<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Transition Period From to
Commission file number 333-25683
CAPSTAR BROADCASTING PARTNERS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-2672663
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 CONGRESS AVENUE
SUITE 1400
AUSTIN, TEXAS 78701
(Address of principal executive offices) (Zip Code)
</TABLE>
(512) 340-7800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
AT NOVEMBER 7, 1997, 279,632,180 SHARES OF CLASS A COMMON STOCK, PAR VALUE
$.01 PER SHARE, AND NO SHARES OF CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE,
OF CAPSTAR BROADCASTING PARTNERS, INC. (THE "REGISTRANT") WERE OUTSTANDING.
================================================================================
<PAGE> 2
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1997
(unaudited) and December 31, 1996......................... 2
Consolidated Statements of Operations for the three months
ended September 30, 1997 and 1996 (unaudited)............. 3
Consolidated Statements of Operations for the nine months
ended September 30, 1997 and 1996 (unaudited)............. 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996 (unaudited)...... 5
Consolidated Statement of Stockholder's Equity for the nine
months ended September 30, 1997 (unaudited)............... 6
Notes to Consolidated Financial Statements (unaudited)...... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 18
PART II -- OTHER INFORMATION
Item 2 Changes in Securities....................................... 27
Item 6. Exhibits and Reports on Form 8-K............................ 27
</TABLE>
1
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS.
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED) (RESTATED)
(NOTE)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 11,477,120 $ 9,820,861
Accounts receivable, net of allowance for doubtful
accounts of $1,954,076 and $1,166,834 at September 30,
1997 and December 31, 1996, respectively................ 49,800,262 17,249,395
Note receivable........................................... 1,522,652 --
Refundable income taxes................................... -- 1,111,940
Prepaid expenses and other current assets................. 3,291,952 600,206
------------ ------------
Total current assets................................ 66,091,986 28,782,402
Property and equipment, net................................. 100,182,892 29,325,524
Intangibles and other, net.................................. 749,418,022 341,076,514
Other non-current assets.................................... 1,920,494 3,448,103
------------ ------------
Total assets........................................ $917,613,394 $402,632,543
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt and capital lease
obligations............................................. $ 115,406 $ 3,936,317
Accounts payable and accrued expenses..................... 19,526,955 9,173,307
Accrued interest.......................................... 8,120,427 1,846,682
Income taxes payable...................................... 1,938,359 --
------------ ------------
Total current liabilities........................... 29,701,147 14,956,306
Long-term debt and capital lease obligations, net of current
portion................................................... 462,842,130 187,233,972
Due to Parent............................................... 13,039,559 --
Deferred income taxes....................................... 91,227,213 83,608,220
------------ ------------
Total liabilities................................... 596,810,049 285,798,498
------------ ------------
Commitments and contingencies
Redeemable preferred stock:
GulfStar Communications, Inc., $.01 par value, 507,500
shares authorized, issued and outstanding at December 31,
1996, aggregate liquidation preference of $27,052,500 in
1996...................................................... -- 23,097,788
Capstar Broadcasting Partners, Inc., $.01 par value,
10,000,000 shares authorized, 1,000,000 shares issued and
outstanding at September 30, 1997, aggregate liquidation
preference of $103,386,301 in 1997........................ 98,457,258 --
Stockholder's equity:
GULFSTAR COMMUNICATIONS, INC.:
Common stock, voting, $0.01 par value, 100,000 shares
authorized, 10,986 shares issued and outstanding at
December 31, 1996....................................... -- 109
Common stock, Class A, nonvoting, $0.01 par value, 60,000
shares authorized, 49,033 shares issued and outstanding
at December 31, 1996.................................... -- 490
Common stock, Class B, nonvoting, $0.01 par value, 10,000
shares authorized, no shares issued and outstanding at
December 31, 1996....................................... -- --
Common stock, Class C, voting, $0.01 par value, 100,000
shares authorized, 3,172 shares issued and outstanding
at December 31, 1996.................................... -- 31
Additional paid-in capital................................ -- 11,871,525
Stock subscriptions receivable............................ -- (2,090,024)
Unearned compensation..................................... -- (1,518,120)
CAPSTAR BROADCASTING PARTNERS, INC.:
Class A Common Stock, $.01 par value, 300,000,000 and
200,000,000 shares authorized, 279,632,180 and
94,155,000 shares issued and outstanding at September
30, 1997 and December 31, 1996, respectively............ 2,796,321 941,550
Class B Common Stock, convertible into Class A Common
Stock, $.01 par value, 50,000,000 shares authorized,
none issued and outstanding at September 30, 1997 and
December 31, 1996, respectively......................... -- --
Additional paid-in capital................................ 268,662,827 93,957,450
ACCUMULATED DEFICIT......................................... (49,113,061) (9,426,754)
------------ ------------
Total stockholder's equity.......................... 222,346,087 93,736,257
------------ ------------
Total liabilities and stockholder's equity.......... $917,613,394 $402,632,543
============ ============
</TABLE>
- ---------------
Note: The consolidated balance sheet at December 31, 1996 has been derived from
the audited consolidated financial statements at that date but does not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE> 4
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
(RESTATED)
<S> <C> <C>
Gross broadcast revenue..................................... $ 54,101,151 $ 9,634,201
Less: agency commissions.................................... (2,853,604) (985,861)
------------ -----------
Net broadcast revenue..................................... 51,247,547 8,648,340
------------ -----------
Operating expenses:
Programming, technical and news........................... 8,411,833 1,984,310
Sales and promotion....................................... 14,723,603 2,596,832
General and administrative................................ 7,931,002 1,699,734
Direct programmed music and entertainment................. 3,880,232 --
Corporate expenses.......................................... 4,293,670 1,077,774
Depreciation and amortization............................... 7,955,512 639,744
------------ -----------
Operating income............................................ 4,051,695 649,946
Other expense:
Interest expense.......................................... (12,460,510) (1,340,772)
Other expenses, net....................................... (7,606,421) (128,003)
------------ -----------
Loss before benefit for income taxes and extraordinary
loss...................................................... (16,015,236) (818,829)
Benefit (provision) for income taxes........................ (883,853) 769,365
------------ -----------
Loss before extraordinary item.............................. (16,899,089) (49,464)
Extraordinary item, loss on early extinguishment of debt,
net of tax benefit of $883,853 and $457,429 for the three
months ended September 30, 1997 and 1996, respectively.... (1,442,076) (746,332)
------------ -----------
Net loss.................................................... (18,341,165) (795,796)
Dividends, accretion and redemption of preferred stock...... (8,817,196) (555,251)
------------ -----------
Net loss attributable to common stock....................... $(27,158,361) $(1,351,047)
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 5
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
(RESTATED)
<S> <C> <C>
Gross broadcast revenue..................................... $125,949,358 $ 23,386,654
Less: agency commissions.................................... (9,545,740) (2,316,627)
------------ ------------
Net broadcast revenue..................................... 116,403,618 21,070,027
Operating expenses:
Programming, technical and news........................... 19,916,085 5,009,129
Sales and promotion....................................... 32,038,225 6,269,570
General and administrative................................ 18,967,840 4,630,117
Direct programmed music and entertainment................. 7,973,052 --
Corporate expenses.......................................... 9,399,031 1,035,297
Corporate expenses -- noncash compensation.................. 10,817,712 --
Depreciation and amortization............................... 17,293,328 1,869,392
------------ ------------
Operating income (loss)..................................... (1,655) 2,256,522
Other expense:
Interest expense.......................................... (31,830,146) (3,219,154)
Other expenses, net....................................... (4,155,353) (789,425)
------------ ------------
Loss before benefit for income taxes and extraordinary
loss...................................................... (35,987,154) (1,752,057)
Benefit (provision) for income taxes........................ (1,405,679) 532,903
------------ ------------
Loss before extraordinary item.............................. (37,392,833) (1,219,154)
Extraordinary item, loss on early extinguishment of debt,
net of tax benefit of $1,405,679 and $457,429 for the nine
months ended September 30, 1997 and 1996, respectively.... (2,293,475) (746,332)
------------ ------------
Net loss.................................................... (39,686,308) (1,965,486)
Dividends, accretion and redemption of preferred stock...... (10,509,894) (555,251)
------------ ------------
Net loss attributable to common stock....................... $(50,196,202) $ (2,520,737)
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 6
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- --------------
(RESTATED)
<S> <C> <C>
Net cash used in operating activities....................... $ (3,928,423) $ (675,739)
Cash flows from investing activities:
Purchase of property and equipment........................ (8,207,506) (979,604)
Proceeds from sale of assets.............................. 35,932,464 --
Deferred acquisition and intangible costs................. (8,132,359) (888,565)
Acquisitions of stations and companies, net of cash
acquired............................................... (429,565,217) (13,819,266)
Other investing activities, net........................... 150,543 121,272
------------- ------------
Net cash used in investing activities............. (409,822,075) (15,566,163)
------------- ------------
Cash flows from financing activities:
Repurchase of common stock................................ (175,000) --
Proceeds from issuance of common stock.................... 115,737,000 --
Net proceeds from issuance of preferred stocks, net....... 95,070,957 24,881,932
Proceeds from issuance of debt............................ 349,509,394 --
Proceeds from credit facilities........................... 81,806,380 5,547,309
Payment of financing related costs........................ (24,992,063) --
Repayment of amounts borrowed............................. (199,911,761) (13,210,226)
Principal repayments on capital lease obligations......... (62,138) (38,330)
Redemption of preferred stock............................. (811,012) --
Dividends paid............................................ (765,000) --
------------- ------------
Net cash provided by financing activities......... 415,406,757 17,180,685
------------- ------------
Net increase in cash and cash equivalents................... 1,656,259 938,783
Cash and cash equivalents at beginning of period............ 9,820,861 220,049
------------- ------------
Cash and cash equivalents at end of period.................. $ 11,477,120 $ 1,158,832
============= ============
Supplemental disclosure of cash flow information:
Cash payments during the year for:
Interest............................................... $ 6,808,510 $ 3,391,816
============= ============
Taxes.................................................. $ 191,243 $ --
============= ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 7
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
GULFSTAR COMMUNICATIONS, INC.
-------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
----------------- ----------------- ----------------- ----------------- ADDITIONAL
NUMBER PAR NUMBER PAR NUMBER PAR NUMBER PAR PAID-IN
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE CAPITAL
--------- ----- --------- ----- --------- ----- --------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GULFSTAR COMMUNICATIONS, INC.:
Balance at January 1, 1997......... 10,986 $ 109 49,033 $ 490 -- -- 3,172 $ 31 $11,871,525
Issuance of Common stock.......... 356 4 -- -- -- -- -- -- 299,621
Conversion of Class A Common stock
to Class C Common stock......... -- -- (39,033) (390) -- -- 39,033 390 --
Dividends and accretion on
Redeemable preferred stock...... -- -- -- -- -- -- -- -- (1,692,698)
Accrued interest on Stock
subscriptions receivable........ -- -- -- -- -- -- -- -- 130,664
Conversion of Class C Common stock
to Class A Common stock......... -- -- 10,102 101 -- -- (10,102) (101) --
Payments received on Stock
subscriptions receivable........ -- -- -- -- -- -- -- -- --
Compensation expense.............. -- -- -- -- -- -- -- -- 7,232,032
CAPSTAR BROADCASTING PARTNERS,
INC.:
Issuances of Common stock......... -- -- -- -- -- -- -- -- --
Repurchase and Cancellation of
Common Stock.................... -- -- -- -- -- -- -- -- --
Conversion of Class B Common stock
to Class A Common stock......... -- -- -- -- -- -- -- -- --
Issuances of shares in connection
with the GulfStar merger........ (11,342) (113) (20,102) (201) -- -- (32,103) (320) (12,462,285)
Redemption of preferred stock by
Parent.......................... -- -- -- -- -- -- -- -- (5,378,859)
Equity contribution from parent... -- -- -- -- -- -- -- -- --
Payments received on Stock
subscriptions receivable........ -- -- -- -- -- -- -- -- --
Transfer of Stock subscriptions
receivable to parent............ -- -- -- -- -- -- -- -- --
Dividends and accretion on
Redeemable preferred stock...... -- -- -- -- -- -- -- -- --
Dividends......................... -- -- -- -- -- -- -- -- --
Compensation expense.............. -- -- -- -- -- -- -- -- --
Net loss.......................... -- -- -- -- -- -- -- -- --
------- ----- ------- ----- -- -- ------- ----- -----------
Balance at September 30, 1997...... -- -- -- -- -- -- -- -- --
======= ===== ======= ===== == == ======= ===== ===========
<CAPTION>
GULFSTAR COMMUNICATIONS, INC. CAPSTAR BROADCASTING PARTNERS, INC.
---------------------------- ----------------------------------------------------
CLASS A CLASS B
COMMON STOCK COMMON STOCK
STOCK ------------------------ -------------------------
SUBSCRIPTIONS UNEARNED NUMBER PAR NUMBER PAR
RECEIVABLE COMPENSATION OF SHARES VALUE OF SHARES VALUE
------------- ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
GULFSTAR COMMUNICATIONS, INC.:
Balance at January 1, 1997......... $(2,090,024) $(1,518,120) 94,155,000 $ 941,550 -- --
Issuance of Common stock.......... (299,625) -- -- -- -- --
Conversion of Class A Common stock
to Class C Common stock......... -- -- -- -- -- --
Dividends and accretion on
Redeemable preferred stock...... -- -- -- -- -- --
Accrued interest on Stock
subscriptions receivable........ (130,664) -- -- -- -- --
Conversion of Class C Common stock
to Class A Common stock......... -- -- -- -- -- --
Payments received on Stock
subscriptions receivable........ 35,534 -- -- -- -- --
Compensation expense.............. -- 1,518,120 -- -- -- --
CAPSTAR BROADCASTING PARTNERS,
INC.:
Issuances of Common stock......... -- -- 82,507,956 825,079 18,181,818 181,818
Repurchase and Cancellation of
Common Stock.................... -- -- (175,000) (1,750) -- --
Conversion of Class B Common stock
to Class A Common stock......... -- -- 18,181,818 181,818 (18,181,818) (181,818)
Issuances of shares in connection
with the GulfStar merger........ 2,484,779 -- 84,962,406 849,624 -- --
Redemption of preferred stock by
Parent.......................... -- -- -- -- -- --
Equity contribution from parent... -- -- -- -- -- --
Payments received on Stock
subscriptions receivable........ -- -- -- -- -- --
Transfer of Stock subscriptions
receivable to parent............ -- -- -- -- -- --
Dividends and accretion on
Redeemable preferred stock...... -- -- -- -- --
Dividends......................... -- -- -- -- -- --
Compensation expense.............. -- -- -- -- --
Net loss.......................... -- -- -- -- -- --
----------- ----------- ----------- ---------- ----------- -----------
Balance at September 30, 1997...... -- -- 279,632,180 $2,796,321 -- --
=========== =========== =========== ========== =========== ===========
<CAPTION>
CAPSTAR BROADCASTING PARTNERS, INC.
