the Company.
9
<PAGE> 10
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, all as
of the day and year first above written.
CAPSTAR BROADCASTING PARTNERS, INC.
Address: By: /s/ WILLIAM S. BANOWSKY, JR.
600 Congress Avenue ---------------------------------
Suite 1400 Name: William S. Banowsky, Jr.
Austin, Texas 75201 Title: Executive Vice President
and General Counsel
ACCEPTED AND AGREED TO:
/s/ R. STEVEN HICKS
- -----------------------------------------------------
Name: R. Steven Hicks
Address: 600 Congress Avenue
Suite 1400
Austin, TX 78701
<PAGE> 11
ANNEX A
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
TO CAPSTAR BROADCASTING PARTNERS, L.P.:
The undersigned hereby irrevocably elects to exercise the attached
Warrant and to purchase thereunder, in exercise of the [ ] A Warrant for _____
shares of Common Stock and/or [ ] B Warrant for _________ shares of Common
Stock in payment of an Exercise Price in an amount equal to $__________.
Please issue a certificate or certificates for such shares of Common
Stock in the following name or names and denominations:
If said number of shares shall not be all the shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated: ___________________, ______
--------------------------------
Note: The above signature should
correspond exactly with
the name on the face of
the attached Warrant or
with the name of the
assignee appearing in the
assignment form below.
<PAGE> 12
ANNEX B
CERTIFICATION
The undersigned hereby certifies to Capstar Broadcasting Partners, L.P.
that he, she or it is:
a. an "accredited investor" as that term is defined in
Regulation D promulgated pursuant to the Securities Act or
any successor regulation, as such provisions may be in
effect on the date hereof, and is an "accredited investor"
pursuant to Section of such provision; and
b. is knowledgeable, sophisticated and experienced in
business and financial matters and in securities similar
to the Common Stock; is aware of the limitation on the
transfer of the Common Stock imposed by applicable
securities laws and any limitations on transfer imposed by
contracts with the Company or others; and has had access
to, or been furnished with, all information about the
Common Stock and the Company deemed necessary to conclude
that he, she or it has the ability to bear the economic
risk of the investment in the Common Stock and to afford
the complete loss of such investment.
IN WITNESS WHEREOF, the undersigned has executed this CERTIFICATION this
_____ day of ________________, _____.
For Individuals: For Entities:
- --------------------------------- ------------------------------
Signature Printed Name of Entity
By:
- --------------------------------- ---------------------------
Printed Name Name:
----------------------
Title:
---------------------
<PAGE> 1
Exhibit 11.1
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Computation for statement of earnings:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,756,453)
============
Computation for weighted average common
shares outstanding:
Weighted average common shares outstanding . . . . . . . . . . . . . . . . . . 93,691,842
Incremental common shares applicable to common stock options
and warrant based on the estimated fair value of the stock . . . . . . . . . 1,016,130
Common stock options and warrant excluded based on
antidilutive effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,016,130)
Weighted average common shares . . . . . . . . . . . . . . . . . . . . . . . . 93,691,842
============
Primary and fully diluted loss per common share . . . . . . . . . . . . . . . . . . . $ (0.04)
============
</TABLE>
<PAGE> 1
EXHIBIT 11.2
STATEMENT RE COMPUTATION OF HISTORICAL
PRO FORMA EARNINGS PER SHARE EARNINGS
(AFTER GIVING EFFECT TO THE RECAPITALIZATION)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Computation for statement of earnings:
Net loss ............................................................. $ (3,756,453)
============
Computation for weighted average common
shares outstanding:
Weighted average common shares outstanding ........................... 9,369,184
Incremental common shares applicable to common stock options
and warrant based on the estimated fair value of the stock ......... 101,613
Common stock options and warrant excluded based on
antidilutive effect ................................................ (101,613)
Weighted average common shares ....................................... 9,369,184
============
Primary and fully diluted loss per common share ........................... $ (0.40)
============
</TABLE>
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF THE COMPANY
1. The following entities are wholly-owned subsidiaries of the Company:
a. Commodore Media, Inc., a Delaware corporation.
b. Point Madison Acquisition Company, Inc., a Delaware
corporation
c. OCC Holding Corporation, a Delaware corporation
d. Pacific Star Communications, Inc., a Delaware corporation
e. Capstar Broadcasting-Florida, Inc., a Delaware corporation
2. Atlantic Star Communications, Inc., a Delaware corporation, is a
wholly-owned subsidiary of Commodore Media, Inc.
3. The following entities are wholly-owned subsidiaries of Atlantic Star
Communications, Inc.:
a. Commodore Media of Delaware, Inc., a Delaware corporation.
b. Commodore Media of Pennsylvania, Inc., a Delaware corporation.
c. Commodore Media of Florida, Inc., a Delaware corporation.
d. Commodore Media of Kentucky, Inc., a Delaware corporation.
e. Commodore Media of Norwalk, Inc., a Delaware corporation.
f. Commodore Media of Westchester, Inc., a Delaware corporation.
4. Danbury Broadcasting, Inc., a Connecticut corporation, is a
wholly-owned subsidiary of Commodore Media of Norwalk, Inc.
