<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
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 333-48819
CAPSTAR BROADCASTING
CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 74-2833106
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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 Capstar Broadcasting Corporation ("Capstar
Broadcasting") (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 [
] No [X]
Indicate the number of shares outstanding of each of Capstar Broadcasting's
classes of common stock, as of the latest practicable date: As of July 31, 1998,
Capstar Broadcasting had outstanding (i) 33,918,456 shares of Class A Common
Stock, par value $.01 per share, ("Class A Common Stock"), (ii) 6,081,723 shares
of Class B Common Stock, par value $.01 per share, ("Class B Common Stock"), and
(iii) 67,589,121 shares of Class C Common Stock, par value $.01 per share,
("Class C Common Stock").
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<PAGE> 2
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements:
CAPSTAR BROADCASTING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets as of December 31, 1997 and June
30, 1998 (unaudited)........................................ 2
Consolidated Statements of Operations for the three months
ended June 30, 1997 and 1998 (unaudited).................... 3
Consolidated Statements of Operations for the six months
ended June 30, 1997 and 1998 (unaudited).................... 4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1998 (unaudited)............. 5
Consolidated Statement of Stockholders' Equity for the six
months ended June 30, 1998 (unaudited)...................... 6
Notes to Consolidated Financial Statements (unaudited)...... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 18
Item 3. Quantitative and Qualitative Disclosure About Market Risk...
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings........................................... 28
Item 2. Changes in Securities....................................... 29
Item 4. Submission of Matters to a Vote of Security Holders......... 30
Item 6. Exhibits and Reports on Form 8-K............................ 30
</TABLE>
As used in this Quarterly Report on Form 10-Q, unless the context otherwise
requires, (i) "Capstar Broadcasting" refers to Capstar Broadcasting Corporation,
(ii) the "Company" collectively refers to Capstar Broadcasting and its
subsidiaries, (iii) "Capstar Partners" refers to Capstar Broadcasting Partners,
Inc., the outstanding common stock of which is wholly-owned by Capstar
Broadcasting and (iv) "Capstar Radio" refers to Capstar Radio Broadcasting
Partners, Inc., a direct wholly-owned subsidiary of Capstar Partners.
1
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CAPSTAR BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................... $ 70,059 $ 33,589
Accounts receivable, net of allowance for doubtful
accounts of $2,889 and $6,916 at December 31, 1997 and
June 30, 1998, respectively............................. 40,350 127,057
Prepaid expenses and other current assets................. 4,285 80,606
---------- ----------
Total current assets............................... 114,694 241,252
Property and equipment, net................................. 106,717 218,495
Intangibles and other, net.................................. 881,545 4,237,040
Other non-current assets.................................... 18,500 60,961
---------- ----------
Total assets....................................... $1,121,456 $4,757,748
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 1,388 $ 174,077
Accounts payable.......................................... 13,641 14,099
Accrued liabilities....................................... 16,826 65,995
Income taxes payable...................................... 2,417 99,955
---------- ----------
Total current liabilities.......................... 34,272 354,126
Long-term debt, net of current portion (includes $150,000
due to an affiliate at June 30, 1998)..................... 593,184 1,457,145
Deferred income taxes....................................... 160,422 1,164,312
---------- ----------
Total liabilities.................................. 787,878 2,975,583
---------- ----------
Commitments and contingencies
Redeemable preferred stock, aggregate liquidation preference
of $106,560 and $112,460 at December 31, 1997 and June 30,
1998, respectively........................................ 101,493 107,595
Series E Cumulative Exchangeable Preferred Stock, aggregate
liquidation preference of $252,603 at June 30, 1998....... -- 283,578
Stockholders' equity:
Preferred stock, $.01 par value, 100,000,000 shares
authorized, none issued................................. -- --
Common stock, Class A, voting, $.01 par value, 750,000,000
shares authorized, 2,578,839 and 33,918,456 shares
issued and outstanding at December 31, 1997 and June 30,
1998, respectively...................................... 26 339
Common stock, Class B, nonvoting, $.01 par value,
150,000,000 shares authorized, 4,817,990 and 6,081,723
shares issued and outstanding at December 31, 1997 and
June 30, 1998, respectively............................. 48 61
Common stock, Class C, voting, $.01 par value, 150,000,000
shares authorized, 22,812,347 and 67,589,121 shares
issued and outstanding at December 31, 1997 and June 30,
1998, respectively...................................... 228 676
Additional paid-in capital................................ 291,324 1,499,491
Stock subscriptions receivable............................ (4,374) (2,874)
Unearned compensation..................................... -- (834)
Accumulated deficit....................................... (55,167) (105,867)
---------- ----------
Total stockholders' equity......................... 232,085 1,390,992
---------- ----------
Total liabilities and stockholders' equity......... $1,121,456 $4,757,748
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE> 4
CAPSTAR BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JUNE 30,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Gross broadcast revenue..................................... $ 44,668 $ 124,263
Less: agency commissions.................................... (4,614) (12,341)
----------- -----------
Net broadcast revenue............................. 40,054 111,922
----------- -----------
Operating expenses:
Programming, technical and news........................... 9,240 19,930
Sales and promotion....................................... 10,578 30,976
General and administrative................................ 5,827 16,830
Corporate expenses.......................................... 3,163 4,058
LMA fees paid............................................... 1,448 1,450
Corporate expenses -- noncash compensation.................. 8,349 6,676
Depreciation and amortization............................... 5,612 19,369
----------- -----------
Operating income (loss)..................................... (4,163) 12,633
Other (income) expense:
Interest expense.......................................... 9,412 22,547
Interest income........................................... -- (956)
Other income, net......................................... (3,516) (202)
----------- -----------
Loss before benefit for income taxes and extraordinary
item...................................................... (10,059) (8,756)
Benefit for income taxes.................................... (2,430) (619)
Dividends and accretion of preferred stock of
subsidiaries.............................................. -- 5,453
----------- -----------
Loss before extraordinary item.............................. (7,629) (13,590)
Extraordinary item, loss on early extinguishment of debt.... -- 7,305
----------- -----------
Net loss.................................................... (7,629) (20,895)
Dividends and accretion on preferred stocks................. 889 --
----------- -----------
Net loss attributable to common stock....................... $ (8,518) $ (20,895)
=========== ===========
Basic and diluted loss per common share
Before extraordinary loss................................. (0.38) (0.16)
Extraordinary loss........................................ -- (0.08)
----------- -----------
Net loss.......................................... $ (0.38) $ (0.24)
=========== ===========
Weighted average common shares outstanding.................. 22,493,114 88,499,124
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 5
CAPSTAR BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Gross broadcast revenue..................................... $ 71,848 $ 194,349
Less: agency commissions.................................... (6,692) (18,352)
----------- -----------
Net broadcast revenue............................. 65,156 175,997
----------- -----------
Operating expenses:
Programming, technical and news........................... 15,597 35,710
Sales and promotion....................................... 17,315 48,985
General and administrative................................ 11,037 30,801
Corporate expenses.......................................... 5,105 7,815
LMA fees paid............................................... 2,131 3,321
Corporate expenses -- noncash compensation.................. 10,818 22,469
Depreciation and amortization............................... 9,337 30,401
----------- -----------
Operating loss.............................................. (6,184) (3,505)
Other (income) expense:
Interest expense.......................................... 17,239 38,444
Interest income........................................... -- (1,410)
Other income, net......................................... (3,451) (68)
----------- -----------
Loss before benefit for income taxes and extraordinary
item...................................................... (19,972) (40,471)
Benefit for income taxes.................................... (4,825) (5,581)
Dividends and accretion of preferred stock of
subsidiaries.............................................. -- 8,505
----------- -----------
Loss before extraordinary item.............................. (15,147) (43,395)
Extraordinary item, loss on early extinguishment of debt.... 851 7,305
----------- -----------
Net loss.................................................... (15,998) (50,700)
Dividends and accretion on preferred stocks................. 1,693 --
----------- -----------
Net loss attributable to common stock....................... $ (17,691) $ (50,700)
=========== ===========
Basic and diluted loss per common share
Before extraordinary loss................................. $ (0.81) $ (0.64)
Extraordinary loss........................................ (0.04) (0.11)
----------- -----------
Net loss.......................................... $ (0.85) $ (0.75)
=========== ===========
Weighted average common shares outstanding.................. 20,899,418 67,432,057
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 6
CAPSTAR BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
-----------------------
1997 1998
--------- -----------
<S> <C> <C>
Net cash provided by operating activities................... $ 392 $ 21,196
--------- -----------
Cash flows from investing activities:
Proceeds on sale of broadcasting property................. 11,000 221,429
Purchase of property and equipment........................ (4,889) (15,508)
Payments for acquisitions, net of cash acquired........... (169,446) (1,613,133)
Payments for pending acquisitions......................... (17,655) (10,244)
Other investing activities, net........................... (183) (12,162)
--------- -----------
Net cash used in investing activities............. (181,173) (1,429,618)
--------- -----------
Cash flows from financing activities:
Proceeds from long-term debt and credit facility.......... 222,866 846,200
Repayment of long-term debt and credit facility........... (80,515) (650,870)
Payments of financing related costs....................... (11,022) (8,887)
Proceeds from issuance of common stock.................... 55,618 1,186,815
Payments on subscribed stock.............................. -- 1,607
Redemption of preferred stock............................. (811) --
Purchase of common stock.................................. (175) (484)
Dividends paid on preferred stock......................... -- (2,429)
--------- -----------
Net cash provided by financing activities......... 185,961 1,371,952
--------- -----------
Net increase (decrease) in cash and cash equivalents........ 5,180 (36,470)
Cash and cash equivalents at beginning of period............ 9,821 70,059
--------- -----------
Cash and cash equivalents at end of period.................. $ 15,001 $ 33,589
========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 7
CAPSTAR BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
COMMON STOCK COMMON STOCK COMMON STOCK
------------------ ------------------ ------------------ ADDITIONAL STOCK
NUMBER PAR NUMBER PAR NUMBER PAR PAID-IN SUBSCRIPTIONS
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE CAPITAL RECEIVABLE
---------- ----- ---------- ----- ---------- ----- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998.... 2,578,839 $ 26 4,817,990 $ 48 22,812,347 $228 $ 291,324 $(4,374)
Initial public offering, net
of expenses................. 31,000,000 310 -- -- -- -- 550,998 --
Other issuances of common
stock....................... 155,699 2 2,463,797 25 43,796,991 438 634,936 --
Repurchase of common stock.... (36,363) (1) -- -- -- -- (483) --
Conversion of Class C common
stock to Class A common
stock....................... 220,281 2 -- -- (220,281) (2) -- --
Conversion of Class B common
stock to Class C common
stock....................... -- -- (1,200,064) (12) 1,200,064 12 -- --
Unearned compensation related
to granting of employee
stock options............... -- -- -- -- -- -- 878 --
Compensation expense.......... -- -- -- -- -- -- 21,731 --
Accrued interest on stock
subscriptions receivable.... -- -- -- -- -- -- 107 (107)
Payments received on stock
subscriptions receivable.... -- -- -- -- -- -- -- 1,607
Net loss...................... -- -- -- -- -- -- -- --
---------- ---- ---------- ---- ---------- ---- ---------- -------
Balance at June 30, 1998...... 33,918,456 $339 6,081,723 $ 61 67,589,121 $676 $1,499,491 $(2,874)
========== ==== ========== ==== ========== ==== ========== =======
<CAPTION>
TOTAL
UNEARNED ACCUMULATED STOCKHOLDERS'
COMPENSATION DEFICIT EQUITY
------------ ----------- -------------
<S> <C> <C> <C>
Balance at January 1, 1998.... $ -- $ (55,167) $ 232,085
Initial public offering, net
of expenses................. -- -- 551,308
Other issuances of common
stock....................... -- -- 635,401
Repurchase of common stock.... -- -- (484)
Conversion of Class C common
stock to Class A common
stock....................... -- -- --
Conversion of Class B common
stock to Class C common
stock....................... -- -- --
Unearned compensation related
to granting of employee
stock options............... (878) -- --
Compensation expense.......... 44 -- 21,775
Accrued interest on stock
subscriptions receivable.... -- -- --
Payments received on stock
subscriptions receivable.... -- -- 1,607
Net loss...................... -- (50,700) (50,700)
----- --------- ----------
Balance at June 30, 1998...... $(834) $(105,867) $1,390,992
===== ========= ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 8
CAPSTAR BROADCASTING CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
Information with respect to the three and six month periods ended June 30,
1997 and 1998 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
considered necessary for a fair presentation. Operating results for the three
and six month periods ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1998, or for any
other interim period. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended December 31, 1997
for the Company included in the Registration Statement on Form S-1 of Capstar
Broadcasting, as amended (Commission File No. 333-48819).
The consolidated financial statements include the accounts of Capstar
Broadcasting, and its direct and indirect subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Capstar Broadcasting is a holding company with no operations other than its
investment in its subsidiaries.
NOTE 2 -- RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("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.
This pronouncement is effective for financial statements beginning after
December 15, 1997.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which significantly changes
current financial statement disclosure requirements from those that were
required under SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." SFAS No. 132 does
not change the existing measurement or recognition provision of SFAS Nos. 87, 88
or 106. This pronouncement is effective for financial statements beginning after
December 15, 1997.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This pronouncement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999.
Management does not believe the implementation of these accounting
pronouncements will have a material effect on its consolidated financial
statements
NOTE 3 -- INITIAL PUBLIC OFFERING BY CAPSTAR BROADCASTING
On May 29, 1998 Capstar Broadcasting completed an initial public offering
(the "Offering") in which Capstar Broadcasting sold 31,000,000 shares of its
Class A Common Stock at $19.00 per share for net
7
<PAGE> 9
CAPSTAR BROADCASTING CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
proceeds to Capstar Broadcasting of $551,308 after deducting underwriting
discounts and commissions and offering expenses of $37,692. The shares sold by
Capstar Broadcasting represented approximately 28.8% of the outstanding shares
of Capstar Broadcasting on May 29, 1998. Capstar Broadcasting contributed the
net proceeds from the Offering to Capstar Partners which then contributed the
net proceeds from the Offering to Capstar Radio. Capstar Radio used this
contribution to fund a portion of the acquisition of SFX Broadcasting, Inc., a
Delaware corporation ( "SFX"), as discussed in Note 4 below.
NOTE 4 -- ACQUISITIONS AND DISPOSITIONS OF BROADCASTING PROPERTIES
SFX Acquisition and Related Transactions
On May 29, 1998, SBI Holding Corporation, a Delaware corporation
("Parent"), acquired SFX, which has been renamed Capstar Communications, Inc.
("CCI"). The acquisition was effected through the merger (the "Merger") of SBI
Radio Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of Parent ("Sub"), with and into SFX, with SFX as the surviving
corporation. The acquisition of SFX by Parent resulted in a change of control of
SFX. As a result of the Merger, SFX became a direct wholly-owned subsidiary of
Capstar Radio. Consummation of the Merger and related transactions increased the
Company's portfolio of stations by 67 owned and operated radio stations (50 FM
and 17 AM) and two radio stations on which the Company sells commercial time.
The holders of (i) Class A common stock, par value $.01 per share ("CCI
Class A Common Stock"), of SFX were paid $75.00 per share, (ii) Class B common
stock, par value $.01 per share ("CCI Class B Common Stock"), of SFX were paid
$97.50 per share, (iii) Series C Redeemable Preferred Stock, par value $.01 per
share ("CCI Series C Preferred Stock"), of SFX were paid $1,009.73 per share,
and (iv) Series D Cumulative Convertible Exchangeable Preferred Stock, par value
$.01 per share ("CCI Series D Preferred Stock" and together with the CCI Class A
Common Stock, CCI Class B Common Stock, and CCI Series C Preferred Stock, the
"CCI Stock"), of SFX were paid $82.4025 per share. Each issued and outstanding
share of 12 5/8% Series E Cumulative Exchangeable Preferred Stock, par value
$.01 per share ("CCI Series E Preferred Stock"), of SFX remained outstanding.
From and after the effective time of the Merger, each option or warrant to
purchase shares of the capital stock of SFX represented only the right to
receive cash from CCI (net of any applicable exercise price). The total
consideration paid by the Company in the Merger was approximately $1,500,000
(the "Merger Consideration"), including the repayment of the outstanding balance
under the existing credit facility of SFX (the "SFX Credit Facility") of
approximately $313,000.
The Merger and other related transactions, including (i) certain station
acquisitions and dispositions completed contemporaneously with the Merger (as
discussed below), (ii) the repayment of outstanding indebtedness of SFX under
the SFX Credit Facility, (iii) the redemption of approximately $154,000
aggregate principal amount of CCI's 10 3/4% Senior Subordinated Notes Due 2006
(the "10 3/4% CCI Notes")(as discussed in Note 8), and (iv) the redemption of
approximately $119,600 aggregate liquidation preference of CCI's 12 5/8% Series
E Cumulative Exchangeable Preferred Stock, par value $.01 per share ("CCI Series
E Preferred Stock") (as discussed in Note 8), were financed with (A) the net
proceeds from the Offering, (B) borrowings of $590,600 (the "Capstar Loan")
under the Capstar Credit Facility (as defined in Note 8), (C) borrowings of
$150,000 from Chancellor Media Corporation of Los Angeles ("Chancellor Media"),
an affiliate, and (D) net proceeds of approximately $221,429 from sales of
certain assets.
On February 20, 1998, Capstar Broadcasting and Chancellor Media entered
into a letter Agreement (the "Chancellor Exchange Agreement") pursuant to which
Capstar Broadcasting agreed to exchange 11 SFX stations in the Dallas, Houston,
San Diego and Pittsburgh markets ("Chancellor Exchange Stations") having an
aggregate deemed market value of $637,500 for certain stations to be acquired by
Chancellor Media during the three-year period ending February 20, 2001 (the
"Exchange Period"). SFX station KODA-FM, which is a Chancellor Exchange Station,
was exchanged for certain radio stations in the Austin, Texas and the
Jacksonville, Florida markets concurrently with the consummation of the Merger.
The remaining Chancellor
8
<PAGE> 10
CAPSTAR BROADCASTING CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Exchange Stations will be exchanged for mid-sized market radio stations to be
identified by Capstar Broadcasting and paid for by Chancellor Media. Capstar
Broadcasting and Chancellor Media intend for the exchange transactions to
qualify as like-kind exchanges under Section 1031 of the Internal Revenue Code
of 1986, as amended (the "Code"). Capstar Broadcasting, however, bears all risks
related to the tax treatment of the exchanges. Capstar Broadcasting has agreed
not to solicit, initiate or encourage the submission of proposals for the
acquisition of the Chancellor Exchange Stations or to participate in any
discussions for such purpose during the Exchange Period, other than as
contemplated under the Chancellor Exchange Agreement. Concurrently with the
consummation of the Merger, Chancellor Media began providing services to the
Chancellor Exchange Stations (other than KODA-FM, which was acquired, via a
like-kind exchange by Chancellor Media) pursuant to separate local marketing
agreements ("LMAs") until such stations are exchanged. Chancellor Media retains
the advertising revenues it generates while it provides services to the
Chancellor Exchange Stations under such LMAs. As of June 30, 1998, the Company
earned LMA fees of approximately $4,000 from the Chancellor Exchange Stations.
The LMA fees earned by the Company will decrease as Chancellor Exchange Stations
are exchanged.
On May 21, 1998, SFX completed the acquisition of three radio stations (two
FM and one AM) in the Nashville, Tennessee market from Sinclair Broadcasting
Group for an aggregate purchase price of approximately $35,000 in cash (the
"Nashville Purchase Price").
On May 29, 1998, CCI exchanged station KODA- FM in Houston, Texas for
Chancellor Media radio stations WAPE-FM and WFYV-FM in Jacksonville, Florida and
approximately $90,250 in cash (the "KODA Exchange"). In an exchange under
Section 1031 of the Code, the indirect, wholly-owned subsidiaries of CCI,
through a qualified intermediary, used the $90,250 in cash received from
Chancellor Media to acquire radio stations KASE-FM, KVET-AM and KVET-FM in
Austin, Texas. The deemed value of the KODA Exchange was $143,250.
On May 29, 1998, due to governmental restrictions on multiple station
ownership, the Company completed the sale of the assets of four radio stations
(three FM and one AM) in the Greenville, South Carolina market for approximately
$35,000 in cash to Clear Channel Radio, Inc.
On May 29, 1998, due to governmental restrictions on multiple station
ownership, the Company assigned the assets of four radio stations (two FM and
two AM) in the Fairfield, Connecticut market, subject to a right of repurchase,
with an aggregate fair market value at such date of approximately $15,000 to a
trust, whose trustee is Henry M. Rivera (the "Trustee") and whose beneficiary is
Capstar Broadcasting. Concurrently with such assignment, the Company contributed
its right to repurchase such assets to Upper Fairfield Radio, L.L.C. ("Upper
Fairfield") in exchange for all of the outstanding ownership interests in Upper
Fairfield. Subject to approval by the Federal Communications Commission ("FCC"),
it is expected that the Trustee will sell the assets to Upper Fairfield for
approximately $14,900 and the Company will sell its voting interest in Upper
Fairfield to BBR II, L.L.C. for $150. After the sale of the assets to Upper
Fairfield, the Trustee will distribute the proceeds to the Company. The Company
will retain a non-voting interest in Upper Fairfield.
On May 29, 1998, due to governmental restrictions on multiple station
ownership, CCI completed the sale of the assets of one FM radio station in the
Daytona Beach, Florida market for consideration of approximately $11,500 in cash
to Clear Channel Metroplex, Inc. and Clear Channel Metroplex Licensee, Inc.
On May 29, 1998, due to governmental restrictions on multiple station
ownership, CCI completed the sale of the assets of four radio stations (three FM
and one AM) in the Long Island, New York market for an aggregate sale price of
$46,000 in cash to Cox Radio, Inc.
On May 29, 1998, due to governmental restrictions on multiple station
ownership, CCI completed the sale of the assets of one FM radio station in the
Houston, Texas market for $54,000 in cash to HBC Houston, Inc. and HBC Houston
License Corporation. Pursuant to an agreement with Chancellor Media, CCI paid
50% of the sale proceeds in excess of $50,000, approximately $1,700, to
Chancellor Media.
9
<PAGE> 11
CAPSTAR BROADCASTING CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other Acquisitions and Dispositions
In addition to the Merger and the other related transactions described
above, during the six months ended June 30, 1998, the Company acquired 23 AM and
43 FM radio stations and related broadcast equipment through several
acquisitions, all of which have been accounted for under the purchase method of
accounting. Accordingly, the purchase price has been allocated to the assets and
liabilities acquired based upon their fair values at the date of acquisition.
The excess purchase price over the fair value of net tangible assets acquired is
allocated to intangible assets, primarily FCC licenses. The results of
operations associated with the acquired radio stations have been included in the
accompanying consolidated financial statements from the dates of acquisition.
Acquisition activity during the six months ended June 30, 1998 was as
follows. All consideration paid for the acquisitions scheduled below consisted
solely of cash and promissory notes.
<TABLE>
<CAPTION>
STATIONS
ACQUIRED
---------
TRANSACTION AM FM DATE OF ACQUISITION PURCHASE OF COST
- ----------- --- --- ------------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Patterson Broadcasting............... 14 25 January Common Stock $ 227,186
Quass Broadcasting................... 1 2 January Common Stock 16,281
Knight Radio......................... 3 5 January Assets 66,180
East Penn Broadcasting............... 1 -- January Assets 2,010
Commonwealth Broadcasting............ 1 2 February Assets 5,514
Brantly Broadcast Associates......... -- 1 February Assets 1,735
KOSO................................. -- 1 April Assets 8,472
Americom............................. 1 3 April Assets 26,662
KDOS LP.............................. 1 1 April Assets 3,532
Grant................................ 1 -- May Assets 3,440
SFX.................................. 17 50 May Common Stock 1,274,656
Class Act............................ -- 1 June Assets 1,068
KRNA................................. -- 1 June Assets 6,398
University of Alaska................. -- 1 June Assets 221
----------
$1,643,355
==========
</TABLE>
Additionally, in April 1998, the Company acquired Prophet Systems, Inc., a
manufacturer, seller and distributor of combination hardware-software devices
which permit the remote programming of radio station broadcasts, for aggregate
consideration of approximately $15,000 in cash. Pursuant to the asset purchase
agreement, Capstar Broadcasting will issue 285,714 shares of Class A Common
Stock with a deemed value of $10,000, or $35.00 per share, upon the satisfaction
of certain conditions contained in the asset purchase agreement.
10
<PAGE> 12
CAPSTAR BROADCASTING CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisitions during the six months ended June 30, 1998 are summarized
in the aggregate as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED
JUNE 30,
1998
----------
<S> <C>
Consideration:
Cash and notes............................................ $1,582,779
Acquisition costs......................................... 71,663
Assets exchanged.......................................... 4,432
----------
Total............................................. $1,658,874
==========
Assets acquired and liabilities assumed:
Cash...................................................... $ 16,528
Accounts receivable....................................... 90,379
Prepaid expenses and other................................ 110,664
Property and equipment.................................... 122,766
Intangible assets......................................... 3,598,913
Accounts payable.......................................... (12,150)
Accrued liabilities....................................... (134,490)
Deferred income taxes..................................... (1,038,369)
Long-term debt............................................ (811,762)
Preferred stock........................................... (283,605)
----------
Total............................................. $1,658,874
==========
</TABLE>
In addition to the Merger and other related transactions described above,
during the six months ended June 30, 1998, the Company disposed of 5 AM and 8 FM
radio stations and related broadcast equipment through several dispositions for
aggregate consideration of approximately $91,870, including $77,288 in cash,
$10,150 in notes and $4,432 in broadcast properties. The carrying value of net
assets sold related to these stations approximated the consideration received.
The following unaudited proforma summary presents the consolidated results
of operations for the six months ended June 30, 1997 and 1998 as if the
acquisitions and dispositions completed through June 30, 1998 had occurred at
the beginning of 1997. These pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of what would have
occurred had the acquisitions and dispositions been made as of that date or of
results which may occur in the future.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
---------------------
1997 1998
-------- --------
<S> <C> <C>
Net revenue................................................. $264,898 $289,539
======== ========
Loss before extraordinary item.............................. 66,682 87,286
======== ========
Net loss.................................................... (67,533) (94,591)
======== ========
Basic and diluted loss per common share before
extraordinary loss........................................ (0.99) (1.29)
======== ========
Net loss attributable to common stock....................... (69,226) (94,591)
======== ========
Basic and diluted loss per common share..................... (1.03) (1.40)
======== ========
</TABLE>
11
<PAGE> 13
CAPSTAR BROADCASTING CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Subsequent to June 30, 1998, the Company acquired 4 AM and 4 FM radio
stations and related broadcast equipment through several acquisitions for
aggregate consideration in cash of approximately $11,300 and an AM station with
a deemed value of $5,000. The acquisitions were funded with excess cash on hand.
Subsequent to June 30, 1998, the Company sold 2 FM radio stations and
related broadcast equipment through one disposition for aggregate consideration
in cash of approximately $7,500. The carrying value of net assets sold related
to these stations approximated the contract sales price.
On July 23, 1998, Capstar Radio agreed to acquire Triathlon Broadcasting
Corporation ("Triathlon"; Nasdaq: TBCOA, TBCOL) in a transaction valued at
approximately $190,000. Capstar Radio will pay approximately $130,000 in cash to
acquire all of the outstanding shares of common and preferred stock of Triathlon
and will assume approximately $60,000 of debt. Triathlon owns and operates or
programs 32 stations in six markets: Wichita, Kansas (4 FM and 2 AM); Colorado
Springs, Colorado (2 FM/2 AM); Lincoln, Nebraska (4 FM); Omaha, Nebraska (3 FM/1
AM); Spokane, Washington (5 FM/3 AM); and Tri-Cities, Washington (4 FM/2 AM).
Triathlon also owns Pinnacle Sports Productions, L.L.C., a regional sports
network that controls the rights to University of Nebraska football and other
sports events.
Additionally, the Company has entered into eight agreements to acquire 23
additional radio stations (6 AM and 17 FM) and related broadcast equipment for
aggregate consideration in cash of approximately $50,350. The Company currently
operates 13 of these stations under either LMA's or joint sales agreements.
NOTE 5 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DEPRECIABLE
DEPRECIATION LIFE DECEMBER 31, JUNE 30,
METHOD (YEARS) 1997 1998
------------- ----------- ------------ --------
<S> <C> <C> <C> <C>
Buildings and improvements........... Straight-line 5-20 $ 17,006 $37,851
Broadcasting and other Equipment..... Straight-line 3-20 85,481 183,070
Equipment under capital lease
Obligations........................ Straight-line 3-5 1,356 1,222
-------- --------
103,843 222,143
Accumulated depreciation and
Amortization....................... (10,336) (18,066)
-------- --------
93,507 204,077
Land................................. 13,210 14,418
-------- --------
$106,717 $218,495
======== ========
</TABLE>
Depreciation and amortization expense for the six months ended June 30,
1997 and 1998 was approximately $3,456 and $7,545, respectively.
12
<PAGE> 14
CAPSTAR BROADCASTING CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- INTANGIBLES
Intangibles consist of the following:
<TABLE>
<CAPTION>
AMORTIZABLE
AMORTIZATION LIFE DECEMBER 31, JUNE 30,
METHOD (YEARS) 1997 1998
--------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
FCC licenses.................... Straight-line 40 $861,502 $4,124,051
Goodwill........................ Straight-line 40 2,784 91,225
Noncompete agreements........... Straight-line 1-3 6,115 13,494
Organization costs.............. Straight-line 5 3,040 436
Deferred financing costs........ Interest Method -- 21,358 26,364
Other........................... Straight-line 3-5 6,700 22,554
-------- ----------
901,499 4,278,124
Accumulated amortization........ (25,888) (43,139)
-------- ----------
875,611 4,234,985
Pending acquisition costs....... 5,934 2,055
-------- ----------
$881,545 $4,237,040
======== ==========
</TABLE>
Amortization expense of intangible assets for the six months ended June 30,
1997 and 1998 was approximately $5,881 and $22,856 respectively.
NOTE 7 -- ACCRUED LIABILITIES
Accrued liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ --------
<S> <C> <C>
Accrued compensation........................................ $ 4,252 $ 1,313
Accrued acquisition costs................................... 5,284 18,517
Accrued interest............................................ 960 9,492
Accrued commissions......................................... 2,403 10,436
Other....................................................... 3,927 26,237
------- -------
$16,826 $65,995
======= =======
</TABLE>
13
<PAGE> 15
CAPSTAR BROADCASTING CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- LONG-TERM DEBT AND REDEEMABLE PREFERRED STOCK
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------
<S> <C> <C>
Capstar Credit Facility..................................... $141,700 $ 590,600
12 3/4% Capstar Partners Notes, $277,000 principal,
including unamortized discount of $99,324, due 2009....... 166,991 177,676
9 1/4% Capstar Radio Notes, $200,000 principal, including
unamortized discount of $738, due 2007.................... 199,238 199,262
13 1/4% Capstar Radio Notes................................. 79,816 --
Chancellor Note (due to an affiliate)....................... -- 150,000
10 3/4% CCI Notes, $450,000 principal, including unamortized
premium of $47,671, due 2006.............................. -- 497,671
Capital lease obligation and other notes payable at various
interest rates............................................ 6,827 16,013
-------- ----------
594,572 1,631,222
Less current portion........................................ (1,388) (174,077)
-------- ----------
$593,184 $1,457,145
======== ==========
</TABLE>
In connection with the Merger, Capstar Radio, as the borrower, entered into
a new credit agreement, dated as of May 29, 1998 (the "Capstar Credit
Facility"), with Capstar Broadcasting, Capstar Partners, and the financial
institutions party thereto. The Capstar Credit Facility consists of a $500,000
revolving loan, a $450,000 term loan facility (the "A Term Loan") and a $400,000
term loan (the "B Term Loan"). The Capstar Credit Facility also contains
mechanisms that permit Capstar Radio to request additional term loans and
revolving credit loans in an aggregate amount up to $550,000; provided, however,
that all such additional loans are subject to future commitment availability and
approval from the banks and are not currently available under the Capstar Credit
Facility. The revolving loan matures on November 30, 2004. The A Term Loan
provides for scheduled loan repayments from August 31, 1999 to November 30,
2004. The B Term Loan provides for scheduled loan repayments from August 31,
1998 to May 31, 2005. Up to $150,000 of the revolving loan commitment is
available to Capstar Radio for the issuance of letters of credit. As of June 30,
1998, $751,408 was available for borrowing under the Capstar Credit Facility.
Due to the Company replacing its previous credit facility with the Capstar
Credit Facility, an extraordinary loss, net of tax, of approximately $2,605 was
recognized in the second quarter of 1998.
The revolving loans and the term loans bear interest at a rate based, at
the option of Capstar Radio, on (i) a base rate defined as the higher of 1/2 of
1% in excess of the federal reserve reported certificate of deposit rate or the
administrative agent bank's prime lending rate, plus an incremental rate or (ii)
the Eurodollar rate, plus an incremental rate. The weighted-average interest
rates on revolving loans outstanding at June 30, 1998 was 8.1%. Capstar Radio
pays fees ranging from 0.25% to 0.50% per annum on the aggregate unused portion
of the loan commitment based on the leverage ratio for the most recent quarter
end. In addition, Capstar Radio is required to pay letter of credit fees.
The Capstar Credit Facility contains customary restrictive covenants,
which, among other things and with certain exceptions, limit the ability of
Capstar Radio to incur additional indebtedness and liens in connection
therewith, enter into certain transactions with affiliates, pay dividends,
consolidate, merge or effect certain asset sales, issue additional stock, make
capital expenditures and enter new lines of business. The Capstar Credit
Facility limits the ability of Capstar Radio and its subsidiaries to make
additional acquisitions in excess of $200,000 on an individual basis without the
prior consent of a majority of the banks. Substantially all the assets of
Capstar Radio and its subsidiaries are restricted. Under the Capstar Credit
Facility, Capstar Radio is also required to satisfy certain financial covenants,
which require Capstar Radio and its subsidiaries to
14
<PAGE> 16
CAPSTAR BROADCASTING CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
maintain specified financial ratios and to comply with certain financial tests,
such as maximum leverage ratio, minimum consolidated EBITDA and minimum
consolidated EBITDA to consolidated net cash interest expense.
Capstar Radio has collateralized the Capstar Credit Facility by granting a
first priority perfected pledge of Capstar Radio's assets, including the capital
stock of its subsidiaries, excluding the assets of CCI. Capstar Partners,
Capstar Broadcasting and all of the direct and indirect subsidiaries of Capstar
Partners (other than CCI) have guaranteed the Capstar Credit Facility and have
collateralized their guarantees by granting a first priority perfected pledge of
substantially all of their assets.