----------------------------
ADDITIONAL STOCK TOTAL
PAID-IN SUBSCRIPTIONS (ACCUMULATED STOCKHOLDER'S
CAPITAL RECEIVABLE DEFICIT) EQUITY
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
GULFSTAR COMMUNICATIONS, INC.:
Balance at January 1, 1997......... $ 93,957,450 -- $ (9,426,753) $ 93,736,258
Issuance of Common stock.......... -- -- -- --
Conversion of Class A Common stock
to Class C Common stock......... -- -- -- --
Dividends and accretion on
Redeemable preferred stock...... -- -- -- (1,692,698)
Accrued interest on Stock
subscriptions receivable........ -- -- -- --
Conversion of Class C Common stock
to Class A Common stock......... -- -- -- --
Payments received on Stock
subscriptions receivable........ -- -- -- 35,534
Compensation expense.............. -- -- -- 8,750,152
CAPSTAR BROADCASTING PARTNERS,
INC.:
Issuances of Common stock......... 119,874,750 (1,596,364) -- 119,285,283
Repurchase and Cancellation of
Common Stock.................... (173,250) -- -- (175,000)
Conversion of Class B Common stock
to Class A Common stock......... -- -- -- --
Issuances of shares in connection
with the GulfStar merger........ 40,572,230 -- -- 31,443,714
Redemption of preferred stock by
Parent.......................... -- -- -- (5,378,859)
Equity contribution from parent... 29,358,333 -- -- 29,358,333
Payments received on Stock
subscriptions receivable........ -- 405,455 -- 405,455
Transfer of Stock subscriptions
receivable to parent............ (1,190,909) 1,190,909 -- 0
Dividends and accretion on
Redeemable preferred stock...... (3,438,337) -- -- (3,438,337)
Dividends......................... (12,365,000) -- -- (12,365,000)
Compensation expense.............. 2,067,560 -- -- 2,067,560
Net loss.......................... -- -- (39,686,308) (39,686,308)
------------ ---------- ------------ ------------
Balance at September 30, 1997...... $268,662,827 -- $(49,113,061) $222,346,087
============ ========== ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 8
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
Information with respect to the three and nine month periods ended
September 30, 1997 and 1996 is unaudited. The accompanying unaudited
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited interim consolidated financial
statements contain all adjustments consisting of normal recurring accruals,
considered necessary for a fair presentation. Operating results for the three
and nine month periods ended September 30, 1997, are not necessarily indicative
of the results that may be expected for the year ended December 31, 1997, or for
any other interim period. For further information, refer to the December 31,
1996 consolidated financial statements and footnotes thereto of Capstar
Broadcasting Partners, Inc. and Subsidiaries and GulfStar Communications, Inc.
and Subsidiaries ("Former Gulfstar") included in Capstar Broadcasting Partners,
Inc.'s Amendment No. 1 to Registration Statement on Form S-4 (File No.
333-25683), dated July 8, 1997.
The consolidated financial statements include the accounts of Capstar
Broadcasting Partners, Inc. and its direct and indirect wholly owned
subsidiaries ("Capstar Partners"). The direct wholly-owned subsidiary of the
Company is Capstar Radio Broadcasting Partners, Inc. (formerly named Commodore
Media, Inc.) ("Capstar Radio"). Capstar Broadcasting Corporation ("Capstar
Broadcasting") owns all of the outstanding common stock of Capstar Partners.
On October 16, 1996, Capstar Radio, was acquired pursuant to a merger
agreement dated June 21, 1996 with Capstar Partners, a holding company
controlled by Hicks, Muse, Tate & Furst Equity Fund III, L.P. ("Hicks Muse
Equity, Fund III")
In June 1997, Capstar Broadcasting, a newly formed holding company,
acquired all of the issued and outstanding common stock of Capstar Partners in
exchange for common stock of Capstar Broadcasting.
In July 1997, Capstar Broadcasting acquired Former GulfStar, a company
controlled by the general partner of Hicks Muse Equity Fund III. The acquisition
was effected through a merger of Former GulfStar with and into a newly formed,
wholly owned subsidiary of Capstar Broadcasting, with this subsidiary as the
surviving corporation. Pursuant to the merger agreement, each share of Former
GulfStar's common stock was converted into the right to receive shares of
Capstar Broadcasting, subject to a conversion ratio calculated based on the
relative value of Capstar Broadcasting and Former GulfStar, principally
determined by utilizing projected broadcast cash flows for the year ending
December 31, 1998. Concurrently with the merger: (i) the surviving corporation
was renamed GulfStar Communications, Inc. ("GulfStar"), (ii) Capstar
Broadcasting exchanged its shares of GulfStar for additional shares of Capstar
Partners (iii) Capstar Partners exchanged its shares of GulfStar for additional
shares of Capstar Radio. As a result of the merger and its related transactions,
GulfStar became a wholly owned subsidiary of Capstar Radio. Due to the fact that
Capstar Broadcasting and GulfStar were under common control, the transfer of the
assets and liabilities of GulfStar have been accounted for at historical cost in
a manner similar to a pooling-of-interests except that the acquisition by
Capstar Broadcasting of the minority interest of Former GulfStar has been
accounted for by the purchase method. The accompanying consolidated financial
statements have been restated for all periods presented to give retroactive
effect to the merger and present the financial statements of Gulfstar as the
historical consolidated financial statements of the Company for the period prior
to Capital Partners' Acquisition of Capstar Radio on October 16, 1996, and the
combined consolidated
7
<PAGE> 9
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
results of operations for the periods that Capstar Partners and GulfStar
(collectively, the "Company") were under common control. The restated financial
statements also reflect the application of "push down" accounting for the new
basis of accounting for the purchased assets and assumed liabilities in
connection with Capstar Partners' Acquisition of Capstar Radio on October 16,
1996.
The acquisition of Capstar Radio has been accounted for by Capstar Partners
under the purchase method of accounting.
NOTE 2 -- RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share" which establishes standards for computing and presenting earnings per
share. SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
About Capital Structure." SFAS No. 129 consolidates the existing disclosure
requirements to disclose certain information about an entity's capital
structure. The statement is effective for financial statements issued for
periods ending after December 15, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS No. 130 is effective for fiscal years beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Restated Information," which establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS No. 131 is
effective for financial statements for periods beginning after December 15,
1997.
Management does not believe the implementation of SFAS No. 128, No. 129,
No. 130 and No. 131 will have a material effect on its consolidated financial
statements.
NOTE 3 -- CONSUMMATED ACQUISITIONS AND DISPOSITIONS (THROUGH SEPTEMBER 30, 1997)
In January 1997, the Company acquired substantially all of the assets of
Tippie Communications of CC, Inc., the owner of radio station KNCN-FM in Corpus
Christi, Texas. The acquisition cost was approximately $2.5 million.
In February 1997, the Company acquired substantially all of the assets of
South Plains Broadcasting Company, Inc., the owner of radio stations KZII(FM)
and KFYO(AM) in Lubbock, Texas. The purchase price was approximately $3.2
million.
In February 1997, the Company acquired substantially all of the assets of
J.Thomas Development of N.M., Inc., et. al., owners of radio stations KTRA-FM
and KDAG-FM in Farmington, New Mexico, KCQL-AM in Aztec, New Mexico and KKFG-FM,
Bloomfield, New Mexico. The acquisition cost was approximately $6.3 million.
In February 1997, the Company acquired Osborn Communications Corporation
("Osborn"), subsequently renamed Southern Star Communications, Inc. ("Southern
Star"). Osborn owned and operated or provided services to 17 stations (11 FM and
6 AM). The acquisition cost was approximately $102.9 million, including
1,636,361 shares of the Company's common stock (having a fair value of $1.10 per
share).
8
<PAGE> 10
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In March 1997, the Company acquired from Noalmark Broadcasting Corporation
substantially all of the assets used or held for use in the operation of radio
stations KKIX-FM and KKZQ-FM in the Fayetteville and Lowell, Arkansas markets,
respectively. The acquisition cost was approximately $11.5 million.
In April 1997, the Company acquired substantially all of the assets of City
Broadcasting Co., Inc. (the "City Acquisition"), the owner and operator of two
radio stations (one FM and one AM), for approximately $3.0 million, EZY Com,
Inc., (the "EZY Acquisition"), the owner and operator of two radio stations (one
FM and one AM) for approximately $5.0 million and Roper Broadcasting, Inc. (the
"Roper Acquisition"), the owner and operator of one FM station for approximately
$4.0 million (the City Acquisition, EZY Acquisition and the Roper Acquisition
are collectively referred to as the "Space Coast Acquisitions"). The radio
stations acquired in the Space Coast Acquisitions serve the
Melbourne-Titusville-Cocoa, Florida Market.
In April 1997, the Company sold substantially all of the assets of three
radio stations (two FM and one AM) in the Ft. Myers, Florida market. The sales
price was approximately $11.0 million.
In May 1997, the Company acquired all of the outstanding capital stock of
Dixie Broadcasting, Inc. and Radio WBHP, Inc., the owners and operators of three
radio stations (one FM and two AM) in the Huntsville, Alabama market. The
acquisition cost was approximately $23.4 million.
In May 1997, the Company acquired substantially all of the assets of Fort
Smith FM, Inc., the owner and operator of two radio stations (one FM and one AM)
in Fort Smith, Arkansas. The acquisition cost was approximately $3.5 million.
In May 1997, the Company acquired substantially all of the assets of
Texarkana Broadcasting, Inc., the owners and operators of two FM radio stations
in Texarkana, Texas. The purchase price was approximately $5.0 million.
In May 1997, the Company acquired substantially all of the assets Taylor
Communications Corporation's two radio stations (one FM and one AM) in the
Tuscaloosa, Alabama market. The stations were managed by Osborn pursuant to a
local marketing agreement ("LMA") since December 1996. The acquisition cost was
approximately $1.3 million.
In June 1997, Capstar Broadcasting executed an agreement with GulfStar
whereby in July 1997, Capstar Broadcasting acquired GulfStar through a merger
(the "GulfStar Merger") (See Note 1). The Company also repaid approximately
$119.5 million of GulfStar's indebtedness, which was funded with the proceeds of
the Preferred Stock Offering (as hereinafter defined), the Hicks Muse GulfStar
Equity Investment (as hereinafter defined) and the Capstar BT Equity Investment
(as hereinafter defined).
In July 1997, the Company acquired substantially all of the assets of
Community Pacific Broadcasting Company L.P. ("Community Pacific"), the owner and
operator of 11 radio stations (six FM and five AM) in four markets located in
the Western United States and Iowa, including Anchorage, Alaska, Modesto and
Stockton, California, and Des Moines, Iowa. The acquisition cost was
approximately $35.9 million.
In July 1997, the Company acquired substantially all of the assets of
Cavalier Communications L.P., the owner and operator of five radio stations
(four FM and one AM) in the Roanoke/Lynchburg, Virginia market. The acquisition
cost was approximately $8.3 million.
In July 1997, the Company acquired all of the capital stock of radio
station KIOC-FM, in Beaumont, Texas. The acquisition cost was approximately $2.6
million.
In August 1997, the Company acquired substantially all of the assets of
McForhun, Inc. and Livingston, Inc., the owners and operators of two radio
stations (one FM and one AM) in the Baton Rouge, Louisiana market. The
acquisition cost was approximately $8.0 million.
9
<PAGE> 11
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In August 1997, Benchmark Communications Radio Limited Partnership, L.P.
("Benchmark") became an indirect wholly owned subsidiary of the Company through
a series of mergers and stock purchases (the "Benchmark Acquisition"). Benchmark
owns and operates 30 radio stations (20 FM and 10 AM) in 10 markets in the
Southeastern United States, including Dover, Delaware; Salibury-Ocean City,
Maryland; Montgomery, Alabama; Shreveport, Louisiana; Jackson, Mississippi;
Statesville, North Carolina; Columbia, South Carolina; Greenville, South
Carolina; Roanoke-Lynchburg, Virginia; and Westchester, Virginia markets. The
acquisition cost was approximately $192.1 million. Due to FCC ownership limits,
the four stations acquired in the Jackson, Mississippi market were sold in
October 1997, as discussed in Note 4.
In August 1997, the Company acquired substantially all of the assets of The
Madison Radio Group, the owner and operator of six radio stations (four FM and
two AM) in the Madison, Wisconsin market. The acquisition cost was approximately
$41.6 million.
In August 1997, the Company acquired substantially all of the assets of
Emerald City Radio Partners, L.P. used or useful in the operation of radio
station WNOK-FM. The acquisition cost was approximately $10.0 million.
In September 1997, the Company sold all of the outstanding capital stock of
Bryan Broadcasting Operating Company, Inc., an indirect wholly-owned subsidiary
of the Company ("BBOC"). BBOC owns and operates three radio stations (two FM and
one AM) in Bryan-College Station, Texas. The sales price was approximately
$600,000.
In September 1997, the Company acquired substantially all of the assets of
WRIS, Inc., the owner and operator of an FM radio station in the Salem, Virginia
market. The acquisition cost was approximately $3.4 million.
In September 1997, the Company acquired substantially all of the assets of
Booneville Broadcasting Company and Arklahoma Communications Company
(collectively, "Booneville"), the owners and operators of an FM radio station in
the Fort Smith, Arkansas market. The acquisition cost for Booneville was
approximately $1.6 million.
In September 1997, the Company contributed substantially all of the assets
of radio station WJBR-FM in Wilmington, Delaware to a newly formed limited
liability corporation.
For financial statement purposes, all of the acquisitions described above,
except for the GulfStar Merger, were accounted for using the purchase method of
accounting, with the purchase price allocated to the assets acquired
(principally intangible assets) and the liabilities assumed based on their
estimated fair values at the dates of acquisition. Certain of the recent
transactions are based on preliminary estimates of the fair value of the net
assets acquired and subject to final adjustment. The excess purchase price over
the estimated fair value of the net assets acquired has been recorded as FCC
licenses and goodwill. The assets and liabilities of these acquisitions and the
results of their operations and cash flows for the period from the date of
acquisition are included in the accompanying consolidated financial statements.
