<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CITADEL BROADCASTING COMPANY
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
NEVADA 4832 86-0703641
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CITADEL LICENSE, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
NEVADA 4832 86-0837753
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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140 South Ash Avenue
Tempe, AZ 85281
(602) 731-5222
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Lawrence R. Wilson
Chief Executive Officer
Citadel Broadcasting Company
140 South Ash Avenue
Tempe, AZ 85281
(602) 731-5222
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
Bryan D. Rosenberger, Esq.
Eckert Seamans Cherin & Mellott, LLC
44th Floor, 600 Grant Street
Pittsburgh, PA 15219
(412) 566-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TO BE OFFERING PRICE PER AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED NOTE(1) OFFERING PRICE(1)
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<S> <C> <C> <C>
9-1/4% Senior Subordinated Notes due 2008 $115,000,000 100% $115,000,000
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Guarantee of 9-1/4% Senior Subordinated Notes due
2008(2) -- -- --
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<CAPTION>
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AMOUNT OF
REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED FEE
- -------------------------------------------------- -------------------
<S> <C>
9-1/4% Senior Subordinated Notes due 2008 $31,970
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Guarantee of 9-1/4% Senior Subordinated Notes due
2008(2) --
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Pursuant to Rule 457(n), no registration fee is required with respect to the
Guarantee.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 16, 1998
PROSPECTUS
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CITADEL LOGO
CITADEL BROADCASTING COMPANY
OFFER TO EXCHANGE
9-1/4% SENIOR SUBORDINATED NOTES DUE 2008
FOR
9-1/4% SENIOR SUBORDINATED NOTES DUE 2008,
which have been registered under the Securities Act of 1933, as amended.
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Material Terms of the Exchange Offer:
- Expires at 5:00 p.m., New York City time, on ,
1999, unless extended,
- Not subject to any conditions other than that the Exchange
Offer, or the making of an exchange by a holder of outstanding
notes, does not violate applicable law or any applicable
interpretation of the staff of the Securities and Exchange
Commission,
- The terms of the notes to be issued are substantially
identical to the outstanding notes, except the new notes do
not have certain restrictions and registration rights and do
not provide for additional interest in certain circumstances,
and
- Tenders of outstanding notes may be withdrawn any time prior
to 5:00 p.m., New York City time, on the expiration date of
the Exchange Offer.
See "Description of the Notes" for more information about the notes being
offered in the Exchange Offer.
CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 15 OF THIS PROSPECTUS.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
No public market exists for the outstanding notes or the new notes. We do
not intend to list the new notes on any securities exchange or to seek approval
for quotation through any automated quotation system. We cannot assure you that
an active market for the new notes will develop. See "Risk Factors--Absence of
Public Market for the Notes." Moreover, to the extent that outstanding notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
or unaccepted outstanding notes could be adversely affected.
This prospectus is dated , 199
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 15
Use of Proceeds............................................. 21
Capitalization.............................................. 22
Pro Forma Financial Information............................. 23
Selected Historical Financial Data.......................... 35
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 37
Business.................................................... 44
The Pending Transactions.................................... 69
Management.................................................. 72
Certain Transactions........................................ 79
Principal Stockholders...................................... 82
Description of Indebtedness................................. 84
The Exchange Offer.......................................... 90
Description of the Notes.................................... 99
Certain U.S. Federal Income Tax Consequences................ 123
Plan of Distribution........................................ 127
Legal Matters............................................... 127
Independent Auditors........................................ 127
Available Information....................................... 128
</TABLE>
<PAGE> 4
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements, principally in "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." We have based these forward-looking
statements largely on our current expectations and projections about future
events and financial trends affecting our business. These forward-looking
statements are subject to risks, uncertainties and assumptions including, among
other things:
- general economic and business conditions, both nationally and in
our markets,
- our expectations and estimates concerning future financial
performance, financing plans and the impact of competition,
- our level of debt,
- anticipated trends in our industry,
- the impact of the Year 2000 problem,
- existing and future governmental regulation, and
- other risk factors set forth under "Risk Factors."
The words "believes," "may," "will," "estimates," "continues,"
"anticipates," "intends," "expects" and similar words are intended to identify
forward-looking statements. We undertake no obligation to publicly update or
revise any forward-looking statements because of new information, future events
or otherwise. In light of these risks and uncertainties, the forward-looking
events and circumstances discussed in this prospectus might not transpire.