In connection with the Merger, Capstar Broadcasting, borrowed $150,000 (the
"Chancellor Loan") from Chancellor Media evidenced by a note (the "Chancellor
Note"). The Chancellor Note bears interest at a rate of 12% per annum (subject
to increase in certain circumstances), payable quarterly, of which 5/6 is
payable in cash and 1/6 is, at Capstar Broadcasting's option, either payable in
cash or added to the principal amount of the Chancellor Note. In addition,
Capstar Broadcasting may elect to defer the 5/6 portion payable in cash, in
which case the Chancellor Note would bear interest at a rate of 14% per annum.
If Capstar Broadcasting elects to pay interest when due, quarterly interest
payments will equal $4,500, payable until maturity. The Chancellor Note will
mature on the twentieth anniversary of the date of issuance, provided that
Capstar Broadcasting may prepay all or part of the outstanding principal balance
and, in certain circumstances, Chancellor Media has the right to require Capstar
Broadcasting to prepay part of the outstanding principal balance. The common
stock of Capstar Partners was pledged by Capstar Broadcasting on a first
priority basis to Chancellor Media as collateral for the Chancellor Note.
After the consummation of the Merger, CCI remained liable for the $450,000
in aggregate principal amount of the 10 3/4% CCI Notes. Interest is payable
semi-annually on May 15 and November 15 of each year until maturity on May 15,
1996. The notes are unsecured obligations of CCI and are subordinate to all
senior debt of CCI.
All 2,392,022 shares of CCI Series E Preferred Stock remained outstanding
after the consummation of the Merger. Dividends on the CCI Series E Preferred
Stock accumulate from the date of issuance at the rate per share of $12.625 per
annum, and are payable semi-annually on January 15 and July 15 of each year.
Dividends may be paid, at CCI's option, on any dividend payment date occurring
on or before January 15, 2002, either in cash or in additional shares of CCI
Series E Preferred Stock having a liquidation preference equal to the amount of
such dividend. Subject to certain conditions, the shares of the CCI Series E
Preferred Stock are exchangeable in whole or in part, on a pro rata basis, at
the option of CCI, on any dividend payment date, for CCI's 12 5/8% Senior
Subordinated Exchangeable Debentures due 2006 ("CCI Exchange Notes"), provided
that immediately after giving effect to any partial exchange, there shall be
outstanding CCI Series E Preferred Stock with an aggregate liquidation
preference of not less than $50,000 and not less than $50,000 in aggregate
principal amount of CCI Exchange Notes. CCI is required, subject to certain
conditions, to redeem all of the CCI Series E Preferred Stock outstanding on
October 31, 2006.
On March 30, 1998, Capstar Radio announced an offer to purchase for cash
any and all of its $76,808 in aggregate principal amount of its 13 1/4% Senior
Subordinated Notes due 2003 (the "13 1/4% Capstar Radio Notes"). On April 28,
1998, Capstar Radio purchased all of the outstanding 13 1/4% Capstar Radio Notes
for an aggregate purchase price of $90,200, including a $10,700 purchase premium
and $2,700 of accrued interest, resulting in an extraordinary loss, net of tax,
of approximately $4,700, which was recognized in the second quarter of 1998.
On July 3, 1998, (i) pursuant to the terms of the indenture governing the
10 3/4% CCI Notes, CCI redeemed $154,000 aggregate principal amount of the
10 3/4% CCI Notes for an aggregate purchase price of $172,800 including a
$16,600 redemption premium and $2,200 of accrued interest and (ii) pursuant to
the terms of the Certificate of Designation that governs the CCI Series E
Preferred Stock (the "CCI Certificate
15
<PAGE> 17
CAPSTAR BROADCASTING CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of Designation"), CCI redeemed $119,600 aggregate liquidation preference, or
1,196,011 shares, of the CCI Series E Preferred Stock for an aggregate purchase
price of $141,800, including a $15,100 redemption premium and $7,000 of accrued
dividends.
The Merger resulted in a change of control under the indentures governing
the 10 3/4% CCI Notes and CCI's 11 3/8% Senior Subordinated Notes due 2000 (the
"CCI 11 3/8% Notes") and under the CCI Certificate of Designation. Pursuant to
change of control offers to acquire all of the outstanding 10 3/4% CCI Notes,
CCI 11 3/8% Notes and CCI Series E Preferred Stock, each of which commenced on
June 8, 1998, CCI purchased on July 10, 1998 (i) $1,915 aggregate principal
amount of the 10 3/4% CCI Notes for an aggregate purchase price of $1,866,
including an $18 purchase premium and $31 of accrued interest and (ii) $500
aggregate liquidation preference, or 5,004 shares, of the CCI Series E Preferred
Stock for an aggregate purchase price of $536, including a $5 purchase premium
and $31 of accrued dividends. No 11 3/8% CCI Notes were tendered for repurchase.
NOTE 9 -- STOCKHOLDER'S EQUITY
On January 26, 1998, Capstar Broadcasting issued 558,496 shares of its
Class B Common Stock, and 7,518,797 shares of its Class C Common Stock, each at
a per share price of $13.30. On February 4, 1998, Capstar Broadcasting issued
11,278,195 shares of Class C Common Stock at a per share price of $13.30. On
March 18, 1998, Capstar Broadcasting issued 21,428,571 shares of Class C Common
Stock at a per share price of $14.00. On April 3, 1998, Capstar Broadcasting
issued 3,571,428 shares of Class C Common Stock at a per share price of $14.00.
On April 10, 1998, Capstar Broadcasting issued 1,905,301 shares of Class B
Common Stock at a per share price of $14.00. During the second quarter of 1998,
Capstar Broadcasting issued 120,000 shares of Class A Common Stock for $1,596 in
connection with the exercise of employee stock options. On May 29, 1998, Capstar
Broadcasting issued 35,699 shares of Class A Common Stock at a per share price
of $14.00.
On May 18, 1998, 1,200,064 shares of Class B Common Stock were exchanged
for the same number of shares of Class C Common Stock. Capstar Broadcasting
received no cash consideration for such exchange.
On May 22, 1998, Capstar Broadcasting effected a one-for-ten reverse stock
split whereby each share of common stock of Capstar Broadcasting outstanding
immediately prior to the reverse stock split thereafter represented 0.10 shares
of the same class of common stock of Capstar Broadcasting. Fractional shares, if
any, resulting from the reverse stock split represent the right of the holder
thereof to receive a cash payment equal to the product of such fraction
multiplied by $19.00 per whole share. All share and per share data (other than
authorized share data) contained in the financial statements have been
retroactively adjusted to give effect to the reverse stock split.
In April 1998, Capstar Broadcasting (i) amended and restated three warrants
(the "Original Warrants") to purchase up to 1,508,437 shares of Class C Common
Stock that were previously granted to R. Steven Hicks, Capstar Broadcasting's
President and Chief Executive Officer, (ii) granted two additional warrants to
Mr. Hicks to purchase up to 187,969 shares and 500,000 shares of Class C Common
Stock, respectively, and (iii) granted warrants to two other executive officers
of Capstar Broadcasting to purchase up to an aggregate of 300,000 shares of
Class A Common Stock.
The unvested portion of the Original Warrants and the warrant to purchase
187,969 shares of Class C Common Stock vest on June 30, 2001. Accordingly,
Capstar Broadcasting is recording non-cash compensation expense ratably over the
vesting period for the difference between the exercise price and the fair value
of the Class A Common Stock. Due to the warrant to purchase 500,000 shares and
the warrants to the other two executive officers becoming exercisable only upon
the occurrence of a triggering event, the Company will not record any non-cash
compensation expense until such time that the triggering event becomes probable.
16
<PAGE> 18
CAPSTAR BROADCASTING CORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On April 1, 1998, Capstar Broadcasting granted stock options under its
stock option plan to certain key employees and eligible non-employees, which
stock options are exercisable for the purchase of up to 585,340 shares of Class
A Common Stock at a per share exercise price of $17.50. A total non-cash
compensation charge of $878 will be charged ratably over the five-year vesting
period of such stock options.
On June 15, 1998, Capstar Broadcasting granted stock options under its
stock option plan to certain key employees and eligible non-employees, which
stock options are exercisable for the purchase of up to 1,922,240 shares of
Class A Common Stock at a per share exercise price of $19.00.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
The Company is subject to various legal proceedings and claims that arise
in the ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not have a material
impact on the consolidated financial position or results of operations or cash
flows of the Company.
NOTE 11 -- SUBSEQUENT EVENTS
On July 5, 1998, a director of Capstar Broadcasting was granted a warrant
to purchase 200,000 shares of Class A Common Stock at an exercise price of
$14.00 per share. The terms of this warrant are the same as the terms of the
warrants granted to the two executive officers of Capstar Broadcasting (as
discussed in Note 9).
17
<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 of the Company
included elsewhere in this Quarterly Report on Form 10-Q.
A radio broadcast company's revenues are derived primarily from the sale of
time to local and national advertisers. Those revenues are affected by the
advertising rates that a radio station is able to charge and the number of
advertisements that can be broadcast without jeopardizing listener levels (and
resulting ratings). Advertising rates tend to be based upon demand for a
station's advertising inventory and its ability to attract audiences in targeted
demographic groups, as measured principally by Arbitron. Radio stations attempt
to maximize revenues by adjusting rates based upon local market conditions,
controlling advertising inventory and creating demand and audience ratings.
Seasonal revenue fluctuations are common in the radio broadcasting industry
and are due primarily to fluctuations in advertising expenditures by local and
national advertisers, with revenues typically being lowest in the first calendar
quarter and highest in the second and fourth calendar quarters of each year. A
radio station's operating results in any period may be affected by the
occurrence of advertising and promotion expenses that do not produce
commensurate revenues in the period in which the expenditures are made. Because
Arbitron reports audience ratings on a quarterly basis, a radio station's
ability to realize revenues as a result of increased advertising and promotional
expenses and any resulting audience ratings improvements may be delayed for
several months.
The Company's results of operations from period to period have not
historically been comparable because of the impact of the various acquisitions
and dispositions that the Company has completed.
As of June 30, 1998, the Company currently owns and operates, provides
programming to or sells advertising on behalf of 304 radio stations located in
75 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 336 radio stations located in 81 markets. The Company
anticipates that it will consummate the pending acquisitions and dispositions;
however, the closing of each such acquisition or disposition is subject to
various conditions, including FCC and other governmental approvals, which are
beyond the Company's control, and the availability of financing to the Company
on acceptable terms. No assurances can be given that regulatory approval will be
received, or that the terms of the Company's existing indebtedness or any other
instruments of indebtedness to which the Company may in the future become a
party will permit additional financing for the pending transactions or that such
financing will be available to the Company on acceptable terms.
In the following analysis, management discusses broadcast cash flow and
EBITDA (before noncash compensation expense and LMA fees). Broadcast cash flow
consists of operating income before depreciation, amortization, corporate
expenses, LMA fees and noncash compensation expense. EBITDA (before noncash
compensation expense and LMA fees) consists of operating income before
depreciation, amortization, LMA fees and noncash compensation expense. Although
broadcast cash flow and EBITDA (before noncash compensation expense and LMA
fees) are not measures of performance calculated in accordance with generally
accepted accounting principles ("GAAP"), management believes that they are
useful to an investor in evaluating the Company because it is a measure widely
used in the broadcasting industry to evaluate a radio company's operating
performance. However, broadcast cash flow and EBITDA (before noncash
compensation expense and LMA fees) should not be considered in isolation or as
substitutes for operating income, cash flows from operating activities and other
income or cash flow statements prepared in accordance with GAAP or as a measure
of liquidity or profitability.
RESULTS OF OPERATIONS
The following table presents summary supplemental historical consolidated
financial data of the Company for the three months ended June 30, 1997 and 1998
and should be read in conjunction with the
18
<PAGE> 20
consolidated financial statements of the Company and the related notes included
elsewhere in this Quarterly Report on Form 10-Q.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JUNE 30,
-------------------------
1997 1998
----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Operating Data:
Net revenue............................................. $ 40,054 $ 111,922
Station operating expenses.............................. 25,645 67,736
Depreciation and amortization........................... 5,612 19,369
Corporate expenses...................................... 3,163 4,058
LMA fees................................................ 1,448 1,450
Noncash compensation expense............................ 8,349 6,676
Operating income (loss)................................. (4,163) 12,633
Interest expense........................................ 9,412 22,547
Net loss................................................ (7,629) (20,895)
Net loss attributable to common stock................... $ (8,518) $ (20,895)
Basic and diluted loss per common share................. $ (0.38) $ (0.24)
Weighted average common shares outstanding.............. 22,493,114 88,499,124
Other Data:
Broadcast cash flow(1).................................. $ 14,409 $ 44,186
Broadcast cash flow margin.............................. 36.0% 39.5%
EBITDA (before noncash compensation expense and LMA
fees)(2)............................................. 11,246 40,128
</TABLE>
- ---------------
(1) Broadcast cash flow consists of operating income before depreciation,
amortization, corporate expenses, LMA fees and noncash compensation expense.
Although broadcast cash flow is not a measure of performance calculated in
accordance with GAAP, management believes that it is useful to an investor
in evaluating the Company because it is a measure widely used in the
broadcasting industry to evaluate a radio company's operating performance.
Nevertheless, it should not be considered in isolation or as a substitute
for operating income, cash flows from operating activities or any other
measure for determining the Company's operating performance or liquidity
that is calculated in accordance with GAAP. As broadcast cash flow is not a
measure calculated in accordance with GAAP, this measure may not be compared
to similarly titled measures employed by other companies.
(2) EBITDA (before noncash compensation expense and LMA fees) consists of
operating income before depreciation, amortization, LMA fees and noncash
compensation expense. Although EBITDA (before noncash compensation expense
and LMA fees) is not a measure of performance calculated in accordance with
GAAP, management believes that it is useful to an investor in evaluating the
Company because it is a measure widely used in the broadcasting industry to
evaluate a radio company's operating performance. Nevertheless, it should
not be considered in isolation or as a substitute for operating income, cash
flows from operating activities or any other measure for determining the
Company's operating performance or liquidity that is calculated in
accordance with GAAP. As EBITDA (before noncash compensation expense and LMA
fees) is not a measure calculated in accordance with GAAP, this measure may
not be compared to similarly titled measures employed by other companies.
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1998
Net Revenue. Due to the impact of the various acquisitions and dispositions
that the Company has completed, net revenue increased $71.8 million or 179.4% to
$111.9 million for the three months ended June 30, 1998 from $40.1 million for
the three months ended June 30, 1997. This increase was attributable to the
acquisition of radio stations and revenue generated from JSAs and LMAs entered
into during the three months ended June 30, 1998 and 1997. On a same station
basis, for stations owned or operated as of June 30,
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<PAGE> 21
1998, net revenue increased $16.5 million or 11.3% to $162.8 million from $146.3
million in the three months ended June 30, 1997. This increase was primarily
attributable to growth in the sale of time to local and national advertisers.
Station Operating Expenses. Due to the impact of the various acquisitions
and dispositions that the Company has completed, station operating expenses
increased $42.1 million or 164.1% to $67.7 million for the three months ended
June 30, 1998 from $25.6 million for the three months ended June 30, 1997. The
increase was attributable to the station operating expenses of the radio
acquisitions and the JSAs and the LMAs entered into during the period ended June
30, 1998. On a same station basis, for stations owned or operated as of June 30,
1998, operating expenses increased $6.5 million or 7.7% to $91.6 million from
$85.1 million in the period ended June 30, 1997, and as a percentage of revenue,
on a same station basis, operating expenses declined from 58.2% in 1997 to 56.3%
in 1998 as a result of (i) cost saving measures implemented by the Company in
connection with its acquisitions and (ii) the spreading of fixed costs over a
larger revenue base.
Corporate Expenses. Due to the impact of the various acquisitions and
dispositions that the Company has completed, corporate expenses increased $.9
million or 28.3% to $4.1 million for the three months ended June 30, 1998 from
approximately $3.2 million for the three months ended June 30, 1997 primarily as
a result of higher salary expense for additional staffing.
Other Operating Expenses. Depreciation and amortization increased $13.8
million or 245.1% to $19.4 million for the three months ended June 30, 1998 from
$5.6 million for the three months ended June 30, 1997 primarily due to the
various acquisitions consummated during 1997 and 1998. Noncash compensation
expense related to certain options, warrants, and stockholder non-recourse notes
decreased $1.6 million or 20.0% to $6.7 million in the three months ended June
30, 1998 from $8.3 million in the three months ended June 30, 1997 primarily due
to the Company fixing certain of the warrants exercise prices.
Other Expenses (Income). Interest expense increased $13.1 million or 139.6%
to $22.5 million in the three months ended June 30, 1998 from $9.4 million
during the same period in 1997 primarily due to indebtedness incurred in
connection with the Company's acquisitions. Other income decreased approximately
$3.3 million to approximately $0.2 million for the three months ended June 30,
1998 from approximately $3.5 million in other income in the same period in 1997.
In 1998, the Company recorded an extraordinary loss of $7.3 million
relating to the purchase of the 13 1/4% Capstar Radio Notes and the termination
of the Company's prior credit facility.
Net Loss. Due to the impact of the various acquisitions and dispositions
that the Company has completed, net loss increased $13.3 million to $20.9
million for the three months ended June 30, 1998 from $7.6 million for the three
months ended June 30, 1997.
Broadcast Cash Flow. Due to the impact of the various acquisitions and
dispositions that the Company has completed, broadcast cash flow increased $29.8
million or 206.7% to $44.2 million for the three months ended June 30, 1998 from
$14.4 million for the three months ended June 30, 1997. The broadcast cash flow
margin was 39.5% for the three months ended June 30, 1998 compared to 36.0% for
the three months ended June 30, 1997.
EBITDA (before noncash compensation expense and LMA fees). Due to the
impact of the various acquisitions and dispositions that the Company has
completed, a result of the factors described above, EBITDA (before noncash
compensation expense and LMA fees) increased $28.9 million or 256.8% to $40.1
million for the three months ended June 30, 1998 from $11.2 million for the
three months ended June 30, 1997. The EBITDA (before noncash compensation
expense and LMA fees) margin for the three months ended June 30, 1998 was 35.9%
compared to 28.1% for the three months ended June 30, 1997.
The following table presents summary supplemental historical consolidated
financial data of the Company for the six months ended June 30, 1997 and 1998
and should be read in conjunction with the
20
<PAGE> 22
consolidated financial statement of the Company and the related notes included
elsewhere in the Quarterly Report on Form 10-Q.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------------
1997 1998
----------- -----------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C> <C>
Operating Data:
Net revenue............................................. $ 65,156 $ 175,997
Station operating expenses.............................. 43,949 115,496
Depreciation and amortization........................... 9,337 30,401
Corporate expenses...................................... 5,105 7,815
LMA fees................................................ 2,131 3,321
Noncash compensation expense............................ 10,818 22,469
Operating income (loss)................................. (6,184) (3,505)
Interest expense........................................ 17,239 38,444
Net loss................................................ (15,998) (50,700)
Net loss attributable to common stock................... $ (17,691) $ (50,700)
Basic and diluted loss per common share................. $ (0.85) $ (0.75)
Weighted average common shares outstanding.............. 20,899,418 67,432,057
Other Data:
Broadcast cash flow(1).................................. $ 21,207 $ 60,501
Broadcast cash flow margin.............................. 32.5% 34.4%
EBITDA (before noncash compensation expense and LMA
fees)(2)............................................. 16,102 52,686
Cash Flows Related To:
Operating activities................................. 392 21,196
Investing activities................................. (181,173) (1,429,618)
Financing activities................................. 185,961 1,371,952
Capital expenditures................................. $ 4,889 $ 15,508
</TABLE>
- ---------------
(1) Broadcast cash flow consists of operating income before depreciation,
amortization, corporate expenses, LMA fees and noncash compensation expense.
Although broadcast cash flow is not a measure of performance calculated in
accordance with GAAP, management believes that it is useful to an investor
in evaluating the Company because it is a measure widely used in the
broadcasting industry to evaluate a radio company's operating performance.
Nevertheless, it should not be considered in isolation or as a substitute
for operating income, cash flows from operating activities or any other
measure for determining the Company's operating performance or liquidity
that is calculated in accordance with GAAP. As broadcast cash flow is not a
measure calculated in accordance with GAAP, this measure may not be compared
to similarly titled measures employed by other companies.
(2) EBITDA (before noncash compensation expense and LMA fees) consists of
operating income before depreciation, amortization, LMA fees and noncash
compensation expense. Although EBITDA (before noncash compensation expense
and LMA fees) is not a measure of performance calculated in accordance with
GAAP, management believes that it is useful to an investor in evaluating the
Company because it is a measure widely used in the broadcasting industry to
evaluate a radio company's operating performance. Nevertheless, it should
not be considered in isolation or as a substitute for operating income, cash
flows from operating activities or any other measure for determining the
Company's operating performance or liquidity that is calculated in
accordance with GAAP. As EBITDA (before noncash compensation expense and LMA
fees) is not a measure calculated in accordance with GAAP, this measure may
not be compared to similarly titled measures employed by other companies.
21
<PAGE> 23
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1998
Net Revenue. Due to the impact of the various acquisitions and dispositions
that the Company has completed, net revenue increased $110.8 million or 170.1%
to $176.0 million for the six months ended June 30, 1998 from $65.2 million for
the six months ended June 30, 1997. This increase was attributable to the
acquisition of radio stations and revenue generated from JSAs and LMAs entered
into during the six months ended June 30, 1998 and 1997. On a same station
basis, for stations owned or operated as of June 30, 1998, net revenue increased
$24.6 million or 9.3% to $289.5 million from $264.9 million in the six months
ended June 30, 1997. This increase was primarily attributable to growth in the
sale of time to local and national advertisers.
Station Operating Expenses. Due to the impact of the various acquisitions
and dispositions that the Company has completed, station operating expenses
increased $71.6 million or 162.8% to $115.5 million for the six months ended
June 30, 1998 from $43.9 million for the six months ended June 30, 1997. The
increase was attributable to the station operating expenses of the radio
acquisitions and the JSAs and the LMAs entered into during the period ended June
30, 1998. On a same station basis, for stations owned or operated as of June 30,
1998, operating expenses increased $10.4 million or 6.3% to $173.7 million from
$163.3 million in the period ended June 30, 1997, and as a percentage of
revenue, on a same station basis, operating expenses declined from 61.7% in 1997
to 60.0% in 1998 as a result of (i) cost saving measures implemented by the
Company in connection with its acquisitions and (ii) the spreading of fixed
costs over a larger revenue base.
Corporate Expenses. Due to the impact of the various acquisitions and
dispositions that the Company has completed, corporate expenses increased $2.7
million or 53.1% to $7.8 million for the six months ended June 30, 1998 from
approximately $5.1 million for the six months ended June 30, 1997 primarily as a
result of higher salary expense for additional staffing.
Other Operating Expenses. Depreciation and amortization increased $21.1
million or 225.6% to $30.4 million for the six months ended June 30, 1998 from
$9.3 million for the six months ended June 30, 1997 primarily due to the various
acquisitions consummated during 1997 and 1998. Noncash compensation expense
related to certain options, warrants and stockholder non-recourse notes
increased $11.7 million or 107.7% to $22.5 million in the six months ended June
30, 1998 from $10.8 million in the six months ended June 30, 1997 due to the
increase in the fair value of Capstar Broadcasting's common stock.
Other Expenses (Income). Interest expense increased $21.2 million or 123.0%
to $38.4 million in the six months ended June 30, 1998 from $17.2 million during
the same period in 1997 primarily due to indebtedness incurred in connection
with the Company's acquisitions. Other income decreased approximately $3.4
million to approximately $.1 million for the six months ended June 30, 1998 from
approximately $3.5 million in other income in the same period in 1997.
In 1998, the Company recorded an extraordinary loss of $7.3 million
relating to the purchase of the 13 1/4% Capstar Radio Notes and the termination
of the Company's prior credit facility.
Net Loss. Due to the impact of the various acquisitions and dispositions
that the Company has completed, net loss increased $34.7 million to $50.7
million for the six months ended June 30, 1998 from $16.0 million for the six
months ended June 30, 1997.
Broadcast Cash Flow. Due to the impact of the various acquisitions and
dispositions that the Company has completed, broadcast cash flow increased $39.3
million or 185.3% to $60.5 million for the six months ended June 30, 1998 from
$21.2 million for the six months ended June 30, 1997. The broadcast cash flow
margin was 34.4% for the six months ended June 30, 1998 compared to 32.5% for
the six months ended June 30, 1997.
EBITDA (before noncash compensation expense and LMA fees). Due to the
impact of the various acquisitions and dispositions that the Company has
completed, EBITDA (before noncash compensation expense and LMA fees) increased
$36.6 million or 227.2% to $52.7 million for the six months ended June 30, 1998
from $16.1 million for the six months ended June 30, 1997. The EBITDA (before
noncash compensation
22
<PAGE> 24
expense and LMA fees) margin for the six months ended June 30, 1998 was 29.9%
compared to 24.7% for the six months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's acquisition strategy has required a significant portion of
the Company's capital resources. The acquisitions that have been completed by
the Company were funded from one or a combination of the following sources: (i)
equity investments in the Company from Hicks, Muse, Tate & Furst Incorporated
("Hicks Muse") and its affiliates and management of the Company of approximately
$872.7 million; (ii) assumption of indebtedness of acquired companies, including
the 13 1/4% Capstar Radio Notes , the 10 3/4% CCI Notes, and the 11 3/8% CCI
Notes; (iii) net proceeds from the issuance of the 12 3/4% Senior Discount
Notes due 2009 of Capstar Partners (the "12 3/4% Capstar Partners Notes") in
February 1997 of approximately $150.3 million; (iv) net proceeds from the
issuance of the 12% Senior Exchangeable Preferred Stock, par value $0.01 per
share, of Capstar Partners (the "12% Capstar Partners Preferred Stock") in June
1997 of approximately $100.0 million; (v) net proceeds from the issuance of the
9 1/4% Senior Subordinated Notes due 2007 of Capstar Radio (the "9 1/4% Capstar
Radio Notes") in June 1997 of approximately $199.2 million; (vi) the Chancellor
Loan; (vii) net proceeds of approximately $551.3 million (after deducting
underwriting discounts and commissions and offering expenses of $37.7 million),
from the Offering; (viii) borrowings under the Capstar Credit Facility and other
bank indebtedness of the Company of approximately $590.6 million; (ix) net
proceeds from dispositions of certain assets of the Company of approximately
$257.4 million; and (x) cash flows from operating activities.
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 such
indebtedness.
In October 1996, the Company assumed the 13 1/4% Capstar Radio Notes in
connection with the financing of the acquisition of Commodore Media, Inc. (now
known as Capstar Radio). On April 28, 1998, Capstar Radio purchased all of the
outstanding 13 1/4% Capstar Radio Notes for an aggregate purchase price of
$90.2 million, including a $10.7 million purchase premium and $2.7 million of
accrued interest, which amount was funded with the proceeds of an equity
investment in the Company by an affiliate of Hicks Muse in 1998.
In connection with the financing of the acquisition of Osborn
Communications Corporation in February 1997, Capstar Partners issued the 12 3/4%
Capstar Partners Notes at a substantial discount from their aggregate principal
amount at maturity of $277.0 million, generating gross proceeds to the Company
of approximately $150.3 million. The 12 3/4% Capstar Partners Notes pay no cash
interest until August 1, 2002. Accordingly, the carrying value will increase
through accretion until August 1, 2002. As of June 30, 1998, the outstanding
principal balance was $177.7 million. On August 1, 2002 and thereafter, interest
of approximately $17.7 million will be payable semi-annually on February 1 and
August 1 of each year until maturity on February 1, 2009.
In June 1997, Capstar Radio issued the 9 1/4% Capstar Radio Notes in
connection with certain acquisitions that were completed during the third
quarter of 1997. As of June 30, 1998, the outstanding principal balance was
$199.3 million. Interest on the 9 1/4% Capstar Radio Notes is payable
semi-annually on January 1 and July 1 of each year until maturity on July 1,
2007.
In June 1997, Capstar Partners issued 1,000,000 shares of the 12% Capstar
Partners Preferred Stock in connection with the financing of the acquisition of
GulfStar Communications, Inc. Dividends on the 12% Capstar Partners Preferred
Stock accumulate from the date of issuance and are payable semi-annually on
January 1 and July 1 of each year at a rate per annum of 12% of the $100.00 per
share liquidation preference. Dividends may be paid, at Capstar Partners'
option, on any dividend payment date occurring on or before July 1, 2002, either
in cash or in additional shares of 12% Capstar Partners Preferred Stock. Capstar
Partners paid the required dividend on January 1, 1998 and July 1, 1998 by
issuing an additional 64,658 shares and 63,872 shares, respectively, of 12%
Capstar Partners Preferred Stock and intends to pay in kind dividends, rather
than cash, through July 1, 2002.
23
<PAGE> 25
CCI remained liable after the consummation of the Merger for the
outstanding indebtedness of SFX under the 10 3/4% CCI Notes and the 11 3/8% CCI
Notes. On July 3, 1998, pursuant to the terms of the indenture governing the
10 3/4% CCI Notes, CCI redeemed $154 million aggregate principal amount of the
10 3/4% CCI Notes for an aggregate purchase price of $172.8 million, including a
$16.6 million redemption premium and $2.2 million of accrued interest. The
Merger resulted in a change of control under the indentures governing the
10 3/4% CCI Notes and the CCI 11 3/8% Notes. Pursuant to change of control
offers to acquire all of the outstanding 10 3/4% CCI Notes and CCI 11 3/8%
Notes, each of which commenced on June 8, 1998, CCI purchased on July 10, 1998,
$1.9 million aggregate principal amount of the 10 3/4% CCI Notes for an
aggregate purchase price of $1.9 million, including a $18,000 purchase premium
and $31,000 of accrued interest. No 11 3/8% CCI Notes were tendered for
repurchase. The partial redemption and the change of control offers were funded
with borrowings under the Capstar Credit Facility. Interest payments of
approximately $15.8 million are payable on the 10 3/4% CCI Notes semi-annually
on May 15 and November 15 of each year until maturity on May 15, 2006. Interest
payments of approximately $32,000 are payable on the 11 3/8% CCI Notes semi-
annually on April 1 and October 1 of each year until maturity on October 1,
2000.
Upon completion of the Merger, all 2,392,022 shares of CCI Series E
Preferred Stock remained outstanding. Dividends on the CCI Series E Preferred
Stock accumulate from the date of issuance at the rate per share of $12.625 per
annum, and are payable semi-annually on January 15 and July 15 of each year.
Dividends may be paid, at CCI's option, on any dividend payment date occurring
on or before January 15, 2002, either in cash or in additional shares of CCI
Series E Preferred Stock having a liquidation preference equal to the amount of
such dividend. CCI paid the required dividend on July 15, 1998 by issuing an
additional 75,169 shares of CCI Series E Preferred Stock, and CCI intends to pay
in kind dividends, rather than cash dividends, through January 15, 2002. On July
3, 1998, pursuant to the terms of the CCI Certificate of Designation, CCI
redeemed $119.6 million aggregate liquidation preference, or 1,196,011 shares,
of the CCI Series E Preferred Stock for an aggregate purchase price of $141.8
million, including a $15.1 million redemption premium and $7.0 million of
accrued dividends. The Merger resulted in a change of control under the CCI
Certificate of Designation. Pursuant to a change of control offer to acquire all
of the outstanding CCI Series E Preferred Stock, which commenced on June 8,
1998, CCI purchased on July 10, 1998, $500,400 aggregate liquidation preference,
or 5,004 shares, of the CCI Series E Preferred Stock for an aggregate purchase
price of $536,000, including a $5,000 purchase premium and $31,000 of accrued
dividends. The partial redemption and the change of control offer were funded
with borrowings under the Capstar Credit Facility.
In 1998, the Company received proceeds in the amount of $634.1 million from
equity investments of Hicks Muse and its affiliates, of which (i) approximately
$467.7 million was used to consummate station acquisitions, to repay
indebtedness under the Capstar Credit Facility, and to purchase all of the
outstanding 13 1/4% Capstar Radio Notes and (ii) approximately $166.4 million
was used to consummate in part the Merger and related transactions.
In May 1998, the Company purchased a $8.5 million letter of credit
reimbursement obligation owing from R. Steven Hicks to Bankers Trust Company.
The $8.5 million indebtedness of R. Steven Hicks currently owing to the Company
will be satisfied upon the transfer by R. Steven Hicks to the Company of a
construction permit issued by the FCC to construct a new FM broadcast station on
Channel 290C2 located in Round Rock, Texas.
Concurrently with the Offering, Capstar Radio entered into the Capstar
Credit Facility and terminated its existing credit facility. The Capstar Credit
Facility consists of a $500 million revolving loan, a $450 million A Term Loan
and a $400 million B Term Loan. The Capstar Credit Facility also contains
mechanisms that permit Capstar Radio to request additional term loans and
revolving credit loans in an aggregate amount up to $550 million; provided
however, that all such additional loans are subject to future commitment
availability and approval from the banks and are not currently available under
the Capstar Credit Facility. Borrowings under the Capstar Credit Facility bear
interest at floating rates and require interest payments on varying dates
depending on the interest rate option selected by the Company. The Company as of
July 31, 1998 had borrowings of approximately $891.1 million outstanding under
the Capstar Credit Facility comprised of $41.1 million in revolving loans, $450
million under the A Term Loan and $400 million under the B Term
24
<PAGE> 26
Loan, with a weighted average effective interest rate of 8% per annum. As of
July 31, 1998, $455.3 million was available for borrowing. Beginning August 31,
1999, the A Term Loan will require scheduled annual principal payments, payable
quarterly, of $45 million for the first year, $67.5 million in the second and
third years, $90 million for the fourth and fifth years, and two quarterly
payments of $45 million during the final year commencing August 31, 2004.
Beginning August 31, 1998, the B Term Loan will require scheduled annual
principal payments, payable quarterly, of $4 million in the first, second,
third, fourth and fifth years following the Closing Date (as defined in the
Capstar Credit Facility), $180 million in the sixth year following the Closing
Date and $200 million in the seventh year following the Closing Date.
Concurrently with the Offering, the Company borrowed $150.0 million from
Chancellor Media. The Chancellor Note bears interest at a rate of 12% per annum
(subject to increase in certain circumstances), payable quarterly, of which 5/6
is payable in cash and 1/6 is, at the Company's option, either payable in cash
or added to the principal amount of the Chancellor Note. In addition, the
Company may elect to defer the 5/6 portion payable in cash, in which case the
Chancellor Note would bear interest at a rate of 14% per annum. If the Company
elects to pay interest when due, quarterly interest payments will equal $4.5
million, payable until maturity. The Chancellor Note will mature on the
twentieth anniversary of the date of issuance, provided that the Company may
prepay all or part of the outstanding principal balance and, in certain
circumstances, Chancellor Media will have the right to require the Company to
prepay part of the outstanding principal balance.