10
<PAGE> 12
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Unaudited proforma results of the Company for the aforementioned
acquisitions and dispositions which were completed during the nine months ended
September 30, 1997, as if they were purchased or sold on January 1, 1996 are as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net revenue................................................. 152,332 141,924
======== ========
Loss before extraordinary item.............................. (35,066) (28,652)
======== ========
Net loss before dividend and accretion on preferred stock... (37,360) (29,398)
======== ========
</TABLE>
NOTE 4 -- PENDING ACQUISITIONS AND DISPOSITION (AS OF SEPTEMBER 30, 1997)
In January 1997, the Company agreed to acquire substantially all of the
assets of Commonwealth Broadcasting of Arizona, L.L.C. ("Commonwealth").
Commonwealth owns and operates three radio stations (two FM and one AM) in Yuma,
Arizona. The purchase price will equal approximately $5.3 million payable in
cash. The Company has secured its obligation to consummate the acquisition by
placing into escrow a letter of credit in the amount of $262,500. The Company
anticipates that the acquisition will be consummated in January 1998.
In March 1997, the Company acquired an option to acquire substantially all
of the assets of Noalmark Broadcasting Corporation used or held for use in the
operation of two radio stations (one FM and one AM) in Longview, Texas. The
purchase price will equal approximately $2.4 million, payable in cash, of which
$1.0 million was paid in cash by the Company on the date of the agreement and
the Company has agreed to make payments at the closing under two noncompete
agreements in an aggregate amount equal to $800,000. In most circumstances, the
option payment is not refundable. The Company may exercise its option, in its
sole discretion, on or before March 2000. The Company and Noalmark entered into
an LMA in connection with the two stations, pursuant to which the Company
provides certain sales, programming and marketing services for the stations.
In June 1997, the Company agreed to acquire substantially all of the assets
of Quass Broadcasting Company ("Quass"). Quass owns and operates three radio
stations (two FM and one AM). The purchase price will equal approximately $14.9
million payable in cash. The Company has secured its obligation to consummate
the acquisition by placing into escrow a letter of credit in the amount of
$750,000. Subsequent to September 30, 1997, Quass has entered into an LMA, with
a third party, in connection with the AM station referred to above. The Company
anticipates that the acquisition will be consummated in January 1998.
In June 1997, the Company entered into an agreement to acquire all of the
outstanding preferred stock, common stock and common stock equivalents of
Patterson Broadcasting, Inc. ("Patterson"). The purchase price will equal
approximately $215.0 million payable in cash. The Company secured its obligation
to consummate the acquisition by placing into escrow a letter of credit in the
amount of $10 million. Patterson owns and operates 39 radio stations (25 FM and
14 AM) in the Savannah, Georgia; Allentown and Harrisburg, Pennsylvania; Fresno,
California; Honolulu, Hawaii; Battle Creek and Grand Rapids, Michigan; Reno,
Nevada; Springfield, Illinois; and Pensacola, Florida markets. FCC approval is
pending and the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, has not yet terminated. The U.S.
Department of Justice has raised an issue with the Company regarding the number
of radio stations that the Company will own in the Allentown-Bethlehem,
Pennsylvania area upon completion of the acquisition. In order to resolve this
matter, the Company has agreed with the U.S. Department of Justice to dispose of
two radio stations to
11
<PAGE> 13
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
be acquired from Patterson in the Allentown-Bethlehem, Pennsylvania area. The
Company has already signed an agreement with Clear Channel Communications, Inc.
to dispose of these stations. The Company anticipates that the acquisition will
be consummated in February 1998.
In June 1997, the Company agreed to acquire substantially all of the assets
of Grant Radio Group, L.L.C. ("Grant"). Grant owns and operates one FM radio
station in Tuscaloosa, Alabama. The purchase price will equal approximately $3.2
million payable in cash. The Company has secured its obligation to consummate
the acquisition by placing into escrow cash in the amount of $160,000. The
Company anticipates that the acquisition will be consummated in December 1997.
In June 1997, the Company agreed to acquire substantially all of the assets
of Knight Radio, Inc., Knight Communications Corporation and Knight Broadcasting
of New Hampshire, Inc. (collectively, "Knight Quality"). Knight Quality owns and
operates eight radio stations (five FM and three AM) in various markets
including Portsmouth-Rochester and Manchester, New Hampshire, Burlington,
Vermont and Worcester, Massachusetts. The purchase price will equal
approximately $55 million payable in cash. The Company anticipates that the
acquisition will be consummated in January 1998.
In July 1997, the Company agreed to acquire substantially all the assets
used or useful in the operation of radio station KEPG-FM in Victoria, Texas. The
purchase price will equal approximately $32,500 payable in cash. There is
pending litigation not involving the Company regarding the FCC license for this
radio station which may affect the Company's ability to consummate the
acquisition. The Company can not predict when this matter will be resolved.
In August 1997, the Company agreed to acquire all of the assets of KOSO,
Inc. used or held for use in the operation of radio station KOSO-FM, in
Patterson, California. The purchase price will equal approximately $6.8 million.
The Company has secured its obligation to consummate the acquisition by placing
into escrow a letter of credit in the amount of $400,000. The Company expects
the acquisition to be consummated in January 1998.
In August 1997, the Company agreed to acquire all of the assets of KRNA,
Inc. used or held for use in the operation of radio station KRNA-FM in Iowa
City, Iowa. The purchase price will equal approximately $7.0 million. The
Company has secured its obligation to consummate the acquisition by placing into
escrow a letter of credit in the amount of $350,000. The Company expects the
acquisition to be consummated in January 1998.
In August 1997, the Company agreed to acquire all of the assets of KRNA,
Inc. used or held for use in the operation of radio station KXMX-FM, in Cedar
Rapids, Iowa. The purchase price will equal approximately $3.1 million. The
Company has secured its obligation to consummate the acquisition by placing into
escrow a letter of credit in the amount of $155,000. The Company expects the
acquisition to be consummated in January 1998.
In September 1997, the Company agreed to acquire all of the assets of East
Penn Broadcasting Company, Inc., a Delaware corporation, used or held for use in
the operation of an AM radio station in Allentown, Pennsylvania. The purchase
price will equal approximately $2.1 million, with approximately $1.0 million
payable in cash at closing and approximately $1.0 million in an unsecured
promissory note payable to seller. The Company has secured its obligation to
consummate the acquisition by placing into escrow a letter of credit in the
amount of $155,000. The Company currently provides certain sales and marketing
services to this station pursuant to a Joint Sales Agreement. The Company
expects the acquisition to be consummated in January 1998.
In September 1997, the Company agreed to acquire all of the assets of
McCarthy Wireless, Inc., a California corporation, used or held for use in the
operation of radio stations KNCQ-FM in Redding, California, KEWB-FM in Anderson,
California and KEGR-FM in Red Bluff, California. The purchase
12
<PAGE> 14
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
price will equal approximately $6.2 million payable in cash. The Company has
secured its obligation to consummate the acquisition by placing into escrow a
letter of credit in the amount of $325,000. The Company expects the acquisition
to be consummated in January 1998.
In October 1997, the Company acquired substantially all of the assets of
Ameron Broadcasting, Inc., the owner and operator of three radio stations (two
FM and one AM) in the Birmingham, Alabama market. The acquisition cost for the
assets of Ameron was approximately $32.6 million in cash.
In October 1997, the Company acquired substantially all of the assets of
Griffith Broadcasting, Inc., the owner and operator of three FM radio stations
in the Huntsville, Alabama market. The acquisition cost was approximately $5.8
million in cash.
In October 1997, the Company acquired substantially all of the assets of
American General Media of Texas, Inc., the owner and operator of one FM radio
station in the Lubbock, Texas market. The purchase price was approximately $3.4
million in cash.
In October 1997, the Company acquired substantially all of the assets of
KLAW Broadcasting, Inc., the owner and operator of two FM radio stations in
Lawton, Oklahoma market. The acquisition cost was approximately $2.5 million in
cash.
In October 1997, the Company acquired substantially all of the assets of
KJEM-FM, the owner and operator of one FM radio station in the Fayetteville,
Arkansas market. The acquisition cost was approximately $2.0 million in cash.
In October 1997, the Company agreed to acquire all of the assets of Big
Chief Broadcasting Co., an Arkansas corporation, used or held for use in the
operation of radio stations KTCS-AM/FM in Ft. Smith, Arkansas. The purchase
price will equal approximately $9.0 million payable in cash. The Company has
secured its obligation to consummate the acquisition by placing into escrow a
letter of credit in the amount of $450,000. The closing is to be held after the
consent of the FCC to assign the broadcast license, and the Company expects the
acquisition to be consummated in January 1998.
In October 1997, the Company agreed to acquire all of the assets of Class
Act of Texas, Inc., a Texas corporation, used or held for use in the operation
of radio stations KTBQ-FM and KSFA-AM in Lufkin, Texas. The purchase price will
equal approximately $700,000 payable in cash. The Company has secured its
obligation to consummate the acquisition by placing into escrow a letter of
credit in the amount of $50,000. FCC approval is pending. The Company expects
the acquisition to be consummated in January 1998.
In October 1997, the Company entered into an agreement to sell
substantially all of the assets of four stations (two FM and two AM) in the
Jackson, Mississippi market to Clear Channel Radio, Inc. for approximately $20.0
million.
In October 1997, the Company agreed to acquire all of the assets of radio
station WMHS (FM) in the Montgomery, Alabama market from Joan Reynolds d/b/a
Bradley Broadcasting Associates. Currently, the Company is operating WMHS (FM)
under a LMA. The purchase price for WMHS (FM) is approximately $2.0 million. The
Company expects the acquisition to be consummated in January 1998.
In November 1997, the Company agreed to acquire substantially all of the
assets of KATQ Radio, Inc. used or held for use in the operation of two radio
stations (one FM and one AM) in the Texarkana, Texas/Arkansas market. The
purchase price will equal approximately $640,000. The Company has secured its
obligation to consummate the acquisition by placing into escrow a letter of
credit in the amount of $30,000. The Company and KATQ Radio, Inc. expect to file
an application with the FCC for
13
<PAGE> 15
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approval to transfer control of such radio stations to the Company in November
1997. The Company expects the acquisition to be consummated in the first quarter
of 1998.
In November 1997, the Company agreed to acquire substantially all of the
assets of Americom II used or held for use in the operation of three radio
stations (two FM and one AM) in the Fresno, California market. The purchase
price will approximate $21.0 million. The Company has secured its obligation to
consummate the acquisition by placing into escrow a letter of credit in the
amount of $1.05 million. The Company and Americom II expect to file an
application with the FCC for approval to transfer control of such radio stations
to the Company in November 1997. The Company expects the acquisition to be
consummated in the first quarter of 1998.
In November 1997, the Company agreed to exchange substantially all of the
assets used or useful in the Company's operation of three radio stations (two FM
and one AM) in the Reno, Nevada market for substantially all of the assets used
in Americom Las Vegas Limited Partnership's operation of a FM radio station in
the Fresno, California market. The three stations to be exchanged by the Company
will be acquired from Patterson Broadcasting, Inc. in February 1998. The Company
has secured its obligation to consummate the exchange by placing into escrow a
letter of credit in the amount of $300,000. The Company and Americom Las Vegas
Limited Partnership expect to file an application with the FCC for approval to
transfer control of the radio stations in November 1997. The Company expects the
exchange to be consummated in the first quarter of 1998. The agreement with
Americom II and the agreement with Americom Las Vegas Limited Partnership are
conditioned upon the simultaneous consummation of the other agreement.
In November 1997, the Company sold substantially all of the assets of radio
station KASH-AM in Anchorage, Alaska to Chinook Concert Broadcasting, Inc. The
selling price was approximately $135,000 in cash.
In November 1997, the Company acquired substantially all of the assets of
COMCO Broadcasting, Inc. ("COMCO"), the owner and operator of six radio stations
(four FM and two AM) in the Anchorage and Fairbanks, Alaska markets. The
purchase price was approximately $6.7 million in cash.
As part of the Company's ongoing acquisition strategy, the Company is
continually evaluating certain other potential acquisition opportunities. As of
November 13, 1997, the Company has entered into 11 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.
NOTE 5 -- LONG-TERM DEBT
On February 20, 1997, in connection with the acquisition of Osborn, the
Company issued $277.0 million in aggregate principal amount at maturity of its
12 3/4% Senior Discount Notes due 2009. The Capstar Notes were issued at a
substantial discount from their aggregate principal amount at maturity under an
Indenture dated as of February 20, 1997 (the "Indenture"), between the Company
and U.S. Trust Company of Texas, N.A., as trustee, generating gross proceeds to
the Company of approximately $150.3 million. On September 12, 1997, the Company
exchanged its 12 3/4% Senior Discount Notes due 2009 (the "Capstar Notes"),
which were registered under the Securities Act of 1933 (the "Securities Act"),
for all of the outstanding 12 3/4% Senior Discount Notes due 2009 previously
issued on February 20, 1997. The terms of the Capstar Notes are identical in all
material respects to the discount notes issued on February 20, 1997, except that
the Capstar Notes do not bear restrictive legends restricting the transfer
thereof. The Capstar Notes are general unsecured senior obligations of
14
<PAGE> 16
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company, which will mature on February 1, 2009. No interest will accrue on
the Capstar Notes prior to February 1, 2002. Thereafter, interest on the Capstar
Notes will accrue at an annual rate of 12 3/4% and will be payable semi-annually
in cash on February 1 and August 1 each year, commencing on August 1, 2002 to
holders of record on the immediately preceding January 15 and July 15. The
Capstar Notes are redeemable at the option of the Company, in whole or in part,
at any time and from time to time on or after February 1, 2002 at the redemption
prices set forth in the Indenture, plus, without duplication, accrued and unpaid
interest to the redemption date. In addition, prior to February 1, 2001, the
Company, at its option, may 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 aggregate principal amount at
maturity of the Capstar Notes at a redemption price of 112.75%; provided,
however, that after any such redemption, there is outstanding at least 75% of
the original aggregate principal amount at maturity of the Capstar Notes.