GENERAL INFORMATION
Unless otherwise indicated in this prospectus:
- We obtained all metropolitan statistical area ("MSA") rank
information, information concerning the number of stations in a
market, market revenue information and station group market share and
rank information from Investing in Radio 1998 Market Report (3rd ed.)
published by BIA Publications, Inc. ("BIA").
- We give all audience share and primary demographic share and rank
information for 1998 and obtained this information from the Spring
1998 Radio Market Report published by The Arbitron Company
("Arbitron").
- We obtained information concerning the number of viable stations in a
market from Duncan's Radio Market Guide (1997 ed.) compiled by
Duncan's American Radio, Inc. This guide defines "viable stations" as
stations which are active and viable competitors for advertising
dollars in the market. If the total number of viable AM or viable FM
stations within a market was not a whole number, we rounded that
number up to the nearest whole number. We counted a viable AM/FM
combination as one viable FM station.
A radio station's designated market may be different from its community of
license. If a radio station's call letters have changed during the time we have
owned or operated the station, we describe the station by its call letters
currently in use, unless otherwise indicated.
"Broadcast cash flow" consists of operating income (loss) before
depreciation, amortization and corporate expenses. "EBITDA" consists of
operating income (loss) before depreciation and amortization. Although broadcast
cash flow and EBITDA are not measures of performance calculated in accordance
with generally accepted accounting principles ("GAAP"), we believe that they are
useful to an investor in evaluating our company because they are measures widely
used in the broadcasting industry to evaluate a radio company's operating
performance. However, you should not consider broadcast cash flow and EBITDA in
isolation or as substitutes for net income, cash flows from operating activities
and other income or cash flow statement data prepared in accordance with GAAP as
a measure of liquidity or profitability.
<PAGE> 5
PROSPECTUS SUMMARY
In this prospectus, unless the context otherwise requires, the terms "we,"
"our," "us" and "Company" refer to Citadel Broadcasting Company and Citadel
Broadcasting Company's subsidiary, Citadel License, Inc., and the term "Citadel
Communications" refers to Citadel Communications Corporation, our parent. Unless
the context otherwise requires, the term "operate," as used in connection with
our radio station activities, includes providing programming and selling
advertising pursuant to local marketing agreements ("LMAs") or selling
advertising pursuant to joint sales agreements ("JSAs"). This summary contains a
general discussion of our business, the offering and summary financial
information. We encourage you to read this entire prospectus for a more complete
understanding of our Company and the Exchange Offer.
THE COMPANY
We are a radio broadcasting company that focuses on acquiring, developing
and operating radio stations in mid-sized markets. After we complete our pending
transactions, we will own or operate 92 FM and 43 AM radio stations in 26
markets, including clusters of four or more stations in 19 markets. We also will
have the right to construct one additional FM station. Our stations comprise the
first or second ranked radio station group in terms of revenue share in 19 of
our markets for which such information is available. After giving effect to the
transactions described under the caption "Pro Forma Financial Information" as if
all such transactions had occurred on January 1, 1997, we would have had net
broadcasting revenue and broadcast cash flow of $161.4 million and $51.5
million, respectively, for the twelve months ended September 30, 1998.
Our primary strategy is to secure and maintain a leadership position in the
markets we serve and to expand into additional mid-sized markets where we
believe we can obtain a leadership position. When we enter a market, we seek to
acquire additional stations which, when integrated with our existing operations,
allow us to reach a wider range of demographic groups that appeal to
advertisers, increase revenue and achieve substantial cost savings. We have
completed 31 station acquisitions in markets where we already owned stations and
have entered into a JSA and an LMA for eight and one additional stations,
respectively, in those markets. Primarily as a result of this strategy, in the
six markets in which we have owned radio stations since 1994, we have increased
our average revenue share and average broadcast cash flow margin from 37.3% and
19.9%, respectively, for the year ended December 31, 1995, to 52.1% and 34.2%,
respectively, for the twelve months ended September 30, 1998.
We believe that mid-sized markets represent attractive opportunities. As
compared to the 50 largest markets in the United States, mid-sized markets are
generally characterized by:
- lower radio station purchase prices as a multiple of
broadcast cash flow,
- fewer sophisticated and well-capitalized competitors, including both
radio and competing advertising media such as newspapers and
television, and
- less direct format competition due to the smaller number of stations
in any given market.