CCI estimates that in connection with (i) SFX's distribution on April 27,
1998 of all the capital stock owned by SFX in SFX Entertainment, Inc. ("SFX
Entertainment") to certain of SFX's stockholders and other security holders (the
"Spin-Off") and (ii) certain other intercompany transactions engaged in by SFX
Entertainment prior to the Spin-Off, SFX incurred a federal income tax liability
of approximately $94.0 million. SFX Entertainment has agreed to fully indemnify
CCI from and against such tax liability (including any tax liability of CCI
arising from such indemnification payments), which full indemnity payments are
presently estimated to be approximately $105 million. On June 30, 1998, CCI
received approximately $52.5 million in cash from SFX Entertainment in partial
payment of SFX Entertainment's indemnity obligation. It is anticipated that CCI
will receive approximately $26.3 million in cash from SFX Entertainment on both
September 30, 1998 and December 31, 1998. In connection with certain asset
divestiture transactions occurring immediately after the Merger, CCI incurred a
federal income tax liability of approximately $26.0 million. These federal
income taxes resulting from the Spin-Off and the divestiture transactions will
be due in full by March 15, 1999.
Chancellor Media has agreed to provide services for ten large market CCI
stations under separate LMAs with the Company for approximately $49.4 million
per year for up to three years after the consummation of the Merger. In
addition, Chancellor Media has agreed to acquire such stations in exchange for
radio stations to be identified by the Company over a three-year period, with
corresponding decreases in the amount of the LMA fees received by the Company as
stations are exchanged. No assurances can be given that stations acquired by the
Company will generate cash flows comparable to the LMA fees to be received from
Chancellor Media in connection therewith, either initially when such stations
are acquired or at all.
In addition to debt service, the Company's principal liquidity requirements
will be for working capital and general corporate purposes, including capital
expenditures estimated at $51.0 million for fiscal year 1998 and payment of the
federal income tax liabilities resulting from the Spin-Off, which is
indemnified, and the asset divestiture transactions occurring immediately after
the merger, to consummate its pending acquisitions and, as appropriate
opportunities arise, to acquire additional radio stations or complementary
broadcast-related businesses. Management believes that the disposition of
certain assets of the Company, cash from operating activities, LMA fees from
Chancellor Media and SFX Entertainment's satisfaction of its indemnity
obligation to pay CCI for CCI's tax liability resulting from the Spin-Off,
together with available revolving credit borrowings under the Capstar Credit
Facility, should be sufficient to permit the Company to meet its obligations
under the agreements governing its existing indebtedness, to fund its
operations, and to consummate its pending acquisitions. The Company may require
financing, either in the form of additional debt or equity securities, for
additional future acquisitions, if any, and there can be no assurance that it
will be able to obtain such financing on terms considered to be favorable by
management. Management evaluates
25
<PAGE> 27
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.
Capstar Broadcasting's only current obligation is the repayment of the
Chancellor Loan. In addition, the Company has guaranteed the Capstar Credit
Facility and the outstanding bank indebtedness of three limited liability
companies in the amount of approximately $28.6 million, $26.0 million and $11.0
million, respectively, in each of which entities Capstar Broadcasting holds a
30% non-voting equity interest, and may in the future be required to repay such
indebtedness. Through July 31, 1998, the Company has performed as guarantor on
these notes paying $1.4 million in principal and interest. Capstar Broadcasting
is a holding company with no significant assets other than the capital stock of
its direct and indirect subsidiaries. Consequently, Capstar Broadcasting's sole
source of cash from which to service indebtedness is dividends distributed or
other payments made to it by its operating subsidiaries. The instruments
governing the Company's indebtedness contain certain covenants that restrict or
prohibit the ability of subsidiaries to pay dividends and make other
distributions. These restrictions are not anticipated to have an impact on
Capstar Broadcasting's ability to meet its cash obligations.
Net cash provided by operating activities was approximately $21.2 million
and $.4 million for the six month periods ended June 30, 1998 and 1997,
respectively. Net cash used in investing activities was $ 1,429.6 million and
$181.2 million for the six month periods ended June 30, 1998 and 1997,
respectively. Net cash provided by financing activities was $1,372.0 million and
$186.0 million for the six month periods ended March 31, 1998 and 1997,
respectively. These cash flows primarily reflect the borrowings, capital
contribution and expenditures for stations acquisitions and dispositions.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward looking statements. The
words "anticipate," "believe," "expect," "plan," "intend," "estimate,"
"project," "foresee," "will," "could," "may" and similar expressions are
intended to identify forward looking statements. Such statements reflect the
Company's current views with respect to future events and financial performance
and involve risks and uncertainties, including without limitation business
conditions and growth in the industry and the general economy, competitive
factors, changes in interest rates, the failure or inability to renew one or
more of the Company's broadcasting licenses, and regulatory developments
affecting the Company's operations and the acquisitions and dispositions
described elsewhere in this Quarterly Report on Form 10-Q. Should one or more of
these risks or uncertainties occur, or should underlying assumptions prove
incorrect, actual results may vary materially and adversely from those
indicated.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("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.
This pronouncement is effective for financial statements beginning after
December 31, 1997.
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which significantly changes
current financial statement disclosure requirements from those that were
required under SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." SFAS No. 132 does
not change the existing measurement or recognition provision of SFAS Nos. 87, 88
or 106. This pronouncement is effective for financial statements beginning after
December 31, 1997.
26
<PAGE> 28
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This pronouncement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999.
Management does not believe the implementation of these accounting
pronouncements will have a material effect on its consolidated financial
statements
EXTRAORDINARY ITEMS
On February 20, 1997, in connection with the financing of the Osborn
Acquisition, the Company repaid its outstanding loan balance (including
principal and interest) under the Company's senior credit facility with AT&T
Commercial Finance Corporation and recognized an extraordinary loss of $0.9
million as a result of the write off of unamortized deferred financing costs
plus a prepayment penalty. In 1998, extraordinary loss comprises approximately
$2.6 million from the write-off of deferred fees associated with the Company's
previous credit facility, which was terminated on May 29, 1998, and
approximately $4.7 million from the purchase of the 13 1/4% Notes on April 28,
1998.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue is whether the Company's computer system will properly
recognize date sensitive information when the year changes to 2000, or "00."
Systems that do not properly recognize such information could generate erroneous
data or cause a system to fail. The Company uses purchased software programs for
a variety of functions, including general ledger, accounts payable and accounts
receivable accounting packages. These purchased software programs have been
brought into Year 2000 compliance at no additional cost to the Company by
utilizing vendor upgrades to the Company's financial accounting software
programs. Substantially all of the Company's advertising scheduling and billing
systems are Year 2000 compliant. The Company expects to begin implementation of
a new integrated software package called "Galaxy" in November 1998, which will
bring the remainder of the advertising scheduling and billing systems into Year
2000 compliance by the end of 1999 at an estimated cost of $17.7 million. The
Company believes that its other financial applications are Year 2000 compliant.
Responsibility for the Year 2000 compliance has been analyzed and testing is
currently ongoing. The Company is identifying and replacing technical items
which are not Year 2000 compliant at an estimated aggregate cost of less than
$1.0 million. The Company believes that the Year 2000 Issue will not pose
significant operational problems for the Company's computer systems and,
therefore, will not have a material impact on the financial position or the
operations of the Company. The Company does not have a contingency plan and, at
this time, does not expect to create one because it expects to be Year 2000
compliant by the end of 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
27
<PAGE> 29
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In October 1996, Cardinal Communications Partners, L.P. ("Cardinal") filed
a complaint in the United States District Court, Northern District of Texas,
Dallas Division, against SFX, its Executive Chairman and other defendants. The
complaint concerns Cardinal's sale of radio station KTCK-AM to SFX in 1995. The
claims asserted in the complaint include breach of contract, fraud, negligent
misrepresentation, quantum meruit and unjust enrichment. The complaint seeks
declaratory relief, actual and punitive damages and attorneys' fees all in
unspecified amount. SFX reached an agreement with Cardinal effective August 1,
1997, that settled and resolved the claims asserted in the lawsuit. As a result
of the settlement agreement, all of the claims have been dismissed against all
of the defendants, with prejudice, except for one claim. This one claim,
alleging breach of contract related to deferred payments which SFX may be
required to pay to Cardinal in 1998, was dismissed without prejudice, subject to
renewal by Cardinal through an agreed arbitration procedure. In 1998, Cardinal
demanded an arbitration regarding the 1998 deferred payment as provided in the
settlement agreement. Cardinal claims entitlement to $3.5 million, plus
attorneys' fees and costs. CCI is defending vigorously against the claims made
in the arbitration.
On August 29, 1997, two lawsuits were commenced against SFX and its
directors in the Court of Chancery of the State of Delaware (New Castle County).
The plaintiffs in the lawsuits are Harbor Finance Partners (C.A. No. 15891) and
Steven Lieberman (C.A. No. 15901). The complaints are identical and allege that
the consideration to be paid as a result of the Merger to the holders of the CCI
Class A Common Stock is unfair and that the individual defendants have breached
their fiduciary duties. Both complaints seek to have the actions certified as
class actions and seek to enjoin the Merger or, in the alternative, monetary
damages. The defendants have filed answers denying the allegations, and
discovery has commenced. The parties have agreed that the lawsuits may be
consolidated in one action entitled In Re SFX Broadcasting, Inc. Shareholders
Litigation (C.A. No. 15891).
On March 17, 1998, the parties entered into a Memorandum of Understanding,
pursuant to which the parties reached an agreement providing for a settlement of
the action (the "Settlement"). Pursuant to the Settlement, SFX agreed not to
seek an amendment to the merger agreement to reduce the consideration to be
received by the stockholders of SFX in the Merger in order to offset SFX
Entertainment's indemnity obligations. The Settlement also provides for SFX to
pay plaintiff's counsel an aggregate of $950,000, including all fees and
expenses as approved by the court. The Settlement is conditioned on the (a)
consummation of the Merger, (b) completion of the confirmatory discovery and (c)
approval of the court. Pursuant to the Settlement, the defendants have denied,
and continue to deny, that they have acted in bad faith or breached any
fiduciary duty. There can be no assurance that the court will approve the
Settlement on the terms and conditions provided for therein, or at all. The
parties currently are engaging in confirmatory discovery.
On July 13, 1998, Noddings Investment Group, Inc. and Noddings Warrant
Limited Partnership ("Noddings") filed Civil Action No. 16538 in the Court of
Chancery of the State of Delaware in and for New Castle County against CCI.
Noddings alleges that CCI breached a March 23, 1994, Warrant Agreement that
Noddings contends requires CCI to permit Noddings to exercise warrants in
exchange for cash and shares of stock of SFX Entertainment, Inc. ("SFX
Entertainment"), a former subsidiary of SFX which was spun-off prior to the
Merger. Specifically, Noddings alleges that CCI has violated the Warrant
Agreement by permitting Noddings to receive cash in exchange for its warrants,
but refusing to convey shares of stock of SFX Entertainment. In addition to
suing on its own behalf, Noddings is seeking to prosecute the action on behalf
of a putative class comprised of all persons who owned equivalent warrants on
April 21, 1998, (the date immediately following the record date of the
distribution of stock of SFX Entertainment to holders of the stock of SFX) and
their transferees and successors in interest. Noddings has requested that the
Court (i) declare that on the exercise of its warrants CCI transmit to
plaintiffs and members of the class that it seeks to represent $22.3725 in cash
per warrant and .2983 shares of common stock of SFX Entertainment per warrant,
(ii) require CCI to pay .2983 shares of common stock of SFX Entertainment per
warrant and, (if not previously paid) $22.3725 in cash, to any putative class
member that has exercised or exercises warrants after
28
<PAGE> 30
April 20, 1998, (iii) in the alternative, award plaintiffs and members of the
putative class monetary damages in an amount to be determined at trial, and (iv)
award costs and attorneys' fees.
On July 24, 1998 in connection with Capstar Broadcasting's pending
acquisition of Triathlon, Capstar Broadcasting was notified of an action filed
on behalf of all holders of depository shares of Triathlon against Triathlon,
its directors, and Capstar Broadcasting. The action was filed in the Court of
Chancery of the State of Delaware in and for New Castle County, Delaware. The
complaint alleges that Triathlon and its directors breached their fiduciary
duties to the class of depository shareholders by agreeing to a transaction with
Capstar Broadcasting that allegedly favored the Class A common shareholders at
the expense of the depository shareholders. Capstar Broadcasting is accused of
knowingly aiding and abetting the breaches of fiduciary duties allegedly
committed by the other defendants. Capstar Broadcasting expects to file a motion
to dismiss at the appropriate time.
See Part I Item 1 Note 10 to the June 30, 1998 unaudited financial
statements.
ITEM 2. CHANGES IN SECURITIES.
(c) Recent Sales of Unregistered Securities
The following information describes all securities issued or sold by
Capstar Broadcasting during the quarter ended June 30, 1998, and not registered
under the Securities Act of 1933 (the "Securities Act"). Each of the
transactions described below was conducted in reliance upon the exemption from
registration provided in Section 4(2) of the Securities Act and the rules and
regulations promulgated thereunder. Furthermore, each of the certificates
representing Capstar Broadcasting's securities issued in connection with such
transactions contains a restrictive legend, as appropriate, requiring each
person acquiring such securities from Capstar Broadcasting to furnish investment
representations to Capstar Broadcasting.
On April 3, 1998, Capstar Broadcasting sold 3,571,428 shares of Class C
Common Stock to Capstar Broadcasting Partners, L.P. for a purchase of
$50,000,000 in cash.
On April 10, 1998, Capstar Broadcasting sold 1,905,301 shares of Class B
Common Stock to Capstar BT Partners, L.P. for a purchase price of $26,674,224 in
cash.
On May 6, 1998, R. Steven Dinetz exercised his employee stock options and
Capstar Broadcasting sold 85,000 shares of Class A Common Stock to Mr. Dinetz
for a purchase price of $1,130,500 in cash.
On May 18, 1998, Capstar Broadcasting exchanged 1,200,064 shares of Class C
Common Stock for the same number of shares of Class B Common Stock held of
record by Thomas O. Hicks. Capstar Broadcasting received no cash consideration.
On May 19, 1998, Claude C. Turner exercised his employee stock options and
Capstar Broadcasting sold 35,000 shares of Class A Common Stock to Mr. Turner
for a purchase price of $465,000 in cash.
(d) Use of Proceeds from Registered Securities
On May 29, 1998, Capstar Broadcasting completed its initial public offering
(the "Offering") of 31,000,000 shares of Class A Common Stock. Such shares were
registered under the Securities Act pursuant to a Registration Statement on Form
S-1 (Commission File No. 333-48819) that was declared effective on May 26, 1998.
All 31,000,000 shares of Class A Common Stock were sold by Capstar Broadcasting
for an aggregate offering price of $589.0 million, before deducting underwriting
discounts and commissions and offering fees and expenses of $37.7 million. The
Offering was made through an underwriting syndicate led by Credit Suisse First
Boston, BT Alex. Brown, Morgan Stanley Dean Witter, Bear, Stearns & Co. Inc.,
Goldman, Sachs & Co., NationsBanc Montgomery Securities LLC and Salomon Smith
Barney. On May 29, 1998, the net proceeds from the Offering of approximately
$551.3 million were used to pay in part the merger consideration paid to the
stockholders of SFX in connection with the acquisition of SFX.
29
<PAGE> 31
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 18, 1998, the holders of a majority of the outstanding shares of
Class A Common Stock and Class C Common Stock, by written consent, approved (i)
the amendment and restatement of Capstar Broadcasting's Certificate of
Incorporation that, among other things, effected a one-for-ten reverse stock
split, increased the number of authorized shares of Capstar Broadcasting's
capital stock and implemented other stockholder protection measures and (ii) the
amendment and restatement of Capstar Broadcasting's 1997 Stock Option Plan to
increase the number of shares of Class A Common Stock authorized for grant
thereunder and to effect changes necessary for the plan to qualify for certain
exemptions from the provisions of Section 16 under the Securities Exchange Act
of 1934, as amended, and Section 162(m) of the Internal Revenue Code of 1986, as
amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 -- Amended and Restated Certificate of Incorporation of
Capstar Broadcasting.(1)
3.2 -- Amended and Restated By-Laws of Capstar Broadcasting.(1)
10.1 -- Employment Agreement, dated May 4, 1998, by and among
Capstar Broadcasting, Capstar Employee Management
Company, Inc. and James P. Donahoe.(1)
10.2 -- Fourth Amendment to Affiliate Stockholders Agreement,
dated May 18, 1998, by and among Capstar Broadcasting,
Capstar Partners, the securityholders listed therein and
Hicks Muse.(1)
10.3 -- Third Amendment to Management Stockholders Agreement,
dated May 18, 1998, by and among Capstar Broadcasting,
Capstar Partners, the securityholders listed therein and
Hicks Muse.(1)
10.4 -- Amended and Restated GulfStar Stockholders Agreement,
dated May 18, 1998, by and among Capstar Broadcasting,
the securityholders listed therein and Hicks Muse.(1)
10.5 -- Amended and Restated Warrant dated April 1, 1998, issued
to R. Steven Hicks for 930,000 shares of Class C Common
Stock.(2)
10.6 -- Amended and Restated Warrant dated April 1, 1998, issued
to R. Steven Hicks for 255,317 shares of Class C Common
Stock.(3)
10.7 -- Amended and Restated Warrant dated April 1, 1998, issued
to R. Steven Hicks for 323,120 shares of Class C Common
Stock.(4)
10.8 -- Warrant dated April 1, 1998, issued to R. Steven Hicks
for 187,969 shares of Class C Common Stock.(5)
10.9 -- Warrant dated April 1, 1998, issued to R. Steven Hicks
for 500,000 shares of Class C Common Stock.(6)
10.10 -- Warrant dated April 1, 1998, issued to William S.
Banowsky, Jr. for 150,000 shares of Class A Common
Stock.(7)
10.11 -- Warrant dated April 1, 1998, issued to Paul D. Stone for
150,000 shares of Class A Common Stock.(8)
10.12 -- Warrant dated July 5, 1998, issued to D. Geoffrey
Armstrong for 200,000 shares of Class A Common Stock.(9)
10.13 -- Employment Agreement, dated July 5, 1998, by and between
Capstar Broadcasting and D. Geoffrey Armstrong.*
10.14 -- Agreement and Plan of Merger, dated July 23, 1998, among
Capstar Radio, TBC Radio Acquisition Corp. and Triathlon
Broadcasting Company.*
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.15 -- Credit Agreement, dated as of May 29, 1998, among Capstar
Radio, as the borrower, Capstar Broadcasting, Capstar
Partners and the financial institutions party
thereto.(10)
10.16 -- Amendment to Letter Agreement, dated February 20, 1998,
between Chancellor Media and Capstar Broadcasting.(1)
10.17 -- Note, dated May 29, 1998, made payable by Capstar
Broadcasting to Chancellor Media Corporation of Los
Angeles.(10)
10.18 -- Capstar Broadcasting Corporation Pledge Agreement, dated
May 29, 1998, between Capstar Broadcasting and Chancellor
Media Corporation of Los Angeles.(10)
10.19 -- Asset Exchange Agreement, dated as of May 29, 1998, among
Chancellor Media Corporation of Los Angeles, Chancellor
Media Licensee Company, SFX Texas Limited Partnership and
SFXTX Limited Partnership.(10)
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
(1) Incorporated by reference to Capstar Broadcasting's Registration Statement
on Form S-1, dated May 26, 1998, File No. 333-48819.
(2) Incorporated by reference to Exhibit 10.6 of Capstar Broadcasting's Current
Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(3) Incorporated by reference to Exhibit 10.7 of Capstar Broadcasting's Current
Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(4) Incorporated by reference to Exhibit 10.8 of Capstar Broadcasting's Current
Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(5) Incorporated by reference to Exhibit 10.9 of Capstar Broadcasting's Current
Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(6) Incorporated by reference to Exhibit 10.10 of Capstar Broadcasting's
Current Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(7) Incorporated by reference to Exhibit 10.12 of Capstar Broadcasting's
Current Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(8) Incorporated by reference to Exhibit 10.11 of Capstar Broadcasting's
Current Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(9) Incorporated by reference to Exhibit 99.8 of Capstar Broadcasting's
Registration Statement on Form S-8, dated July 27, 1998, File No.
333-59937.
(10) Incorporated by reference to Capstar Broadcasting's Current Report on Form
8-K, dated May 29, 1998, File No. 333-48819.
(b) Reports on Form 8-K
The following report on Form 8-K was filed by Capstar Broadcasting during
the three months ended June 30, 1998:
Current Report on Form 8-K, filed June 15, 1998, relating to the
acquisition of SFX Broadcasting, Inc. and related transactions. Items 2 and
7 were reported.
31
<PAGE> 33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Capstar Broadcasting Corporation has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CAPSTAR BROADCASTING
CORPORATION
By: /s/ PAUL D. STONE
----------------------------------
Paul D. Stone
Executive Vice President and
Chief Financial Officer
Date: August 12, 1998
32
<PAGE> 34
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 -- Amended and Restated Certificate of Incorporation of
Capstar Broadcasting.(1)
3.2 -- Amended and Restated By-Laws of Capstar Broadcasting.(1)
10.1 -- Employment Agreement, dated May 4, 1998, by and among
Capstar Broadcasting, Capstar Employee Management
Company, Inc. and James P. Donahoe.(1)
10.2 -- Fourth Amendment to Affiliate Stockholders Agreement,
dated May 18, 1998, by and among Capstar Broadcasting,
Capstar Partners, the securityholders listed therein and
Hicks Muse.(1)
10.3 -- Third Amendment to Management Stockholders Agreement,
dated May 18, 1998, by and among Capstar Broadcasting,
Capstar Partners, the securityholders listed therein and
Hicks Muse.(1)
10.4 -- Amended and Restated GulfStar Stockholders Agreement,
dated May 18, 1998, by and among Capstar Broadcasting,
the securityholders listed therein and Hicks Muse.(1)
10.5 -- Amended and Restated Warrant dated April 1, 1998, issued
to R. Steven Hicks for 930,000 shares of Class C Common
Stock.(2)
10.6 -- Amended and Restated Warrant dated April 1, 1998, issued
to R. Steven Hicks for 255,317 shares of Class C Common
Stock.(3)
10.7 -- Amended and Restated Warrant dated April 1, 1998, issued
to R. Steven Hicks for 323,120 shares of Class C Common
Stock.(4)
10.8 -- Warrant dated April 1, 1998, issued to R. Steven Hicks
for 187,969 shares of Class C Common Stock.(5)
10.9 -- Warrant dated April 1, 1998, issued to R. Steven Hicks
for 500,000 shares of Class C Common Stock.(6)
10.10 -- Warrant dated April 1, 1998, issued to William S.
Banowsky, Jr. for 150,000 shares of Class A Common
Stock.(7)
10.11 -- Warrant dated April 1, 1998, issued to Paul D. Stone for
150,000 shares of Class A Common Stock.(8)
10.12 -- Warrant dated July 5, 1998, issued to D. Geoffrey
Armstrong for 200,000 shares of Class A Common Stock.(9)
10.13 -- Employment Agreement, dated July 5, 1998, by and between
Capstar Broadcasting and D. Geoffrey Armstrong.*
10.14 -- Agreement and Plan of Merger, dated July 23, 1998, among
Capstar Radio, TBC Radio Acquisition Corp. and Triathlon
Broadcasting Company.*
10.15 -- Credit Agreement, dated as of May 29, 1998, among Capstar
Radio, as the borrower, Capstar Broadcasting, Capstar
Partners and the financial institutions party
thereto.(10)
10.16 -- Amendment to Letter Agreement, dated February 20, 1998,
between Chancellor Media and Capstar Broadcasting.(1)
10.17 -- Note, dated May 29, 1998, made payable by Capstar
Broadcasting to Chancellor Media Corporation of Los
Angeles.(10)
10.18 -- Capstar Broadcasting Corporation Pledge Agreement, dated
May 29, 1998, between Capstar Broadcasting and Chancellor
Media Corporation of Los Angeles.(10)
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.19 -- Asset Exchange Agreement, dated as of May 29, 1998, among
Chancellor Media Corporation of Los Angeles, Chancellor
Media Licensee Company, SFX Texas Limited Partnership and
SFXTX Limited Partnership.(10)
27.1 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
(1) Incorporated by reference to Capstar Broadcasting's Registration Statement
on Form S-1, dated May 26, 1998, File No. 333-48819.
(2) Incorporated by reference to Exhibit 10.6 of Capstar Broadcasting's Current
Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(3) Incorporated by reference to Exhibit 10.7 of Capstar Broadcasting's Current
Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(4) Incorporated by reference to Exhibit 10.8 of Capstar Broadcasting's Current
Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(5) Incorporated by reference to Exhibit 10.9 of Capstar Broadcasting's Current
Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(6) Incorporated by reference to Exhibit 10.10 of Capstar Broadcasting's
Current Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(7) Incorporated by reference to Exhibit 10.12 of Capstar Broadcasting's
Current Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(8) Incorporated by reference to Exhibit 10.11 of Capstar Broadcasting's
Current Report on Form 8-K, dated May 29, 1998, File No. 333-48819.
(9) Incorporated by reference to Exhibit 99.8 of Capstar Broadcasting's
Registration Statement on Form S-8, dated July 27, 1998, File No.
333-59937.
(10) Incorporated by reference to Capstar Broadcasting's Current Report on Form
8-K, dated May 29, 1998, File No. 333-48819.
<PAGE> 1
EXHIBIT 10.13
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into July 5, 1998, by and between Capstar Broadcasting Corporation, a
Delaware corporation (together with its successors and assigns permitted
hereunder, the "Company"), D. Geoffrey Armstrong (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 on September 1, 1998 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"). Notwithstanding the foregoing, it shall be a
condition to the obligations of the parties hereunder that the merger of a
subsidiary of the Company with and into SFX Broadcasting, Inc. shall have
occurred. 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), 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
<PAGE> 2
reasonable best efforts to perform faithfully, effectively and efficiently such
responsibilities. During the term of Executive's employment it shall not be a
violation of this Agreement for the Executive to (1) serve on corporate, civic
or charitable boards or committees, (2) deliver lectures or fulfill speaking
engagements and (3) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
(b) Compensation.
(i) Base Salary. During the term of the Executive's
employment, the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid in accordance with the customary payroll practices
of the Company, at least equal to $300,000. Commencing on January 1, 1999, and
on each subsequent January 1 as long as the Executive remains an employee of the
Company (each such January 1 being herein referred to as an "Adjustment Date"),
the Annual Base Salary of the Executive shall be increased by an amount equal to
five percent (5%) of the then current Annual Base Salary or such greater amount
as the Board in its discretion may determine appropriate. The result of such
increase to the then current Annual Base Salary shall constitute the Executive's
Annual Base Salary commencing on the Adjustment Date then at hand and continuing
until the next Adjustment Date. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement. The term Annual Base Salary as utilized in this Agreement shall refer
to Annual Base Salary as so increased.
(ii) Bonuses. The Executive shall be entitled to
receive an annual performance bonus in the amount equal to $100,000 (prorated
for any partial years) or such greater amount as the Board in its discretion may
determine appropriate.
(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 $1,200, which shall be paid monthly in accordance
with the customary practices of the Company.
2
<PAGE> 3
(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; Warrants. 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"). Contemporaneously with the execution and delivery of this
Agreement, the Company is issuing to the Executive stock purchase warrants for
the purchase of an aggregate of 200,000 shares of Class A Common Stock of the
Company ("Warrants") having an exercise price of $14.00 per share.
(x) Country Club. During the term of the Executive's
employment, the Company shall pay (1) the initiation fee (up to $25,000) 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. 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).
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(b) Cause or Board Termination. The Company may terminate the
Executive's employment during the Employment Period for Cause or without Cause.
For purposes of this Agreement, "Cause" shall mean (i) a breach by the Executive
of the Executive's obligations under Section 2(a) (other than as a result of
physical or mental incapacity) which constitutes a continued material
nonperformance by the Executive of his obligations and duties thereunder, as
reasonably determined by the Board, and which is not remedied within 30 days
after receipt of written notice from the Company specifying such breach, (ii)
commission by the Executive of an act of fraud upon, or willful misconduct
toward, the Company, as reasonably determined by a majority of the disinterested
members of the Board (neither the Executive nor members of his family being
deemed disinterested for this purpose) after a hearing by the Board following
ten days' notice to the Executive of such hearing, (iii) a material breach by
the Executive of Section 6 or Section 9, (iv) the conviction of the Executive of
any felony (or a plea of nolo contendere thereto); or (v) the failure of the
Executive to carry out, or comply with, in any material respect any directive of
the Board consistent with the terms of this Agreement, which is not remedied
within 30 days after receipt of written notice from the Company specifying such
failure. The refusal by the Executive, for any reason or no reason, to submit to
any drug, intelligence or other form of test (including a polygraph test) shall
not constitute "Cause" herein. 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), expressly including any
requirement that the Executive report to any officer of the Company other than
R. Steven Hicks, 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
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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);
(v) the relocation or transfer of the Executive's
principal office to a location more than 20 miles from the Company's current
executive offices as such are maintained on the date hereof in the city of
Austin, Texas;
(vi) the failure of the Executive to be elected or
appointed to serve as a member of the Board (including the Board of Directors of
any successor or assign of the Company) or the removal of the Executive from the
Board without Cause; or
(vii) 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
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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) At the Executive's election, the Company shall
reimburse Executive for, or pay on behalf of Executive, the cost of the monthly
premiums paid by or allocable to Executive for medical and dental insurance
coverage for Executive pursuant to the continuation coverage requirements of
Section 4980B(f) of the Internal Revenue Code of 1986, as amended (the "Code").
The consideration payable to Executive under this subsection (a)(ii) shall
continue until the earlier of (A) the date which is 18 months after the Date of
Termination, or, if shorter, until the end of the maximum required period for
which continuation coverage is required to be offered under Code Section
4980B(f)(2)(B), or (B) the date Executive has commenced new employment and has
thereby become eligible for comparable medical benefits.
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(iii) Notwithstanding the terms or conditions of any
Executive Option or any 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,
excluding the Warrants, the vesting and exercisability of which shall be subject
to the express terms of the Warrants) 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, at the option of the Executive's family,
the Company agrees to reimburse Executive's family for, or pay on behalf of
Executive's family, the cost of the monthly premiums allocable to Executive's
family for medical and dental insurance coverage provided for Executive's family
with respect to the Company's group health plan pursuant to the continuation
coverage requirements of Section 4980B(f) of the Code, 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 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.
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
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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 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
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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. If this Agreement is terminated by the
Executive for Good Reason prior to the beginning of the Employment Period the
Executive shall not be bound by the provisions of this Section 9.
(b) During the term of Non-Competition, the Executive will not
(other than for the benefit of the Company pursuant to this Agreement) directly
or indirectly, individually or as an officer, director, employee, shareholder,
consultant, contractor, partner, joint venturer, agent, equity owner or in any
capacity whatsoever, (i) engage in any radio broadcasting business that
transmits a primary or city-grade signal within a Metro Survey Area (as
currently defined by The Arbitron Company in its Radio Markets Reports) in which
a station directly operated by the Company transmits a primary or city-grade
signal (1), with respect to the term of Non-Competition that is during the
Executive's employment, during such term of employment, and (2), with respect to
the term of Non-Competition that is after the term of the Executive's
employment, on the Date of Termination (all such areas being collectively called
the "Geographic Area") (a "Competing Business"), (ii) hire, attempt to hire, or
contact or solicit with respect to hiring any employee of the Company, or (iii)
divert or take away any customers or suppliers of the Company in the Geographic
Area. Notwithstanding the foregoing, the Company agrees that none of the
following shall constitute a violation by Executive of this Section 6; (A)
ownership by the Executive of 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 sentence, (B) Executive serving in the
capacity of director of SFX Entertainment, Inc., or (C) ownership of less than a
5% voting or equity interest in Resource Media, Phoenix. 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
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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: D. Geoffrey Armstrong
Capstar Broadcasting Corporation
600 Congress Avenue, Suite 1400
Austin, Texas 78701
and
D. Geoffrey Armstrong
4301 Michael's Cove
Austin, Texas 78701
If to the Company: Capstar Broadcasting Corporation
600 Congress Avenue, Suite 1400
Austin, Texas 78701
Attn: William S. Banowsky, 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.
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(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.
(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
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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
Austin, Texas, and that any arbitration commenced in any other venue will be
transferred to Austin, 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.
(l) The Company agrees to reimburse the Executive for the
reasonable fees and expenses of Executive's counsel incurred in connection with
the negotiation 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/ D. Geoffrey Armstrong
---------------------------------
D. Geoffrey Armstrong
CAPSTAR BROADCASTING CORPORATION
/s/ R. Steven Hicks
---------------------------------
By: R. Steven Hicks
Title: President and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.14
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
CAPSTAR RADIO BROADCASTING PARTNERS, INC.,
TBC RADIO ACQUISITION CORP.