On June 17, 1997, Capstar Radio issued (the "Capstar Radio Notes Offering")
$200.0 million in aggregate principal amount of its 9 1/4% Senior Subordinated
Notes due 2007. The proceeds from the issuance of such subordinated notes were
used to finance acquisitions by the Company during the quarter ended September
30, 1997. On September 16, 1997, the Company exchanged its 9 1/4% Senior
Subordinated Notes due 2007 (the "1997 Notes"), which were registered under the
Securities Act, for all of the outstanding 9 1/4% Senior Subordinated Notes due
2007 previously issued on June 17, 1997. The terms of the 1997 Notes are
identical in all material respects to the subordinated notes issued on June 17,
1997, except that the 1997 Notes do not bear restrictive legends restricting the
transfer thereof. The 1997 Notes, which mature on July 1, 2007, are general
unsecured obligations of Capstar Radio and rank pari passu in right of payment
to Capstar Radio's 13 1/4% Senior Subordinated Notes due 2003 (the "1995
Notes"). Interest on the 1997 Notes is payable semi-annually on January 1 and
July 1 of each year, commencing on January 1, 1998. The 1997 Notes are
redeemable at the option of Capstar Radio, in whole or in part, on or after July
1, 2002, at the redemption prices set forth in the indenture governing the 1997
Notes, plus accrued and unpaid interest to the date of redemption. In addition,
prior to July 1, 2001, Capstar Radio may, at its option, redeem up to 25% of the
aggregate principal amount of the 1997 Notes originally issued with the net cash
proceeds of one or more Public Equity Offerings or Major Asset Sales (both as
defined in the indenture governing the 1997 Notes), at the redemption prices set
forth in the indenture; provided, however, that after any such redemption there
is outstanding at least 75% of the aggregate principal amount of the 1997 Notes
originally issued.
On February 20, 1997, the Company and Capstar Radio, as borrower, entered
into a credit facility (the "Former Credit Facility") with various banks and
Bankers Trust Company, as administrative agent, which consisted of a $50.0
million revolving loan facility. On August 12, 1997, the Company amended and
restated the Former Credit Facility (the "Credit Facility"). The Credit Facility
consists of a $200.0 million revolving loan facility, and an additional $150
million of multiple advancing term loans subject to future commitment
availability from the banks party to the Credit Facility. $75.0 million of the
revolving loan facility is available to Capstar Radio for the issuance of
letters of credit. Indebtedness under the Credit Facility is collateralized by
the grant of a first priority perfected pledge of Capstar Radio's assets,
including, without limitation, the capital stock of its subsidiaries. The
Company, Capstar Broadcasting and all of the direct and indirect subsidiaries of
the Company (other than Capstar Radio) have guaranteed the Credit Facility,
which guarantees have been collateralized by grants of a first priority
perfected pledge of substantially all of their assets, including Capstar
Broadcasting's pledge of capital stock of the Company and the Company's pledge
of the capital stock of Capstar Radio. Borrowings under the Credit Facility bear
interest at floating rates and require interest payments on varying dates
depending on the interest rate option selected by Capstar Radio. All loans
outstanding under the Credit Facility will mature in 2004. As of November 12,
1997, a principal balance of $72.2 million (excluding $19.9 million of
outstanding letters of credit) was
15
<PAGE> 17
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
outstanding under the Credit Facility and approximately $106.7 million would
have been available for borrowing thereunder.
NOTE 6 -- STOCKHOLDER'S EQUITY
At various dates during 1997, the Company issued 82,332,959 shares of Class
A Common Stock, par value $0.1 per share ("Class A Common Stock"), of the
Company and 18,181,818 shares of Class B Common Stock, par value $.01 per share
("Class B Common Stock"), of the Company to affiliates of Hicks, Muse, Tate &
Furst Incorporated ("Hicks Muse") at a purchase price ranging from $1.10 to
$1.33 per share. The net proceeds were used in part to fund various acquisitions
and retire existing indebtedness of the Company and the companies that were
acquired.
Additionally, the Company issued 1,327,272 shares of Class A Common Stock
to related parties in exchange for cash and receivables totaling $1.4 million.
The Company issued 2,727,272 and 909,091 shares of Class A Common Stock at
a purchase price of $1.10 per share in April and June 1997, respectively. The
proceeds of the sales of common stock of the Company are to be used in future
acquisitions and for general corporate purposes.
On June 17, 1997, the Company issued (the "Preferred Stock Offering")
1,000,000 shares of its 12% Senior Exchangeable Preferred Stock. All of the
proceeds from the Preferred Stock Offering were used to finance the GulfStar
Merger. On September 12, 1997, the Company exchanged its 12% Senior Exchangeable
Preferred Stock (the "Senior Exchangeable Preferred Stock"), which was
registered under the Securities Act, for all of the outstanding 12% Senior
Exchangeable Preferred Stock previously issued on June 17, 1997. The terms of
the Senior Exchangeable Preferred Stock are identical in all material respects
to the preferred stock issued on June 17, 1997, except that the Senior
Exchangeable Preferred Stock does not bear restrictive legends restricting the
transfer of such stock. Dividends on the Senior Exchangeable Preferred Stock
accumulate from the date of issuance and are payable semi-annually, commencing
January 1, 1998, at a rate per annum of 12% of the liquidation preference per
share. Dividends may be paid, at the Company's option, on any dividend payment
date occurring on or prior to July 1, 2002 either in cash or in additional
shares of the Senior Exchangeable Preferred Stock. The liquidation preference of
the Senior Exchangeable Preferred Stock is $100.00 per share. The Senior
Exchangeable Preferred Stock is redeemable at the Company's option, in whole or
in part at any time on or after July 1, 2002, at the redemption prices set forth
in the Certificate of Designation governing the Senior Exchangeable Preferred
Stock, plus, without duplication, accumulated and unpaid dividends to the date
of redemption. In addition, subject to certain exceptions, prior to July 1,
2001, the Company may, at its option, redeem the Senior Exchangeable Preferred
Stock with the net cash proceeds from one or more Public Equity or Major Asset
Sales (both as defined in the Certificate of Designation governing the Senior
Exchangeable Preferred Stock), at the redemption prices set forth in the
Certificate of Designation, plus, without duplication, accumulated and unpaid
dividends to the redemption date.
Effective June 20, 1997, Capstar Broadcasting acquired all of the issued
and outstanding common stock of the Company in exchange for common stock of
Capstar Broadcasting.
In July 1997, the Company received payments on receivables from
stockholders of approximately $405,000.
In connection with the July 1997 GulfStar Merger (see "Item 1. Financial
Statements -- Note 1"), the Company recorded $5.4 million relating to the
premium paid for the redemption of GulfStar's preferred stock.
16
<PAGE> 18
CAPSTAR BROADCASTING PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In September 1997, the Company declared and paid to Capstar Broadcasting
cash dividends totaling approximately $765,000 million relating to the proceeds
from the disposition of three stations in the Bryan, Texas markets.
In September 1997, the Company declared a dividend to Capstar Partners for
$11.6 million.
In June 1997, the Company amended its Certificate of Incorporation to
increase the number of authorized shares of Common Stock to 300,000,000 shares.
NOTE 7 -- DIRECT PROGRAMMED MUSIC AND ENTERTAINMENT
The Company, through Southern Star distributes programmed music (primarily
MUZAK) in certain markets in the southeast. Revenue and costs associated with
the distribution of the programmed music are included in gross broadcast revenue
and direct programmed music and entertainment, respectively, in the 1997
consolidated statement of operations from the date of the acquisition in
February 1997.
NOTE 8 -- EXTRAORDINARY ITEM
On February 20, 1997, in connection with the financing of the acquisition
of Osborn, the Company repaid its outstanding loan balance (including principal
and interest) under the senior credit facility (the "AT&T Credit Facility") of
Capstar Radio with AT&T Commercial Finance Corporation and recognized an
extraordinary loss of approximately $868,000 as a result of the write off of
unamortized deferred financing costs plus a prepayment penalty. In July 1997 and
in connection with the GulfStar merger, the Company recorded an extraordinary
loss on early extinguishment of certain GulfStar debt of approximately $1.4
million.
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<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion of the consolidated financial condition and
results of operations of the Company should be read in conjunction with the
consolidated financial statements and related notes thereto. The following
discussion contains certain forward-looking statements that reflect the
Company's current views with respect to future events and financial performance
and involve risks and uncertainties. The words "anticipate," "believe,"
"expect," "plan," "intend," "estimate," "project," "will," "could," "may" and
similar expressions are intended to identify forward looking statements. The
Company's actual results could differ materially and adversely from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, risks and uncertainties relating to leverage,
the need for additional funds, consummation of the pending acquisitions,
integration of the recently completed acquisitions, the ability of the Company
to achieve certain cost savings, the ability of the Company to compete
effectively, the management of growth, the introduction of new technology,
changes in the regulatory environment, the popularity of radio as a broadcasting
and advertising medium and changing consumer tastes. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements that may be made to reflect any future events or
circumstances.
THE COMPANY
As of September 30, 1997, the Company currently owns and operates, provides
programming to or sells advertising on behalf of 165 radio stations located in
43 markets. This represents growth from June 3, 1997 of 95 radio stations and 25
markets. Following completion of the pending acquisitions and the pending
dispositions, the Company will own and operate, provide programming to or sell
advertising on behalf of 245 radio stations located in 61 markets.
The performance of a radio station group, such as the Company, is
customarily measured by its ability to generate Broadcast Cash Flow. "Broadcast
Cash Flow" is defined as operating income before corporate expenses, noncash
compensation expense and depreciation and amortization. Although Broadcast Cash
Flow is not a measure of performance calculated in accordance with generally
accepted accounting principles ("GAAP"), the Company believes that Broadcast
Cash Flow is accepted by the broadcasting industry as a generally recognized
measure of performance and is used by analysts who report publicly on the
performance of broadcasting companies. Nevertheless, this measure should not be
considered in isolation or as a substitute for operating income, net income, net
cash provided by operating activities or any other measure for determining the
Company's operating performance or liquidity which is calculated in accordance
with GAAP.
The primary source of the Company's revenue is the sale of advertising time
on its radio stations. The Company's most significant station operating expenses
are employee salaries and commissions, programming expenses and advertising and
promotional expenditures. The Company strives to control these expenses by
working closely with local station management.
The Company's revenues are primarily affected by the advertising rates its
radio stations can obtain in the face of competition from radio and other media.
The Company's advertising rates are in large part based on a station's ability
to attract audiences in the demographic groups targeted by its advertisers, as
measured principally by Arbitron (an independent rating service) on a quarterly
basis. Because audience ratings in local markets are crucial to a station's
financial success, the Company endeavors to develop strong listener loyalty. The
Company believes that the diversification of formats on its stations helps to
insulate it from the effects of changes in the musical tastes of the public in
any particular format. The number of advertisements that can be broadcast
without jeopardizing listening levels (and the resulting ratings) is limited in
part by the format of a particular station. The Company's stations strive to
maximize revenue by constantly managing the number of commercials available for
sale and adjusting prices based upon local competitive conditions. In the
broadcasting industry, radio stations often utilize trade (or barter) agreements
which exchange advertising time for goods or
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<PAGE> 20
services (such as travel or lodging), instead of for cash. The Company seeks to
minimize its use of such agreements. The Company's advertising contracts are
generally short-term. Advertising revenue is either from local advertising or
national advertising. To generate national advertising sales, the Company
engages independent advertising sales representatives that specialize in
national sales for each of its stations.
The radio broadcasting industry is highly competitive and the Company's
stations are located in highly competitive markets. The financial results of
each of the Company's stations are dependent to a significant degree upon its
audience ratings and its share of the overall advertising revenue within the
station's geographic market. Each of the Company's stations competes for
audience share and advertising revenue directly with over FM and AM radio
stations, as well as with other media, including newspapers and television,
within their respective markets. The Company's audience ratings and market share
are subject to change, and any adverse change in audience rating and market
share in any particular market could have a material and adverse effect on the
Company's net revenues. Although the Company competes with other radio stations
with comparable programming formats in most of its markets, if another station
in the market were to convert its programming format to a format similar to one
of the Company's radio stations, if a new radio 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 or
advertising revenue and could require increased promotional and other expenses.
In addition, certain of the Company's stations compete, and in the future other
stations may compete, with groups of stations in a market operated by a single
operator. As a result of the Telecommunication Act of 1996 (the "Telecom Act")
the radio broadcasting industry has become increasingly consolidated, resulting
in the existence of radio broadcasting companies which are significantly larger,
with greater financial resources, than the Company. Furthermore, the Telecom Act
will permit other radio broadcasting companies to enter the markets in which the
Company operates or may operate in the future. Although the Company believes
that each of its stations is able to compete effectively in its market, there
can be no assurance that any of the Company's stations will be able to maintain
or increase current audience ratings and advertising revenue market share. The
Company's stations also compete with other advertising media such as newspapers,
television, magazines, billboard advertising, transit advertising and direct
mail advertising. Radio broadcasting is also subject to competition from new
media technologies that are being developed or introduced, such as the delivery
of audio programming by cable television systems or the introduction of digital
audio broadcasting. The Company cannot predict the effect, if any, which these
technologies may have on the radio broadcasting industry.
The Company's revenues vary throughout the year. As is typical in the radio
broadcasting industry, the Company's first calendar quarter generally produces
the lowest revenues for the year, and the fourth calendar quarter generally
produces the highest revenues for the year. The Company's radio operating
results in any period may be affected by the incurrence of advertising and
promotion expenses that do not necessarily produce commensurate revenues until
the impact of the advertising and promotion is realized in future periods. The
Company anticipates that the second and third quarters will reflect the highest
revenues from the Company's concert promotion activities.
Because the Company has incurred substantial indebtedness for its
acquisitions for which it has significant debt service requirements, and because
the Company has significant charges for noncash compensation, dividends and
accretion on preferred stock and depreciation and amortization expense related
to the fixed assets and intangibles acquired in its acquisitions, the Company
expects that it will report net losses attributable to common stock for the
foreseeable future, which losses may be greater than those historically
experienced by the Company.
RESULTS OF OPERATIONS
The Company's consolidated financial statements tend not to be directly
comparable from period to period due to acquisition and disposition activity.
The major acquisitions in 1997, all of which have
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<PAGE> 21
been accounted for using the purchase method of accounting, except for the
GulfStar Merger, and major dispositions were as follows:
In January 1997, the Company acquired substantially all of the assets of
Triple Communications of CC, Inc., the owner of radio station KNCN-FM in Corpus
Christi, Texas. The acquisition cost was approximately $2.5 million.
In February 1997, the Company acquired substantially all of the assets of
South Plain Broadcasting Company, Inc., the owner of radio stations KZII(FM) and
KFYO(AM) in Lubbock, Texas. The acquisition cost was approximately $3.2 million.
In February 1997, the Company acquired substantially all of the assets of
J.Thomas Development of N.M., Inc., et. al., owners of radio stations KTRA-FM
and KDAG-FM in Farmington, New Mexico, KCQL-AM in Aztec, New Mexico and KKFG-FM,
Bloomfield, New Mexico. The acquisition cost was approximately $6.3 million.