5. Southern Star Communications, Inc., a Delaware corporation, is a
wholly-owned subsidiary of the Commodore Media, Inc.
6. The following entities are wholly-owned subsidiaries of Southern Star
Communications, Inc.:
a. Atlantic City Broadcasting Corp., a Delaware corporation.
b. Breadbasket Broadcasting Corporation, a Delaware corporation.
c. Houndstooth Broadcasting Corporation, a Delaware corporation.
d. O.C.C., Inc., a Delaware corporation.
e. Osborn Entertainment Enterprises Corporation, a Delaware
corporation.
f. SNG Holdings, Inc., a Delaware corporation.
g. Southeast Radio Holding Corp., a Delaware corporation.
h. Ameron Broadcasting Corporation, a Delaware corporation.
i. WNOK Acquisition Company, Inc., a Delaware corporation.
<PAGE> 2
7. The following entities are wholly-owned subsidiaries of O.C.C., Inc.:
a. Ladner Communications Holding Corp., a Delaware corporation.
b. Mountain Radio Corporation, a Delaware corporation.
c. Orange Communications, Inc., a Delaware corporation.
d. RKZ Television, Inc., a Delaware corporation.
e. Yellow Brick Radio Corporation, a Delaware corporation.
8. The following entities are wholly-owned subsidiaries of Osborn
Entertainment Enterprises Corporation:
a. Jamboree in the Hills, Inc., a Delaware corporation.
b. Music Hall Club, Inc., a West Virginia corporation.
9. The following entities are wholly-owned subsidiaries of SNG Holdings,
Inc.:
a. Great American East, Inc., a North Carolina corporation.
b. Nelson Broadcasting Corporation, a Delaware corporation.
c. Short Broadcasting Corporation, a Delaware corporation.
10. The following entities are wholly-owned subsidiaries of Southeast
Radio Holding Corp.:
a. Asheville Broadcasting Corp., a Delaware corporation.
b. Corkscrew Broadcasting Corporation, a Delaware corporation.
c. Daytona Beach Broadcasting Corp., a Delaware corporation.
d. Rainbow Broadcasting Corporation, a Delaware corporation.
11. The following entities are wholly-owned subsidiaries of Ladner
Communications Holding Corp.:
a. Beatrice Broadcasting Corporation, a Delaware corporation.
b. Currey Broadcasting Corporation, a Delaware corporation.
c. Osborn Sound & Communications Corp., a Delaware corporation.
d. Waite Broadcasting Corp., a Delaware corporation.
12. Capstar Acquisition Company, Inc., a Delaware corporation, and
Benchmark Communications, Inc., a Delaware corporation, are
wholly-owned subsidiaries of Commodore Media, Inc.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. ) of our report dated February 14, 1997, on our audit of the
consolidated financial statements and financial statement schedules of Capstar
Broadcasting Partners, Inc. We also consent to the reference to our firm under
the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Austin, Texas
April 15, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated (i) February 10, 1997 with respect to the
consolidated financial statements of Commodore Media, Inc. and Subsidiaries, the
Predecessor Company of Capstar Broadcasting Partners, Inc., and (ii) February 3,
1997 with respect to the consolidated financial statements of Osborn
Communications Corporation, both included in the Registration Statement (Form
S-1) and related Prospectus of Capstar Broadcasting Partners, Inc. for the
registration of Class A Common Stock.
/s/ ERNST & YOUNG LLP
New York, New York
April 11, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated February 8, 1997, on our audits of the combined financial
statements of Benchmark Communications Radio Limited Partnership. We also
consent to the reference to our firm under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Dallas, Texas
April 15, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. ) of our report dated February 3, 1997, on our audit of the
financial statements of Midcontinent Broadcasting Co. of Wisconsin, Inc. We also
consent to the reference to our firm under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
April 15, 1997
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. ) of our report dated February 3, 1997, on our audit of the
financial statements of Point Communications Limited Partnership. We also
consent to the reference to our firm under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
April 15, 1997
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. ) of our report dated February 13, 1997, on our audit of the
financial statements of Community Pacific Broadcasting Company L.P. We also
consent to the reference to our firm under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
San Jose, California
April 15, 1997
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. ) of our report dated February 12, 1996, on our audits of the
financial statements of Q Broadcasting, Inc. We also consent to the reference to
our firm under the caption "Experts".
/s/ HOLTZ RUBENSTEIN & CO., L.L.P.
Melville, New York
April 14, 1997
<PAGE> 1
EXHIBIT 23.9
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. ) of our report dated August 18, 1995, on our audit of the
financial statements of Danbury Broadcasting, Inc. We also consent to the
reference to our firm under the caption "Experts".
/s/ PANETH, HABER & ZIMMERMAN L.L.P.
New York, NY
April 14, 1997
<PAGE> 1
EXHIBIT 23.10
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. ) of our report dated May 1, 1996, on our audit of the
financial statements of Adventure Communications-Huntington (Division of
Adventure Communications, Inc.). We also consent to the reference to our firm
under the caption "Experts".
/s/ BROWN, EDWARDS & CO., LLP
Bluefield, West Virginia
April 14, 1997
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