AND
TRIATHLON BROADCASTING COMPANY
DATED AS OF JULY 23, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
ARTICLE 1
THE MERGER
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.03. Effective Time . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.04. Effects of the Merger . . . . . . . . . . . . . . . . . . . 2
SECTION 1.05. Certificate of Incorporation and By-laws . . . . . . . . . . 2
SECTION 1.06. Directors . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.07. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
EFFECT OF THE MERGER ON THE SECURITIES OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. Effect on Capital Stock and Derivative Securities . . . . . 3
SECTION 2.02. Exchange of Certificates . . . . . . . . . . . . . . . . . . 6
SECTION 2.03. Warrants, Options and SARs . . . . . . . . . . . . . . . . . 8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Company . . . . . . . 9
SECTION 3.02. Representations and Warranties of Parent and Sub . . . . . . 31
ARTICLE 4
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. Conduct of Business . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.02. No Solicitation . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.03. Stockholders Meeting . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.04. Assistance . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.05. Releases . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.06. Termination of Certain Affiliate Transactions . . . . . . . 41
SECTION 4.07. Signal Downgrade/Upgrade . . . . . . . . . . . . . . . . . . 41
</TABLE>
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<TABLE>
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ARTICLE 5
ADDITIONAL AGREEMENTS
SECTION 5.01. Access to Information; Confidentiality . . . . . . . . . . . 41
SECTION 5.02. Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.03. Benefit Plans; Vacation . . . . . . . . . . . . . . . . . . 44
SECTION 5.04. Indemnification, Exculpation and Insurance . . . . . . . . . 45
SECTION 5.05. Fees and Expenses; Deposit . . . . . . . . . . . . . . . . . 46
SECTION 5.06. Public Announcements . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.07. Closing Extension . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.08. Citadel JSA . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.09. Environmental Assessments . . . . . . . . . . . . . . . . . 52
SECTION 5.10. Conversion of Class D Common Stock . . . . . . . . . . . . . 54
SECTION 5.11. Acquisition of Antelope Creek Property . . . . . . . . . . . 54
ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.01. Conditions to Each Party's Obligation To Effect the Merger . 55
SECTION 6.02. Conditions to Obligations of Parent and Sub . . . . . . . . 56
SECTION 6.03. Conditions to Obligation of the Company . . . . . . . . . . 58
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.02. Effect of Termination . . . . . . . . . . . . . . . . . . . 61
SECTION 7.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 8
GENERAL PROVISIONS
SECTION 8.01. Nonsurvival of Representations and Warranties . . . . . . . 61
SECTION 8.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.03. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.04. Interpretation . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.05. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries . . . . . . . 67
SECTION 8.07. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.08. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.09. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.10. Director and Officer Liability . . . . . . . . . . . . . . . 68
SECTION 8.11. Termination Date . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.12. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
ii
<PAGE> 4
Schedule A Principal Stockholders
Schedule B Series B Preferred Stockholders
Schedule C Class D Shares to be Converted
Annex A Form of Release Agreement
Annex B Form of Escrow Agreement
Annex C Form of Letter of Credit
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
as of July 23, 1998, among Capstar Radio Broadcasting Partners, Inc., a
Delaware corporation ("Parent"), TBC Radio Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), and Triathlon
Broadcasting Company, a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company, and Parent acting as the sole stockholder of Sub, have approved the
merger of Sub with and into the Company (the "Merger"), upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, as a condition of the willingness of Parent and Sub to enter
into this Agreement, simultaneously with the execution of this Agreement by the
parties hereto, each of the record holders of outstanding capital stock of the
Company listed on Schedule A attached hereto (collectively, the "Principal
Stockholders") is entering into a Stockholder Agreement dated as of the date
hereof (collectively, the "Stockholder Agreements") with Parent, Sub and the
Company which provides, among other things, that, subject to the terms and
conditions thereof, each of the Principal Stockholders will vote all shares of
Capital Stock (as defined in Section 2.01(c)(i)) with respect to which such
Principal Stockholder possesses the power to vote or direct the vote thereof
(whether by direct ownership, voting trust, voting agreement, proxy or
otherwise) in favor of the Merger and the approval and adoption of this
Agreement and the transactions contemplated hereby to the extent such shares
are entitled to vote thereon;
WHEREAS, as a condition to the willingness of Parent and Sub to enter
into this Agreement, simultaneously with the execution of this Agreement by the
parties hereto, each of the record holders of outstanding Series B Convertible
Preferred Stock, par value $.01 per share, of the Company ("Series B Preferred
Stock") listed on Schedule B attached hereto (collectively, the "Series B
Preferred Stockholders") is entering into a Series B Agreement dated as of the
date hereof (the "Series B Agreement") with Parent and the Company;
WHEREAS, contemporaneously with the execution and delivery hereof,
Norman Feuer has entered into a Termination Agreement (the "Termination
Agreement") with Parent and the Company, which establishes the terms and
provisions under which such individual's employment with the Company shall
terminate;
WHEREAS, the Board of Directors of the Company has approved for
purposes of Section 203 of the Delaware General Corporation Law (the "DGCL")
the terms of the Stockholder Agreements and the transactions contemplated
thereby;
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
<PAGE> 6
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE 1.
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL, Sub
shall be merged with and into the Company at the Effective Time (as defined in
Section 1.03). Following the Effective Time, the separate corporate existence
of Sub shall cease and the Company shall continue as the surviving corporation
(the "Surviving Corporation") and shall succeed to and assume all the rights
and obligations of Sub in accordance with the DGCL.
SECTION 1.02. CLOSING. Subject to the provisions of Article 6, the
closing of the Merger (the "Closing") will take place at the offices of Vinson
& Elkins L.L.P., 2001 Ross Avenue, Suite 3700, Dallas, Texas 75201, on the
earlier of (i) April 30, 1999 (as such date may be extended pursuant to Section
5.07), or (ii) such time, date or place as Parent shall specify by providing
written notice to the Company at least five (5) business days prior to such
date, provided that, at any time and from time to time prior to the occurrence
of the Closing, the date of Closing specified in any such notice may be delayed
by Parent on up to three separate occasions to a date not later than the
Termination Date by Parent delivering written notice to the Company at any time
prior to the occurrence of the Closing (the "Closing Date"), provided that upon
the third of such delays, Parent will pay the Company $25,000 within five
business days after the date such notice is given.
SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the
DGCL. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Delaware Secretary of State, or at such other
time as Sub and the Company shall agree should be specified, and is so
specified, in the Certificate of Merger (the time the Merger becomes effective
being hereinafter referred to as the "Effective Time").
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 259 of the DGCL.
SECTION 1.05. CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The certificate of incorporation of the Company as in
effect immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
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<PAGE> 7
(b) The by-laws of Sub as in effect at the Effective Time
shall be the by-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
SECTION 1.06. DIRECTORS. The directors of Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 1.07. OFFICERS. The officers of Sub immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE 2.
EFFECT OF THE MERGER ON THE SECURITIES OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK AND DERIVATIVE SECURITIES.
As of the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any shares of the capital stock of the Company or Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding
share of capital stock of Sub shall be converted into and become a number of
fully paid and nonassessable shares of Class A Common Stock, par value $.01 per
share, of the Surviving Corporation equal to the quotient realized by dividing
(i) the sum of the aggregate number of shares of Class A Common Stock (as
defined in Section 2.01(b)(i)) determined on a fully-diluted basis immediately
prior to the Effective Time by (ii) the aggregate number of shares of capital
stock of Sub issued and outstanding immediately prior to the Effective Time.
The term "on a fully-diluted basis" shall mean, as of any date, the number of
shares of Class A Common Stock then outstanding (including any Dissenting
Shares (as defined in Section 2.01(e)) and shares of Class A Common Stock that
are owned by and held in the treasury of the Company), together with the
aggregate number of shares of Class A Common Stock that the Company may be
required, as of such date or thereafter, to issue (with or without notice,
lapse of time or the action of any third party) pursuant to any outstanding
securities, options, warrants, commitments, agreements, arrangements or
undertakings of any kind (including, without limitation, the Options, Warrants
(as such terms are defined in Section 2.03) and all Preferred Stock (as defined
in Section 8.03) and assuming the maximum number of shares of Common Stock (as
defined in Section 2.01(b)(iv)) issuable thereunder).
(b) CONVERSION OF COMMON STOCK.
(i) Each issued and outstanding share of Class A
Common Stock, par value $.01 per share, of the Company ("Class A
Common Stock") (other than shares to be canceled in accordance with
Section 2.01(d) and Dissenting Shares) shall be converted into the
right to receive the Common Per Share Price (as defined in Section
8.03) (the "Class A
3
<PAGE> 8
Merger Consideration"), payable to the holder thereof in cash, without
any interest thereon, upon surrender of the certificate representing
such share; and all such shares of Class A Common Stock shall no
longer be outstanding and automatically shall be canceled and retired
and shall cease to exist, and each holder of a certificate
representing any such shares of Class A Common Stock shall cease to
have any rights with respect thereto, except the right to receive the
Class A Merger Consideration to be paid in consideration therefor upon
surrender of such certificate in accordance with Section 2.02, without
interest.
(ii) Each issued and outstanding share of Class B
Common Stock, par value $.01 per share, of the Company ("Class B
Common Stock") (other than shares to be canceled in accordance with
Section 2.01(d) and Dissenting Shares) shall be converted into the
right to receive the Common Per Share Price (the "Class B Merger
Consideration"), payable to the holder thereof in cash, without any
interest thereon, upon surrender of the certificate representing such
share; and all such shares of Class B Common Stock shall no longer be
outstanding and automatically shall be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares of Class B Common Stock shall cease to have any rights with
respect thereto, except the right to receive the Class B Merger
Consideration to be paid in consideration therefor upon surrender of
such certificate in accordance with Section 2.02, without interest.
(iii) Each issued and outstanding share of Class C
Common Stock, par value $.01 per share, of the Company ("Class C
Common Stock") (other than shares to be canceled in accordance with
Section 2.01(d) and Dissenting Shares) shall be converted into the
right to receive the Common Per Share Price (the "Class C Merger
Consideration"), payable to the holder thereof in cash, without any
interest thereon, upon surrender of the certificate representing such
share; and all such shares of Class C Common Stock shall no longer be
outstanding and automatically shall be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares of Class C Common Stock shall cease to have any rights with
respect thereto, except the right to receive the Class C Merger
Consideration to be paid in consideration therefor upon surrender of
such certificate in accordance with Section 2.02, without interest.
(iv) Each issued and outstanding share of Class D
Common Stock, par value $.01 per share, of the Company ("Class D
Common Stock" and together with the Class A Common Stock, the Class B
Common Stock and the Class C Common Stock, the "Common Stock") (other
than shares to be canceled in accordance with Section 2.01(d) and
Dissenting Shares) shall be converted into the right to receive the
Common Per Share Price (the "Class D Merger Consideration" and,
together with the Class A Merger Consideration, the Class B Merger
Consideration and the Class C Merger Consideration, the "Common Stock
Merger Consideration"), payable to the holder thereof in cash, without
any interest thereon, upon surrender of the certificate representing
such share; and all such shares of Class D Common Stock shall no
longer be outstanding and automatically shall be canceled and retired
and shall cease to exist, and each holder of a certificate
representing any such shares of Class D Common Stock shall cease to
have any rights with respect thereto, except
4
<PAGE> 9
the right to receive the Class D Merger Consideration to be paid in
consideration therefor upon surrender of such certificate in
accordance with Section 2.02, without interest.
(c) CONVERSION OF THE PREFERRED STOCK AND DEPOSITARY
SHARES.
(i) Each issued and outstanding share of 9%
Mandatory Convertible Preferred Stock, par value $.01 per share, of
the Company ("Mandatory Preferred Stock"; the Common Stock, the
Mandatory Preferred Stock and the Series B Preferred Stock are
sometimes collectively referred to herein as the "Capital Stock")
(other than shares to be canceled in accordance with Section 2.01(d)
and Dissenting Shares) shall be converted into the right to receive
the Mandatory Preferred Per Share Price (as defined in Section 8.03)
(the "Mandatory Preferred Merger Consideration"), payable to the
holder thereof in cash, without any interest thereon, upon surrender
of the certificate representing such share; and all such shares of
Mandatory Preferred Stock shall no longer be outstanding and
automatically shall be canceled and retired and shall cease to exist,
and each holder of a certificate representing any such shares of
Mandatory Preferred Stock shall cease to have any rights with respect
thereto, except the right to receive the Mandatory Preferred Merger
Consideration to be paid in consideration therefor upon surrender of
such certificate in accordance with Section 2.02, without interest.
(ii) Each Depositary Share shall be converted into
the right to receive the Depositary Share Merger Consideration (as
defined in Section 8.03), payable to the holder thereof in cash,
without any interest thereon, upon surrender and exchange of the
receipt representing such Depositary Share. The Company shall
cooperate with Parent in notifying the Depositary (as defined in
Section 8.03) to establish the duties and responsibilities of the
Depositary, on terms reasonably acceptable to Parent, in distributing
the Depositary Share Merger Consideration (as defined in Section 8.03)
to holders of Depositary Shares.
(iii) Each issued and outstanding share of Series B
Preferred Stock (other than shares to be canceled in accordance with
Section 2.01(d) and Dissenting Shares) shall be converted into the
right to receive $.01 (the "Series B Merger Consideration" and,
together with the Common Stock Merger Consideration and the Mandatory
Preferred Merger Consideration, the "Merger Consideration"), payable
to the holder thereof in cash, without any interest thereon, upon
surrender of the certificate representing such share; and all such
shares of Series B Preferred Stock shall no longer be outstanding and
automatically shall be canceled and retired and shall cease to exist,
and each holder of a certificate representing any such shares of
Series B Preferred Stock shall cease to have any rights with respect
thereto, except the right to receive $.01 per share to be paid in
consideration therefor upon surrender of such certificate in
accordance with Section 2.02, without interest.
(d) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED
STOCK. Each share of Common Stock and Preferred Stock that is owned by the
Company or by any wholly-owned Subsidiary (as defined in Section 8.03) of the
Company and each share of Common Stock and Preferred Stock that is owned by
Parent, Sub or any other wholly-owned Subsidiary of Parent
5
<PAGE> 10
automatically shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(e) DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, shares of Common Stock and Preferred Stock that are
issued and outstanding immediately prior to the Effective Time and that are
held by stockholders who properly have exercised appraisal rights with respect
thereto under Section 262 of the DGCL (the "Dissenting Shares") shall not be
converted into the right to receive the consideration therefor specified in
this Section 2.01, but the holders of Dissenting Shares shall be entitled to
receive such payment as shall be determined pursuant to Section 262 of the
DGCL; provided, however, that if any such holder shall have failed to perfect
or shall withdraw or lose the right to appraisal and payment under the DGCL,
each such holder's shares of Common Stock or Preferred Stock thereupon shall be
deemed to have been converted as of the Effective Time into the right to
receive the consideration therefor specified in this Section 2.01, without any
interest thereon, as provided in Section 2.02, and such shares shall no longer
be Dissenting Shares.
SECTION 2.02. EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. At or prior to the Effective Time,
Parent shall enter into an agreement with a bank or trust Company mutually
acceptable to Parent and the Company (the "Paying Agent"), which shall provide
that Parent shall deposit with the Paying Agent immediately after the Effective
Time, for the benefit of the holders of shares of Common Stock and shares of
Preferred Stock for exchange in accordance with this Article 2, through the
Paying Agent, cash in the aggregate amount required to make the payments
specified in Section 2.01, in respect of the Common Stock and the Preferred
Stock issued and outstanding at the Effective Time (other than Dissenting
Shares and shares canceled in accordance with Section 2.01(d)), such sum of
cash being hereinafter referred to as the "Exchange Fund." The Paying Agent
shall, pursuant to irrevocable instructions, deliver cash in exchange for
surrendered certificates representing Common Stock or Preferred Stock in
accordance with Sections 2.01 and 2.02.
(b) EXCHANGE PROCEDURES. As soon as reasonably
practicable after the Effective Time but no later than three business days
following the Effective Time, the Paying Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Common Stock or Preferred
Stock (collectively, the "Certificates"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in such form and have such other provisions as Parent
may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the consideration payable
therefor pursuant to Section 2.01. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Paying Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor
the consideration which such holder has the right to receive pursuant to the
provisions of this Article 2, and the Certificate so surrendered shall
forthwith be canceled. If any
6
<PAGE> 11
holder of Common Stock or Preferred Stock shall be unable to surrender such
holder's Certificates because such Certificates have been lost, stolen or
destroyed, such holder may deliver in lieu thereof an affidavit and indemnity
agreement in form and substance reasonably satisfactory to the Parent. In the
event payment is requested to be made to a person other than the person in
whose name a surrendered Certificate is registered in the books of the Company,
cash representing the consideration payable pursuant to Section 2.01 may be
paid to a Person other than the Person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the Person requesting such payment
shall pay any transfer or other Taxes (as defined in Section 3.01(j)(ix))
required by reason of payment of the consideration specified in Section 2.01 to
a Person other than the registered holder of such Certificate or establish to
the satisfaction of Parent that such Tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.02, each Certificate shall
be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the consideration specified in this Article 2. No
interest will be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article 2.
(c) TRANSFER BOOKS. At and after the Effective Time,
there shall be no transfers on the stock transfer books of the Company of the
shares of Common Stock or shares of Preferred Stock which were outstanding
immediately prior to the Effective Time. On or after the Effective Time, any
Certificates presented to the Surviving Corporation or the Paying Agent for any
reason, except notations thereon that a stockholder has elected to exercise his
rights to appraisal pursuant to Delaware law, shall be canceled and exchanged
as provided in this Article 2.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund which remains undistributed to the holders of the Certificates
for one year after the Effective Time shall be delivered to Parent, upon
demand, and any holders of the Certificates who have not theretofore complied
with this Article 2 shall thereafter look only to Parent for payment of the
consideration therefor specified in this Article 2.
(e) NO LIABILITY. None of Parent, Sub, the Company or the
Paying Agent shall be liable to any Person in respect of any cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) INVESTMENT OF EXCHANGE FUND. The Paying Agent shall
invest any cash included in the Exchange Fund, as directed by Parent, on a
daily basis, provided that any such investment is guaranteed as to payment of
principal and interest by the federal government of the United States. Any
interest and other income resulting from such investments shall be paid to
Parent.
(g) WITHHOLDING OF TAX. Parent shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any former holder of Capital Stock such amount as Parent (or
any Affiliate thereof) or the Paying Agent is required to deduct and withhold
with respect to the making of such payment under the United States Internal
Revenue Code of 1986, as amended (the "Code"), or state, local or foreign Tax
law. To the extent that amounts are so withheld by Parent, such withheld
amounts shall be treated for all purposes of
7
<PAGE> 12
this Agreement as having been paid to the former holder of Capital Stock in
respect of which such deduction and withholding was made by Parent.
SECTION 2.03. WARRANTS, OPTIONS AND SARS.
(a) WARRANTS. At the Effective Time, each then
outstanding warrant to purchase shares of Common Stock pursuant to the Warrants
to purchase Class A Common Stock dated September 7, 1995 (the "Warrant
Agreement") (whether or not then presently exercisable) (collectively, the
"Warrants"), shall continue to be outstanding subject to the respective terms
and conditions of the agreements relating thereto and, subsequent to the
Effective Time, shall be exercisable for cash, with each agreement evidencing
the Warrants immediately prior to the Effective Time evidencing the right to
receive (without payment of the per share exercise price of such Warrant) an
amount in cash, without any interest thereon, for each share of Class A Common
Stock subject to such Warrant, equal to the difference between the Common Per
Share Price and the per share exercise price of such Warrant to the extent such
difference is a positive number, less any applicable withholding Taxes. The
aggregate consideration payable to each Warrant holder shall be rounded to the
nearest penny. The surrender of a Warrant to the Company in exchange for the
consideration set forth in this Section 2.03(a) shall, to the extent permitted
by law, be deemed a release of any and all rights the holder had or may have
had in respect of such Warrant.
(b) OPTIONS. At the Effective Time, each then
outstanding option to purchase shares of Common Stock granted by the Company
(whether or not then presently vested or exercisable) (collectively, the
"Options"), shall be canceled, and each holder of a canceled Option shall be
entitled `to receive, as soon as practicable (but in no event later than one
business day) after the Effective Time, in consideration for the cancellation
of such Option, an amount in cash, without any interest thereon, for each share
of Common Stock subject to such Option equal to the difference between the
Common Per Share Price and the per share exercise price of such Option to the
extent such difference is a positive number, less any applicable withholding
Taxes. Each agreement evidencing the Options immediately prior to the
Effective Time that are settled pursuant to this Section shall be deemed for
all purposes to evidence solely the right to receive the consideration per
Option as provided in this Section 2.03(b). The aggregate cash consideration
payable to each holder of Options shall be rounded up to the nearest penny.
The surrender of an Option to the Company in exchange for the consideration set
forth in this Section 2.03(b) shall, to the extent permitted by law, be deemed
a release of any and all rights the holder had or may have had in respect of
such Option.
(c) STOCK APPRECIATION RIGHTS. At the Effective Time,
each then outstanding stock appreciation right with respect to shares of Common
Stock granted by the Company (whether or not presently exercisable)
(collectively, the "SARs") shall be canceled, and each holder of a canceled SAR
shall be entitled to receive, as soon as practicable (but in no event later
than one business day) after the Effective Time, in consideration for the
cancellation of such SAR, an amount in cash, without any interest thereon, for
each share of Common Stock subject to such SAR equal to (i) with respect to
each then outstanding 1996 SAR (as defined in Section 8.03), one-half of the
difference between $0.01 and the Common Per Share Price or (ii) with respect to
each then
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<PAGE> 13
outstanding 1995 SAR (as defined in Section 8.03) and all other outstanding
SARs, the difference between the Common Per Share Price and the per share base
price of such SAR to the extent such difference is a positive number, in all
cases less any applicable withholding Taxes. Each agreement evidencing the
SARs immediately prior to the Effective Time that are settled pursuant to this
Section 2.03(c) shall be deemed for all purposes to evidence solely the right
to receive the consideration per SAR as provided in this Section 2.03(c). The
aggregate consideration payable to each SAR holder shall be rounded up to the
nearest penny. The surrender of a SAR to the Company in exchange for the
consideration set forth in this Section 2.03(c) shall, to the extent permitted
by law, be deemed a release of any and all rights the holder had or may have
had in respect of such SAR.
(d) OPTION AND SAR TRANSFER BOOKS. At and after the
Effective Time, there shall be no transfers on the books of the Company of the
Options or SARs which were outstanding immediately prior to the Effective Time.
On or after the Effective Time, any certificates or agreements evidencing
Options or SARs presented to the Surviving Corporation for any reason shall be
canceled and exchanged as provided in this Article 2.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to Parent and Sub as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of
the Company and each of its Subsidiaries (as defined in Section 8.03) is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated or
organized and has the requisite corporate or other such entity power and
authority to carry on its business as now being conducted. Each of the Company
and each of its Subsidiaries is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed or to be in good standing individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect
(as defined in Section 8.03) on the Company. The Company has delivered (or, in
the case of the Company's Subsidiaries, made available) to Parent prior to the
execution of this Agreement complete and correct copies of its certificate of
incorporation and by-laws, as in effect on the date of this Agreement, and the
certificate of incorporation and by-laws (or comparable organizational
documents) of its Subsidiaries, in each case as amended to date.
(b) SUBSIDIARIES. Section 3.01(b)(i) of the Company
Disclosure Schedule (as defined in Section 8.03) sets forth a true and complete
list, as of the date hereof, of each Subsidiary of the Company, together with
the jurisdiction of incorporation or organization and the percentage of each
Subsidiary's outstanding capital stock or other equity interests owned by the
Company or another Subsidiary of the Company. Except as set forth in Section
3.01(b)(ii) of the Company Disclosure Schedule, all the outstanding shares of
capital stock of, or other ownership interests in,
9
<PAGE> 14
each Subsidiary of the Company have been validly issued and (with respect to
corporate Subsidiaries) are fully paid and nonassessable and are owned directly
or indirectly by the Company, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"). Except for the capital stock of its Subsidiaries and
the partnership interests listed in Section 3.01(b)(iii) of the Company
Disclosure Schedule, as of the date hereof, the Company does not own, directly
or indirectly, any capital stock or other ownership interest in any
corporation, limited liability company, partnership, joint venture or other
entity.
(c) CAPITAL STRUCTURE.
(i) The authorized capital stock of Company
consists of 30,000,000 shares of Class A Common Stock, 1,689,256
shares of Class B Common Stock, 367,344 shares of Class C Common
Stock, 1,444,366 shares of Class D Common Stock and 4,000,000 shares
of preferred stock, par value $.01 per share ("Authorized Preferred
Stock"), of which, as of the date of this Agreement, (A) 3,172,533
shares of Class A Common Stock are issued and outstanding, (B) 244,890
shares of Class B Common Stock are issued and outstanding, (C) 31,000
shares of Class C Common Stock are issued and outstanding, (D)
1,444,366 shares of Class D Common Stock are issued and outstanding,
(E) 600,000 shares of Authorized Preferred Stock are designated as
Series B Preferred Stock, 565,000 shares of which are issued and
outstanding, (F) 598,000 of the Authorized Preferred Stock are
designated as Mandatory Preferred Stock, 583,400 shares of which are
issued and outstanding, and (G) no shares of Class A Common Stock,
Class B Common Stock, Class C Common Stock or Class D Common Stock are
held by the Company in its treasury or by any of the Company's
Subsidiaries.
(ii) As of the date hereof, there are no bonds,
debentures, notes or other indebtedness issued or outstanding having
the right to vote on any matters on which holders of Common Stock or
Authorized Preferred Stock may vote, including without limitation the
Merger.
(iii) Section 3.01(c)(iii) of the Company's
Disclosure Schedule sets forth a complete and correct list as of the
date hereof, of each holder of record of shares of Class B Common
Stock, Class C Common Stock, Class D Common Stock and Series B
Preferred Stock and, in each case, the number of shares held of record
by each such holder.
(iv) Giving effect to the applicable provisions of
the Company's Amended and Restated Certificate of Incorporation (the
"Restated Certificate"), the Certificate of Designation of Series B
Convertible Preferred Stock (the "Series B Designation"), the
Certificate of Designations of Preferred Stock of Triathlon
Broadcasting Company to be designated 9% Mandatory Convertible
Preferred Stock (the "Mandatory Designation") and all other
instruments affecting the rights of holders of Capital Stock to which
the Company is a party or is bound (which, if any, other than the
Restated Certificate, the Series B Designation, the Mandatory
Designation and the Transaction Documents (as defined in Section
8.03), are set forth in Section 3.01(c)(iv) of the Company Disclosure
Schedule):
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<PAGE> 15
(A) each outstanding share of Class D
Common Stock is convertible into one share of Class A Common
Stock or, in the event of an occurrence set forth in paragraph
4.2(f)(iii)(B) of Article Four of the Restated Certificate,
one share of Class B Common Stock, in each case subject to any
necessary FCC (as defined in Section 3.01(d)(iii)) approval
and approval under the HSR Act (as defined in Section
3.01(d)(iii)); other than as set forth in paragraph
4.2(f)(iii)(B) of the Restated Certificate and any
restrictions or required approval of the FCC or under the HSR
Act, there are no restrictions or limitations, contractual or
otherwise, binding upon the Company or to which the Company is
subject that prohibit or limit the right of a holder of Class
D Common Stock to convert shares of Class D Common Stock into
shares of Class A Common Stock or Class B Common Stock; and
the conversion of any Class D Common Stock into shares of
Class A Common Stock or Class B Common Stock will not violate
or result in or constitute a default under the Credit
Agreement or any other loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise,
license or any other contract, agreement, arrangement or
understanding to which the Company is a party or by which it
or any of its properties or assets are bound;
(B) as of the date hereof, no event has
occurred permitting any outstanding shares of Series B
Preferred Stock to become convertible into any shares of
Capital Stock; and
(C) as of the date hereof, each
outstanding share of Mandatory Preferred Stock is convertible
into 8.33 shares of Class A Common Stock, and no event has
occurred requiring any adjustment to the Redemption Rate (as
defined in paragraph 6(a) of the Mandatory Designation),
pursuant to paragraph 8 of the Mandatory Designation or
otherwise, or the Optional Conversion Rate (as defined in
Paragraph 7(a) of the Mandatory Designation), pursuant to
paragraph 8 of the Mandatory Designation or otherwise.
(v) Except as set forth in Section 3.01(c)(v) of
the Company Disclosure Schedule, there are no outstanding stock
options, stock appreciation rights or other rights to receive shares
of Capital Stock granted under the Option Plans. Without limiting the
generality of the foregoing, except as set forth in Section 3.01(c)(v)
of the Company Disclosure Schedule, there are no outstanding "Options"
as defined in the Option Plans. Section 3.01(c)(v) of the Company
Disclosure Schedule sets forth a complete and correct list, as of the
date hereof, of the holders of all Warrants, Options and SARs, and the
number, class and series of shares subject to each such Warrant,
Option and SAR, and the exercise or base prices thereof. Except for
the Options, Warrants, Class B Common Stock, Class C Common Stock,
Class D Common Stock, Series B Preferred Stock and Mandatory Preferred
Stock (as to which no more than 7,388,728 shares of Class A Common
Stock and, except for 1,444,366 shares of Class B Common Stock
issuable upon conversion of outstanding Class D Common Stock, no
shares of any other class or series of Capital Stock are issuable upon
exercise or conversion thereof, as applicable) and, except as set
forth above or in Section
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<PAGE> 16
3.01(c)(v) of the Company Disclosure Schedule, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the
Company or any of its Subsidiaries is a party or by which any of them
is bound obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or
of any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking ("Derivative Securities"). Except as set forth in the
Mandatory Designation, the Series B Designation and in Section
3.01(c)(iv) of the Company Disclosure Schedule, there are no
outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries, and during
the period commencing on March 4, 1996, and ending on July 31, 1997,
the Company took such actions as necessary to satisfy the requirements
of paragraph 9 of the Mandatory Designation and has not at any time
been required to repurchase any shares of Mandatory Preferred Stock
pursuant to paragraph 9 of the Mandatory Designation.
(vi) All outstanding shares of capital stock of
the Company and its Subsidiaries are, and all shares which may be
issued will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive or similar
rights.
(vii) Except as contemplated hereby or in the other
Transaction Documents or as set forth in Section 3.01(c)(vii) of the
Company Disclosure Schedule, there are not as of the date hereof and
there will not be at the Effective Time any stockholder agreements,
voting agreements or trusts, proxies or other agreements or
contractual obligations to which the Company or any Subsidiary is a
party or bound with respect to the voting or disposition of any shares
of the capital stock of the Company or any of its Subsidiaries and, to
the Company's knowledge, as of the date hereof, there are no other
stockholder agreements, voting agreements or trusts, proxies or other
agreements or contractual obligations among the stockholders of the
Company with respect to the voting or disposition of any shares of the
capital stock of the Company or any of its Subsidiaries.
(d) AUTHORITY; NONCONTRAVENTION.
(i) The Company has all requisite corporate power
and authority to enter into this Agreement and the other Transaction
Documents to which it is a party and, subject to the Stockholder
Approval (as defined in Section 3.01(k)), to consummate the
transactions contemplated by the Transaction Documents. The execution
and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated by the
Transaction Documents have been duly authorized by all necessary
corporate action on the part of the Company, subject to the
Stockholder Approval. Each of the Transaction Documents to which the
Company is a party has been duly executed and delivered by the Company
and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
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<PAGE> 17
(ii) Except as disclosed in Section 3.01(d)(ii) of
the Company Disclosure Schedule, the execution and delivery by the
Company of the Transaction Documents to which the Company is a party
do not, and compliance by the Company with the provisions of the
Transaction Documents will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or
result in the creation of any Lien upon any of the properties or
assets of the Company or any of its Subsidiaries under, (i) subject
to, with respect to the Merger, Stockholder Approval, the certificate
of incorporation or by-laws of the Company or the comparable
organizational documents of any of its Subsidiaries, (ii) subject to
the consents and other matters referred to in Section 3.01(d)(iii),
any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise or
license applicable to the Company or any of its Subsidiaries or their
respective properties or assets, including without limitation those
agreements set forth in Section 3.01(o)(v) of the Company Disclosure
Schedule or (iii) subject to the governmental filings and other
matters referred to in Section 3.01(d)(iii), any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its Subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii) and (iii), any such
conflicts, violations, defaults, rights, Liens, judgments, orders,
decrees, statutes, laws, ordinances, rules or regulations that
individually or in the aggregate could not reasonably be expected to
(x) have a Material Adverse Effect on the Company, (y) impair the
ability of the Company to perform its obligations under any of the
Transaction Documents in any material respect or (z) delay in any
material respect or prevent the consummation of any of the
transactions contemplated by the Transaction Documents.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, any Federal, state or
local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency (a "Governmental
Entity") or other Person, is required by or with respect to the
Company or any of its Subsidiaries in connection with the execution
and delivery of the Transaction Documents by the Company or the
consummation by the Company of the transactions contemplated by the
Transaction Documents, except for (1) the filing of a premerger
notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"); (2) the filing with the Securities and Exchange Commission
(the "SEC") of (A) a proxy statement relating to the Stockholders
Meeting (as defined in Section 4.03), as amended or supplemented from
time to time (the "Proxy Statement") and (B) such reports under
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as may be required in connection with
the Transaction Documents and the transactions contemplated by the
Transaction Documents; (3) the filing of the Certificate of Merger
with the Delaware Secretary of State and appropriate documents with
the relevant authorities of other states in which the Company is
qualified to do business; (4) such filings with and approvals and
authorizations of the Federal Communications Commission or any
successor entity (the "FCC") as may be required under the
Communications Act of 1934, as amended, and the rules, regulations and
13
<PAGE> 18
policies of the FCC thereunder (collectively, the "Communications
Act"), including filings and approvals in connection with the transfer
of control of the FCC Licenses (as defined in Section 3.01(p)); (5)
such other filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval necessitated by the
Merger or the transactions contemplated by the Transaction Documents;
(6) such consents, approvals, orders or authorizations the failure of
which to be made or obtained could not reasonably be expected to have
a Material Adverse Effect on the Company, impair the ability of the
Company to perform its obligations under this Agreement in any
material respect or delay in any material respect or prevent the
consummation of the transactions contemplated by the Transaction
Documents; and (7) as disclosed in Section 3.01(d)(iii) of the Company
Disclosure Schedule.
(e) FILED DOCUMENTS; UNDISCLOSED LIABILITIES.
(i) The Company and its Subsidiaries have filed,
except, in the case of (B) and (C), where the failure to file could
not reasonably be expected to have a Material Adverse Effect on the
Company, and delivered or made available to Parent true and complete
copies of, all reports, schedules, forms, statements and other
documents required to be filed with (A) the SEC (collectively, the
"Company SEC Documents"), (B) any applicable state securities
authorities (collectively, the "Blue Sky Reports") and (C) any other
Governmental Entities including the FCC (collectively, the "Other
Company Reports").
(ii) As of their respective dates, the Company SEC
Documents and Blue Sky Reports complied in all material respects with
the requirements of the Securities Act, the Exchange Act, or
applicable state securities laws, as the case may be, and the rules
and regulations of the SEC and applicable state securities authorities
promulgated thereunder applicable to such Company SEC Documents and
Blue Sky Reports; and the Other Company Reports were prepared in all
material respects in accordance with the requirements of applicable
law. None of the Company SEC Documents when filed contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. Except to the extent that information
contained in any Company SEC Documents has been revised or superseded
by a later filed Company SEC Document, none of the Company SEC
Documents contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(iii) The Company's Consolidated Balance Sheets as
of December 31, 1996 and 1997, and the Company's Consolidated
Statements of Operations, Cash Flows and Stockholders' Equity for the
years ended December 31, 1995, 1996 and 1997, included in the
Company's Form 10-K for the year ended December 31, 1997, as filed
with the SEC (the "Form 10-K"), and the Company's Consolidated Balance
Sheets as of March 31, 1998, and the Company's Consolidated Statements
of Operations, Cash Flows and Stockholders' Equity
14
<PAGE> 19
for the three months ended March 31, 1998, included in the Company's
Form 10-Q for the period ended March 31, 1998, as filed with the SEC
(the "Form 10-Q") (collectively, the "Current Financial Statements"),
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC and pro forma
financial statements as required by SEC Regulation S-X) applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position of the Company and its
Subsidiaries on a consolidated basis as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments).