In February 1997, the Company acquired Osborn Communications Corporation
("Osborn"), subsequently renamed Southern Star Communications, Inc. ("Southern
Star"). Osborn owned and operated or provided services to 17 stations (11 FM and
6 AM). The acquisition cost was approximately $102.9 million, including
1,636,361 shares of common stock (having a deemed value of $1.10 per share).
In March 1997, the Company acquired from Noalmark Broadcasting Corporation
substantially all of the assets used or held for use in the operation of radio
stations KKIX-FM and KKZQ-FM in the Fayetteville and Lowell, Arkansas markets,
respectively. The acquisition cost was approximately $11.5 million.
In April 1997, the Company acquired substantially all of the assets of City
Broadcasting Co., Inc. (the "City Acquisition"), the owner and operator of two
radio stations (one FM and one AM), for approximately $3.0 million, EZY Com,
Inc., (the "EZY Acquisition"), the owner and operator of two radio stations (one
FM and one AM) for approximately $5.0 million and Roper Broadcasting, Inc. (the
"Roper Acquisition"), the owner and operator of one FM station for approximately
$4.0 million (the City Acquisition, EZY Acquisition and the Roper Acquisition
are collectively referred to as the "Space Coast Acquisitions"). The radio
stations acquired in the Space Coast Acquisitions serve the
Melbourne-Titusville-Cocoa, Florida Market.
In April 1997, the Company sold substantially all of the assets of three
radio stations (two FM and one AM) in the Ft. Myers, Florida market. The sales
price was approximately $11.0 million.
In May 1997, the Company acquired all of the outstanding capital stock of
Dixie Broadcasting, Inc. and Radio WBHP, Inc., the owners and operators of three
radio stations (one FM and two AM) in the Huntsville, Alabama market. The
acquisition cost was approximately $23.0 million.
In May 1997, the Company acquired substantially all of the assets of Fort
Smith FM, Inc., the owner and operator of two radio stations (one FM and one AM)
in Fort Smith, Arkansas. The acquisition cost was approximately $3.5 million.
In May 1997, the Company acquired substantially all of the assets of
Texarkana Broadcasting, Inc., the owners and operators of two FM radio stations
in Texarkana, Texas. The purchase price was approximately $5.0 million.
In May 1997, the Company acquired substantially all of the assets Taylor
Communications Corporation's two radio stations (one FM and one AM) in the
Tuscaloosa, Alabama market. The stations were managed by Osborn pursuant to a
local marketing agreement ("LMA") since December 1996. The acquisition cost was
approximately $1.3 million.
In June 1997, Capstar Broadcasting executed an agreement with GulfStar
whereby in July 1997, Capstar Broadcasting acquired GulfStar through a merger
(the "GulfStar Merger") (see Note 1). The Company also repaid approximately
$119.5 million of Gulfstar's indebtedness, which was funded with
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<PAGE> 22
the proceeds of the Preferred Stock Offering, the Hicks Muse Gulfstar Equity
Investment and the Capstar BT Equity Investment.
In July 1997, the Company acquired substantially all of the assets of
Community Pacific Broadcasting Company L.P. ("Community Pacific"), the owner and
operator of 11 radio stations (six FM and five AM) in four markets located in
the Western United States and Iowa, including Anchorage, Alaska, Modesto and
Stockton, California, and Des Moines, Iowa. The acquisition cost was
approximately $35.9 million.
In July 1997, the Company acquired substantially all of the assets of
Cavalier Communications L.P., the owner and operator of five radio stations
(four FM and one AM) in the Roanoke/Lynchburg, Virginia market. The acquisition
cost was approximately $8.3 million.
In July 1997, the Company acquired all of the capital stock of radio
station KIOC-FM, in Beaumont, Texas. The purchase price was approximately $2.6
million.
In August 1997, the Company acquired substantially all of the assets of
McForhun, Inc. and Livingston, Inc., the owners and operators of two radio
stations (one FM and one AM) in the Baton Rouge, Louisiana market. The
acquisition cost was approximately $8.0 million.
In August 1997, Benchmark Communications Radio Limited Partnership, L.P.
("Benchmark") became an indirect wholly owned subsidiary of the Company through
a series of mergers and stock purchases (the "Benchmark Acquisition"). Benchmark
owns and operates 30 radio stations (20 FM and 10 AM) in 10 markets in the
Southeastern United States, including Dover, Delaware; Salibury-Ocean City,
Maryland; Montgomery, Alabama; Shreveport, Louisiana; Jackson, Mississippi;
Statesville, North Carolina; Columbia, South Carolina; Greenville, South
Carolina; Roanoke-Lynchburg, Virginia; and Westchester, Virginia markets. The
acquisition cost was approximately $192.1 million. Due to FCC ownership limits,
the four stations acquired in the Jackson, Mississippi market were sold in
October 1997. See "Item 1. Financial Statements -- Note 4."
In August 1997, the Company acquired substantially all of the assets of The
Madison Radio Group, the owner and operator of six radio stations (four FM and
two AM) in the Madison, Wisconsin market. The acquisition cost was approximately
$41.6 million.
In August 1997, the Company acquired substantially all of the assets of
Emerald City Radio Partners, L.P. used or useful in the operation of radio
station WNOK-FM. The acquisition cost was approximately $10.0 million.
In September 1997, the Company sold all of the outstanding capital stock of
Bryan Broadcasting Operating Company, Inc., an indirect wholly-owned subsidiary
of the Company ("BBOC"). BBOC owns and operates three radio stations (two FM and
one AM) in Bryan-College Station, Texas. The sales price was approximately
$600,000.
In September 1997, the Company acquired substantially all of the assets of
WRIS, Inc., the owner and operator of an FM radio station in the Salem, Virginia
market. The acquisition cost was approximately $3.4 million.
In September 1997, the Company acquired substantially all of the assets of
Booneville Broadcasting Company and Arklahoma Communications Company
(collectively, "Booneville"), the owners and operators of an FM radio station in
the Fort Smith, Arkansas market. The acquisition cost for Booneville was
approximately $1.6 million.
In September 1997, the Company contributed substantially all of the assets
of radio station WJBR-FM in Wilmington, Virginia to a newly formed limited
liability corporation.
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<PAGE> 23
The following table presents summary consolidated financial data of the
Company (as restated) for the three months ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
OPERATING DATA:
Net broadcast revenue................................. $ 51,247,547 $ 8,648,340
Station operating expenses............................ 34,946,670 6,280,876
Corporate expenses.................................... 4,293,670 1,077,774
Depreciation and amortization......................... 7,955,512 639,744
Operating income...................................... 4,051,695 649,946
Interest expense...................................... 12,460,510 1,340,772
Net loss attributable to common stock.............. $ (27,158,361) $ (1,351,047)
OTHER DATA:
Broadcast cash flow(1)................................ $ 16,300,877 $ 2,367,464
Broadcast cash flow margin............................ 31.8% 27.4%
EBITDA(2)............................................. $ 12,007,207 $ 1,289,690
</TABLE>
- ---------------
(1) Broadcast cash flow consists of operating income before corporate expenses,
non-cash stock option compensation expense and depreciation and
amortization.
(2) EBITDA consists of operating income before depreciation and amortization.
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996
Net Broadcast Revenue. Net broadcast revenue increased $42.6 million or
492.6% to $51.2 million for the three months ended September 30, 1997 from $8.6
million for the three months ended September 30, 1996. Net broadcast revenue
increases are a result of the continuing acquisitions of the Company through
September 30, 1997.
Station Operating Expenses. Station operating expenses increased $28.7
million or 456.4% to $34.9 million for the three months ended September 30, 1997
from $6.3 million for the three months ended September 30, 1996. The increase is
attributable to additional operating expenses as a result of continuing
acquisitions of the Company through September 30, 1997.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased approximately $13.9 million or 588.5% to $16.3 million for
the three months ended September 30, 1997 from $2.4 million for the three months
ended September 30, 1996. The broadcast cash flow margin was 31.8% for the three
months ended September 30, 1997 compared to 27.4% for the three months ended
September 30, 1996.
Corporate Expenses. Corporate expenses increased approximately $3.2 million
or 298.4% to approximately $4.3 million for the three months ended September 30,
1997 from approximately $1.1 million for the three months ended September 30,
1996. This increase was primarily due to the corporate offices of the Company
which opened in October 1996 and the additional corporate expense associated
with acquired radio station operations.
Other Operating Expenses. Depreciation and amortization increased $7.3
million to $8.0 million for the three months ended September 30, 1997 from
approximately $640,000 for the three months ended September 30, 1996 primarily
due to the various acquisitions consummated during 1996 and 1997.
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<PAGE> 24
Operating Income. As a result of the factors described above, the Company's
results for the three months ended September 30, 1997 reflected an operating
income of approximately $4.1 million compared to $650,000 for the three months
ended September 30, 1996.
Interest Expense. Interest expense increased approximately $11.1 million or
829.4% to $12.5 million for the three months ended September 30, 1997 from $1.3
million for the three months ended September 30, 1996. The increase is primarily
attributable to additional borrowings under the Company's credit facility to
fund the Company's acquisitions.
Net Loss Attributable to Common Stock. As a result of the factors described
above, net loss attributable to common stock increased approximately $25.8
million to $27.2 million for the three months ended September 30, 1997 from $1.4
million for the three months ended September 30, 1996.
EBITDA. As a result of the factors described above, EBITDA increased
approximately $10.7 million or 831.0% to $12.0 million for the three months
ended September 30, 1997 from $1.3 million for the three months ended September
30, 1996. The EBITDA margin for the three months ended September 30, 1997 was
23.4% compared to 14.9% for the three months ended September 30, 1996.
The following table presents summary consolidated financial data of the
Company (as restated) for the nine months ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
OPERATING DATA:
Net broadcast revenue..................................... $ 116,403,618 $ 21,070,027
Station operating expenses................................ 78,895,202 15,908,816
Corporate expenses........................................ 9,399,031 1,035,297
Corporate expenses -- noncash compensation................ 10,817,712 --
Depreciation and amortization............................. 17,293,328 1,869,392
Operating income (loss)................................... (1,655) 2,256,522
Interest expense.......................................... 31,830,146 3,219,154
Net loss attributable to common stock.................. $ (50,196,202) $ (2,520,737)
OTHER DATA:
Broadcast cash flow(1).................................... $ 37,508,416 $ 5,161,211
Broadcast cash flow margin................................ 32.2% 24.5%
EBITDA(2)................................................. $ 17,291,673 $ 4,125,914
Net cash used in operating activities..................... $ (3,928,423) $ (675,739)
Net cash used in investing activities..................... $(409,822,075) $(15,566,163)
Net cash provided by financing activities................. $ 415,406,757 $ 17,180,685
</TABLE>
- ---------------
(1) Broadcast cash flow consists of operating income before corporate expenses,
corporate expenses -- noncash compensation expense and depreciation and
amortization.
(2) EBITDA consists of operating income before depreciation and amortization.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996
Net Broadcast Revenue. Net broadcast revenue increased $95.3 million or
452.5% to $116.4 million for the nine months ended September 30, 1997 from $21.1
million for the nine months ended September 30, 1996. Net broadcast revenue
increases are a result of continuing acquisitions through September 30, 1997.
Station Operating Expenses. Station operating expenses increased $63.0
million or 395.9% to $78.9 million for the nine months ended September 30, 1997
from $15.9 million for the nine months ended September 30, 1996. The increase is
attributable to additional station operating expenses as a result of continuing
acquisitions of the Company through September 30, 1997.
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<PAGE> 25
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased approximately $32.3 million or 626.7% to $37.5 million for
the nine months ended September 30, 1997 from $5.2 million for the nine months
ended September 30, 1996. The broadcast cash flow margin was 32.2% for the nine
months ended September 30, 1997 compared to 24.5% for the nine months ended
September 30, 1996.
Corporate Expenses. Corporate expenses, including noncash stock
compensation, increased approximately $19.2 million or 1,852.8% to approximately
$20.2 million for the nine months ended September 30, 1997 from approximately
$1.0 million for the nine months ended September 30, 1996. This increase was
primarily due to the corporate offices of the Company which opened in October
1996 and the additional corporate expense associated with radio station
operations acquired during 1996 and 1997. During the nine months ended September
30, 1997, the Company recognized approximately $10.8 million of noncash
compensation expense.
Other Operating Expenses. Depreciation and amortization increased $15.4
million to $17.3 million for the nine months ended September 30, 1997 from
approximately $1.9 million for the nine months ended September 30, 1996
primarily due to the various acquisitions consummated during 1996 and 1997.
Operating Income. As a result of the factors described above, the Company's
results for the nine months ended September 30, 1997 reflected an operating loss
of $1,655 compared to an operating income of $2.3 million for the nine months
ended September 30, 1996. The decrease is primarily attributable to the
increased depreciation and amortization expense.
Interest Expense. Interest expense increased approximately $28.6 million or
888.8% to $31.8 million for the nine months ended September 30, 1997 from $3.2
million for the nine months ended September 30, 1996. The increase is primarily
attributable to additional borrowings under the Company's credit facility to
fund the Company's acquisitions.
Net Loss Attributable to Common Stock. As a result of the factors described
above, net loss attributable to common stock increased approximately $47.7
million to $50.2 million for the nine months ended September 30, 1997 from $2.5
million for the nine months ended September 30, 1996.
EBITDA. As a result of the factors described above, EBITDA increased
approximately $13.2 million or 319.1% to $17.3 million for the nine months ended
September 30, 1997 from $4.1 million for the nine months ended September 30,
1996. The EBITDA margin for the nine months ended September 30, 1997 was 14.9%
compared to 19.6% for the nine months ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Pursuit of the Company's acquisition strategy has required a significant
portion of the Company's capital resources. See "Item 1. Financial
Statements -- Notes 3 and 4." As a result of the financing of its acquisitions,
the Company has a substantial amount of long-term indebtedness, and for the
foreseeable future, the Company will use a large percentage of its cash to make
payments under the Credit Facility, the Capstar Notes, the 1995 Notes and the
1997 Notes.
In October 1996, the Company assumed the 1995 Notes in connection with the
acquisition of Capstar Radio. The 1995 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. Beginning on May 1,
1998, the 1995 Notes will bear cash interest at a rate of 13 1/4% per annum
until maturity. The 1995 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 November 1, 1998, until maturity. On February 20, 1997, the Company issued
the Capstar Notes at a substantial discount to their aggregate principal amount
at maturity of $277.0 million. The Capstar 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. On June 17, 1997, Capstar Radio issued the 1997
Notes. Interest on the 1997 Notes is payable semi-annually on January 1 and July
1 of each year, commencing on January 1, 1998, at a rate of 9 1/4% per annum.
The 1997 Notes mature on July 1, 2007.
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<PAGE> 26
The Company entered into the Credit Facility in August 1997, which provides for,
among other things, borrowings of up to $200.0 million under a revolving credit
facility. Borrowings under the Credit Facility bear interest at floating rates
and require interest payments on varying dates depending on the interest rate
option selected by Capstar Radio. As of November 12, 1997, a principal balance
of $72.2 million (excluding $19.9 million of outstanding letters of credit) was
outstanding under the Credit Facility and approximately $106.7 million would
have been available for borrowing thereunder.
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
its pending acquisitions and, as appropriate opportunities arise, to acquire
additional radio stations. The Company intends to fund the aggregate purchase
price for its pending acquisitions with borrowings under the Credit Facility and
a combination of indebtedness of Capstar Broadcasting, Capstar Radio and/or the
Company and/or capital stock of Capstar Broadcasting or its subsidiaries. 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 indentures governing the
Capstar Notes, the 1995 Notes, the 1997 Notes and the Company's 12% Subordinated
Exchange Debentures due 2009, the Certificate of Designation governing the
Senior Exchangeable Preferred Stock and the Credit Facility. 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 its 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 the proceeds from the commitment by Hicks, Muse,
Tate & Furst Equity Fund III, L.P. ("HM Fund III") and its affiliates to invest
an additional $50.0 million in equity of Capstar Broadcasting (for which Capstar
Broadcasting has committed to issue capital stock in exchange therefor) and cash
from operating activities, together with available revolving credit borrowings
under the 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 for 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.
Net cash used in operating activities was $3.9 million and $676,000 for the
nine-month periods ended September 30, 1997 and 1996, 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 $409.8 million and $15.6 million
for the nine-month periods ended September 30, 1997 and 1996, respectively. Net
cash provided by financing activities was $415.4 million and $17.2 million for
the nine-month periods ended September 30, 1997 and 1996, respectively. These
cash flows primarily reflect the borrowings, capital contributions and
expenditures for station acquisitions and dispositions and includes the effects
of the acquisition of Capstar Radio in October 1996.
EXTRAORDINARY ITEM
In connection with the acquisition of Osborn, the Company repaid the AT&T
Credit Facility. The repayment of the AT&T Credit Facility resulted in an
extraordinary loss of approximately $868,000 as a
25
<PAGE> 27
result of the write off of unamortized deferred financing costs plus a
prepayment penalty. In July 1997 and in connection with the GulfStar Merger, the
Company recorded an extraordinary loss on early extinguishment of certain
GulfStar debt of approximately $1.4 million.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share" which establishes standards for computing and presenting earnings per
share. SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997.
In February 1997, the FASB issued SFAS No. 129 "Disclosure of Information
About Capital Structure" which establishes disclosure requirements for an
entity's capital structure. SFAS No. 129 is effective for financial statements
issued for periods ending after December 15, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS No. 130 is effective for fiscal years beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Restated Information," which establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS No. 131 is
effective for financial statements for periods beginning after December 15,
1997.
Management does not believe the implementation of SFAS No. 128, No. 129,
No. 130 and No. 131 will have a material effect on its consolidated financial
statements.
26
<PAGE> 28
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
On September 12, 1997, the Company exchanged its 12% Senior Exchangeable
Preferred Stock (the "New Senior Exchangeable Preferred Stock"), which was
registered under the Securities Act of 1933, for all of the outstanding 12%
Senior Exchangeable Preferred Stock previously sold on June 17, 1997 (the
"Original Senior Exchangeable Preferred Stock") in reliance on Section 4(2) of
the Securities Act and the rules and regulations promulgated thereunder. The
terms of the New Senior Exchangeable Preferred Stock are identical in all
material respects to the Original Senior Exchangeable Preferred Stock, except
that the New Senior Exchangeable Preferred Stock does not bear restrictive
legends restricting the transfer of such stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 -- Amendment No. 11 to Indenture, dated as of April 21,
1995, among Capstar Radio Broadcasting Partners, Inc.
("Capstar Radio"), IBJ Schroeder Bank & Trust Company, as
Trustee, and the guarantors named therein, governing
Capstar Radio's 13 1/4% Senior Subordinated Notes due
2003.*
10.1 -- Agreement and Plan of Merger dated June 16, 1997, by and
among GulfStar Communications, Inc., Capstar Broadcasting
Corporation ("Capstar Broadcasting"), CBC-GulfStar Merger
Sub, Inc. and the stockholders listed therein. (1)
10.2 -- First Amendment to Employment Agreement dated February
14, 1997, effective July 1, 1997, among the Registrant,
Capstar Broadcasting and R. Steven Hicks.*
10.3 -- Employment Agreement dated July 1, 1997, between Capstar
Broadcasting and Paul D. Stone. (1)
10.4 -- Employment Agreement dated July 1, 1997, between Capstar
Broadcasting and William S. Banowsky, Jr. (1)
10.5 -- Not used.
10.6 -- Employment Agreement dated September 22, 1997, between
Capstar Broadcasting and Steven Dinetz.*
10.7 -- Employment Agreement dated September 22, 1997, between
Capstar Broadcasting and Eric W. Neumann.*
27 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Previously filed.
(1) Incorporated by reference to the Registrant's Amendment No. 1 to
Registration Statement on Form S-4 (File No. 333-25683), dated July 8, 1997.
(b) Reports on Form 8-K
During the quarter ended September 30, 1997, the following reports on Form
8-K were filed:
Current Report on Form 8-K/A dated May 1, 1997, relating to the Company's
acquisition of Dixie Broadcasting, Inc. and Radio WBHP, Inc. Item 7 was
reported.
Current Report on Form 8-K dated July 8, 1997, relating to the Company's
acquisition of GulfStar Communications, Inc. and Community Pacific Broadcasting,
L.P. Items 2 and 7 were reported.
27
<PAGE> 29
Current Report on Form 8-K/A dated July 8, 1997, relating to the Company's
acquisition of GulfStar Communications, Inc. and Community Pacific Broadcasting,
L.P. Item 7 was reported.
Current Report on Form 8-K dated August 6, 1997, relating to the Company's
acquisition of Benchmark Communications Radio Limited Partnership. Items 2 and 7
were reported.
28
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ PAUL D. STONE
----------------------------------
Paul D. Stone
Executive Vice President
Date: March 27, 1998
29
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 -- Amendment No. 11 to Indenture, dated as of April 21,
1995, among Capstar Radio Broadcasting Partners, Inc.
("Capstar Radio"), IBJ Schroeder Bank & Trust Company, as
Trustee, and the guarantors named therein, governing
Capstar Radio's 13 1/4% Senior Subordinated Notes due
2003.*
10.1 -- Agreement and Plan of Merger dated June 16, 1997, by and
among GulfStar Communications, Inc., Capstar Broadcasting
Corporation ("Capstar Broadcasting"), CBC-GulfStar Merger
Sub, Inc. and the stockholders listed therein. (1)
10.2 -- First Amendment to Employment Agreement dated February
14, 1997, effective July 1, 1997, among the Registrant,
Capstar Broadcasting and R. Steven Hicks.*
10.3 -- Employment Agreement dated July 1, 1997, between Capstar
Broadcasting and Paul D. Stone. (1)
10.4 -- Employment Agreement dated July 1, 1997, between Capstar
Broadcasting and William S. Banowsky, Jr. (1)
10.5 -- Not used.
10.6 -- Employment Agreement dated September 22, 1997, between
Capstar Broadcasting and Steven Dinetz.*
10.7 -- Employment Agreement dated September 22, 1997, between
Capstar Broadcasting and Eric W. Neumann.*
27 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
(1) Incorporated by reference to the Registrant's Amendment No. 1 to
Registration Statement on Form S-4 (File No. 333-25683), dated July 8, 1997.
<PAGE> 1
EXHIBIT 4.1
================================================================================
CAPSTAR RADIO BROADCASTING PARTNERS, 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. 11
DATED AS OF AUGUST 16, 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. 11, dated as of August 16, 1997 ("Amendment No. 11"), to
the INDENTURE, dated as of April 21, 1995, as amended (the "Indenture"), among
CAPSTAR RADIO BROADCASTING PARTNERS, 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. Benchmark Communications Holdings, Inc., a Delaware
corporation ("Benchmark Holdings"), is a wholly- owned subsidiary of the
Company, and is a Restricted Subsidiary acquired or created pursuant to Section
4.14(ii) of the Indenture. Benchmark Holdings delivers herewith the Guarantee
attached as Exhibit A to this Amendment No. 11 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,
Benchmark Holdings shall be deemed a party to the Indenture by virtue of its
execution of this Amendment No. 11 and the defined term the "Guarantor"
contained in Article 1.01 of the Indenture shall be deemed to include Benchmark
Holdings.
2. Each of Radioco I, Inc., a Maryland corporation ("Radioco I"),
Radioco II, Inc., a Maryland corporation ("Radioco II"), and BC Funds Holdings
Co., Inc., a Maryland corporation ("BC Holdings") (collectively, the "Benchmark
Holding Subsidiaries"), is a wholly-owned subsidiary of Benchmark Holdings and
indirect subsidiary of the Company, and is a Restricted Subsidiary acquired or
created pursuant to Section 4.14(ii) of the Indenture. Each Benchmark Holding
Subsidiary delivers herewith the Guarantee attached as Exhibit A to this
Amendment No. 11 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, each Benchmark Holdings
Subsidiary shall be deemed a party to the Indenture by virtue of its execution
of this Amendment No. 11 and the defined term the "Guarantor" contained in
Article 1.01 of the Indenture shall be deemed to include each Benchmark Holding
Subsidiary.
3. Benchmark Communications Radio Limited Partnership, a Maryland
limited partnership ("Benchmark Communications"), is a Restricted Subsidiary
acquired or created pursuant to Section 4.14(ii) of the Indenture. Benchmark
Holdings is the general partner and Radioco I and Radioco II are the limited
partners of Benchmark Communications. Benchmark Communications delivers
herewith the Guarantee attached as Exhibit A to this Amendment No. 11 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, Benchmark Communications shall be deemed a party to
the Indenture by virtue of its execution of this Amendment No. 11 and the
defined term the "Guarantor" contained in Article 1.01 of the Indenture shall
be deemed to include Benchmark Communications.
4. Benchmark Jackson, L.L.C., a Delaware limited liability
company ("Benchmark Jackson"), is a wholly- owned subsidiary of Benchmark
Communications and an indirect subsidiary of the Company, and is a Restricted
Subsidiary acquired or created pursuant to Section 4.14(ii) of the Indenture.
Benchmark Jackson delivers herewith the Guarantee attached as Exhibit A to this
Amendment No. 11 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, Benchmark Jackson shall be
deemed a party to the Indenture by virtue of its execution of this Amendment
No. 11 and the defined term the "Guarantor" contained in Article 1.01 of the
Indenture shall be deemed to include Benchmark Jackson.
-1-
<PAGE> 3
5. Each of Benchmark Radio Acquisition Fund I Limited
Partnership, a Maryland limited partnership ("Fund I"), Benchmark Radio
Acquisition Fund IV Limited Partnership, a Maryland limited partnership ("Fund
IV"), Benchmark Radio Acquisition Fund VII Limited Partnership, a Maryland
limited partnership ("Fund VII"), and Benchmark Radio Acquisition Fund VIII
Limited Partnership, a Maryland limited partnership ("Fund VIII")
(collectively, the "Benchmark Fund I-IV Subsidiaries"), is a Restricted
Subsidiary acquired or created pursuant to Section 4.14(ii) of the Indenture.
Benchmark Communications is the general partner and BC Holding is the limited
partner of each of the Benchmark Fund I-IV Subsidiaries. Each Benchmark Fund
I-IV Subsidiary delivers herewith the Guarantee attached as Exhibit A to this
Amendment No. 11 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, each Benchmark Fund I-IV
Subsidiary shall be deemed a party to the Indenture by virtue of its execution
of this Amendment No. 11 and the defined term the "Guarantor" contained in
Article 1.01 of the Indenture shall be deemed to include each Benchmark Fund
I-IV Subsidiary.
6. Each of Benchmark Radio Acquisition Fund IX Limited
Partnership, a Maryland limited partnership and Benchmark Radio Acquisition
Fund XI Limited Partnership, a Maryland limited partnership, (collectively, the
"Benchmark Fund IX-XI Subsidiaries"), is a Restricted Subsidiary acquired or
created pursuant to Section 4.14(ii) of the Indenture. Benchmark
Communications is the general partner and Country Heartlines, Inc., a Delaware
corporation, is the limited partner of each of the Benchmark Fund IX-XI
Subsidiaries. Each Benchmark Fund IX-XI Subsidiary delivers herewith the
Guarantee attached as Exhibit A to this Amendment No. 11 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, each Benchmark Fund IX-XI Subsidiary shall be deemed a party to the
Indenture by virtue of its execution of this Amendment No. 11 and the defined
term the "Guarantor" contained in Article 1.01 of the Indenture shall be deemed
to include each Benchmark Fund IX-XI Subsidiary.
7. Each of WDOV License Limited Partnership, a Maryland limited
partnership, WDSD License Limited Partnership, a Maryland limited partnership,
and WSRV License Limited Partnership, a Maryland limited partnership
(collectively, the "Fund I Subsidiaries"), is a Restricted Subsidiary acquired
or created pursuant to Section 4.14(ii) of the Indenture. Fund I is the
general partner and Benchmark Communications is the limited partner of each of
the Fund I Subsidiaries. Each Fund I Subsidiary delivers herewith the
Guarantee attached as Exhibit A to this Amendment No. 11 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, each Fund I Subsidiary shall be deemed a party to the Indenture by
virtue of its execution of this Amendment No. 11 and the defined term the
"Guarantor" contained in Article 1.01 of the Indenture shall be deemed to
include each Fund I Subsidiary.