(iv) Except (A) as set forth on Section 3.01(e) of
the Company Disclosure Schedule, (B) as set forth in the Current
Financial Statements, (C) liabilities and obligations incurred in the
ordinary course of business consistent with past practice since
December 31, 1997, and (D) liabilities under the Transaction
Documents, neither the Company nor any of its Subsidiaries has any
material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by generally accepted
accounting principles to be recognized or disclosed on a consolidated
balance sheet of the Company and its consolidated Subsidiaries or in
the notes thereto.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Form 10-Q, as contemplated by the Transaction Documents or as
disclosed in Section 3.01(f) of the Company Disclosure Schedule, since December
31, 1997, each of the Company and its Subsidiaries have conducted their
business only in the ordinary course consistent with past practice, and there
has not been (i) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any
capital stock of the Company (other than regular cash dividends on shares of
Mandatory Preferred Stock declared and paid on each scheduled quarterly record
date and payment date, respectively, in accordance with the terms of the
Mandatory Designation as in effect on the date hereof), (ii) any split,
combination or reclassification of any capital stock of the Company or any of
its Subsidiaries or (other than issuances of shares of Class A Common Stock
upon the exercise of Options or Warrants and/or issuances of Class A Common
Stock and/or Class B Common Stock upon conversion after the date hereof of
shares of Capital Stock outstanding on December 31, 1997) any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of capital stock of the Company or any of its
Subsidiaries, (iii) (x) any granting by the Company or any of its Subsidiaries
to any executive officer or other key employee of the Company or any of its
Subsidiaries of any increase in compensation, except for normal increases in
the ordinary course of business consistent with past practice or as required
under employment or other agreements or benefit arrangements in effect as of
December 31, 1997, or (y) any granting by the Company or any of its
Subsidiaries to any such executive officer of any increase in severance or
termination pay, except as was required under any employment, severance,
termination or other agreements or benefit arrangements in effect as of
December 31, 1997, (iv) except as required by a change in generally accepted
accounting principles,
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<PAGE> 20
any change in accounting methods, principles or practices by the Company or any
of its Subsidiaries materially affecting its assets, liabilities or business or
(v) any event, circumstance, or fact that has resulted in a Material Adverse
Change in the Company.
(g) LITIGATION. Except as disclosed in the Form 10-K, the
Form 10-Q or in Section 3.01(g) of the Company Disclosure Schedule, there is no
suit, action, proceeding or indemnification claim (including any proceeding by
or before the FCC but excluding proceedings of general applicability to the
radio industry and proceedings by or before any Federal Antitrust Agencies (as
defined in Section 5.02(b)) or the FCC relating to the transactions
contemplated hereby and proceedings arising under the Communications Act
relating to such transactions) pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries that,
individually or in the aggregate, reasonably could be expected to (i) have a
Material Adverse Effect on the Company or any of its Subsidiaries, (ii) impair
the ability of the Company to perform its obligations under the Transaction
Documents in any material respect or (iii) delay in any material respect or
prevent the consummation of any of the transactions contemplated by the
Transaction Documents, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against the Company
or any of its Subsidiaries which reasonably could be expected to have, any
effect referred to in clause (i), (ii) or (iii) above, except for any suit,
action or proceeding asserted after the date hereof by any stockholders of the
Company in connection with any of the transactions contemplated by the
Transaction Documents.
(h) ABSENCE OF CHANGES IN BENEFIT PLANS. Except (x) as
disclosed in Section 3.01(h) of the Company Disclosure Schedule, (y) for normal
increases in the ordinary course of business consistent with past practice or
as required by law or (z) as contemplated by the Transaction Documents, since
December 31, 1997, there has not been any adoption or amendment in any material
respect by the Company or any of its Subsidiaries of any collective bargaining
agreement or any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other material plan providing material benefits to
any current or former employee, officer or director of the Company or any of
its Subsidiaries. Without limiting the foregoing, except as disclosed in
Section 3.01(h) of the Company Disclosure Schedule, since December 31, 1997,
there has not been any change in any actuarial or other assumption used to
calculate funding obligations with respect to any Pension Plan (as defined
below), or in the manner in which contributions to any Pension Plan are made or
the basis on which such contributions are determined. Except as disclosed in
Section 3.01(h) of the Company Disclosure Schedule and except for the
Termination Agreement, there exist no employment, consulting or severance
agreements currently in effect between the Company or any of its Subsidiaries
and any current or former employee, officer or director of the Company or any
of its Subsidiaries providing for annual base compensation or other payments
(including amounts payable upon consummation of the transactions contemplated
by the Transaction Documents) in excess of $100,000.
(i) ERISA COMPLIANCE. Except as disclosed in Section
3.01(i) of the Company Disclosure Schedule:
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<PAGE> 21
(i) The Company has delivered or made available
to Parent each "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (a "Pension Plan"), each "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA) (a "Welfare Plan"), each
stock option, stock purchase, deferred compensation plan or
arrangement, employment agreement, severance plan or agreement,
consulting agreement and each other employee fringe benefit plan or
arrangement maintained, contributed to or required to be maintained or
contributed to by the Company, any of its Subsidiaries or any other
Person or entity that, together with the Company, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code
(each, a "Commonly Controlled Entity"), which is currently in effect
for the benefit of any current or former employees, officers,
directors or independent contractors of the Company or any of its
Subsidiaries or with respect to which the Company or any Commonly
Controlled Entity has any material contingent liability (collectively,
"Benefit Plans"). The Company has delivered or made available to
Parent true, complete and correct copies of (w) the most recent annual
report on Form 5500 filed with the Internal Revenue Service with
respect to each Benefit Plan for which the filing of any such report
is required by ERISA or the Code, (x) the most recent summary plan
description for each Benefit Plan for which the preparation of any
such summary plan description is required by ERISA, (y) each currently
effective trust agreement, insurance or group annuity contract and
each other funding or financing arrangement relating to any Benefit
Plan and (z) a schedule of employer expenses with respect to each
Benefit Plan for the current plan year of each Benefit Plan.
(ii) Each Benefit Plan has been administered in
material compliance with its terms, the applicable provisions of
ERISA, the Code and all other applicable laws and the terms of all
applicable collective bargaining agreements. To the knowledge of the
Company, there are no investigations by any governmental agency,
termination proceedings or other claims (except routine claims for
benefits payable under the Benefit Plans), suits or proceedings
pending or threatened against any Benefit Plan or asserting any rights
or claims to benefits under any Benefit Plan that, individually or in
the aggregate, reasonably could be expected to result in a Material
Adverse Effect on the Company.
(iii) (A) No Pension Plan is subject to the minimum
funding standards imposed by Section 412 of the Code.
(iv) Each Pension Plan that is intended to be a
tax-qualified plan has been the subject of a determination letter from
the Internal Revenue Service to the effect that such Pension Plan and
related trust is qualified and exempt from Federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code; to the
knowledge of the Company, no such determination letter has been
revoked, revocation of such letter has not been threatened nor has
such Pension Plan been amended since the effective date of its most
recent determination letter in any respect that would adversely affect
its qualification. The Company has delivered or made available to
Parent a copy of the most recent determination letter received with
respect to each Pension Plan for which such a letter has been issued,
as well as a copy of any pending application for a determination
letter. To the knowledge of the
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<PAGE> 22
Company, no event has occurred that could subject the Company or any
Pension Plan to any liability under Section 502 of ERISA that,
individually or in the aggregate, reasonably could be expected to
result in a Material Adverse Effect on the Company.
(v) (A) Neither the Company nor any of its
Subsidiaries has engaged in a "prohibited transaction" (as defined in
Section 4975 of the Code or Section 406 of ERISA) that involves the
assets of any Benefit Plan that reasonably could be expected to
subject the Company, any of its Subsidiaries, any employee of the
Company or its Subsidiaries or, to the knowledge of the Company, a
non-employee trustee, non-employee administrator or other non-employee
fiduciary of any trust created under any Benefit Plan to any Tax or
penalty on prohibited transactions imposed by Section 4975 of the Code
that, individually or in the aggregate, reasonably could be expected
to result in a Material Adverse Effect on the Company; (B) within the
past five years, the Company has not maintained any Pension Plan that
is subject to Title IV of ERISA; and (C) none of the Company, any of
its Subsidiaries or, to the knowledge of the Company, any non-employee
trustee, non-employee administrator or other non-employee fiduciary of
any Benefit Plan has breached the fiduciary duty provisions of ERISA
or any other applicable law in a manner that, individually or in the
aggregate, has had or is reasonably likely to result in a Material
Adverse Effect on the Company.
(vi) No Commonly Controlled Entity sponsors any
Pension Plan that is a "defined benefit pension plan" (as defined in
Section 3(35) of ERISA) (a "Defined Benefit Plan").
(vii) No Commonly Controlled Entity has incurred
any liability under Title IV of ERISA.
(viii) No Commonly Controlled Entity has engaged in
a transaction described in Section 4069 of ERISA that could subject
the Company to liability at any time after the date hereof that
individually, or in the aggregate, reasonably could be expected to
result in a Material Adverse Effect on the Company.
(ix) No Commonly Controlled Entity has withdrawn
from any multi- employer plan (as defined in Section 3(37) or
4001(a)(3) of ERISA) where such withdrawal has resulted in any
"withdrawal liability" (as defined in Section 4201 of ERISA) that has
not been fully paid.
(x) Prior to the date hereof, the Company has
made available to Parent copies of all agreements and Benefit Plans
under which any employee of the Company or any of its Subsidiaries
will be entitled to any additional benefits or any acceleration of the
time of payment or vesting of any benefits under any Benefit Plan or
under any employment, severance, termination or compensation agreement
as a result of the transactions contemplated by this Agreement and
Section 3.01(i) of the Company Disclosure Schedule
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<PAGE> 23
sets forth any severance payments contained in such agreements or
Benefit Plans which provide for payments in excess of $100,000 to any
such employee.
(xi) No Benefit Plan provides that payments
pursuant to such Benefit Plan may be made in securities of a Commonly
Controlled Entity, nor does any trust maintained pursuant to any
Benefit Plan hold any securities of a Commonly Controlled Entity.
(xii) Notwithstanding any of the foregoing to the
contrary, the representations and warranties of this Section 3.01(i),
other than clauses (i) and (ix), shall not apply to any multi-employer
plan (as defined in Section 3(37) or 4001(a)(3) of ERISA), nor shall
they apply with respect to any actions or omissions of a Pension Plan
prototype plan sponsor of which the Company has no knowledge.
(j) TAXES.
(i) Each of the Company, its Subsidiaries and any
affiliated, consolidated, combined, unitary or similar group of which
the Company or any of its Subsidiaries is or was a member (a "Tax
Group") has filed all federal, state and other material tax returns
and reports required to be filed by it or requests for extensions to
file such returns or reports have been timely filed, granted and have
not expired, except to the extent that such failures to file or to
have extensions granted that remain in effect individually or in the
aggregate could not reasonably be expected to have a Material Adverse
Effect on the Company. All returns filed by the Company, each of its
Subsidiaries and any Tax Group are complete and accurate in all
material respects to the knowledge of the Company. The Company and
each of its Subsidiaries has paid (or the Company has paid on its
behalf) all Taxes shown as due on such returns, and the Current
Financial Statements reflect an adequate reserve for all Taxes payable
by the Company and its Subsidiaries for all taxable periods and
portions thereof accrued through the date of such financial
statements.
(ii) No deficiencies for any Taxes have been
proposed, asserted or assessed against the Company or any of its
Subsidiaries that are not adequately reserved for, except for
deficiencies that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect on the
Company, and no requests for waivers of the time to assess any such
Taxes have been granted or are pending that, individually or in the
aggregate, reasonably could be expected to have a Material Adverse
Effect on the Company. The statute of limitations on assessment or
collection of any Federal income taxes due from the Company, any of
its Subsidiaries or any Tax Group has expired for all taxable years of
the Company, any of its Subsidiaries or any Tax Group through 1991. No
audit or other proceeding by any court, governmental or regulatory
authority or similar Person is pending in regard to any material Taxes
due from or with respect to the Company or any of its Subsidiaries or
any material tax return filed by, or with respect to the Company, any
of its Subsidiaries or any Tax Group, other than normal and routine
audits by non-federal governmental authorities. None of the assets or
properties of the Company or any of its Subsidiaries is subject to any
tax lien, other than any such liens for Taxes which are not yet
19
<PAGE> 24
due and payable, which may thereafter be paid without penalty or the
validity of which is being contested in good faith by appropriate
proceedings and for which adequate reserves are being maintained in
accordance with generally accepted accounting principles ("Permitted
Tax Liens").
(iii) No consent to the application of Section
341(f)(2) of the Code (or any predecessor provision) has been made or
filed by or with respect to the Company or, for so long as the Company
has owned any Subsidiary, by or with respect to such Subsidiary. None
of the Company or any of its Subsidiaries has agreed to make any
material adjustment pursuant to Section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting
method, and there is no application pending with any taxing authority
requesting permission for any changes in any accounting method of the
Company or any of its Subsidiaries which, in each respective case,
will or would reasonably cause the Company or any of its Subsidiaries
to include any material adjustment in taxable income for any taxable
period (or portion thereof) ending after the Closing Date.
(iv) Except as set forth in the Form 10-K or the
Form 10-Q, neither the Company nor any of its Subsidiaries is a party
to, is bound by, or has any obligation under, any tax sharing
agreement, tax allocation agreement or similar contract, agreement or
arrangement.
(v) Neither the Company nor any of its
Subsidiaries has executed or entered into with the Internal Revenue
Service, or any taxing authority, a closing agreement pursuant to
Section 7121 of the Code or any similar provision of state, local,
foreign or other income tax law, which will require any increase in
taxable income or alternative minimum taxable income, or any reduction
in tax credits for, the Company or any of its Subsidiaries for a
taxable period ending after the Closing Date.
(vi) Except as disclosed in Section 3.1(j) of the
Company Disclosure Schedule, there is no contract, agreement, plan or
arrangement covering any person that, individually or collectively,
could give rise to the payment of any amount by the Company or any
Subsidiary that would not be deductible by the Company or any of its
Subsidiaries by reason of Section 280G of the Code or that would
constitute compensation whose deductibility is limited under Section
162(m) of the Code.
(vii) The Company is not a party to nor has it
assumed any "corporate acquisition indebtedness" as defined in Section
279(b) of the Code or any obligations described in Section 279(a) of
the Code.
(viii) There are no excess loss accounts or deferred
intercompany transactions between the Company and/or any of its
Subsidiaries within the meaning of Treas. Reg. Sections 1.1502-13 or
1.1502-19, respectively.
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(ix) As used in this Agreement, "Taxes" shall
include all Federal, state and local income, franchise, use, property,
sales, excise and other taxes, tariffs or governmental charges of any
nature whatsoever, domestic or foreign, including any interest,
penalties or additions with respect thereto.
(k) VOTING REQUIREMENTS. The affirmative vote of the
holders of a majority of the voting power of all outstanding shares of Class A
Common Stock, Class B Common Stock and Mandatory Preferred Stock, voting as a
single class, is the only vote of the holders of any class or series of
Company's capital stock necessary to approve and adopt this Agreement and the
Merger. The votes required in the preceding sentence are collectively referred
to herein as the "Stockholder Approval."
(l) STATE TAKEOVER STATUTES. The Board of Directors of
the Company has approved the terms of this Agreement and the Stockholder
Agreements and the consummation of the Merger and the other transactions
contemplated by this Agreement and the Stockholder Agreements, and such
approval is sufficient to render inapplicable to the Merger and the other
transactions contemplated by this Agreement and the Stockholder Agreements, the
restrictions on business combinations set forth in Section 203 of the DGCL. To
the Company's knowledge, no other state takeover statute or similar statute or
regulation applies or purports to apply to the Merger, this Agreement, the
Stockholder Agreements or any of the transactions contemplated by this
Agreement or the Stockholder Agreements, and no provision of the certificate of
incorporation, by-laws or other governing instruments of the Company or any of
its Subsidiaries would, directly or indirectly, restrict or impair the ability
of Parent to vote, or otherwise to exercise the rights of a stockholder with
respect to, shares of the Company and its Subsidiaries that may be acquired or
controlled by Parent.
(m) LABOR MATTERS. Neither the Company nor any of its
Subsidiaries is the subject of any suit, action or proceeding which is pending
or, to the knowledge of the Company, threatened, asserting that the Company or
any of its Subsidiaries has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or applicable state statutes) or
seeking to compel the Company or any of its Subsidiaries to bargain with any
labor organization as to wages and conditions of employment, in any such case,
that reasonably could be expected to result in a material liability of the
Company and its Subsidiaries. No strike or other labor dispute involving the
Company or any of its Subsidiaries is pending or, to the knowledge of the
Company, threatened, and, to the knowledge of the Company, there is no activity
involving any employees of the Company or any of its Subsidiaries seeking to
certify a collective bargaining unit or engaging in any other organizational
activity, except for any such dispute or activity which could not reasonably be
expected to have a Material Adverse Effect on the Company.
(n) COMPLIANCE WITH APPLICABLE LAWS. Each of the Company
and each of its Subsidiaries has in effect all Federal, state and local
governmental approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights ("Permits") necessary for it to own,
lease or operate its properties and assets and to carry on its business as now
conducted, and there has occurred no default under any such Permit, except for
the lack of Permits and for defaults
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<PAGE> 26
under Permits which lack or defaults, individually or in the aggregate, could
not reasonably be expected to (i) have a Material Adverse Effect on the
Company, (ii) impair the ability of the Company to perform its obligations
under this Agreement in any material respect or (iii) delay in any material
respect or prevent the consummation of the transactions contemplated by this
Agreement. Except as disclosed in the Form 10-K or the Form 10-Q, the Company
and its Subsidiaries are in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Entity, except
for possible noncompliance which, individually or in the aggregate, could not
reasonably be expected to (x) have a Material Adverse Effect on the Company,
(y) impair the ability of the Company to perform its obligations under this
Agreement in any material respect or (z) delay in any material respect or
prevent the consummation of the transactions contemplated by this Agreement.
(o) CONTRACTS; DEBT INSTRUMENTS.
(i) Section 3.01(o)(i) of the Company Disclosure
Schedule lists all defaults that, to the Company's knowledge,
currently exist, or that have existed at any time since December 31,
1997, and all conditions which upon the passage of time or the giving
of notice would cause a violation or default, under the Credit
Agreement (as defined in Section 8.03) (collectively, "Credit
Defaults"), and identifies each such Credit Default that currently
exists and each such Credit Default with respect to which a waiver or
forbearance has been requested or obtained.
(ii) Except as disclosed in Sections 3.01(o)(i)
and 3.02(o)(ii) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is in violation of or in default
under (nor does there exist any condition which upon the passage of
time or the giving of notice would cause such a violation of or
default under) any loan or credit agreement, note, bond, mortgage,
indenture, lease, permit, concession, franchise, license or any other
contract, agreement, arrangement or understanding to which it is a
party or by which it or any of its properties or assets is bound,
except for violations or defaults that, individually or in the
aggregate, could not reasonably be expected to (x) have a Material
Adverse Effect on the Company, (y) impair the ability of the Company
to perform its obligations under this Agreement in any material
respect or (z) delay in any material respect or prevent the
consummation of the transactions contemplated by this Agreement. The
agreements described in Section 3.01(o) of the Company Disclosure
Schedule are in full force and effect and are binding on the Company
and each of the Subsidiaries to the extent any such entity is a party
thereto.
(iii) The Company has made available to Parent (x)
true and correct copies of the Credit Agreement and all other loan or
credit agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any Indebtedness of the
Company or any of its Subsidiaries in an aggregate principal amount in
excess of $50,000 is outstanding or may be incurred and (y) accurate
information regarding the respective principal amounts outstanding
thereunder as of the date hereof. For purposes of this
Agreement,"Indebtedness" shall mean, with respect to any Person,
without duplication, (A)
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<PAGE> 27
all obligations of such Person for borrowed money, or with respect to
deposits or advances of any kind to such Person, (B) all obligations
of such Person evidenced by bonds, debentures, notes or similar
instruments, (C) all obligations of such Person under conditional sale
or other title retention agreements relating to property purchased by
such Person, (D) all obligations of such Person issued or assumed as
the deferred purchase price of property or services (excluding
obligations of such Person to creditors for raw materials, inventory,
services and supplies incurred in the ordinary course of such Person's
business), (E) all capitalized lease obligations of such Person, (F)
all obligations of others secured by a Lien on property or assets
owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (G) all obligations of such Person
under interest rate or currency hedging transactions (valued at the
termination value thereof), (H) all letters of credit issued for the
account of such Person and (I) all guarantees and arrangements having
the economic effect of a guarantee of such Person of any Indebtedness
of any other Person.
(iv) Except for agreements that are terminable by
the Company upon not more than 60 days prior notice without payment of
any termination fee or other amounts (other than commissions earned
prior to termination), neither the Company nor any of its Subsidiaries
is a party to any sales representation, commission, agent or similar
agreement or arrangement with any person related to the sale of
advertising or other air time to be provided by the Company's
broadcast operations.
(v) Section 3.01(o)(v) of the Company Disclosure
Schedule sets forth a true and complete list of the following, true
and complete copies of which have been provided or made available to
Parent:
(A) all joint sales agreements ("JSAs")
and local marketing agreements ("LMAs") to which the Company
or any Subsidiary of the Company is a party or by which the
Company or any Subsidiary of the Company is otherwise bound;
except as set forth in Section 3.01(o)(v) of the Company
Disclosure Schedule, no JMAs or LMAs set forth therein require
the payment by the Company or any Subsidiary of the Company of
any renewal or similar fees to maintain such agreements in
force;
(B) each other contract, agreement or
other instrument to which the Company or any Subsidiary of the
Company is a party or by which the Company or any Subsidiary
of the Company otherwise is bound that by its terms reasonably
could be expected to require the future payment by or to the
Company or any Subsidiary of the Company of $50,000 or more
or, in the case of employment agreements with any employee of
the Company or its Subsidiaries entered into in the ordinary
course of business consistent with past practice, $100,000 or
more;
(C) all contracts, agreements or other
instruments to which the Company or any Subsidiary of the
Company is a party or otherwise is bound which by its terms
prohibits or restricts the rights of the Company or any
Subsidiary of the
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Company to conduct broadcast operations in any market or
geographic region or prohibits or restricts the right of any
other party to such contract, agreement or instrument to
conduct broadcast operations in any market or geographic
region.
Each contract or agreement disclosed or required to be disclosed in
Section 3.01(o)(v) of the Company Disclosure Schedule is in full force
and effect and constitutes a legal, valid and binding obligation of
the Company and each Subsidiary of the Company to the extent any such
entity is a party thereto and, to the knowledge of the Company, each
other party thereto. Neither the Seller nor the Company has received
from any other party to such contract or agreement any notice, whether
written or oral, of termination or intention to terminate such
contract or agreement. Except as set forth in Section 3.01(o)(v) of
the Company Disclosure Schedule, neither the Company nor, to the
knowledge of the Company, any other party to such contract or
agreement is in violation or breach of or default under any such
contract or agreement (or with or without notice or lapse of time or
both, would be in violation or breach of or default under any such
contract or agreement), which violation, breach or default has had or
reasonably could be expected to have a Material Adverse Effect on the
Company. Except as set forth in Section 3.01(o)(v) of the Company
Disclosure Schedule, none of the contracts or agreements disclosed or
required to be disclosed therein contains any change of control or
similar provision that would give the other party thereto the right to
terminate any such contract or agreement as a result of the execution
and delivery of this Agreement or the consummation of the Merger.
(p) FCC LICENSES; OPERATIONS OF LICENSED FACILITIES. The
Company and its Subsidiaries have operated the radio stations for which the
Company or any of its Subsidiaries holds licenses from the FCC (the "Licensed
Facilities") in material compliance with the terms of the Permits issued by the
FCC to the Company and its Subsidiaries for the operation of the Licensed
Facilities (the "FCC Licenses"), and the Communications Act, except for
possible non-compliance which could not reasonably be expected to (i) have a
Material Adverse Effect on the Company, (ii) impair the ability of the Company
to perform its obligations under this Agreement in any material respect or
(iii) delay in any material respect or prevent the consummation of the
transactions contemplated by this Agreement. The Company and its Subsidiaries
have filed or made all applications, reports and other disclosures required by
the FCC to be filed or made with respect to the Licensed Facilities and have
paid all FCC regulatory fees with respect thereto except for possible filings,
disclosures or payments that if not so filed, disclosed or paid could not
reasonably be expected to (x) have a Material Adverse Effect on the Company,
(y) impair the ability of the Company to perform its obligations under this
Agreement in any material respect or (z) delay in any material respect or
prevent the consummation of the transactions contemplated by this Agreement.
The Company and each of its Subsidiaries are the authorized legal holders of
all FCC Licenses necessary or used in the operation of the businesses of the
Licensed Facilities as presently operated except where the absence of such FCC
Licenses could not reasonably be expected to have a Material Adverse Effect on
the Company. All such FCC Licenses are validly held and are in full force and
effect, unimpaired by any act or omission of the Company, each of its
Subsidiaries or their respective officers, employees or agents, except for such
lack of being in full force and effect or for such impairment that (A) could
not reasonably be expected to have a Material Adverse Effect on the
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Company, (B) could not reasonably be expected to prevent the continued
operation of the Licensed Facilities as presently operated, (C) could not
reasonably be expected to impair the ability of the Company to perform its
obligations under this Agreement in any material respect and (D) could not
reasonably be expected to delay in any material respect or prevent the
consummation of the transactions contemplated by this Agreement. Except as
disclosed in Section 3.01(p) of the Company Disclosure Schedule, as of the date
hereof, no application, action or proceeding is pending for the renewal or
major modification of any of the FCC Licenses and, to the Company's knowledge,
there is not now before the FCC any material investigation, proceeding, notice
of violation, order of forfeiture or complaint against the Company or any of
its Subsidiaries relating to any of the Licensed Facilities that, if adversely
decided, reasonably could be expected to have a Material Adverse Effect on the
Company, impair the ability of the Company to perform its obligations under
this Agreement in any material respect or delay in any material respect or
prevent the consummation of the transactions contemplated by this Agreement
(and the Company is not aware of any basis that would cause the FCC not to
renew any of the FCC Licenses that are renewable). Except as disclosed in
Section 3.01(p) of the Company Disclosure Schedule, there is not now pending
and, to the Company's knowledge, there is not threatened, any action by or
before the FCC to revoke, suspend, cancel, rescind or modify in any material
respect any of the FCC Licenses that, if adversely decided, reasonably could be
expected to have a Material Adverse Effect on the Company.
(q) ENVIRONMENTAL MATTERS. Section 3.01(q)(i) of the
Company Disclosure Schedule sets forth a true and complete list of all Phase I,
Phase II or similar reports currently in the possession of the Company or that
have been prepared for or on behalf of or at the direction of the Company
regarding the environmental condition of any real properties or facilities that
currently are, or in the past have been, leased, owned or operated by the
Company or any of its Subsidiaries ("Environmental Reports"), and true and
correct copies of all Environmental Reports in the possession of the Company or
that, to the Company's knowledge, are available to the Company have been
delivered to Parent. Except as disclosed in Section 3.01(q) of the Company
Disclosure Schedule or in the Environmental Reports, to the knowledge of the
Company:
(i) the real property and facilities owned by the
Company or any of its Subsidiaries and the operations of the Company
or any of its Subsidiaries thereon comply in all material respects
with all Environmental Laws;
(ii) no judicial proceedings are pending or
threatened against the Company or any of its Subsidiaries alleging the
violation of any Environmental Laws, and there are no administrative
proceedings pending or threatened against the Company or any of its
Subsidiaries alleging the material violation of any Environmental Laws
and no written notice from any Governmental Entity or any private or
public Person has been received by the Company or any of its
Subsidiaries claiming any material violation of any Environmental Laws
in connection with any real property or facility owned by the Company
or any of its Subsidiaries, or requiring any material remediation,
clean-up, modification, repairs, work, construction, alterations, or
installations on or in connection with any real property or facility
owned, operated or leased by the Company or any of its Subsidiaries
that are necessary to
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comply with any Environmental Laws and that have not been complied
with or otherwise resolved to the satisfaction of the party giving
such notice;
(iii) all material Permits required to be obtained
or filed by the Company or any of its Subsidiaries under any
Environmental Laws in connection with the Company's or any of its
Subsidiaries' operations, including those activities relating to the
generation, use, storage, treatment, disposal, release, or remediation
of Hazardous Substances (as such term is defined in Section
3.01(q)(iv) hereof), have been duly obtained or filed, and the Company
and each of its Subsidiaries are in compliance in all material
respects with the terms and conditions of all such Permits;
(iv) all Hazardous Substances used or generated by
the Company or any of its Subsidiaries on, in, or under any of the
Company's or any of its Subsidiaries owned, operated, or leased real
property or facilities are and have at all times been generated,
stored, used, treated, disposed of, and released by such Persons or on
their behalf in such manner as not to result in any material
Environmental Costs or Liabilities. "Hazardous Substances" means (A)
any hazardous materials, hazardous wastes, hazardous substances, toxic
wastes, and toxic substances as those or similar terms are defined
under any Environmental Laws; (B) any asbestos or any material which
contains any hydrated mineral silicate, including chrysolite, amosite,
crocidolite, tremolite, anthophylite and/or actinolite, whether
friable or non-friable; (C) PCBs, or PCB-containing materials, or
fluids; (D) radon; (E) any other hazardous, radioactive, toxic or
noxious substance, material, pollutant, contaminant, constituent, or
solid, liquid or gaseous waste regulated under any Environmental Law;
(F) any petroleum, petroleum hydrocarbons, petroleum products, crude
oil and any fractions or derivatives thereof, any oil or gas
exploration or production waste, and any natural gas, synthetic gas
and any mixtures thereof; and (G) any substance that, whether by its
nature or its use, is subject to regulation under any Environmental
Laws or with respect to which any Environmental Laws or Governmental
Entity requires environmental investigation, monitoring or
remediation. "Environmental Costs or Liabilities" means any material
losses, liabilities, obligations, damages, fines, penalties,
judgments, settlements, actions, claims, costs and expenses
(including, without limitation, reasonable fees, disbursements and
expenses of legal counsel, experts, engineers and consultants, and the
reasonable costs of investigation or feasibility studies and
performance of remedial or removal actions and cleanup activities) in
connection with (A) any violation of any Environmental Laws, (B) order
of, or contract of the Company or any of its Subsidiaries with, any
Governmental Entity or any private or public Persons arising out of or
resulting from the treatment, storage, disposal or release by the
Company or any of its Subsidiaries of any Hazardous Substances in
material violation of any Environmental Law or (C) a claim by any
private or public Person arising out of any material exposure of any
Person or property to Hazardous Substances in material violation of
any Environmental Law;
(v) there are not now, nor have there been in
the past, on, in or under any property or facilities when owned by the
Company or any of its Subsidiaries or when owned, leased or operated
by any of their predecessors, any Hazardous Substances that are in a
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<PAGE> 31
condition or location that materially violates any Environmental Law
or that has required or reasonably could be expected to require any
material remediation under any Environmental Laws or give rise to a
claim for material damages or compensation by any affected Person or
to any material Environmental Costs or Liabilities and that have not
been cured, complied with, remediated, or resolved to the satisfaction
of such affected Person or paid or resolved in all material respects;
and
(vi) neither the Company nor any of its
Subsidiaries has received any written notification from any source
advising the Company or any of its Subsidiaries that: (A) it is a
potentially responsible party under CERCLA or any other Environmental
Laws; (B) any real property or facility currently or previously owned,
operated, or leased by it is identified or proposed for listing as a
federal National Priorities List ("NPL") (or state-equivalent) site or
a Comprehensive Environmental Response, Compensation and Liability
Information System ("CERCLIS") list (or state-equivalent) site; or (C)
any facility to which it has ever transported or otherwise arranged
for the disposal of Hazardous Substances is identified or proposed for
listing as an NPL (or state-equivalent) site or CERCLIS (or
state-equivalent) site.
(r) BOARD RECOMMENDATION. As of the date hereof, the
Board of Directors of the Company, at a meeting duly called and held, has (i)
determined that this Agreement and the transactions contemplated hereby are
advisable and are fair to and in the best interests of the Company's
stockholders and have approved the same and (ii) resolved to recommend that the
Company's stockholders approve this Agreement and the transactions contemplated
herein.
(s) PROPERTY.
(i) Section 3.01(s)(i) of the Company Disclosure
Schedule sets forth all of the real property owned in fee by the
Company and its Subsidiaries that are material to the conduct of
business of the Company and its Subsidiaries, taken as a whole. Each
of the Company and its Subsidiaries owns fee title to each parcel of
real property owned by it free and clear of all Liens, except for
Permitted Liens (as defined in this Section 3.01(s)).
(ii) With respect to the tangible properties and
assets of the Company and its Subsidiaries (excluding real property)
that are material to the conduct of the broadcast operations of the
Company and its Subsidiaries, the Company and its Subsidiaries have
good title to, or hold pursuant to valid and enforceable leases, all
such properties and assets, with only such exceptions as, individually
or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company and subject to the Permitted
Liens. All of the assets of the Company and its Subsidiaries have
been maintained and repaired for their continued operation and are in
good operating condition, reasonable wear and tear excepted, and
usable in the ordinary course of business, except where the failure to
be in such repair or condition or so usable individually or in the
aggregate could not reasonably be expected to have a Material Adverse
Effect on the Company.
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(iii) Section 3.01(s)(ii) of the Company Disclosure
Schedule sets forth each lease, sublease, license, sublicense or other
agreement (collectively, the "Property Leases") under which the
Company or any of its Subsidiaries uses or occupies or has the right
to use or occupy, now or in the future, any real property or personal
property material to the conduct of the businesses of the Company and
its Subsidiaries, taken as a whole or any real property leased or
licensed by the Company or its Subsidiaries. Except to the extent
that (x) it could not reasonably be expected to have a Material
Adverse Effect on the Company, or (y) the term of such Property Lease
has expired or been terminated and the Company or its Subsidiaries
continues to use or occupy any of the subject property on a period to
period basis (i.e., "month to month"), each Property Lease is valid,
binding and in full force and effect, all rent and other sums and
charges which are due and payable by the Company and its Subsidiaries
as tenants thereunder are current except as set forth in Section
3.01(s)(ii) of the Company Disclosure Schedule, and neither the
Company nor any of its Subsidiaries has received actual notice that
any party thereto is in default in any material respect under any
lease, sublease, license, sublicense or use or occupancy agreement
listed in Section 3.01(s)(ii) of the Company Disclosure Schedule. Each
of the Company and its Subsidiaries has a valid leasehold interest
(including subleasehold and subleasehold estates) and/or right of use
under a license or sublicense agreement or other possessory rights in
each location used or occupied for broadcast purposes (whether office,
studio, tower, transmitter building and/or antenna) leased, subleased,
subsubleased, licensed, sublicensed or used by it free and clear of
all Liens, except for Permitted Liens.