8. Each of Benchmark Radio Acquisition Fund V Limited
Partnership, a Maryland limited partnership ("Fund V"), WDOV License Limited
Partnership, a Maryland limited partnership, WDSD License Limited Partnership,
a Maryland limited partnership, and WSRV License Limited Partnership, a
Maryland limited partnership (collectively, the "Fund IV Subsidiaries"), is a
Restricted Subsidiary acquired or created pursuant to Section 4.14(ii) of the
Indenture. Fund IV is the general partner and Benchmark Communications is the
limited partner of each of the Fund IV Subsidiaries. Each Fund IV Subsidiary
delivers herewith the Guarantee attached as Exhibit A to this Amendment No. 11
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, each Fund IV Subsidiary shall be deemed a party
to the Indenture by virtue of its execution of this Amendment No. 11 and the
defined term the "Guarantor" contained in Article 1.01 of the Indenture shall
be deemed to include each Fund IV Subsidiary.
-2-
<PAGE> 4
9. Each of WCOS(AM) License Limited Partnership, a Maryland
limited partnership, WCOS-FM License Limited Partnership, a Maryland limited
partnership, WHKZ License Limited Partnership, a Maryland limited partnership,
and WVOC License Limited Partnership, a Maryland limited partnership
(collectively, the "Fund V Subsidiaries"), is a Restricted Subsidiary acquired
or created pursuant to Section 4.14(ii) of the Indenture. Fund V is the
general partner and Benchmark Communications is the limited partner of each of
the Fund V Subsidiaries. Each Fund V Subsidiary delivers herewith the
Guarantee attached as Exhibit A to this Amendment No. 11 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, each FundV Subsidiary shall be deemed a party to the Indenture by
virtue of its execution of this Amendment No. 11 and the defined term the
"Guarantor" contained in Article 1.01 of the Indenture shall be deemed to
include each Fund V Subsidiary.
10. Congaree Broadcasters, Inc., a South Carolina corporation
("Congaree"), is a wholly-owned subsidiary of Fund V and an indirect subsidiary
of the Company, and is a Restricted Subsidiary acquired or created pursuant to
Section 4.14(ii) of the Indenture. Congaree delivers herewith the Guarantee
attached as Exhibit A to this Amendment No. 11 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,
Congaree shall be deemed a party to the Indenture by virtue of its execution of
this Amendment No. 11 and the defined term the "Guarantor" contained in Article
1.01 of the Indenture shall be deemed to include Congaree.
11. WJMZ License Limited Partnership, a Maryland limited
partnership (the "Fund VII Subsidiary"), is a Restricted Subsidiary acquired or
created pursuant to Section 4.14(ii) of the Indenture. Fund VII is the general
partner and Benchmark Communications is the limited partner of the Fund VII
Subsidiary. The Fund I Subsidiary delivers herewith the Guarantee attached as
Exhibit A to this Amendment No. 11 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, the Fund I
Subsidiary shall be deemed a party to the Indenture by virtue of their
execution of its Amendment No. 11 and the defined term the "Guarantor"
contained in Article 1.01 of the Indenture shall be deemed to include the Fund
I Subsidiary.
12. Each of Benchmark Greenville, L.L.C., a Delaware limited
liability company ("Benchmark Greenville") and Country Heartlines, a Delaware
corporation (collectively, the "Fund VII Direct Subsidiaries"), is a
wholly-owned subsidiary of Fund VII and indirect subsidiary of the Company, and
is a Restricted Subsidiary acquired or created pursuant to Section 4.14(ii) of
the Indenture. Each Fund VII Direct Subsidiary delivers herewith the Guarantee
attached as Exhibit A to this Amendment No. 11 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, each
Fund VII Direct Subsidiary shall be deemed a party to the Indenture by virtue
of its execution of this Amendment No. 11 and the defined term the "Guarantor"
contained in Article 1.01 of the Indenture shall be deemed to include each Fund
VII Direct Subsidiary.
13. Each of WESC(AM) License Limited Partnership, a Maryland
limited partnership, WESC-FM License Limited Partnership, a Maryland limited
partnership, and WFNQ License Limited Partnership, a Maryland limited
partnership (collectively, the "Benchmark Greenville Subsidiaries"), is a
Restricted Subsidiary acquired or created pursuant to Section 4.14(ii) of the
Indenture. Benchmark Greenville is the general partner and Benchmark
Communications is the limited partner of each of the Benchmark Greenville
Subsidiaries. Each Benchmark Greenville Subsidiary delivers herewith the
Guarantee attached as Exhibit A to this Amendment No. 11 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, each Benchmark Greenville Subsidiary shall be deemed a party to the
Indenture by virtue of its execution of this
-3-
<PAGE> 5
Amendment No. 11 and the defined term the "Guarantor" contained in Article 1.01
of the Indenture shall be deemed to include each Benchmark Greenville
Subsidiary.
14. Each of WUSQ License Limited Partnership, a Maryland limited
partnership, WNTW License Limited Partnership, a Maryland limited partnership,
WYYD License Limited Partnership, a Maryland limited partnership, WROV(AM)
License Limited Partnership, a Maryland limited partnership, and WROV-FM
License Limited Partnership, a Maryland limited partnership (collectively, the
"Fund VIII Subsidiaries"), is a Restricted Subsidiary acquired or created
pursuant to Section 4.14(ii) of the Indenture. Fund VIII is the general
partner and Benchmark Communications is the limited partner of each of the Fund
I Subsidiaries. Each Fund I Subsidiary delivers herewith the Guarantee
attached as Exhibit A to this Amendment No. 11 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, each
Fund VIII Subsidiary shall be deemed a party to the Indenture by virtue of its
execution of this Amendment No. 11 and the defined term the "Guarantor"
contained in Article 1.01 of the Indenture shall be deemed to include each Fund
VIII Subsidiary.
15. Benchmark Radio Acquisition Fund VI LC, a Maryland limited
liability company ("LC"), is a wholly-owned subsidiary of Fund VIII and
indirect subsidiary of the Company, and is a Restricted Subsidiary acquired or
created pursuant to Section 4.14(ii) of the Indenture. LC delivers herewith
the Guarantee attached as Exhibit A to this Amendment No. 11 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, LC shall be deemed a party to the Indenture by virtue of its
execution of this Amendment No. 11 and the defined term the "Guarantor"
contained in Article 1.01 of the Indenture shall be deemed to include LC.
16. This Amendment No. 11 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.
17. This Amendment No. 11 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.
18. THIS AMENDMENT NO. 11 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 THAT WOULD RESULT IN THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION).
19. 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 Guarantor of the Amendment No. 11. The Trustee makes no
representation as to the validity or sufficiency of this Amendment No. 11.
-4-
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Amendment No. 11 to
the Indenture to be duly executed and attested as of the date and year first
written above.
CAPSTAR RADIO BROADCASTING PARTNERS, INC.
By: /s/ WILLIAM S. BANOSWKY, JR.
---------------------------------
William S. Banowsky, Jr.
Executive Vice President
ATTEST:
/s/ KATHY ARCHER
- ---------------------------------
Kathy Archer
Assistant Secretary
GUARANTORS:
ATLANTIC STAR COMMUNICATIONS, INC.
CAPSTAR ACQUISITION COMPANY, 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
PACIFIC STAR COMMUNICATIONS, INC.
CENTRAL STAR COMMUNICATIONS, INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
---------------------------------
William S. Banowsky, Jr.
Vice President
ATTEST:
/s/ KATHY ARCHER
- ---------------------------------
Kathy Archer
Assistant Secretary
<PAGE> 7
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
BEATRICE BROADCASTING CORP.
CURREY BROADCASTING CORPORATION
OSBORN SOUND AND COMMUNICATIONS CORP.
WAITE BROADCASTING CORP.
AMERON BROADCASTING CORPORATION
WNOK ACQUISITION COMPANY, INC.
DIXIE BROADCASTING, INC.
RADIO WBHP, INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
---------------------------------
William S. Banowsky, Jr.
Vice President
ATTEST:
/s/ KATHY ARCHER
- ---------------------------------
Kathy Archer
Assistant Secretary
<PAGE> 8
MOUNTAIN LAKES BROADCASTING, L.L.C.
By: Dixie Broadcasting, Inc.,
its Member
By: /s/ WILLIAM S. BRONOWSKY, JR.
----------------------------
William S. Banowsky, Jr.
Vice President
ATTEST:
/s/ KATHY ARCHER
- ----------------------------
Kathy Archer
Assistant Secretary
By: Radio WBHP, Inc.,
its Member
By: /s/ WILLIAM S. BRONOWSKY, JR.
----------------------------
William S. Banowsky, Jr.
Vice President
ATTEST:
/s/ KATHY ARCHER
- ----------------------------
Kathy Archer
Assistant Secretary
WILMINGTON WJBR-FM, L.L.C.
By: Commodore Media of Delaware, Inc.,
its Manager
By: /s/ WILLIAM S. BRONOWSKY, JR.
----------------------------
William S. Banowsky, Jr.
Vice President
ATTEST:
/s/ KATHY ARCHER
- ----------------------------
Kathy Archer
Assistant Secretary
<PAGE> 9
MUSIC HALL CLUB, INC.
By: /s/ LARRY ANDERSON
----------------------------------
Larry Anderson
President
ATTEST:
/s/ NANCY ANDERSON
- ----------------------------
Nancy Anderson
Secretary and Treasurer
<PAGE> 10
GULFSTAR COMMUNICATIONS, INC.
GULFSTAR COMMUNICATIONS HOLDINGS, INC.
GULFSTAR COMMUNICATIONS MANAGEMENT, INC.
GULFSTAR COMMUNICATIONS BEAUMONT, INC.
GULFSTAR COMMUNICATIONS LUFKIN, INC.
GULFSTAR COMMUNICATIONS PORT ARTHUR, INC.
GULFSTAR COMMUNICATIONS TEXARKANA, INC.
GULFSTAR COMMUNICATIONS TYLER, INC.
GULFSTAR COMMUNICATIONS VICTORIA, INC.
GULFSTAR COMMUNICATIONS BATON ROUGE, INC.
BATON ROUGE BROADCASTING COMPANY, INC.
GULFSTAR COMMUNICATIONS CORPUS CHRISTI, INC.
GULFSTAR COMMUNICATIONS WACO, INC.
GULFSTAR COMMUNICATIONS ARKANSAS, INC.
GULFSTAR COMMUNICATIONS NEW MEXICO, INC.
GULFSTAR COMMUNICATIONS KILLEEN, INC.
GULFSTAR COMMUNICATIONS LUBBOCK, INC.
SONANCE WACO OPERATING COMPANY, INC.
BRYAN BROADCASTING OPERATING COMPANY, INC.
GULFSTAR COMMUNICATIONS OKLAHOMA, INC.
GULFSTAR COMMUNICATIONS BEAUMONT LICENSEE, INC.
GULFSTAR COMMUNICATIONS LUFKIN LICENSEE, INC.
GULFSTAR COMMUNICATIONS PORT ARTHUR LICENSEE, INC.
GULFSTAR COMMUNICATIONS TEXARKANA LICENSEE, INC.
GULFSTAR COMMUNICATIONS TYLER LICENSEE, INC.
GULFSTAR COMMUNICATIONS VICTORIA LICENSEE, INC.
GULFSTAR COMMUNICATIONS BATON ROUGE LICENSEE, INC.
GULFSTAR COMMUNICATIONS CORPUS CHRISTI LICENSEE, INC.
GULFSTAR COMMUNICATIONS WACO LICENSEE, INC.
GULFSTAR COMMUNICATIONS ARKANSAS LICENSEE, INC.
GULFSTAR COMMUNICATIONS NEW MEXICO LICENSEE
GULFSTAR COMMUNICATIONS KILLEEN LICENSEE, INC.
GULFSTAR COMMUNICATIONS LUBBOCK LICENSEE, INC.
GULFSTAR COMMUNICATIONS OKLAHOMA LICENSEE, INC.
<PAGE> 11
SONANCE WACO LICENSE SUBSIDIARY, INC.
BRYAN BROADCASTING LICENSE SUBSIDIARY, INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
----------------------------------
William S. Banowsky, Jr.
Vice President
ATTEST
/s/ KATHY ARCHER
- ---------------------------
Kathy Archer
Assistant Secretary
<PAGE> 12
BENCHMARK COMMUNICATIONS HOLDINGS, INC.
RADIOCO I, INC.
RADIOCO II, INC.
BC FUNDS HOLDINGS, INC.
CONGAREE BROADCASTERS, INC.
COUNTRY HEARTLINES, INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
-------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
ATTEST
/s/ KATHY ARCHER
- -------------------------------
Kathy Archer
Assistant Secretary
<PAGE> 13
BENCHMARK COMMUNICATIONS RADIO LIMITED
PARTNERSHIP
By: Benchmark Communications Holdings, Inc.,
its General Partner
By: /s/ WILLIAM S. BANOWSKY, JR.
-------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
ATTEST
/S/ KATHY ARCHER
- -------------------------------
Kathy Archer
Assistant Secretary
BENCHMARK JACKSON, L.L.C.
By: Benchmark Communications Radio Limited
Partnership, its Member
By: Benchmark Communications Holdings, Inc.,
its General Partner
By: /s/ WILLIAM S. BANOWSKY, JR.
-------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
ATTEST
/s/ KATHY ARCHER
- -------------------------------
Kathy Archer
Assistant Secretary
<PAGE> 14
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
BENCHMARK RADIO ACQUISITION FUND IX LIMITED
PARTNERSHIP
BENCHMARK RADIO ACQUISITION FUND XI LIMITED
PARTNERSHIP
By: Benchmark Communications Radio Limited
Partnership, its General Partner
By: Benchmark Communications Holdings, Inc.
its General Partner
By: /s/ WILLIAM S. BANOWSKY, JR.
---------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
ATTEST
/s/ KATHY ARCHER
- ---------------------------------
Kathy Archer
Assistant Secretary
<PAGE> 15
WDOV LICENSE LIMITED PARTNERSHIP
WDSD LICENSE LIMITED PARTNERSHIP
WSRV LICENSE LIMITED PARTNERSHIP
By: Benchmark Radio Acquisition Fund I
Limited Partnership, its General
Partner
By: Benchmark Communications Radio Limited
Partnership, its General Partner
By: Benchmark Communications Holding, Inc.,
its General Partner
By: /s/ WILLIAM S. BANOWSKY, JR.
---------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
ATTEST
/s/ KATHY ARCHER
- ---------------------------------
Kathy Archer
Assistant Secretary
<PAGE> 16
BENCHMARK RADIO ACQUISITION FUND V LIMITED
PARTNERSHIP
WOSC LICENSE LIMITED PARTNERSHIP
WKOC LICENSE LIMITED PARTNERSHIP
WWFG LICENSE LIMITED PARTNERSHIP
By: Benchmark Radio Acquisition Fund IV
Limited Partnership, its General
Partner
By: Benchmark Communications Radio Limited
Partnership, its General Partner
By: Benchmark Communications Holdings,
Inc., its General Partner
By: /s/ WILLIAM S. BANOWSKY, JR.