(iv) As used in this Agreement, "Permitted Liens"
shall mean: (i) statutory liens securing payments not yet delinquent
or the validity of which are being contested in good faith by
appropriate actions, (ii) purchase money liens arising in the ordinary
course, (iii) liens for Taxes and special assessments (e.g., for
municipal improvements) not yet due and payable and/or delinquent,
(iv) liens reflected or reserved against in the unaudited balance
sheet of the Company dated as of March 31, 1998, included in the Form
10-Q (which have not been discharged), (v) liens which in the
aggregate do not materially detract from the value for use for
broadcasting purposes or materially impair the present and continued
use of the properties or assets subject thereto in the usual and
normal conduct of the radio broadcast business of the Company and its
Subsidiaries, (vi) liens on leases, subleases, sub-subleases,
easements, licenses, rights of use, rights to access and rights of way
arising from the provisions of such agreements or benefitting or
created by any superior estate, right or interest which is prior in
right or prior in lien to that of the subject lease, sublease,
sub-sublease, easement, license, right of use, right to access or
right of way, (vii) any liens set forth in the title policies,
endorsements, title commitments, title certificates and title reports
relating to the Company's interests in real property identified in
Section 3.01(s)(iv) of the Company Disclosure Schedule, true and
correct copies of which have been made available to Parent and Sub,
(viii) any leases, subleases, occupancy agreements or licenses set
forth in Section 3.01(s) of the Company Disclosure Schedule, (ix) the
lien of any and all security agreements, documents, mortgages and
deeds of trust held by, or for the benefit of, AT&T Commercial Finance
Corporation and/or Union Bank of California, as co-lenders under the
Credit Agreement, and their respective successors and assigns, (x) any
state of facts
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that an accurate survey or personal inspection of the Company's real
property (whether owned, leased or licensed) would show, provided same
does not material adversely affect the use thereof for their present
broadcasting purposes, (xi) encroachments of stoops, areas, cellar
steps or doors, trim, copings, retaining walls, bay windows,
balconies, sidewalk elevators, fences, fire escapes, cornices,
foundations, footings and similar projections, if any, on, over or
under any of the Company's real property (whether owned, leased or
licensed) or the streets or sidewalks abutting any of such real
property, and the rights of governmental authorities to require the
removal of any such projections and variations between record lines of
such real property and retaining walls and the like, if any, (xii) any
easements or rights of use, if any, created in favor of any public
utility or municipal department or agency for electricity, steam, gas,
telephone, cable television, water, sewer or other services in any
street or avenue abutting the Company's real property (whether owned,
leased or licensed), and the right, if any, to use and maintain wires,
cables, terminal boxes, lines, service connections, poles, mains and
facilities servicing any of such real property or in, on, over or
across any of such real property, (xiii) covenants, easements,
restrictions, agreements, consents and other instruments, now of
record, provided same do not materially adversely interfere with the
use of the Company's real property (whether owned, leased or licensed)
for their present broadcast purposes, (xiv) variations, if any,
between tax lot lines and property lines, (xv) deviations, if any, of
fences or shrubs from property lines, (xvi) any other declaration or
instrument affecting any of the Company's real property (whether
owned, leased or licensed) necessary or appropriate to comply with any
law, ordinance, regulation, zoning resolution or requirement of
applicable governmental authorities or any other public authority,
applicable to the maintenance, demolition, construction, alteration,
repair or restoration of the improvements at the Company's real
property (whether owned, leased or licensed), which does not
materially adversely affect the use of thereof for their present
broadcast purposes, (xvii) the provisions of the applicable zoning
resolution and other regulations, resolutions and ordinances and any
amendments thereto now or hereafter adopted, provided same do not
materially adversely interfere with the use of the Company's real
property for their present broadcast purposes, (xviii) Liens described
in the Form 10-K or Form 10-Q, and (xix) any other Liens set forth in
Section 3.01(s) of the Company Disclosure Schedule. For the purposes
hereof "Company's real property" and "Company's interests in real
property" shall include the real property and interests therein owned
or held (as leasehold interests or otherwise) respectively by the
Company and/or its Subsidiaries.
(t) AFFILIATE RELATIONSHIPS. Except as set forth in
Sections 3.01(c)(vii) and 3.01(t) of the Company Disclosure Schedule or as
contemplated in the Transaction Documents (including Section 4.01(a)(vi)
hereof), no director, officer, Affiliate or "associate" (as such term is
defined in Rule 12b-2 under the Exchange Act) of the Company (other than any of
its wholly-owned Subsidiaries) (i) currently is a party to any transaction
which would be required to be disclosed by the Company under Item 404 of
Regulation S-K of the Securities Act, (ii) has any outstanding indebtedness or
other similar obligations to the Company or any of its Subsidiaries that,
individually or in the aggregate, exceed $60,000 or (iii) is otherwise a party
to any contract, arrangement or understanding with the Company or any of its
Subsidiaries that, individually or in the aggregate, require any payments or
create liabilities or obligations of any party thereto in excess of $60,000
(the
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transactions and relationships described in clauses (i), (ii) and (iii)
collectively referred to as "Affiliate Relationships").
(u) ACQUISITIONS; RELATED OBLIGATIONS.
(i) Except as disclosed in Section 3.01(u) of the
Company Disclosure Schedule or in the Form 10-K, since December 31,
1995, neither the Company nor any Subsidiary of the Company has
engaged in any Significant Transaction or entered into or become bound
by any agreement or binding obligation to engage in any Significant
Transaction. For purposes of this Agreement, "Significant
Transaction" shall mean (A) any acquisition or disposition of (1) any
business, limited liability company, association or other business
organization or division thereof or any material partnership interest
or material joint venture interest, (2) any material assets or
properties other than in the ordinary course of business or (3) any
radio broadcast station, (B) any disposition of any Subsidiary of the
Company or (C) any acquisition of any subsidiary or other business
enterprise from any third party.
(ii) Except as disclosed in Section 3.01(u) of the
Company Disclosure Schedule, neither the Company nor any Subsidiary of
the Company is a party to or bound by any written contract or other
binding agreement (whether written or oral), related to any
Significant Transaction (whether engaged in before or after December
31, 1995) pursuant to which the Company or any Subsidiary of the
Company has any continuing indemnity obligations (whether absolute,
accrued, asserted or unasserted, contingent or otherwise) to any third
party or any obligations (whether absolute, accrued, asserted,
unasserted or contingent or otherwise, and whether pursuant to any
earn-out or post- closing adjustment) to issue any shares of Capital
Stock or other securities of the Company or any securities of any
Subsidiary of the Company or otherwise provide additional, or refund
amounts received as, purchase consideration as part of any such
Significant Transaction. The Company has not received (as of the date
hereof) any written or, to the Company's knowledge, any other demand
or threatened demand for indemnification or issuance of Capital Stock
or other securities of the Company under any contract or agreement set
forth in Section 3.01(u) of the Company Disclosure Statement that was
not satisfied in full on or prior to December 31, 1997.
(v) BROKERS.
(i) Except for the engagement by the Company of
Goldman, Sachs & Co. ("GSC"), neither the Company nor any Subsidiary
of the Company has engaged any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement. The
fees, commissions, expenses and other amounts payable by the Company
to GSC with respect to the transactions contemplated by this Agreement
shall be calculated pursuant to the engagement letter agreement dated
October 28, 1997, between GSC and the Company.
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(ii) The Board of Directors of the Company (or the
Independent Committee) has received from GSC a fairness opinion
related to the transactions contemplated by this Agreement, in form
and substance acceptable to the Board of Directors of the Company,
indicating that the terms of this Merger are fair, from a financial
point of view, to the holders of Common Stock of the Company.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.
Parent and Sub represent and warrant to the Company as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of
Parent and Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and has
the requisite corporate power and authority to carry on its business as now
being conducted or currently proposed to be conducted. Each of Parent and Sub
is duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed or to be in
good standing individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect on Parent or materially impair or delay the
consummation of the transactions contemplated by this Agreement. Parent has
delivered to the Company prior to the execution of this Agreement complete and
correct copies of its certificate of incorporation and by-laws and the
certificate of incorporation and by-laws of Sub, in each case as amended to the
date hereof.
(b) AUTHORITY; NON-CONTRAVENTION.
(i) Each of Parent and Sub has all requisite
corporate power and authority to execute and deliver the Transaction
Documents to which it is a party and to consummate the transactions
contemplated by the Transaction Documents. The execution and delivery
by each of Parent and Sub of the Transaction Documents to which it is
a party and the consummation by Parent and Sub of the transactions
contemplated by the Transaction Documents have been unanimously
approved by the Board of Directors of Parent and Sub and duly
authorized by all necessary corporate action on the part of Parent and
Sub, and no other corporate proceedings on the part of Parent and Sub
are necessary to authorize the Transaction Documents or to consummate
such transactions. No vote of Parent stockholders is required to
approve the Transaction Documents or the transactions contemplated
hereby. Each of the Transaction Documents has been duly executed and
delivered by Parent and Sub and, assuming due authorization, execution
and delivery of the Transaction Documents by the Company and the other
parties thereto, constitutes a valid and binding obligation of Parent
and Sub, enforceable against Parent and Sub in accordance with its
terms.
(ii) The execution and delivery by each of Parent
and Sub of the Transaction Documents to which it is a party do not,
and the consummation of the transactions contemplated by the
Transaction Documents and compliance with the provisions of the
Transaction Documents by Parent or Sub, as the case may be, will not,
conflict with,
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or result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material
benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent, Sub or any of Parent's other
Subsidiaries under, (i) the articles or certificate of incorporation
or by-laws of Parent and Sub, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to Parent, Sub or
such other Subsidiary or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred
to in the following sentence and subject to such divestitures of radio
stations attributable to Parent as are required for compliance with
the provisions of the Communications Act and FCC regulations regarding
radio multiple ownership, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Sub or such other
Subsidiary or their respective properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts, violations,
defaults, rights, Liens, judgments, orders, decrees, statutes, laws,
ordinances, rules or regulations that individually or in the aggregate
could not reasonably be expected to (x) have a Material Adverse Effect
on Parent, (y) impair the ability of Parent and Sub to perform their
respective obligations under the Transaction Documents in any material
respect or (z) delay in any material respect or prevent the
consummation of any of the transactions contemplated by the
Transaction Documents. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Parent or Sub in connection
with the execution and delivery of the Transaction Documents or the
consummation by Parent or Sub, as the case may be, of any of the
transactions contemplated by the Transaction Documents, except for (1)
the filing of a pre-Merger notification and report form by Parent
under the HSR Act; (2) the filing of the Certificate of Merger with
the Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is qualified
to do business; (3) such filings with and approvals of the FCC as may
be required under the Communications Act, including filings and
approvals in connection with the transfer of control of the FCC
Licenses; and (4) such consents, approvals, orders or authorizations
the failure of which to be made or obtained could not reasonably be
expected to have a Material Adverse Effect on Parent, impair the
ability of Parent to perform its obligations in any material respect
or delay in any material respect or prevent the consummation of the
transactions contemplated by this Agreement.
(c) INFORMATION SUPPLIED. None of the information
supplied or to be supplied by Parent or Sub specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the date the Proxy
Statement is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading.
(d) FINANCING. Parent has available, or at the Closing
will have available, sufficient funds (through existing credit arrangements or
otherwise) to enable it to consummate the transactions contemplated by the
Transaction Documents on their respective terms and conditions.
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Parent's and Sub's obligations hereunder are not subject to any conditions
regarding their ability to obtain financing for the consummation of the
transactions contemplated by the Transaction Documents. Parent and Sub are
each able to lawfully certify in the FCC Applications (as defined in Section
5.02(b)) that it is financially qualified to consummate the transactions
contemplated hereby.
(e) LITIGATION. There is no suit, action, proceeding or
indemnification claim (including any proceeding by or before the FCC but
excluding proceedings of general applicability to the radio industry) pending
or, to the knowledge of Parent, threatened against or affecting Parent or any
of its Subsidiaries that individually or in the aggregate reasonably could be
expected to (i) impair the ability of Parent or Sub to perform its obligations
under the Transaction Documents in any material respect or (ii) delay in any
material respect or prevent the consummation of any of the transactions
contemplated by the Transaction Documents, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Parent or any of its Subsidiaries having, or which reasonably could be
expected to have, any effect referred to in clause (i) or (ii) above, except
for any suit, action or proceeding asserted after the date hereof by any
stockholders of the Company in connection with any of the transactions
contemplated by this Agreement.
ARTICLE 4.
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. CONDUCT OF BUSINESS.
(a) CONDUCT OF BUSINESS BY THE COMPANY. During the period
from the date of this Agreement to the Effective Time, except as contemplated
by the Transaction Documents and the transactions contemplated thereby, the
Company shall, and shall cause its Subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and in compliance in all material respects with
all applicable laws and regulations (including the Communications Act). Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, except as contemplated by the Transaction
Documents and the transactions contemplated thereby, the Company shall not, and
shall not permit any of its Subsidiaries to, without the consent of Parent:
(i) (A) except as set forth in Section 4.01(a)(i)
of the Company Disclosure Schedule, declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of
its capital stock, other than dividends and distributions by a direct
or indirect wholly owned Subsidiary of the Company to its parent and
scheduled quarterly cash dividends on outstanding shares of Mandatory
Preferred Stock, payable in arrears on the dates and as set forth in
accordance with the present terms contained in the Mandatory
Designation, (B) split, combine or reclassify any of its capital stock
or (other than issuances of Class A Common Stock upon the exercise of
Options or Warrants outstanding, and in accordance with their terms as
in effect, as of the date hereof and issuances of Common
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Stock upon conversion of outstanding Capital Stock in accordance with
the terms of the instruments governing the rights of the holders
thereof as in effect on the date hereof) issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (C) except pursuant to
the terms of the Series B Designation as in effect on the date hereof,
purchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its Subsidiaries or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(ii) except as set forth in Section 4.01(a)(ii) of
the Company Disclosure Schedule, issue, deliver, sell, pledge or
otherwise encumber any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, voting securities or
convertible securities other than (A) the issuance of Class A Common
Stock upon the exercise of Options outstanding on the date of this
Agreement and in accordance with their present terms, (B) the issuance
of Class A Common Stock upon conversion of the Class B Common Stock,
the Class C Common Stock, Class D Common Stock or any Mandatory
Preferred Stock, in each case in accordance with their present terms
as contained in the Restated Certificate or the Mandatory Designation,
as applicable, (C) the issuance of Class B Common Stock upon the
conversion of Class D Common Stock in accordance with the present
terms contained in the Restated Certificate, and (D) the issuance of
Class A Common Stock upon the exercise of Warrants outstanding on the
date of this Agreement and in accordance with their present terms.
(iii) amend its certificate of incorporation,
by-laws or other comparable organizational documents;
(iv) except and to the extent as set forth in
Section 4.01(a)(iv) and (v) of the Company Disclosure Schedule and as
contemplated by Section 5.11, acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, (A) any business or any
corporation, limited liability company, partnership, joint venture,
association or other business organization or division thereof, (B)
any assets that individually or in the aggregate are material to the
Company and its Subsidiaries taken as a whole or (C) any broadcast
radio stations;
(v) except and to the extent as set forth in
Section 4.01(a)(iv) and (v) of the Company Disclosure Schedule, sell,
lease, license, mortgage or otherwise encumber or subject to any Lien
(other than Permitted Liens) or otherwise dispose of (A) any of its
properties or assets, other than in the ordinary course of business
consistent with past practices of the Company, but, with respect to
sales or dispositions, in no event involving an asset having a fair
market value in excess of $50,000 unless such asset is replaced with
an asset or assets of substantially equal values or (B) any broadcast
radio stations;
(vi) except as set forth in Section 4.01(a)(vi) of
the Company Disclosure Schedule, except to finance capital
expenditures permitted by clause (vii) below, except as contemplated
by Section 5.11, and except for borrowings for working capital
purposes not
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in excess of $60,500,000 (including amounts outstanding under the
Credit Agreement) at any one time outstanding incurred in the ordinary
course of business consistent with past practice and except for
intercompany Indebtedness between the Company and any of its
Subsidiaries or between such Subsidiaries, (A) incur or guarantee any
Indebtedness for borrowed money or any other Indebtedness, not to
exceed $50,000 in the aggregate at any one time incurred or guaranteed
in the ordinary course of business, or (B) make any loans, advances or
capital contributions to, or investments in, any other Person, other
than to the Company or any direct or indirect wholly owned Subsidiary
of the Company or to officers and employees of the Company or any of
its Subsidiaries for travel, business or relocation expenses in the
ordinary course of business;
(vii) except as set forth under the caption
"Committed Projects" in Section 4.01(a)(vii) of the Company Disclosure
Schedule, make or agree to make any new capital expenditures which in
the aggregate are in excess of $25,000; provided, however, that with
the consent of Parent, the Company may make additional capital
expenditures (which consent shall not be unreasonably withheld with
respect to those capital expenditures set forth under the caption
"Proposed Projects" in Section 4.01(a)(vii) of the Company Disclosure
Schedule or capital expenditures to the extent required to replace or
repair property and equipment of the Company damaged after the date of
this Agreement);
(viii) make any tax election that reasonably could
be expected to have a Material Adverse Effect on the Company or settle
or compromise any material income Tax liability;
(ix) except as set forth in Section 4.01(a)(ix) of
the Company Disclosure Schedule or as required by law (or, with
respect to the Citadel JSA (as defined in Section 5.08), as permitted
under Section 5.08), and except in the ordinary course of business and
as could not reasonably be expected to have a Material Adverse Effect
on the Company, modify, amend, terminate or fail to renew (to the
extent such contract or agreement can be unilaterally renewed by the
Company of any of its Subsidiaries) any contract or agreement to which
the Company or any Subsidiary is a party, including the Credit
Agreement, or waive, release or assign any material rights or claims
thereunder;
(x) make any material change to its accounting
methods, principles or practices, except as may be required by
generally accepted accounting principles;
(xi) fail to act in the ordinary course of
business consistent with past practices of the Company exercising
commercially reasonable care to (A) preserve substantially intact the
Company's and each of its Subsidiaries' present business organization,
(B) keep available the services of any employee with an employment
contract with the Company or any of its Subsidiaries, and (C) preserve
its present relationships with customers, suppliers and others having
business dealings with them;
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(xii) fail to use commercially reasonable efforts
to maintain the material assets of the Company and each of its
Subsidiaries in their current physical condition, except for ordinary
wear and tear and damage, provided that nothing contained herein shall
be deemed to require the Company or its Subsidiaries to undertake or
complete any capital improvements or replacements;
(xiii) merge or consolidate with or into any other
legal entity or dissolve or liquidate any of its Subsidiaries;
(xiv) except as set forth in Section 4.01(a)(xiv)
of the Company Disclosure Schedule and as required by the terms and
provisions of the Termination Agreement or other written contracts
between the Company or any of its Subsidiaries and an employee thereof
as in existence on the date of this Agreement or except in connection
with the extension of any collective bargaining agreements, (A) adopt
or amend any Benefit Plan other than in the ordinary course of
business consistent with past practice or as required by law, (B)
change the vacation policy with respect to the accrual, loss or use of
vacation time with respect to any employee of the Company or its
Subsidiaries, (C) materially increase in any manner the aggregate
compensation or fringe benefits (including, without limitation,
commissions) of any officer, director, or employee or other station
and broadcast personnel of the Company or any of its Subsidiaries
(whether employees or independent contractors) other than as required
by law, (D) pay any discretionary bonuses to any employee or
consultant of the Company or any Subsidiary of the Company or (E) make
any loans to any employee or consultant of the Company or any
Subsidiary of the Company in lieu of any bonus otherwise required to
be paid or determined in the discretion of the Board of Directors of
the Company as payable to any employee or consultant of the Company or
any Subsidiary of the Company;
(xv) except as set forth in Section 4.01(a)(xv) of
the Company Disclosure Schedule, pay, discharge, or satisfy any
material (on a consolidated basis for the Company and its Subsidiaries
taken as a whole) claims, liabilities, or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than
in the ordinary course of business consistent with past practice, or
fail to pay or otherwise satisfy (except if being contested in good
faith) any material (on a consolidated basis for the Company and its
Subsidiaries taken as a whole) accounts payable, liabilities, or
obligations when due and payable;
(xvi) except as set forth in Section 4.01(a)(xvi)
of the Company Disclosure Schedule, enter into any agreement with any
Person other than Parent or any of the Company's Subsidiaries with
respect to any local marketing agreement, time brokerage agreement,
joint sales agreement, non-compete agreement or any other similar
agreement;
(xvii) engage in any Affiliate Relationships or
other transactions with any of its Affiliates (other than among the
Company and its Subsidiaries and among such Subsidiaries), other than
transactions disclosed in Section 4.01(a)(xvii) of the Company
Disclosure Schedule which could not reasonably be expected to have a
Material Adverse Effect on the Company, impair the ability of the
Company to perform its obligations under
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the Transaction Documents in any material respect or delay in any
material respect or prevent the consummation of the transactions
contemplated by the Transaction Documents;
(xviii) fail to declare and pay in cash on each
scheduled quarterly record date and payment date, respectively, all
accrued and unpaid dividends on outstanding Mandatory Preferred Stock,
subject to restrictions imposed by the Credit Agreement or under
applicable laws;
(xix) take any action that would cause or result in
any adjustment to the Redemption Rate or Optional Conversion Rate
(each as defined in the Mandatory Designation) as provided in
paragraph 8 of the Mandatory Designation or otherwise;
(xx) except as disclosed on Section 4.01(xx) of
the Company Disclosure Schedule, enter into any contract or agreement
which, if in effect as of the date hereof, would have been required to
be disclosed in Section 3.01(o)(v) of the Company Disclosure Schedule;
or
(xxi) authorize, or commit or agree to take, any of
the foregoing actions.
(b) OTHER ACTIONS. The Company and Parent shall not, and
shall not permit any of their respective Subsidiaries to, except as otherwise
expressly permitted by the Transaction Documents, take any action that would,
or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions to the Merger set forth in
Article 6 not being satisfied. In addition, the Company further covenants that
from and after the date hereof until the Effective Time, without the prior
written consent of Parent, the Company shall not, except as otherwise set forth
in Section 4.01(b) of the Company Disclosure Schedule, take any action that
could reasonably be expected to (x) impair or delay in any material respect
obtaining the FCC Consent (as defined in Section 6.01(b)) or complying with or
satisfying the terms thereof or (y) result in imposition of materially adverse
conditions on the FCC Consent. On and prior to the Effective Time, Parent and
Sub shall remain qualified under the Communications Act and otherwise to
consummate the transactions contemplated herein, subject to such divestitures
of radio stations attributable to Parent as are required for compliance with
the provisions of the Communications Act and FCC regulations regarding radio
multiple ownership.
(c) ADVICE OF CHANGES. The Company and Parent shall
promptly advise the other party orally and in writing of (i) any representation
or warranty made by the advising party contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by the advising party to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by the advising party under this
Agreement or (iii) any change or event having, or which reasonably could be
expected to have,
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a Material Adverse Effect on such party or on the truth of its respective
representations and warranties or the ability of the conditions set forth in
Article 6 to be satisfied; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
(d) NOTIFICATION OF CERTAIN MATTERS. If Parent (or its
Affiliates) or the Company receives an administrative or other order or
notification relating to any violation or claimed violation of the rules and
regulations of the FCC, or of any Governmental Entity, that could affect
Parent's, Sub's or the Company's ability to consummate the transactions
contemplated hereby, or should Parent (or its Affiliates) or the Company become
aware of any fact (including any change in law or regulations (or any
interpretation thereof by the FCC)) relating to the qualifications of Parent
(and its controlling Persons) that reasonably could be expected to cause the
FCC to withhold its consent to the transfer of control of the FCC Licenses
contemplated hereunder, Parent or the Company, as the case may be, shall
promptly notify the other party thereof and the Company shall use all
reasonable efforts to take such steps as may be necessary, to remove any such
impediment of the Company to consummate the transactions contemplated by this
Agreement. In addition, Parent or the Company, as the case may be, shall give
to the other party prompt written notice of (i) the occurrence, or failure to
occur, of any event of which it becomes aware that has caused or that would be
likely to cause any representation or warranty of Parent and Sub or the
Company, as the case may be, contained in this Agreement to be untrue or
inaccurate at any time from the date hereof to the Closing Date, and (ii) the
failure of Parent and Sub or the Company, as the case may be, or any officer,
director, employee or agent thereof, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
by it hereunder. No such notification shall affect the representations or
warranties of the parties or the conditions to their respective obligations
hereunder.
SECTION 4.02. NO SOLICITATION.
(a) From and after the date hereof until the termination
of this Agreement, neither the Company nor any of its Subsidiaries, nor any of
their respective officers, directors, representatives, agents or Affiliates
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its Subsidiaries) (collectively,
"Representatives") will, and the Company will cause the employees and
Representatives of the Company and its Subsidiaries not to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Takeover
Proposal (as defined in Section 8.03), (ii) enter into any agreement with
respect to any Takeover Proposal or give any approval of the type referred to
in Section 3.01(l) with respect to any Takeover Proposal or (iii) participate
in any discussions or negotiations regarding, or furnish to any Person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal; provided, however, that if at any
time prior to the receipt of the Stockholder Approval, the Board of Directors
of the Company determines in good faith, based on the advice of outside
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to the Company's stockholders under applicable law, the Company (and its
Representatives) may, in response to an unsolicited Takeover Proposal of the
sort referred to in clause (x) of the definition of "Superior
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Proposal" as contained in Section 8.03 that involves consideration to the
Company's stockholders with a value that the Company's Board of Directors
reasonably believes, after receiving advice from the Company's financial
advisor, is superior to the consideration provided for in the Merger, and
subject to compliance with Section 4.02(c), (x) furnish information with
respect to the Company pursuant to a customary confidentiality agreement
(having terms substantially similar to those contained in the Confidentiality
Agreement (as defined in Section 5.01)) to any Person making such proposal and
(y) participate in negotiations regarding such proposal. The Company shall
immediately cease and cause to be terminated any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any parties
conducted heretofore by the Company or any Representatives with respect to any
Takeover Proposal existing on the date hereof. Without limiting the foregoing,
it is understood that any violation of the restrictions set forth in the
preceding sentence by any Representative of the Company or any of its
Subsidiaries, whether or not such Person is purporting to act on behalf of the
Company or any of its Subsidiaries or otherwise, shall be deemed to be a breach
of this Section 4.02(a) by the Company.
(b) Neither the Board of Directors of the Company nor any
committee thereof (including without limitation the Independent Committee)
shall (x) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent, the approval (including, without limitation, either the
Board of Directors' or the Independent Committee's resolution providing for
such approval) or recommendation by such Board of Directors or such committee
of this Agreement or the Merger or (y) approve or recommend, or propose to
approve or recommend, any Takeover Proposal, except in the case of clause (x)
or (y), in connection with a Superior Proposal (as defined in Section 8.03) and
then only at or after the termination of this Agreement pursuant to Section
7.01(c).
(c) In addition to the obligations of the Company set
forth in paragraphs (a) and (b) of this Section 4.02, the Company promptly
shall advise Parent orally and in writing of any request for information or of
any Takeover Proposal or any inquiry with respect to or which could reasonably
be expected to lead to any Takeover Proposal, the identity of the Person making
any such request, Takeover Proposal or inquiry and all the terms and conditions
thereof. The Company will keep Parent fully informed of the status and details
(including amendments or proposed amendments) of any such request, Takeover
Proposal or inquiry.
(d) Nothing contained in this Section 4.02 shall prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act;
provided, however, neither the Company nor its Board of Directors nor any
committee thereof shall, except as permitted by Section 4.02(b), withdraw or
modify, or propose to withdraw or modify, its approval or recommendation with
respect to this Agreement or the Merger (including, without limitation, either
the Board of Directors' or the Independent Committee's resolution providing for
such approval) or approve or recommend, or propose to approve or recommend, a
Takeover Proposal.
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SECTION 4.03. STOCKHOLDERS MEETING.
(a) The Company will, as soon as practicable following
the date of this Agreement duly call, give notice of, convene and hold a
meeting of its stockholders (the "Stockholders Meeting") for the purpose of
obtaining the Stockholder Approval. Without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to the first
sentence of this Section 4.03 shall not be affected by the commencement, public
proposal, public disclosure or communication to the Company of any Takeover
Proposal. The Company will, through its Board of Directors and the Independent
Committee, recommend to its stockholders the approval and adoption of this
Agreement and the Merger and such recommendation and approval shall be set
forth in the Proxy Statement, except to the extent that the Board of Directors
of the Company shall have withdrawn or modified its approval or recommendation
of this Agreement or the Merger and terminated this Agreement in accordance
with Section 7.01(c).
(b) The Company shall prepare and file a preliminary
Proxy Statement with the SEC within six weeks following the date of this
Agreement and shall use its commercially reasonable efforts to respond to any
comments of the SEC or its staff, and, to the extent permitted by law, to cause
the Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after responding to all such comments to the satisfaction of the
SEC staff and in any event at least twenty (20) business days prior to the
Stockholders Meeting. The Company shall notify Parent promptly of the receipt
of any comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Proxy Statement or for additional
information and will supply Parent with copies of all correspondences between
the Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement or the Merger.
Prior to the filing of the Proxy Statement or any amendment thereto with the
SEC, the Company shall provide the Parent and its legal counsel with a
reasonable opportunity to review and comment on such document. If at any time
prior to the Stockholders Meeting there shall occur any event that should be
set forth in an amendment or supplement to the Proxy Statement, the Company
shall promptly prepare and mail to its stockholders such an amendment or
supplement. The Company shall not mail any Proxy Statement, or any amendment
or supplement thereto, to which Parent reasonably objects. Parent shall
cooperate with and provide such information as is reasonably requested by the
Company in the preparation of the Proxy Statement or any amendment or
supplement thereto.
SECTION 4.04. ASSISTANCE. If Parent requests, the Company will
cooperate, and the Company will cause each of its Subsidiaries and will request
its accountants, at the sole cost and expense of Parent, to cooperate in all
reasonable respects in connection with any financing efforts of Parent or its
Affiliates (including providing reasonable assistance in the preparation of one
or more registration statements or other offering documents relating to debt
and/or equity financing) and any other filings that may be made by Parent or
its Affiliates with the SEC, all at the sole expense of Parent and during
normal business hours, upon reasonable prior notice and in such manner as will
not unreasonably interfere with the conduct of the Company's or any of its
Subsidiaries' businesses. Subject to the foregoing, the Company shall, and
shall cause each of its Subsidiaries to, (i) furnish to its independent
accountants (or, if requested by Parent to Parent's independent public
accountants), such customary management representation letters as its
accountants may reasonably require of the Company as a condition to its
execution of any required
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accountants' consents necessary in connection with the delivery of any
"comfort" letters requested by financing sources of Parent or its Affiliates,
and (ii) furnish to Parent all financial statements (audited and unaudited) and
other information in the possession of the Company or any of its Subsidiaries
or their representatives or agents as Parent shall reasonably determine is
required in connection with such financing.
SECTION 4.05. RELEASES. The Company shall (a) use its commercially
reasonable efforts to receive, prior to the Effective Time, an Option, SAR and
Warrant Surrender Agreement, Release and Waiver in substantially the form
attached hereto as Annex A (a "Release Agreement") from each Person (other than
the Persons named in Section 4.05 of the Company Disclosure Schedule (the
"Executive Group")) who is the holder of any Options or SARs and (b) obtain
from each member of the Executive Group a Release Agreement.
SECTION 4.06. TERMINATION OF CERTAIN AFFILIATE TRANSACTIONS. At or
prior to the Effective Time, the Company will amend or terminate each of the
agreements set forth Part I of Section 4.06 of the Company Disclosure Schedule,
and all other Affiliate Relationships then existing other than those set forth
in Part II of Section 4.06 of the Company Disclosure Schedule, in each case
without any liability to, or fees or payments by, the Company or any of its
Subsidiaries resulting from such termination (other than payments made pursuant
to the express terms of the agreements related to periods or services provided
prior to the termination date of such agreements) except as expressly set forth
in Part I of Section 4.06 of the Company Disclosure Schedule, and so that as of
and after the Effective Time none of the Company, the Surviving Corporation or
any of their Subsidiaries will have any liability or obligations thereunder.
SECTION 4.07. SIGNAL DOWNGRADE/UPGRADE. The Company shall use
commercially reasonable efforts to execute an agreement with Saga
Communications of Iowa, Inc. ("Saga") on terms reasonably acceptable to Parent
(the "Saga Agreement") for the downgrade, if necessary, of Saga's signal for
KIOA-FM, Des Moines, Iowa, from Channel 227C to 227C1, and the upgrade by the
Company of its signal for KTNP(FM), Bennington, Nebraska, from 227A to 227C3.
The Company shall use commercially reasonable efforts to obtain the FCC's
consent for such downgrade and upgrade.
ARTICLE 5.
ADDITIONAL AGREEMENTS
SECTION 5.01. ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) The Company shall, and shall cause its Subsidiaries
to, afford to Parent and to the officers, employees, accountants, counsel,
financial advisors, lenders and other representatives of Parent, reasonable
access during normal business hours during the period prior to the Effective
Time to all their respective properties, books, contracts, commitments,
personnel and records and, during such period, the Company shall, and shall
cause its Subsidiaries to, prepare or cause to be prepared, or furnish promptly
to Parent (a) a copy of each report, schedule, registration statement and
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other document filed by it during such period pursuant to the requirements of
Federal or state securities laws and (b) all other information concerning its
business, properties and personnel as Parent may reasonably request. Except as
required by law or the rules or regulations of the Nasdaq Stock Market or any
national stock exchange, Parent agrees that, until the earlier of (i) two years
from the date of this Agreement and (ii) the Effective Time, Parent will not,
and will cause its Subsidiaries and Representatives not to, disclose, in whole
or in part, to any other Person any nonpublic information obtained from the
Company other than to Representatives of Parent in connection with an
evaluation of the transactions contemplated by this Agreement, and Parent will
not, and will cause its Subsidiaries and the Representatives of the Parent and
its Subsidiaries not to, use any of such nonpublic information to directly or
indirectly divert or attempt to divert any business, customer or employee of
the Company or any of its Subsidiaries.