---------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
ATTEST
/s/ KATHY ARCHER
- ---------------------------------
Kathy Archer
Assistant Secretary
<PAGE> 17
WCOS (AM) LICENSE LIMITED PARTNERSHIP
WCOS-FM LICENSE LIMITED PARTNERSHIP
WHKZ LICENSE LIMITED PARTNERSHIP
WVOC LICENSE LIMITED PARTNERSHIP
By: Benchmark Radio Acquisition Fund V Limited
Partnership, its General Partner
By: Benchmark Radio Acquisition Fund IV Limited
Partnership, its General Partner
By: Benchmark Communications Radio Limited
Partnership, its General Partner
By: Benchmark Communications Holdings, Inc.
its General Partner
By: /s/ WILLIAM S. BANOWSKY, JR.
------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
ATTEST
/s/ KATHY ARCHER
- ------------------------------
Kathy Archer
Assistant Secretary
<PAGE> 18
WJMZ LICENSE LIMITED PARTNERSHIP
By: Benchmark Radio Acquisition Fund VII
Limited Partnership, its General Partner
By: Benchmark Communications Radio Limited
Partnership, its General Partner
By: Benchmark Communications Holdings, Inc.
its General Partner
By: /s/ WILLIAM S. BANOWSKY, JR.
-------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
ATTEST
/s/ KATHY ARCHER
- -------------------------------
Kathy Archer
Assistant Secretary
<PAGE> 19
BENCHMARK GREENVILLE, L.L.C.
By: Benchmark Radio Acquisition Fund
VII Limited Partnership, its Member
By: Benchmark Communications Radio
Limited Partnership, its General
Partner
By: Benchmark Communications Holding,
Inc., its General Partner
By: /s/ WILLIAM S. BANOWSKY, JR.
-------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
ATTEST
/s/ KATHY ARCHER
- -------------------------------
Kathy Archer
Assistant Secretary
<PAGE> 20
WESC(AM) LICENSE LIMITED PARTNERSHIP
WESC-FM LICENSE LIMITED PARTNERSHIP
WFNQ LICENSE LIMITED PARTNERSHIP
By: Benchmark Greenville, L.L.C.,
its General Partner
By: Benchmark Radio Acquisition Fund
VII Limited Partnership, its Member
By: Benchmark Communications Radio
Limited Partnership, its General
Partner
By: Benchmark Communications Holdings,
Inc., its General Partner
By: /s/ WILLIAM S. BANOWSKY, JR.
-------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
ATTEST
/s/ KATHY ARCHER
- -------------------------------
Kathy Archer
Assistant Secretary
<PAGE> 21
WUSQ LICENSE LIMITED PARTNERSHIP
WNTW LICENSE LIMITED PARTNERSHIP
WYYD LICENSE LIMITED PARTNERSHIP
WROV(AM) LICENSE LIMITED PARTNERSHIP
WROV-FM LICENSE LIMITED PARTNERSHIP
By: Benchmark Radio Acquisition Fund
VIII Limited Partnership,
its General Partner
By: Benchmark Communications Radio
Limited Partnership, its General
Partner
By: Benchmark Communications Holdings,
Inc., its General Partner
By: /s/ WILLIAM S. BANOWSKY, JR.
-------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
ATTEST
/s/ KATHY ARCHER
- -------------------------------
Kathy Archer
Assistant Secretary
<PAGE> 22
BENCHMARK RADIO ACQUISITION FUND VI LC
By: Benchmark Radio Acquisition Fund VIII
Limited Partnership, its General Partner
By: Benchmark Communications Radio Limited
Partnership, its General Partner
By: Benchmark Communications Holdings, Inc.,
its General Partner
By: /s/ WILLIAM S. BANOWSKY, JR.
--------------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
ATTEST
/s/ KATHY ARCHER
- -----------------------
Kathy Archer
Assistant Secretary
<PAGE> 23
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
ATTEST:
- -----------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT (the "First Amendment") to the Employment
Agreement, dated as of February 14, 1997, between Capstar Broadcasting
Partners, Inc., a Delaware corporation ("Capstar Partners") and R. Steven Hicks
(the "Employment Agreement"), is entered into effective July 1, 1997, by and
among the Company, R. Steven Hicks, and Capstar Broadcasting Corporation, a
Delaware Corporation ("Capstar Broadcasting").
RECITALS:
WHEREAS, the stockholders of Capstar Partners effected an exchange of
all shares of Capstar Partners for all shares of Capstar Broadcasting (the
"Exchange");
WHEREAS, as a result of the Exchange, Capstar Partners become a
wholly-owned subsidiary of Capstar Broadcasting;
WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated
June 16, 1997, among Capstar Broadcasting, GulfStar Communications, Inc., a
Delaware corporation ("GulfStar"), CBC-GulfStar Merger Sub, Inc., a Delaware
corporation ("Mergeco"), and the securityholders listed therein, GulfStar
merged with and into Mergeco with Mergeco being the surviving corporation (the
"Merger");
WHEREAS, concurrently herewith, R. Steven Hicks' employment agreement
with GulfStar has been terminated;
WHEREAS, in connection with the Exchange and the Merger, the parties
to the Employment Agreement desire to amend the Employment Agreement as
provided herein; and
WHEREAS, any capitalized term used herein, and not otherwise defined
herein, shall have the meaning set forth in the Employment Agreement.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing and the agreements
herein contained, the parties hereto covenant and agree as follows:
1. As of and after the date hereof, Capstar Partners shall not be
a party to the Employment Agreement. All references in the Employment
Agreement to Capstar Partners shall hereby be deemed, as of and after the date
hereof, to refer to Capstar Broadcasting for all purposes.
<PAGE> 2
2. Capstar Broadcasting hereby assumes and agrees to perform and
discharge all of the Capstar Partners' duties and obligations under the
Employment Agreement that are to be performed after the date hereof.
3. The first sentence of Section 2(b)(i) shall be amended and
restated in its entirety to read as follows:
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 $500,000.
4. The first sentence of Section 2(b)(ix) shall be amended and
restated in its entirety to read as follows:
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 the Company, the Company may, from time to time, grant
Executive stock options (the "Executive Options") exercisable for
shares of capital stock of the Company 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 the Company. Any such Executive Options will be granted under the
Company's 1997 Stock Option Plan (the "Stock Option Plan").
5. Except as herein specifically amended or supplemented, the
Employment Agreement shall continue in full force and effect in accordance with
its terms.
6. This First Amendment may be executed and delivered (including
by facsimile transmission) in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
[Remainder of page intentionally left blank]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment as of the date first written above.
CAPSTAR BROADCASTING PARTNERS, INC.
By: /s/ WILLIAM S. BANOWSKY, JR.
-----------------------------------
William S. Banowsky, Jr.
Executive Vice President
CAPSTAR BROADCASTING CORPORATION
By: /s/ WILLIAM S. BANOWSKY, JR.
-----------------------------------
William S. Banowsky, Jr.
Executive Vice President
/s/ R. STEVEN HICKS
---------------------------------------
R. Steven Hicks
<PAGE> 1
EXHIBIT 10.6
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of the 22nd day of September, 1997 by and between Capstar
Broadcasting Corporation, a Delaware corporation (together with its successors
and assigns permitted hereunder, the "Company"), and Steven Dinetz (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the bests 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 as of the date of this Agreement 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 Executive Vice President and the Chief
Operating Officer of the Company and, in so doing, shall report to the Chief
Executive Officer. The Executive shall have (A) supervision and control over,
and responsibility for, the day-to-day operations of the radio broadcasting
stations owned by the Company and its subsidiaries, (B) such other powers and
duties (including holding officer positions with the Company and one or more
subsidiaries of the Company, including the officer positions of President and
Chief Operating Officer of Capstar Broadcasting Partners, Inc. and Capstar
Radio Broadcasting Partners, Inc.) as may from time to time be prescribed by
the Board, and (C) such other powers and duties as are reasonable and customary
for an Executive Vice President and 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 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
<PAGE> 2
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, equal to $450,000. Commencing on July 1,
1998, and on each subsequent July 1 as long as the Executive remains an
employee of the Company (each such July 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. The Executive shall be entitled to
receive a cash bonus (the "Initial Bonus") in the amount of $55,342 for the
period from September 22, 1997 through December 31, 1997. The Initial Bonus
shall be payable in a lump sum to the Executive within thirty days after
December 31, 1997. The Executive shall also be entitled to receive a cash
bonus (the "Second Bonus") in the amount of $200,000 for the period from
January 1, 1998 through December 31, 1998. The Second Bonus shall be payable
in a lump sum to the Executive within thirty days after December 31, 1998 For
each fiscal year of the Company after 1998, the Board shall approve a budget
which shall include, among other things, a target for EBITDA of the Company for
that year. If the revenues and net income for a fiscal year of the Company
equal or exceed the target for EBITDA as set forth in the budget, as evidenced
by a schedule prepared by the Company (and approved by the Board) based on 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 (other than the Initial 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. For purposes of this Agreement, "EBITDA" shall
have the meaning set forth in the Indenture dated as of February 20, 1997, as
it may be amended from time to time, between Capstar Broadcasting Partners,
Inc., a Delaware corporation ("Capstar Partners"), and U.S. Trust Company of
Texas, N.A., a national banking association, as trustee, which governs Capstar
Partners' 12 3/4% Senior Discount Notes due 2009.
2
<PAGE> 3
(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 $850, 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.
(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, the Company may, from time to time, grant Executive
stock options (the "Executive Options") exercisable for shares of capital stock
of the Company 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. Any such Executive Options will be granted under the Company's
1997 Stock Option Plan or a successor plan of the Company (the "Stock Option
Plan").
(x) Country Club. During the term of the
Executive's employment, the Company shall pay (1) the initiation fee (up to
$15,000) for the Executive to join a country club in the Austin, Texas area,
and (2) the Executive's regular monthly dues at such club.
3
<PAGE> 4
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); (v)
Financial Cause; or (vi) 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, "Financial Cause" shall mean the failure by the Company to meet at
least 90% of its budgeted EBITDA, as approved by the Board, for the prior
fiscal year. 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 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
4
<PAGE> 5
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); or
(v) 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.
5
<PAGE> 6
(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.
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
6
<PAGE> 7
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 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 (other than
Financial 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 Company's Welfare Plans to
the Date of Termination. If the Executive's employment shall be terminated by
the Company for Financial Cause, the Company shall have no further payment
obligations to the Executive other than the continuance of benefits under the
Company's Welfare Plans to the Date of Termination and for payment to the
Executive in a lump sum in cash within ten days after the Date of Termination
the aggregate of the following amounts: (1) Accrued Obligations; (2) one half
of the Executive's then current Annual Base Salary; and (3) Accrued Investments
(which amounts shall be payable in accordance with the terms and conditions of
the Investment Plans).
(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
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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 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
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<PAGE> 9
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 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 OR ANY OF ITS
AFFILIATES 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 ANY OF ITS AFFILIATES, or (iii) divert or
take away any customers or suppliers of the Company OR ANY OF ITS AFFILIATES 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
OR AFFILIATES.
(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.
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<PAGE> 10
(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 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: Steven Dinetz
Capstar Broadcasting Corporation
600 Congress Avenue, Suite 1400
Austin, Texas 78701
If to the Company: Capstar Broadcasting Corporation
c/o Hicks, Muse, Tate & Furst Incorporated
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
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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 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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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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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/ STEVEN DINETZ
-----------------------------------
Steven Dinetz
CAPSTAR BROADCASTING CORPORATION
/s/ PAUL D. STONE
-----------------------------------
By: Paul D. Stone
Title: Executive Vice President
<PAGE> 1
EXHIBIT 10.7
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of the 22nd day of September, 1997 by and between Capstar
Broadcasting Corporation, a Delaware corporation (together with its successors
and assigns permitted hereunder, the "Company"), and Eric W. Neumann (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 as of the date of this Agreement 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 Senior Vice President of the Company
and, in so doing, shall report to the Chief Operating Officer. The Executive
shall have supervision and control over, and responsibility for, such
management and operational functions of the Company currently assigned 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,
including the officer positions of Senior Vice President of Capstar
Broadcasting Partners, Inc. and Capstar Radio Broadcasting Partners, Inc.) as
may from time to time be prescribed by the Board and/or the Chief Operating
Officer, so long as such powers and duties are reasonable and customary for a
Senior Vice President 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
<PAGE> 2
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, equal to $185,000. The Board in its
discretion may at any time increase the amount of the Annual Base Salary to
such greater amount as it may determine appropriate. The result of any such
increase to the then current Annual Base Salary shall constitute the
Executive's Annual Base Salary commencing on the date such increase is duly
authorized by the Board. 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 such may be so increased.
(ii) Bonuses. The Executive shall be entitled to
receive a cash bonus (the "Initial Bonus") in the amount of $15,219 for the
period from September 22, 1997 through December 31, 1997. The Initial Bonus
shall be payable in a lump sum to the Executive within thirty days after
December 31, 1997. 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 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.
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<PAGE> 3
(v) 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.
(vi) 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.
(vii) 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.
(viii) 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, the Company may, from time to time, grant Executive
stock options (the "Executive Options") exercisable for shares of capital stock
of the Company 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. Any such Executive Options will be granted under the Company's
1997 Stock Option Plan or a successor plan of the Company (the "Stock Option
Plan").
(ix) Automobile Allowance. During the term of the
Executive's employment, the Executive shall be entitled to receive a monthly
automobile allowance equal to $850, which shall be paid monthly in accordance
with the customary practices of the Company.
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
3
<PAGE> 4
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 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
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<PAGE> 5
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); or
(v) 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> 6
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 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
6
<PAGE> 7
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 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
7
<PAGE> 8
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 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
8
<PAGE> 9
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 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.
9
<PAGE> 10
(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: Eric W. Neumann
Capstar Broadcasting Corporation
600 Congress Avenue, Suite 1400
Austin, Texas 78701
If to the Company: Capstar Broadcasting Corporation
c/o Hicks, Muse, Tate & Furst Incorporated
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 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.
10
<PAGE> 11
(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 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.
11
<PAGE> 12
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/ ERIC W. NEUMANN
--------------------------------------
Eric W. Neumann
CAPSTAR BROADCASTING CORPORATION
/s/ WILLIAM S. BANOWSKY, JR.
--------------------------------------
By: William S. Banowsky, Jr.
Title: Executive Vice President
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