(b) Parent and Sub shall prepare or cause to be prepared,
and furnish promptly to the Company such information concerning the business,
properties and personnel of Parent and Sub as the Company may reasonably
request for including in the Proxy Statement or as otherwise required to be
included in any filings required to be made by the Company with any
Governmental Entity in connection with the transactions contemplated by this
Agreement. Except as required by law or the rules of regulations of the Nasdaq
Stock Market or any national stock exchange, the Company agrees that, until the
earlier of (i) two years from the date of this Agreement and (ii) the Effective
Time, the Company will not, and will cause its Subsidiaries and the
Representatives of the Company and its Subsidiaries not to, without the prior
written consent of Parent, disclose, in whole or in part, to any other Person
any nonpublic information obtained from Parent that is not provided for use in
the Proxy Statement, other than to Representatives of the Company and its
Subsidiaries in connection with the preparation for the consummation of the
transactions contemplated by this Agreement, and the Company will not, and will
cause its Subsidiaries and the Representatives of the Company and its
Subsidiaries not to, use any of such nonpublic information to directly or
indirectly divert or attempt to divert any business, customer or employee of
Parent or any of its Subsidiaries.
SECTION 5.02. REASONABLE EFFORTS.
(a) Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by the
Transaction Documents, including (i) the obtaining of all necessary consents,
approvals or waivers from third parties ("Third Party Consents"), (ii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging any of the Transaction Documents or the
consummation of the transactions contemplated by the Transaction Documents
(such as in connection with the transfer of control of the FCC Licenses),
including seeking to have any stay or temporary restraining order entered by
any court or other Governmental Entity vacated or reversed, (iii) the waiver
from the lenders under the Credit Agreement of all prepayment premiums,
penalties and fees payable under the terms of the Credit Agreement and (iv) the
execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, the
Transaction
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Documents. Except for making the filings contemplated in Section 5.02(b),
notwithstanding anything to the contrary contained in this Agreement, nothing
in this Agreement shall obligate Parent or Sub to use reasonable efforts to
obtain approval of the FCC Applications or clearance under the HSR Act and the
grant of any waivers in connection therewith. However, notwithstanding the
preceding sentence, Parent shall obtain approval of the FCC Applications (as
defined in Section 5.02(b)) and clearance under the HSR Act and the grant of
any waivers in connection therewith prior to the Termination Date (as defined
in Section 7.01(b)(ii)) unless the failure to obtain such clearance, consents
and waivers is primarily the result of Acts or Changes. For purposes of this
Agreement "Acts or Changes" shall mean (A) acts or omissions on the part of the
Company or any of its Subsidiaries in conducting their respective operations
and activities other than relating to the number of licenses or amount of
revenues in a particular market and other than relating to the Citadel JSA, (B)
a breach by the Company of its obligations under this Agreement, or (C) a
statutory change or enactment made by Congress which (1) decreases the number
of radio licenses which an entity may own nationally or locally or (2)
adversely relates to the concentration of radio licenses which an entity may
own in a market and, as a result of the change or enactment referred to in
either clause (1) or (2) above, Parent's performance of its obligations under
this Agreement would result in a Material Adverse Effect on Parent and its
Attributable Entities, taken as a whole. For purposes of the preceding
sentence, "Attributable Entities" shall mean Parent and any entities whose
radio licenses would be attributable to Parent under applicable FCC rules or
regulations or under the HSR Act.
(b) In connection with and without limiting the
foregoing, Parent and the Company shall file the applications (the "FCC
Applications") with the FCC for the transfer of control of the FCC Licenses
contemplated hereunder within 21 business days after the date hereof.
Additionally, as soon as practicable after the date of this Agreement, but in
no event more than 21 business days after the date of this Agreement, Parent
and the Company will file or will cause to be filed all notifications and
documents in connection with this Agreement required to be filed pursuant to
the HSR Act, and the rules and regulations promulgated under the HSR Act.
Parent and the Company will make or cause to be made all such other filings and
submissions under the HSR Act and regulations thereunder required to consummate
the transactions contemplated by this Agreement. Both Parent and the Company
will request early termination of the waiting period imposed by the HSR Act.
Parent and the Company will coordinate and cooperate with one another in
exchanging information and reasonable assistance as the other may request in
connection with notifications or other filings made under the HSR Act. Parent
and the Company shall keep the other party apprised of the status of any
inquiries made by the U.S. Department of Justice, Antitrust Division, or the
Federal Trade Commission (collectively, the "Federal Antitrust Agencies"), with
respect to the transactions contemplated by this Agreement. Both Parent and the
Company shall use their best efforts to cause a termination of the waiting
period imposed by the HSR Act without the entry by a court of competent
jurisdiction of an order enjoining the consummation of or the transactions
contemplated by this Agreement; provided that, Parent shall consent to the
divestiture of such properties as may be necessary to receive approval by the
Federal Antitrust Agencies without entry of such an injunction; provided,
however, that Parent and Sub (and their Affiliates) shall not be required by
this provision to divest any interest they may hold in any television station.
Parent shall pay all expenses and assume all obligations with respect to such
divestitures. As may be reasonably
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requested by Parent, and subject to the receipt of confidentiality agreements
reasonably acceptable to the Company, the Company shall provide to potential
third party buyers identified by Parent reasonable access to the business,
assets and operations of the Company and its Subsidiaries, on a basis
consistent with that described in Section 5.01, as may be necessary to
cooperate with Parent in connection with its efforts to effectuate,
contemporaneously with the Effective Time, divestitures of the assets and
properties of the Company and its Subsidiaries, and the Company shall otherwise
reasonably cooperate with Parent by making any required governmental filing in
connection with such divestitures. If control of Parent and Sub will change
during the pendency of the FCC Applications, Parent shall amend the FCC
Applications accordingly as may be necessary so long as such amendment does not
delay the Closing beyond the Termination Date.
(c) In connection with and without limiting the
foregoing, the Company and its Board of Directors shall (i) take all action
necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to the Merger, this Agreement, the
Stockholder Agreements or any of the other transactions contemplated by this
Agreement or the Stockholder Agreements and (ii) if any state takeover statute
or similar statute or regulation becomes applicable to the Merger, this
Agreement, the Stockholder Agreements or any other transaction contemplated by
this Agreement or the Stockholder Agreements, take all action necessary to
ensure that the Merger and the other transactions contemplated by this
Agreement and the Stockholder Agreements may be consummated as promptly as
practicable on the terms contemplated by this Agreement and the Stockholder
Agreements and otherwise to minimize the effect of such statute or regulation
on the Merger and the other transactions contemplated by this Agreement and the
Stockholder Agreements.
SECTION 5.03. BENEFIT PLANS; VACATION.
(i) Parent shall take such action as may be
necessary so that on and after the Effective Time and for one year
thereafter, directors (who are employees of the Company or any of its
Subsidiaries), officers and employees of the Company and its
Subsidiaries shall be provided employee benefits, plans and programs
(including but not limited to incentive compensation, deferred
compensation, pension, life insurance, medical (which eligibility
shall not be subject to any exclusions for any pre-existing conditions
if such individual has met the participation requirements of such
benefits, plans or programs of the Company or its Subsidiaries),
profit sharing (including 401(k), severance, salary continuation and
fringe benefits) which are no less favorable in the aggregate than
those generally available to similarly situated directors, officers
and employees of Capstar Broadcasting Corporation and its
Subsidiaries. For purposes of eligibility to participate and vesting
in all benefits provided to directors, officers and employees, the
directors, officers and employees of the Company and its Subsidiaries
will be credited with their years of service with the Company and its
Subsidiaries and prior employers to the extent service with the
Company and its Subsidiaries and prior employers is taken into account
under plans of the Company and its Subsidiaries. Upon termination of
any health plan of the Company or any of its Subsidiaries, individuals
who were directors, officers or employees of the Company or its
Subsidiaries at the Effective Time shall, if employed by the Company
and its Subsidiaries, become eligible to participate in such health
plans established by Parent. Amounts paid before the Effective Time by
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directors, officers and employees of the Company and its Subsidiaries
under any health plans of the Company shall after the Effective Time
be taken into account in applying deductible and out-of-pocket limits
applicable under the health plans of Parent provided as of the
Effective Time to the same extent as if such amounts had been paid
under such health plans of Parent.
(ii) Parent shall permit and shall cause the
Surviving Corporation to permit all individuals who are employees of
the Company and its Subsidiaries immediately prior to the Effective
Time to retain and take any paid vacation days accrued but not taken
or lost under the Company's and its Subsidiaries' vacation policies
prior to the Effective Time, provided that such vacation days are
taken or paid in lieu of being taken within one year after the
Effective Time.
SECTION 5.04. INDEMNIFICATION, EXCULPATION AND INSURANCE.
(a) The certificate of incorporation and by-laws of the
Surviving Corporation shall contain provisions no less favorable with respect
to exculpation, indemnification and advancement of expenses than are set forth
in the certificate of incorporation and by-laws of the Company, as in effect on
the date hereof, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would affect adversely the rights thereunder of (i) individuals who at any time
prior to the Effective Time were directors, officers or employees or agents of
the Company or any of its Subsidiaries or (ii) any of Howard Tytel, Robert F.
X. Sillerman, any member of the Sillerman Group or each of their respective
officers, directors, employees, agents and shareholders, unless such
modification shall be required by law.
(b) From and after the Effective Time, Parent and the
Surviving Corporation shall indemnify, defend and hold harmless each Person who
is now, or has been at any time prior to the date of this Agreement or who
becomes prior to the Effective Time, an officer, director, employee or agent of
the Company or any of its Subsidiaries and each of Howard Tytel, Robert F. X.
Sillerman, any member of the Sillerman Group and each of their respective
officers, directors, employees, agents and shareholders (collectively, the
"Indemnified Parties"), to the same extent as such Indemnified Parties were
indemnified by the Company and its Subsidiaries as of the date of the
Agreement, against all losses, reasonable expenses (including reasonable
attorneys' fees), claims, damages, liabilities or amounts that are paid in
settlement of, or otherwise in connection with, any threatened or actual claim,
action, suit, proceeding or investigation (a "Claim"), based in whole or in
part on or arising in whole or in part out of the fact that the Indemnified
Party (or the Person controlled by the Indemnified Party) is or was a director,
officer, employee, agent, representative or consultant of the Company or any of
its Subsidiaries and pertaining to any matter existing or arising out of
actions or omissions occurring at or prior to the Effective Time (including
without limitation any claim arising out of this Agreement or any of the
transactions contemplated hereby), whether asserted or claimed prior to, at or
after the Effective Time, in each case to the fullest extent permitted under
Delaware law, and shall pay any expenses, as incurred, in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
fullest extent permitted under Delaware law. Without limiting the foregoing,
in the event any such Claim is brought against any
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of the Indemnified Parties, (i) such Indemnified Parties may retain counsel
(including local counsel) satisfactory to them and which shall be reasonably
satisfactory to Parent and the Surviving Corporation and they shall pay all
reasonable fees and expenses of such counsel for such Indemnified Parties; and
(ii) Parent and the Surviving Corporation shall use all reasonable efforts to
assist in the defense of any such Claim, provided that Parent and the Surviving
Corporation shall not be liable for any settlement effected without their
written consent, which consent, however, shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, nothing contained in this Section 5.04
shall be deemed to grant any right to any Indemnified Party which is not
permitted to be granted to an officer, director or employee of Parent under
Delaware law, assuming for such purposes that Parent's certificate of
incorporation and bylaws provide for the maximum indemnification permitted by
law.
(c) Parent will cause to be maintained for a period of
not less than six years from the Effective Time the Company's current
directors' and officers' insurance and indemnification policy to the extent
that it provides coverage for events occurring prior to the Effective Time
("D&O Insurance") for all Persons who are directors and officers of the Company
or otherwise are covered by the D&O Insurance on the date of this Agreement, so
long as the annual premium therefor would not be in excess of 200% of the last
annual premium therefor paid prior to the date of this Agreement (the "Maximum
Premium"); provided, however, that Parent may, in lieu of maintaining such
existing D&O Insurance as provided above, cause coverage to be provided under
any policy maintained for the benefit of Parent or any of its Subsidiaries, so
long as the terms thereof are no less advantageous to the intended
beneficiaries thereof than the existing D&O Insurance. If the existing D&O
Insurance expires, is terminated or canceled during such six-year period,
Parent will use all reasonable efforts to cause to be obtained as much D&O
Insurance as can be obtained for the remainder of such period for an annualized
premium not in excess of the Maximum Premium, on terms and conditions no less
advantageous to the covered Persons than the existing D&O Insurance. The
Company represents to Parent that the Maximum Premium is $234,000.
SECTION 5.05. FEES AND EXPENSES; DEPOSIT.
(a) Except as provided below in this Section 5.05, and as
provided in Section 5.11 and Section 7.02, and except for FCC filing fees in
connection with the filing of the FCC Applications and filing fees under the
HSR Act in connection with the transactions contemplated by this Agreement, 50%
of which shall be paid by Parent and 50% of which shall be paid by the Company,
all fees and expenses incurred in connection with the Merger, this Agreement,
the Stockholder Agreements and the transactions contemplated by this Agreement
and the Stockholder Agreements shall be paid by the party incurring such fees
or expenses, whether or not the Merger is consummated.
(b) The Company shall pay, or shall cause to be paid, in
same day funds to Parent, or its designee, the following specified termination
fee (the "Termination Fee") if this Agreement is terminated as follows: (i) if
this Agreement is terminated pursuant to Section 7.01(b)(i), then a Termination
Fee of $2,500,000 shall be payable; (ii) if this Agreement is terminated
pursuant to Section 7.01(f), then a Termination Fee of $1,666,667 shall be
payable; or (iii) if this Agreement
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is terminated pursuant to Section 7.01(c) or (d) (including a conditional
termination pursuant to the proviso contained in Section 7.01(d)), then a
Termination Fee of $5,000,000 shall be payable contemporaneously with such
termination.
(c) In the event that this Agreement is terminated
pursuant to Section 7.01(b)(i) and within one year of such termination
definitive documentation with respect to a Takeover Proposal has been entered
into or 50% or more of the outstanding shares of Common Stock or voting
securities representing 50% or more of the voting power of the outstanding
capital stock of the Company (giving effect to the conversion of outstanding
Mandatory Preferred Stock to Class A Common Stock if, and at the rate at which,
the Mandatory Preferred Stock is then convertible into shares of Class A Common
Stock) has been acquired pursuant to a tender offer made as a Takeover
Proposal, then the Company shall pay, or shall cause to be paid,
contemporaneously with the consummation of the acquisition pursuant to such
Takeover Proposal or acquisition pursuant to such Tender Offer, in same day
funds to Parent, or its designee, an additional amount of Termination Fee in an
amount equal to $2,500,000.
(d) In the event that this Agreement is terminated
pursuant to Section 7.01(b)(i), 7.01(c), 7.01(d) or 7.01(e), the Company shall
pay upon demand, or shall cause to be paid, in same day funds to Parent, or its
designee, such amount as may be required to reimburse Parent and its Affiliates
(the "Reimbursement Amount") for all reasonable out-of-pocket fees, costs and
expenses incurred by any of them in connection with their due diligence efforts
or the transactions contemplated hereby, including, without limitation, (i)
fees, costs and expenses of accountants, counsel, financial advisors and other
similar advisors, (ii) fees paid to any Governmental Entity, (iii) costs of all
Phase I Assessments and Phase II Assessments and (iv) fees, costs and expenses
paid or payable to third parties under any financing commitments or similar
arrangements or in connection with financing transactions or efforts,
including, without limitation, any purchaser or underwriter's discounts
relating to the sale of the debt or equity financing or (except for the
principal amount payable in connection therewith, but including all accrued
interest payable in connection therewith) the making of any repurchase offer in
respect of such financing (collectively, "Expenses"); provided however, the
Reimbursement Amount shall not exceed (x) $1,000,000 in the case of a
termination under either Section 7.01(b)(i), 7.01(c) or 7.01(d) and (y) $50,000
in the case of a termination under Section 7.01(e).
(e) The Termination Fee and Reimbursement Amount shall be
paid by the Company without reservation of rights or protests and the Company
upon making such payment shall be deemed to have released and waived any and
all rights that it may have to recover such amounts.
(f) Concurrently with the execution of this Agreement, in
order to secure Parent's and Sub's performance under this Agreement and as
security for damages that may be payable by Parent or Sub to the Company
hereunder, Parent shall place into escrow pursuant to the Deposit Escrow
Agreement in the form attached as Annex B hereto (the "Escrow Agreement") an
irrevocable letter of credit (the "Letter of Credit") in the sum of $9,000,000
substantially in the form attached
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as Annex C hereto. The Letter of Credit will provide that the Company can draw
the amount thereof after its release to the Company from the Escrow Agreement.
(g) If this Agreement is terminated pursuant to (i)
Section 7.01(b)(ii) and as of such Termination Date the conditions set forth in
Sections 6.01(b), Section 6.01(c) or both Sections 6.01(b) and 6.01(c) have not
been fulfilled other than a nonfulfillment primarily due to Acts or Changes;
(ii) Section 7.01(b)(iii) and such order, injunction, decree, ruling or other
action is entered or taken by the FCC (or any court of competent jurisdiction
and arises under the Communications Act) or any Federal Antitrust Agency and is
not primarily due to Acts or Changes; (iii) Section 7.01(b)(iv) by the Company;
(iv) Section 7.01(b)(vi); (v) Section 7.01(b)(ii) and as of such Termination
Date the condition set forth in Section 6.01(d) is not satisfied as a result of
a Mandatory Preferred Preliminary Order (as defined in Section 5.07), (vi)
Section 7.01(b)(ii) and as of such Termination Date the conditions in Section
6.01 and all conditions in Section 6.02 other than Section 6.02(d) shall have
been satisfied, then Parent and Company shall promptly instruct the escrow
agent under the Escrow Agreement to release the Escrowed Property (as defined
in the Escrow Agreement) to the Company and Parent promptly shall pay to the
Company, by wire transfer in immediately available funds to an account
designated in writing by the Company, an additional amount of $3,000,000 (the
"Cash Fee"), and the Escrowed Property and the Cash Fee (collectively, the
"Parent Fee") shall constitute liquidated damages. The parties agree that the
foregoing liquidated damages are reasonable considering all the circumstances
existing as of the date hereof and constitute the parties' good faith estimate
of the actual damages reasonably expected to result from the termination of
this Agreement as described in this Section 5.05(g). Except as contemplated by
Section 5.05(i) and Section 5.11, the Company agrees that, to the fullest
extent permitted by law, the Company's right to payment of such liquidated
damages as provided in this Section 5.05(g) shall be its sole and exclusive
remedy if the Closing does not occur because of a termination of this Agreement
as described in this Section 5.05(g) or with respect to any damages whatsoever
that the Company may suffer or allege to suffer as a result of any Claim or
cause of action asserted by the Company relating to or arising from breaches of
the representations, warranties or covenants of Parent or Sub contained in this
Agreement and to be made or performed at or prior to the Closing. If this
Agreement is terminated either by Parent or the Company pursuant to any
provision of Section 7.01 other than a termination described in clauses (i),
(ii), (iii), (iv), (v) or (vi) of this Section 5.05(g), then, Parent and the
Company shall instruct the escrow agent under the Escrow Agreement to release
the Letter of Credit to Parent. Each of clauses (i) through (vi) of this
Section 5.05(g) is independent from each other and nothing in any one clause
modifies or limits any other clause.
(h) As a condition to the release of the Escrowed
Property and the payment of the Cash Fee to the Company under Section 5.05(g),
the Company shall deliver to the Parent an agreement which irrevocably and
unconditionally releases, acquits, and forever discharges Parent and Sub and
their respective successors, assigns, officers, directors, employees, agents,
stockholders, Subsidiaries, Parent companies and other Affiliates (corporate or
otherwise) (the "Released Parties") of and from any and all Released Claims,
including, without limitation, all Released Claims arising out of, based upon,
resulting from or relating to the negotiation, execution, performance, breach
or otherwise related to or arising out of the Transaction Documents or any
agreement entered into in connection therewith or related thereto. "Released
Claims" as used herein shall mean any and all
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charges, complaints, claims, causes of action, promises, agreements, rights to
payment, rights to any equitable remedy, rights to any equitable subordination,
demands, debts, liabilities, express or implied contracts, obligations of
payment or performance, rights of offset or recoupment, accounts, damages,
costs, losses or expenses (including attorneys' and other professional fees and
expenses) held by the Company or any of its Subsidiaries, whether known or
unknown, matured or unmatured, suspected or unsuspected, liquidated or
unliquidated, absolute or contingent, direct or derivative relating to the
transactions contemplated by the Transaction Documents, provided, however, that
Released Claims shall not include claims for unpaid expenses and interest
described in Section 5.05(i) relating to the release of the Escrowed Property,
the payment of the Cash Fee or delivery of the Escrowed Property, or for any
escrow expenses unpaid by Parent and withheld by the escrow agent from the
Escrowed Property pursuant to the Escrow Agreement.
(i) In the event that this Agreement is terminated and
Parent and the Company do not promptly agree on who is entitled to the Escrowed
Property and the Cash Fee then, upon a Final Determination (as defined in the
Escrow Agreement), which shall be binding with respect to the whole of the
Parent Fee, the non-prevailing party shall pay to the prevailing party (x) the
amount of the reasonable fees and expenses actually incurred by the prevailing
party in connection with obtaining the Final Determination and (y) if the
Company is the prevailing party, interest on the face amount of the Parent Fee
at the annual rate of 10% commencing as of the date of the termination or
purported termination of this Agreement and ending as of (A) with respect to
the Escrowed Property, the date that the Escrowed Property has been released
from escrow to the prevailing party and (B) with respect to the Cash Fee, the
date the full amount of the Cash Fee has been tendered for delivery to the
Company as provided in Section 5.05(g).
SECTION 5.06. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one
hand, and the Company, on the other hand, will consult with each other before
issuing, and provide each other the opportunity to review, comment upon and
concur with, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall
not issue any such press release or make any such public statement prior to
such consultation, except as may be required by applicable law, court process
or by obligations pursuant to any listing agreement with any national
securities exchange or the National Association of Securities Dealers, Inc. The
parties agree that the initial press release(s) to be issued with respect to
the transactions contemplated by this Agreement and the Stockholder Agreements
shall be in the form(s) heretofore agreed to by the parties.
SECTION 5.07. CLOSING EXTENSION.
(a) Extension. Subject to Section 1.02, Parent may
extend the initial Termination Date set forth in Section 7.01(b)(ii)(A) for up
to three calendar months, in Half-Month Intervals (as defined in Section 8.03),
by providing the Company notice of its election to do so on or prior to the
then scheduled Termination Date. In the event that Parent elects to extend the
Termination Date pursuant to the immediately preceding sentence, the Common Per
Share Price shall be increased by $.125 and the Mandatory Preferred Per Share
Price shall be increased by $1.04 for each Half-Month
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Interval (or portion thereof) that the Termination Date is extended, beginning
on the first day of each such Half-Month Interval; provided, however, that no
such increase shall be paid if:
(A)(i) all conditions to the obligations of Parent
and Sub to effect the Merger set forth in Section 6.01 have been
satisfied, except for the conditions set forth in either Section
6.01(b), 6.01(c) or both Sections 6.01(b) and 6.01(c), as applicable,
(ii) the failure to satisfy the conditions set forth in either Section
6.01(b), 6.01(c) or both Sections 6.01(b) and 6.01(c), as applicable,
is primarily the result of Acts or Changes and (iii) all the
conditions to the obligations of Parent and Sub to effect the Merger
set forth in Section 6.02 (other than Sections 6.02(c) and 6.02(d))
have been satisfied or waived by Parent and Sub; provided, that if
within ten business days after the later of the satisfaction of the
conditions in Section 6.01(b) and the satisfaction of the conditions
in Section 6.01(c) (the "Satisfaction Date"), Parent fails to
consummate the Merger, the Common Per Share Price shall be increased
by $.125 and the Mandatory Preferred Per Share Price shall be
increased by $1.04 for each Half-Month Interval beginning as of the
first Half-Month Interval which commences after the Satisfaction Date;
or
(B)(i) the Merger shall be restrained or otherwise
prohibited by a temporary or preliminary judicial order, decree,
ruling or other action arising from claims or litigation involving the
Company and its stockholders (collectively, the "Preliminary Order")
and (ii) Parent delivers to the Company on or prior to the applicable
Termination Date written notice to the effect that it shall consummate
the Merger within ten business days after the lifting or withdrawal of
the Preliminary Order; provided, that, if the Preliminary Order is
entered, issued, made or rendered in a Mandatory Preferred Proceeding
(as defined in Section 8.03) on the grounds or basis of, solely or
among other grounds or bases, the Mandatory Preferred Per Share Price
or any other treatment of the Mandatory Preferred Stock pursuant to
this Agreement (a "Mandatory Preferred Preliminary Order") and the
Mandatory Preferred Preliminary Order has not been lifted or withdrawn
by the close of business on June 15, 1999, then Parent may extend the
Termination Date until July 31, 1999, in Half-Month Intervals, but the
Common Per Share Price shall be increased by $.125 and the Mandatory
Preferred Per Share Price shall be increased by $1.04 for each Half-
Month Interval (or portion thereof) that the Termination Date is so
extended, beginning on June 16, 1999; and provided, further, that, if,
within ten business days after the date of the lifting or withdrawal
of the Preliminary Order, Parent fails to consummate the Merger and
such failure is not due to the Company's failure to fulfill any of the
conditions contained in Sections 6.01, Section 6.02 or both Sections
6.01 and 6.02 that are to be fulfilled by it, the Common Per Share
Price shall be increased by $0.25 and the Mandatory Preferred Per
Share Price shall be increased by $2.08 for each Half-Month Interval
(or portion thereof) after the initial Termination Date provided for
herein (and the increase in the Common Per Share Price and the
Mandatory Preferred Per Share Price provided for in the immediately
preceding proviso shall not apply). In the event that the Preliminary
Order has not been lifted or withdrawn by the close of business on
July 31, 1999, then either Parent or the Company may extend the date
of the Closing for an additional 45 days by delivering, prior to
August 1, 1999, written notice to the other party to such effect. In
the event that (x) neither Parent nor the Company elects to extend the
Closing for such additional 45-day period or (y) either Parent or the
Company elects to
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extend the Closing for such 45-day period and the Preliminary Order
has not been lifted or withdrawn prior to the end of such 45-day
period, then this Agreement shall terminate without any liability or
obligation on the part of either party other than payment of fees and
expenses pursuant to Section 5.05(a) and the obligation to release the
Letter of Credit to Parent, unless such Preliminary Order is a
Mandatory Preferred Preliminary Order in which case this Agreement
shall not automatically terminate and the provisions of Section 7.01
and 5.05 shall apply; or
(C) to the extent that the Termination Date is
extended solely as a result of the operation of Section 7.01(f).
(b) Mandatory Preferred Preliminary Order. In the event
any Mandatory Preferred Preliminary Order is entered, issued, made, or rendered
that prohibits or restricts the ability of any of the parties to this Agreement
to consummate the transactions contemplated hereby, including the Stockholders
Meeting or the Merger, the Company and Parent shall cooperate and use
commercially reasonable efforts to promptly cause such prohibitions or
restrictions to be lifted, including without limitation, with respect to the
Company, taking steps necessary to appeal any such action. Subject to the
foregoing sentence, notwithstanding any other provisions of this Agreement to
the contrary, Parent and Sub acknowledge and agree that none of the treatment
of the Mandatory Preferred Stock as contemplated by this Agreement, the
bringing of any Mandatory Preferred Proceeding, or any change, effect, event or
occurrence arising therefrom or the resolution thereof that is materially
adverse to the business, properties, assets, condition (financial or
otherwise), results of operations or prospects of the Company or its
Subsidiaries shall, in any case (i) constitute a breach of any representation
or warranty made by the Company in any Transaction Document, or (ii) constitute
a default, nonsatisfaction or violation by the Company of any covenant,
condition or agreement contained in any Transaction Document.
SECTION 5.08. CITADEL JSA.
(a) Notwithstanding Section 4.01(ix), without the prior
written consent of Parent, the Company may at any time, at its option,
terminate the Joint Sales Agreement dated December 15, 1995, between Pourtales
Radio Partnership, Pourtales Holdings, Inc., Springs Radio, Inc. and KVUU/KSSS,
Inc. (collectively, the "JSA Group") and Citadel Broadcasting Company
("Citadel") (the "Citadel JSA"); provided that in the event the termination of
the Citadel JSA results or reasonably could be expected to result in any
payment becoming due from the Company to Citadel then the Company shall not
terminate the Citadel JSA without the prior consent of Parent, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing or anything
contained herein to the contrary, Parent and Sub acknowledge and agree that the
termination of the Citadel JSA by the Company as permitted in this Section 5.08
and/or by any member of the JSA Group, the termination of the Citadel JSA as
required by an order of the United States Department of Justice to which the
Company or any member of the JSA Group is subject, the bringing of any suit,
action, proceeding or claim relating to or arising from or in connection with
the Citadel JSA or its termination, the entering, issuance or rendering of any
award, decision, injunction, judgment, order,
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ruling, decree, or verdict by any court, administrative agency, or other
governmental body or by any arbitrator relating to the Citadel JSA or its
termination, or any change, effect, event or occurrence arising under the
Citadel JSA or as a result of the termination of the Citadel JSA that is
materially adverse to the business, properties, assets, condition (financial or
otherwise), results of operations or prospects of the Company and its
Subsidiaries shall not, in any case, (i) constitute a breach of any
representation or warranty made by the Company in the Transaction Documents, or
(ii) constitute a default, non-satisfaction or violation by the Company of any
covenant, condition or agreement contained in the Transaction Documents.
(b) The Company agrees to cooperate, and to take such
action within its control to cause each member of the JSA Group to cooperate
with Parent and Sub in their efforts to reach a mutually satisfactory
arrangement with the DOJ and Citadel regarding the Citadel JSA, unless the
Citadel JSA shall have been terminated as permitted by Section 5.08(a).
SECTION 5.09. ENVIRONMENTAL ASSESSMENTS.
(a) On or prior to the date of this Agreement, Parent has
delivered to the Company a written notice identifying, with respect to the
parcels of real property for which Environmental Reports were delivered as
contemplated by Section 3.01(q) (the "ER Properties"), those parcels of the ER
Property with respect to which Parent will require additional Phase I or Phase
II environmental assessments to be prepared ("Open ER Properties").
(b) Within 15 business days after the date of this
Agreement, Parent may request, and upon such request the Company shall cause to
be performed by an environmental consultant mutually agreed to by the Company
and Parent, a Phase I environmental assessment audit (the "Phase I Assessment")
with respect to any of the Open ER Properties or any other of the Company's
real property or any facilities owned, operated or leased by the Company or any
of its Subsidiaries (other than the ER Properties with respect to which a Phase
I Assessment was delivered at least five business days prior to the date of
this Agreement and which was not designated as an Open ER Property) and the
improvements and other assets located thereon. Parent will bear the costs and
expenses of the Phase I Assessments. The Phase I Assessments are to be
conducted for the mutual benefit of the Company and Parent and shall be
performed in a manner that at a minimum satisfies the requirements of ASTM
Practice E 1527-94. The Company covenants and agrees that, upon receipt of the
notice referred to above, it shall diligently pursue the performance of the
requisite Phase I Assessments to their completion, with draft copies of the
Phase I Assessments made available to Parent by no later than 45 days after
delivery to the Company of Parent's request therefor.
(c) Parent may request a Phase II environmental
assessment (a "Phase II Assessment") within 15 business days after the date of
this Agreement with respect to any Open ER Property for which a Phase I
Assessment is not requested pursuant to Section 5.09(b), and within 15 business
days after delivery to the Company of a notice of Environmental Exceptions with
respect to any Open ER Property or other Company real property for which a
Phase I Assessment is requested pursuant to Section 5.09(b). Upon each such
request, the Company shall cause to be
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performed by an environmental consultant mutually agreed to by the Company and
Parent a Phase II Assessment of such property and the improvements and other
assets located thereon; provided, however, the Company shall not be obligated
to cause a Phase II Assessment to be performed with respect to any leased real
property unless the Company is able to obtain written consent for the Phase II
Assessment from the landlord, which consent the Company shall use its best
efforts to obtain. Parent will bear the costs and expenses of the Phase II
Assessment. The Company covenants and agrees that, upon receipt of the notice
referred to above, it shall diligently pursue the performance of the requisite
Phase II Assessments to their completion, with draft copies of the Phase II
Assessments made available to Parent by no later than 60 days after delivery to
the Company of Parent's request therefor. The Phase II Assessments are to be
conducted for the mutual benefit of the Company and Parent, and each Phase II
Assessment shall be performed in a manner reasonably anticipated to identify
(i) the presence of Hazardous Substances on or affecting the Company property
to which the Phase II Assessment relates; (ii) any other environmental
conditions existing at the property that reasonably could be expected to (A)
adversely affect the use of such real property as currently used by the Company
and its Subsidiaries, (B) to require the Surviving Corporation to engage in
remediation or corrective action to cleanup or stabilize such conditions or (C)
subject the Surviving Corporation to third party liability or sanctions, fines,
or penalties by a Governmental Entity as a result of the existence or migration
of any such environmental conditions; and (iii) any violation of Environmental
Laws upon or associated with such real property or any improvements or assets
located therein (collectively, "Environmental Exceptions") and shall include an
estimate of the total cost of remediating or taking other actions to clean up
or stabilize, to the extent required under applicable law or as otherwise
necessary to enable the Surviving Corporation to continue its broadcast
operations as presently conducted, such Environmental Exceptions (collectively,
the "Estimated Remediation Costs").
(d) If the Estimated Remediation Costs exceeds $500,000
in the aggregate, then Parent shall have the right, exercisable by written
notice given to the Company within five (5) business days after Parent's
receipt of the final Phase II Assessment requested pursuant to this Section
5.09, to elect to terminate this Agreement; provided, that, upon the giving by
Parent of written notice electing to terminate this Agreement pursuant to this
Section, 5.09(d), Parent and the Company agree to cooperate in good faith to
attempt to determine (i) Estimated Remediation Costs related to any parcel of
the Company's real property that may be abandoned and/or the leasehold interest
with respect thereto terminated by the Company and its Subsidiaries prior to
the Effective Time without any future material liability with respect to any
Environmental Exceptions related thereto ("Abandoned Property"), (ii) the costs
of terminating any such leasehold interests or abandoning such Abandoned
Property, as applicable (including without limitation estimated future
liabilities with respect to any Environmental Exceptions related thereto), and
acquiring replacement real property (in fee or by leasehold) as reasonably
acceptable to Parent and sufficient to permit continued operation by the
Surviving Corporation as previously conducted on the Abandoned Property
("Replacement Costs") and (iii) if any real property interest may be abandoned
as contemplated in clause (i) of this Section 5.09(d), to identify and procure
replacement property as contemplated by clause (ii) of this Section 5.09(d),
and, if within 60 days after the giving of such notice, Parent and the Company
agree that (A) the Estimated Remediation Cost less (B) the Estimated
Remediation Cost related to any Abandoned Property plus (C) all Replacement
Costs do
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not exceed $500,000, then Parent shall not have the right to terminate this
Agreement pursuant to this Section 5.09(d). If Parent and the Company fail to
reach such agreement within the 60 day period referred to in the preceding
sentence, this Agreement shall terminate at the close of business on such 60th
day.
SECTION 5.10. CONVERSION OF CLASS D COMMON STOCK. The Company
agrees that, except as Parent and the Company may otherwise jointly determine
in their sole discretion, within ten business days after the date of this
Agreement, the Company shall file with the FCC a Form 316 application (the
"Form 316 Application") for any necessary FCC authorization for the conversion
of shares of Class D Common Stock to shares of Class B Common Stock by those
Persons and in such amounts as set forth on Schedule C attached hereto. In the
event that the FCC staff formally or informally advises the Company that FCC
authorization is not needed for the stock conversion specified in the Form 316
Application, the Company shall within five (5) business days thereafter (the
"Dismissal Date") file a letter with the FCC requesting dismissal of the Form
316 Application.
SECTION 5.11. ACQUISITION OF ANTELOPE CREEK PROPERTY.
(a) As soon as practicable after the execution of this
Agreement, to the extent permitted by the Credit Agreement:
(i) The Company will use commercially reasonable
efforts to negotiate and complete remaining documentation (the
"Acquisition Documents") pursuant to which a newly formed Subsidiary
of the Company or one of its Subsidiaries will purchase the parcel of
real property (and the improvements situated therein) located at 4630
Antelope Creek Drive in Lincoln, Lancaster County, Nebraska (the
"Target Property"), provided (A) that Parent will be entitled to
participate in the negotiation of such documentation and (B) neither
the Company nor any Subsidiary will (x) enter into any Acquisition
Documents until Parent has consented thereto in writing, which consent
may be withheld by parent in its sole discretion or (y) be required to
enter into any Acquisition Documents prior to completion of the
Financing Documents as provided in Section 5.11(a)(ii) or after the
termination of this Agreement; and
(ii) Parent and the Company will negotiate in good
faith to complete definitive documentation (the "Financing Documents")
in a form reasonably acceptable to the parties pursuant to which
Parent will provide to the Company nonrecourse financing in an
original principal amount equal to the purchase price for the Target
Station as agreed to by Parent (the "Target Financing").
(b) Upon completion of the Acquisition Documents and the
Financing Documents, Parent will fund, simultaneously with the acquisition of
the Target Property pursuant to the Acquisition Documents, the Target Financing
in an amount equal to the purchase price for the Target Property, and the
Company will direct such funding to be made, on behalf of the Company, directly
to the seller of the Target Property.
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(c) The Company shall engage counsel reasonably
acceptable to the Parent to represent the Company in negotiating the
Acquisition Documents and the Financing Documents. Parent will reimburse,
subject to the terms of Section 5.11(d), the Company for all costs and expenses
(including reasonable attorneys' fees but excluding costs related to employees
and other in-house personnel of the Company and its Subsidiaries) incurred by
the Company in negotiating the Financing Documents and the Acquisition
Documents and in connection with the acquisition of the Target Property,
whether or not consummated ("Target Costs and Expenses").
(d) At any time prior to the consummation of the
acquisition by the Company of the Target Property pursuant to the Acquisition
Documents, Parent may suspend or terminate the obligations of Parent and the
Company under this Section 5.11 by providing written notice to the Company, in
which case the Company shall cease all efforts related to the Acquisition
Documents, the Financing Documents and the acquisition of the Target Property;
provided that any such notice shall not affect Parent's obligations under
Section 5.11(c) to pay the Target Costs and Expenses accrued or incurred prior
to the Company's receipt of such notice; provided further, that if the Company
does not cease its efforts related to the Acquisition Documents, the Financing
Documents and the acquisition of the Target Property notwithstanding the terms
of this Section 5.11(d), the Company shall bear the Target Costs and Expenses
accrued or incurred on and after the date of the Company's receipt of such
notice.
(e) The Company shall use commercially reasonable efforts
to attempt to obtain the consent under the Credit Agreement for the
transactions contemplated by this Section 5.11.
(f) Any change, effect, event or occurrence arising under
the Acquisition Documents, the Financing Documents or otherwise in connection
with the acquisition of the Target Property that is materially adverse to the
business, properties, assets, condition (financial or otherwise), results of
operations or prospects of the Company and its Subsidiaries shall not, in any
case, (i) constitute a breach of any representation or warranty made by the
Company in the Transaction Documents, or (ii) constitute a default, non-
satisfaction or violation by the Company of any covenant, condition or
agreement contained in the Transaction Documents.
ARTICLE 6.
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. The Stockholder Approval shall
have been obtained.
(b) FCC CONSENTS. The FCC shall have issued the FCC
consent ("FCC Consent") approving the applications for transfer of control of
the FCC Licenses for the operation of the Licensed Facilities in connection
with the Merger.
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(c) HSR ACT. The applicable waiting period under the HSR
Act shall have expired or terminated.
(d) NO INJUNCTIONS OR RESTRAINTS. No statute, rule,
regulation, executive order, decree, temporary restraining order, preliminary
or permanent injunction or other order enacted, entered, promulgated, enforced
or issued by any court of competent jurisdiction or other Governmental Entity
preventing the consummation of the Merger shall be in effect.
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The
obligations of Parent and Sub to effect the Merger are further subject to
satisfaction or waiver of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company set forth in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date, except to the extent such representations
and warranties expressly relate to an earlier date (in which case as of such
date; provided, however, that this condition shall be deemed to have been
satisfied unless the individual or aggregate impact of all inaccuracies of such
representations and warranties (without regard to any materiality or Material
Adverse Effect qualifier(s) contained therein) reasonably could be expected to
have a Material Adverse Effect on the Company, and except to the extent that
any inaccuracies of such representations and warranties are a result of changes
in the United States financial markets generally or are a result of matters
arising after the date hereof that affect the broadcast industry generally.
Parent shall have received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company to such
effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date, and
Parent shall have received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company to such
effect.
(c) FCC CONSENT. The FCC Consent shall not contain any
conditions that would be materially adverse to either the Parent, the Surviving
Corporation or their Affiliates and such conditions are primarily the result of
Acts or Changes.
(d) FINAL ORDER. The FCC Consent shall be a Final Order.
A "Final Order" shall be an action by the FCC (i) that has not been reversed,
stayed, enjoined, set aside, annulled or suspended, (ii) with respect to which
no timely request for stay or review, petition for reconsideration or appeal
has been filed by a non-party to this Agreement (or an Affiliate of Parent) or
the FCC Applications or sua sponte action of the FCC with comparable effect is
pending and (iii) as to which the normal time for filing any such request,
petition or appeal or for the taking of any such sua sponte action by the FCC
has expired.
(e) RELEASE AGREEMENTS. The Release Agreement from each
member of the Executive Group as contemplated in Section 4.05 shall have been
obtained.
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(f) THIRD PARTY CONSENTS. All Third Party Consents, other
than with respect to the Credit Agreement and other than those the failure of
which to obtain could not reasonably be expected to have a Material Adverse
Effect on the Company, shall have been obtained.
(g) AFFILIATE TRANSACTIONS. The Company shall have
terminated all Affiliate Relationships listed on Part I of Schedule 4.06 and
shall have complied in all material respects with its covenant in Section 4.06.
(h) BROKERAGE FEE. The Company shall have obtained, and
provided a copy to Parent, of a final invoice from GSC with respect to all
fees, commissions, expenses and other amounts payable by the Company to GSC
with respect to the transactions contemplated by this Agreement and the
aggregate amount thereof (including amounts paid by the Company prior to the
date of such invoice, which amounts shall be reflected on such invoice) shall
not exceed $1,500,000.
(i) CAPITALIZATION. There shall not be outstanding:
(i) any capital stock of the Company other than:
(A) a number of shares of Common Stock
equal to or less than the sum of (1) 4,892,789, (2) the number
of shares of Class A Common Stock issued upon the conversion
of shares of Mandatory Preferred Stock converted to Class A
Common Stock prior to the Effective Time, and (3) 509,050 less
the number of shares of Common Stock subject to then
outstanding Warrants and Options; and
(B) a number of shares of Mandatory
Preferred Stock equal to or less than 583,400 less the number
of shares of Mandatory Preferred Stock converted to Class A
Common Stock prior to the Effective Time; and
(C) a number of shares of Series B
Preferred Stock equal to 565,000; or
(ii) any Derivative Securities other than Options
and Warrants to purchase a number of shares of Class A Common Stock
equal to or less than 509,050 less the number of shares of Common
Stock for which Warrants and Options have been exercised from and
after the date of this Agreement;
(iii) capital stock of the Company and Derivative
Securities outstanding other than as set forth in (i) and (ii) above
("Excess Equity") for which Equity Consideration of $500,000 (plus the
exercise or base price of any such Derivative Security which has been
exercised after the date hereof and received by the Company) or less
(the "Equity Limit") would be payable pursuant to Article II of this
Agreement;
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provided that the condition in this Section 6.02(i) shall be deemed to be
satisfied even if the Equity Consideration to be paid pursuant to Article II of
this Agreement for such Excess Equity exceeds the Equity Limit to the extent
the amount of such excess is (i) applied to reduce by like amount the
consideration to be paid by Parent or Sub pursuant to the Transaction Documents
(other than by a decrease in the Equity Consideration) or (ii) or paid to
Parent by a third party, in each case in a manner reasonably acceptable to
Parent (including payments, in the case of payments provided for in clause
(ii), to adjust for tax liability, if any).
SECTION 6.03. CONDITIONS TO OBLIGATION OF THE COMPANY. The
obligation of the Company to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Parent and Sub set forth in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date, except to the extent such representations
and warranties expressly relate to an earlier date (in which case as of such
date); provided, however, that this condition shall be deemed to have been
satisfied unless the individual or aggregate impact of all inaccuracies of such
representations and warranties (without regard to any materiality or Material
Adverse Effect qualifier(s) contained therein) reasonably could be expected to
have a material adverse effect on Parent's ability to perform its obligations
under the Transaction Documents. The Company shall have received a certificate
signed on behalf of Parent by an executive officer of Parent to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent
and Sub shall have performed in all material respects all obligations required
to be performed by them under this Agreement at or prior to the Closing Date,
and the Company shall have received a certificate signed on behalf of Parent by
an executive officer of Parent to such effect.
ARTICLE 7.
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION. This Agreement may be terminated prior
to the Effective Time whether before or after approval of the matters presented
in connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent, Sub and the
Company by mutual action of their respective Boards of Directors;
(b) by either Parent or the Company:
(i) (A) if, upon a vote at a duly held
Stockholders Meeting or any adjournment thereof at which the
Stockholder Approval shall have been voted upon, the Stockholder
Approval shall not have been obtained or (B) unless (1) prohibited by
an event described in either clause (iii), (v) or (vi) of this Section
7.01(b), (2) prohibited by an order,
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injunction, decree or ruling or any other action entered, issued, made
or rendered by a Governmental Entity or (3) resulting from any act or
omission of Parent or Sub or their Affiliates, as of 11:59 p.m.,
central time, of the day immediately prior to the Termination Date
either (x) no Stockholders Meeting shall have been held or (y) if held
no vote shall have been taken in respect of the Stockholder Approval;
(ii) if the Merger shall not have been consummated
on or before the Termination Date; the term "Termination Date" shall
mean 11:59 p.m., central time, on (A) April 30, 1999 or (B) if such
date has been extended by Parent as provided in Section 5.07 or by the
operation of Section 7.01(f), the date as so extended;
(iii) if any Governmental Entity shall have issued
an order, injunction, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise permanently
prohibiting the Merger and such order, injunction, decree, ruling or
other action shall have become final and nonappealable (other than a
judicial order, decree, ruling or other action contemplated by Section
7.01(b)(v) or 7.01(b)(vi));
(iv) in the event of a breach by the other party
of any representation, warranty, covenant or other agreement contained
in this Agreement which (A) would give rise to the failure of a
condition set forth in Section 6.02(a) or (b) or Section 6.03(a) or
(b), as applicable, and (B) cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching
party of such breach provided in no event shall such thirty (30) day
period extend beyond the Termination Date (a "Material Breach")
(provided that the terminating party is not then in Material Breach of
any representation, warranty, covenant or other agreement contained in
this Agreement);
(v) if the Merger shall have been permanently
restrained, enjoined or otherwise permanently prohibited by a judicial
order, decree, ruling or other action arising from Claims or
litigation involving the Company and its stockholders (other than a
Mandatory Preferred Proceeding);
(vi) if the Merger shall have been permanently
restrained, enjoined or otherwise permanently prohibited by a judicial
order, decree, ruling or other action entered, issued, made or
rendered in a Mandatory Preferred Proceeding on the ground or basis
of, solely or among other grounds or bases, the Mandatory Preferred
Per Share Price or any other treatment of the Mandatory Preferred
Stock pursuant to this Agreement;
(c) by the Company prior to obtaining the Stockholder
Approval, if (i) the Board of Directors of the Company shall have determined in
good faith, based on the advice of outside counsel, that it is necessary, in
order to comply with its fiduciary duties to the Company's stockholders under
applicable law, to terminate this Agreement to enter into an agreement with
respect to or to consummate a transaction constituting a Superior Proposal,
(ii) the Company shall have given notice to Parent advising Parent that the
Company has received a Superior Proposal from a third party, specifying the
material terms and conditions of such Superior Proposal (including the
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<PAGE> 64
identity of the third party) and the material terms and conditions of any
agreements or arrangements to be entered into in connection with a Superior
Proposal with respect to the Principal Stockholders and that the Company
intends to terminate this Agreement in accordance with this Section 7.01(c),
and (iii) either (A) Parent shall not have revised its takeover proposal within
five business days after the date on which such notice is deemed to have been
given to Parent, or (B) if Parent within such period shall have revised its
takeover proposal, the Board of Directors of the Company, after receiving
advice from the Company's financial advisor, shall have determined in its good
faith reasonable judgment that the third party's Takeover Proposal is superior
to Parent's revised takeover proposal; provided that the Company may not effect
such termination pursuant to this Section 7.01(c) unless the Company has
contemporaneously with such termination tendered payment to Parent, or its
designee, of the Termination Fee and the Reimbursement Amount (if and to the
extent that Parent has provided to the Company documentation reasonably
acceptable to the Company in support of the amounts claimed) that is due Parent
or its designee pursuant to Section 5.05;
(d) by Parent if (i) the Board of Directors or the
Independent Committee of the Company shall have failed in the Proxy Statement
to make the recommendation contemplated by Section 4.03, (ii) a tender offer or
exchange offer for 50% or more of the outstanding shares of Common Stock or
voting securities representing 50% or more of the voting power of the
outstanding capital stock of the Company (giving effect to the conversion of
outstanding Mandatory Preferred Stock to Class A Common Stock if, and at the
rate at which, the Mandatory Preferred Stock is then convertible into shares of
Class A Common Stock) is commenced (other than by the Company or its
Affiliates) and the Board of Directors of the Company fails to timely recommend
against the stockholders of the Company tendering their shares into such tender
offer or exchange offer, or (iii) a Takeover Proposal has been publicly
announced by the Company and the Board of Directors of the Company shall fail
to publicly reaffirm its approval or recommendation of the Merger and this
Agreement on or before the tenth business day following the date on which such
Takeover Proposal shall have been announced; provided that Parent in exercising
its termination rights hereunder may condition the effectiveness of such
termination upon receipt of the Termination Fee and Reimbursement Amount (if
and to the extent that Parent has provided to the Company documentation
reasonably acceptable to the Company in support of the amounts claimed) that
are due Parent or its designee pursuant to Section 5.05;
(e) by Parent if Parent has the right to terminate this
Agreement pursuant to Section 5.09;
(f) By Parent, if, at any time after the date hereof, the
condition in Section 6.02(i) would not be satisfied if the Closing were being
held at such time, upon five days written notice of termination hereunder;
provided, that, if at any time prior to the delivery by Parent of such
termination notice, the Company delivers notice to Parent that the condition in
Section 6.02(i) would not be satisfied if the Closing were being held at the
time of such notice, then Parent shall not have the right to terminate this
Agreement pursuant to this Section 7.01(f) for fifteen days. If, after such
fifteen days, the condition in Section 6.02(i) remains unsatisfied, then Parent
may terminate this Agreement within two business days. If Parent does not so
terminate this Agreement, then Parent shall no longer be entitled to terminate
this Agreement pursuant to this Section 7.01(f) unless the
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<PAGE> 65
Equity Consideration payable for the Excess Equity increases from the amount
payable at the date Parent was entitled to terminate the Agreement. If, prior
to the effective date of any termination by Parent under this Section 7.01(f),
the condition in Section 6.02(i) is satisfied, then Parent shall no longer have
a right to terminate this Agreement pursuant to this Section 7.01(f) unless
such condition again becomes unsatisfied.
(g) by Parent if the Saga Agreement has not been entered
into as provided in Section 4.07 on or before August 15, 1998; provided that if
the Company gives written notice to Parent at any time after this date of this
Agreement that the Company does not intend to enter into the Saga Agreement as
provided in Section 4.07, then Parent may terminate this Agreement by giving
written notice to the Company on or after the tenth day after Parent's receipt
of such notice, and if Parent does not terminate this Agreement within such
ten-day period, Parent no longer shall be entitled to terminate this Agreement
pursuant to this Section 7.01(g).
SECTION 7.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 7.01,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Sub or the Company, (i) other
than the provisions of the last sentence of Section 5.01(a), Section 5.05,
Section 5.11, this Section 7.02 and Article 8, and (ii) except to the extent
that such termination results from the Material Breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, in which case subject to Section 5.05 the non-breaching party will
be entitled to recover damages and its Expenses.
SECTION 7.03. AMENDMENT. Subject to the applicable provisions of
the DGCL, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties; provided, however, that
after the Stockholder Approval has been obtained, no amendment shall be made
which reduces the consideration payable in the Merger or adversely affects the
rights of the Company's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
ARTICLE 8.
GENERAL PROVISIONS
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None
of the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 8.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 8.02. NOTICES. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or sent
by overnight courier (providing proof of delivery)
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<PAGE> 66
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Sub, to
Capstar Broadcasting Corporation
600 Congress Avenue, Suite 1400
Austin, Texas 78701
Telecopy No.: (512) 340-7890
Attention: William S. Banowsky, Jr.
with a copy to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Telecopy No.: (214) 220-7716
Attention: Michael D. Wortley
and
(b) if to the Company, to
Triathlon Broadcasting Company
Symphony Towers
750 B Street, Suite 1920
San Diego, California 92101
Telecopy No.: (619) 239-4270
Attention: Norman Feuer
with a copy to:
Baker & McKenzie
Two Allen Center
1200 Smith Street, Suite 1200
Houston, Texas 77002
Telecopy No.: (713) 427-5090
Attention: Amar Budarapu
62
<PAGE> 67
SECTION 8.03. DEFINITIONS. For purposes of this Agreement:
(a) "1996 SARs" means the stock appreciation rights
granted pursuant to Cash-Only Stock Appreciation Rights Agreements dated
January 31, 1996, between the Company and each of Jeffrey Leiderman and Frank
E. Barnes, III, providing for the grant to each individual of cash-only stock
appreciation rights in respect of 2,000 shares of Class A Common Stock.
(b) "1995 SARs" means the stock appreciation rights
granted pursuant to Cash-Only Stock Appreciation Rights Agreements dated
October 30, 1995, between the Company and each of Jeffrey Leiderman, Frank E.
Barnes, III, and John D. Miller, providing for the grant to each individual of
cash-only stock appreciation rights in respect of 1,000 shares, 1,000 shares
and 5,000 shares, respectively, of Class A Common Stock.
(c) "Acts and Changes" has the meaning assigned thereto
in Section 5.02(a).
(d) an "Affiliate" of any Person means another Person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person; for purposes
of this Agreement, an Affiliate of the Company shall be deemed to include all
members of the Sillerman Group;
(e) "Affiliate Relationship" has the meaning assigned
thereto in Section 3.01(t).
(f) "Business Day" or "business day" means any day other
than a Saturday, Sunday or other day on which commercial banks in Dallas, Texas
or New York, New York are authorized or required to close by applicable law.
(g) "Claim" has the meaning assigned thereto in Section
5.04(b).
(h) "Common Per Share Price" means $13.00, as such amount
may be increased pursuant to Section 5.07.
(i) "Company Disclosure Schedule" means the Disclosure
Schedule delivered by the Company to Parent prior to the execution of this
Agreement.
(j) "Credit Agreement" means, collectively, (a) the
Amended and Restated Loan Agreement dated as of May 30, 1997, among Triathlon
Broadcasting of Wichita, Inc., Triathlon Broadcasting of Lincoln, Inc.,
Triathlon Broadcasting of Omaha, Inc., Triathlon Broadcasting of Spokane, Inc.,
Triathlon Broadcasting of Tri-Cities, Inc., Triathlon Broadcasting of Colorado
Springs, Inc., Triathlon Broadcasting of Little Rock, Inc. and AT&T Commercial
Finance Corporation, as administrative agent, and the other lenders named
therein, as amended, and (b) any and all guaranty, security and other
agreements or documents executed and delivered in connection therewith, as each
has been successively extended, renewed or modified.
63
<PAGE> 68
(k) "Deposit Agreement" means the Deposit Agreement dated
as of March 8, 1996, among the Company, the holders of Depositary Shares and
ChaseMellon Shareholder Services as the depositary.
(l) "Depositary" means ChaseMellon Shareholder Services,
as depositary under the Deposit Agreement, or any successor depositary of the
Depositary Shares.
(m) "Depositary Share Merger Consideration" means an
amount of cash per Depositary Share equal to 10% of the Mandatory Preferred Per
Share Price.
(n) "Depositary Shares" means the Depositary Shares, each
representing a one-tenth interest in a share of Mandatory Preferred Stock, on
deposit with ChaseMellon Shareholder Services, as depositary.
(o) "Environmental Laws" means all applicable laws and
rules of common law pertaining to the environment and natural resources,
including the Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. ss. 9601 et seq.) ("CERCLA"), the Emergency Planning and
Community Right to Know Act, the Superfund Amendments and Reauthorization Act
of 1986, the Resource Conservation and Recovery Act, the Hazardous and Solid
Waste Amendments Act of 1984, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Safe Drinking Water Act, the Oil Pollution Act of
1990, the Hazardous Materials Transportation Act, and any similar or analogous
statutes, regulations and decisional law of any governmental authority, as each
of the foregoing may be amended and in effect on or prior to the Closing;
(p) "Equity Consideration" means the aggregate of the
Merger Consideration, the Option Consideration, the SAR Consideration and the
Warrant Consideration.
(q) "Equity Limit" has the meaning assigned thereto in
Section 6.02(i);
(r) "Estimated Remediation Costs" has the meaning
assigned thereto in Section 5.09;
(s) "Expenses" has the meaning assigned thereto in
Section 5.05(d);
(t) "FCC" has the meaning assigned thereto in Section
3.01(d);
(u) "Federal Antitrust Agencies" has the meaning assigned
thereto in Section 5.02(b);
(v) "Governmental Entity" has the meaning assigned
thereto in Section 3.01(d)(iii).
(w) "Half-Month Interval" means, (x) with respect to each
extension of a Termination Date pursuant to Section 5.07, if the Termination
Date being extended is the last day
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<PAGE> 69
of a calendar month (without regard to the effect of Section 8.11), the period
beginning on the first day of the next succeeding calendar month occurring
after the Termination Date then being extended (giving effect to Section 8.11)
and ending on the fifteenth calendar day of such succeeding calendar month,
subject to Section 8.11, or (y) if the Termination Date being extended is the
fifteenth calendar day of a calendar month (as established by a prior extension
of the Termination Date by a Half-Month Interval and without regard to the
effect of Section 8.11), the period beginning on the first day after the later
of (1) the fifteenth day of that calendar month or (2) the Termination Date
being extended (giving effect to Section 8.11) and ending on the last day of
that calendar month, subject to Section 8.11.
(x) "Indebtedness" has the meaning assigned thereto in
Section 3.01(o)(iii);
(y) "Mandatory Preferred Per Share Price" means $108.30,
plus any accrued but unpaid dividends on the Mandatory Preferred Stock accrued
as of and through the date immediately prior to the Effective Time, as such
amount may be increased pursuant to Section 5.07.
(z) "Mandatory Preferred Proceeding" means any action,
suit or proceeding commenced after the date hereof against the Company or any
director, officer, employee, agent, representative or consultant of the Company
by any holder of the Mandatory Preferred Stock that requests an order,
injunction, decree or ruling or any other action enjoining, restraining or
otherwise prohibiting the Merger on the grounds or basis of, solely or among
other grounds or bases, the Mandatory Preferred Per Share Price or any other
treatment of the Mandatory Preferred Stock pursuant to this Agreement.
(aa) "Material Adverse Change" or "Material Adverse
Effect" means, when used in connection with the Company or Parent, any change,
effect, event or occurrence that is materially adverse to the business,
properties, assets, condition (financial or otherwise) or results of operations
of such party and its Subsidiaries taken as a whole, other than any change,
effect, event or occurrence relating to the United States economy in general or
to the United States radio broadcasting industry in general, and, as
applicable, not specifically relating to the Company or Parent or their
respective Subsidiaries.
(bb) "Option Consideration" means the aggregate
consideration payable pursuant to Section 2.03(b) with respect to Options
outstanding as of the Effective Time.
(cc) "Option Plans" means the Company's 1995 Stock Option
Plan and the Company's 1996 Stock Option Plan.
(dd) "Permitted Liens" has the meaning assigned thereto in
Section 3.01(s)(iv);
(ee) "Person" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity;
65
<PAGE> 70
(ff) "Preferred Stock" means the Series B Preferred Stock
and the Mandatory Preferred Stock.
(gg) "Saga Agreement" has the meaning assigned thereto in
Section 4.06.
(hh) "SAR Consideration" means the aggregate consideration
payable pursuant to Section 2.03(c) with respect to SARs outstanding as of the
Effective Time.
(ii) "Sillerman Group" means Robert F. X. Sillerman,
Sillerman Communications Management Corporation, Sillerman Communications
Corporation and all other Affiliates of Robert F. X. Sillerman.
(jj) "Stockholder Approval" has the meaning assigned
thereto in Section 3.01(k).
(kk) a "Subsidiary" of any Person means another Person, an
amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly
by such first Person.
(ll) "Superior Proposal" means (x) a bona fide Takeover
Proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 50% of the shares and/or voting power of
Common Stock then outstanding, voting securities representing 50% or more of
the voting power of the outstanding capital stock of the Company (giving effect
to the conversion of outstanding Mandatory Preferred Stock to Class A Common
Stock if, and at the rate at which, the Mandatory Preferred Stock is then
convertible into shares of Class A Common Stock), or all or substantially all
the assets of the Company, and (y) otherwise on terms which the Board of
Directors of the Company determines in its good faith reasonable judgment to be
more favorable to the Company's stockholders than the Merger (based on the
opinion of the Company's independent financial advisor that the value of the
consideration provided for in such proposal is superior to the value of the
consideration provided for in the Merger), for which financing, to the extent
required, is then committed or which, in the good faith reasonable judgment of
the Board of Directors of the Company, based on advice from the Company's
independent financial advisor, is reasonably capable of being financed by such
third party and for which the Board of Directors of the Company determines, in
its good faith reasonable judgment, that such proposed transaction is
reasonably likely to be consummated without undue delay.
(mm) "Takeover Proposal" means any proposal for a merger,
consolidation or other business combination involving the Company or any
proposal or offer to acquire in any manner, directly or indirectly, an equity
interest in, more than 25% of the voting power (giving effect to the conversion
of outstanding Mandatory Preferred Stock to Class A Common Stock if, and at the
rate at which, the Mandatory Preferred Stock is then convertible into shares of
Class A Common Stock) of, or a substantial portion of the assets of, the
Company and its Subsidiaries, taken as a whole;
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<PAGE> 71
provided, however, that such term does not include the transactions
contemplated by the Transaction Documents.
(nn) "Taxes" has the meaning assigned thereto in Section
3.01(j)(ix).
(oo) "Termination Date" has the meaning assigned thereto
in Section 7.01(b)(ii).
(pp) "Transaction Documents" means this Agreement, the
Escrow Agreement, the Stockholders Agreements, the Release Agreements, the
Series B Agreements and the Termination Agreement.
(qq) "Voting securities" or "voting power" means, with
respect to any Person, all outstanding securities entitled to vote generally on
the election of directors of that Person.
(rr) "Warrant Consideration" means the aggregate
consideration payable pursuant to Section 2.03(a) with respect to Warrants
outstanding as of the Effective Time.
SECTION 8.04. INTERPRETATION. When a reference is made in this
Agreement to an Article, Section or Annex, such reference shall be to an
Article or Section of, or an Annex to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns and, in
the case of an individual, to his heirs and estate, as applicable.
SECTION 8.05. COUNTERPARTS. This Agreement may be executed 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.
SECTION 8.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the documents and instruments referred to herein) (a)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with
67
<PAGE> 72
respect to the subject matter of this Agreement and (b) except for the
provisions of Article 2 and Section 5.04 are not intended to confer upon any
Person other than the parties any rights or remedies.
SECTION 8.07. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
SECTION 8.08. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto, whether by operation of law or otherwise; provided, however,
that (i) upon notice to the Company and without releasing Parent or Sub from
any of their obligations or liabilities hereunder, Parent or Sub may assign or
delegate any or all of their rights or obligations under this Agreement to any
Affiliate thereof, to any purchaser of all or substantially all of the assets
of Parent or Sub, or any Person with or into which Parent, Sub or Capstar
Broadcasting Corporation merges or consolidates, and (ii) nothing in this
Agreement shall limit Parent's or Sub's ability to make a collateral assignment
of its rights under this Agreement to any institutional lender that provides
funds to Parent or Sub without the consent of the Company. The Company shall
execute an acknowledgment of such assignment(s) and collateral assignments in
such forms as Parent or its institutional lenders may from time to time
reasonably request; provided, however, that unless written notice is given to
the Company that any such collateral assignment has been foreclosed upon, the
Company shall be entitled to deal exclusively with Parent as to any matters
arising under this Agreement or any of the other agreements delivered pursuant
hereto. In the event of such an assignment, the provisions of this Agreement
shall inure to the benefit of and be binding on such successors and assignees.
SECTION 8.09. ENFORCEMENT. The Company agrees that irreparable
damage would occur and that Parent would not have any adequate remedy at law in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Parent shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in Delaware state court, this being in addition to any
other remedy to which it is entitled at law or in equity. In addition, each of
the parties hereto (a) consents to submit itself to the personal jurisdiction
of any Federal court located in the State of Delaware or any Delaware state
court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a Federal court sitting in the State of
Delaware or a Delaware state court.
SECTION 8.10. DIRECTOR AND OFFICER LIABILITY. The directors,
officers, and stockholders of Parent and its Affiliates shall not have any
personal liability or obligation arising under this Agreement (including any
Claims that the Company may assert) other than as an assignee of this Agreement
or as otherwise provided herein. Except to the extent that a person is a party
signatory thereto in his personal capacity, the directors, officers and
stockholders of the Company
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<PAGE> 73
and their respective Affiliates shall not have any personal liability or
obligation arising under this Agreement (including any Claims that Parent or
Sub may assert).
SECTION 8.11. TERMINATION DATE. Notwithstanding any provision of
this Agreement to the contrary, in the event that any Termination Date provided
for hereunder (including any Termination Date occurring at the end of any Half-
Month Interval) shall fall on a non-Business Day, then such Termination Date
automatically shall be extended to the first Business Day following such
scheduled Termination Date.
SECTION 8.12. BINDING EFFECT. This Agreement is binding upon and
will inure to the benefit of the parties and their respective successors and
permitted assigns.
[The rest of this page has intentionally been left blank.]
69
<PAGE> 74
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
CAPSTAR RADIO BROADCASTING
PARTNERS, INC.
By: /s/ William S. Banowsky, Jr.
-----------------------------
William S. Banowsky, Jr.
Vice President
TBC RADIO ACQUISITION CORP.
By: /s/ William S. Banowsky, Jr.
-----------------------------
William S. Banowsky, Jr.
Vice President
TRIATHLON BROADCASTING COMPANY
By: /s/
-----------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE> 75
SCHEDULE A
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D SERIES B DEPOSITARY
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK PREFERRED STOCK SHARES
------------ ------------ ------------ ------------ --------------- ------
<S> <C> <C> <C> <C> <C> <C>
Norman Feuer 0 144,890(1)(2) 0 0 60,000 0
Robert F. X. Sillerman 0 86,000(3) 0 136,852.06 404,200 0
The Tomorrow Foundation, Inc. 0 0 0 1,000,000 0 0
Howard J. Tytel 0 14,000(3) 0 185,068.94 65,800 0
</TABLE>
_____________________________________________________
(1) Mr. Feuer has sole voting power, pursuant to a Voting Trust Agreement,
with respect to the 86,000 shares of Class B Common Stock held of
record by Robert F. X. Sillerman and the 14,000 shares of Class B
Common Stock held of record by Howard J. Tytel; 35,294 shares are
pledged to the Company to secure a loan from the Company to Mr. Feuer
in the amount of $150,000.
(2) Subject to a right of first refusal granted to Radio Investors Inc.
with respect to any sale of these shares to a third party at the
proposed sale price.
(3) Subject to the Voting Trust Agreement referred to in note (1).
<PAGE> 76
SCHEDULE B
<TABLE>
<CAPTION>
SHARES OF SERIES B
PREFERRED STOCK OWNED
<S> <C>
John D. Miller 3,000
Dennis R. Ciapura 2,000
C. Terry Robinson 30,000
--------
35,000
</TABLE>
<PAGE> 77
SCHEDULE C
<TABLE>
<CAPTION>
==========================================================================================
STOCKHOLDER NO. OF SHARES OF
CLASS D SHARES TO BE CONVERTED
<S> <C>
- ------------------------------------------------------------------------------------------
Robert Sillerman 136,852.06
- ------------------------------------------------------------------------------------------
The Tomorrow Foundation, Inc. 320,000
- ------------------------------------------------------------------------------------------
Howard Tytel 185,068.94
==========================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 33,589
<SECURITIES> 0
<RECEIVABLES> 133,973
<ALLOWANCES> 6,916
<INVENTORY> 0
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391,173
0
<COMMON> 1,076
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<OTHER-EXPENSES> (1,478)
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<INCOME-TAX> (5,581)
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<CHANGES> 0
<NET-INCOME> (50,700)
<EPS-PRIMARY> (0.75)
<EPS-DILUTED> (0.75)
</TABLE>