We believe that the attractive operating characteristics of mid-sized
markets coupled with the opportunity to establish or expand in-market radio
station groups create the potential for substantial revenue growth and cost
savings. As a result, we seek to achieve broadcast cash flow margins that are
comparable to the higher margins that historically were generally achievable
only in the 50 largest markets.
Our portfolio of stations is diversified in terms of format, target
demographics and geographic location. This diversity reduces our reliance upon
the performance of any single station and helps insulate us from downturns in
specific markets and changes in format preferences.
Our principal executive offices are located at 140 South Ash Avenue, Tempe,
Arizona, 85281, and our telephone number is (602) 731-5222.
1
<PAGE> 6
PENDING TRANSACTIONS AND STATION PORTFOLIO
Pending Transactions. We have entered into an agreement to purchase
Citywide Communications, Inc. for $34.5 million. Citywide currently owns six FM
and three AM radio stations in Baton Rouge and Lafayette, Louisiana. We have
also entered into agreements to purchase a total of ten FM and six AM radio
stations in Charleston, South Carolina, Binghamton, New York and Muncie and
Kokomo, Indiana, five FM radio stations and one AM radio station in Saginaw/Bay
City, Michigan and one FM radio station and one AM radio station and related
real estate in Carlisle, Pennsylvania. The aggregate purchase price for these
stations and related assets is approximately $116.5 million. We have also
exercised an option to purchase for $1.2 million one FM radio station in
Wilkes-Barre/Scranton, Pennsylvania which we have operated pursuant to an LMA
since 1997.
Station Portfolio. The following chart shows the radio stations we own or
operate after giving effect to the pending transactions described above.
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NUMBER OF STATIONS COMBINED
----------------------------------- COMBINED MARKET
FM AM MARKET REVENUE
MSA ---------------- ---------------- AUDIENCE ------------
RANK OWNED OPERATED OWNED OPERATED SHARE(1) SHARE RANK
---- ----- -------- ----- -------- -------- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Providence, RI................... 31 4 -- 2 -- 23.7% 33.7% 1
Salt Lake City, UT............... 35 4 -- 2 -- 22.1 18.1 3
Wilkes-Barre/Scranton, 1
PA(2)(3)....................... 63 6 4 1 26.2 29.0 2
Allentown/Bethlehem, PA.......... 66 2 -- -- -- 22.5 26.5 2
Albuquerque, NM.................. 70 5 -- 3 -- 36.8 55.9 1
Harrisburg/Carlisle, PA(3)(4).... 73 2 -- 1 -- 7.6 17.8 3
Baton Rouge, LA(3)............... 81 3 -- 2 -- 19.1 27.4 2
Little Rock, AR(5)............... 82 7 -- 3 -- 33.8 40.3 2
Spokane, WA(6)................... 86 2 2 2 2 44.9 43.9 1
Colorado Springs, CO(6).......... 93 3 2 -- 2 43.3 60.9 1
Charleston, SC(3)................ 96 5 -- 3 -- 40.1 47.8 1
Lafayette, LA(3)................. 97 3 -- 1 -- 12.7 14.2 4
York, PA(4)...................... 102 1 -- 1 -- 8.8 10.2 4
Modesto, CA...................... 120 4 -- 1 -- 30.7 52.4 1
Saginaw/Bay City, MI(3).......... 123 5 -- 1 -- 39.5 41.7 1
Boise, ID........................ 125 4 -- 1 -- 28.9 42.0 2
Reno, NV......................... 129 3 1 1 -- 32.9 36.3 1
Eugene, OR....................... 143 2 -- 1 -- 16.0 28.6 1
Binghamton, NY(3)................ 164 3 -- 2 -- 39.2 63.0 1
Johnstown, PA.................... 168 2 -- -- -- 11.6 19.5 3
Tri-Cities, WA................... 202 4 -- 1 -- 27.8 42.2 1
Medford, OR...................... 204 4 -- 2 -- 31.2 40.8 2
State College, PA................ 235 2 -- 2 -- 13.6 30.8 1
Billings, MT..................... 242 4 -- 1 -- 36.0 50.5 1
Muncie, IN(3).................... NA 1 -- 1 -- NA NA NA
Kokomo, IN(3).................... NA 1 -- -- -- NA NA NA
--- --- --- ---
TOTAL................... 86 6 38 5
</TABLE>
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NA--Information not available.
(1) Combined market audience share has been derived from Arbitron surveys of
persons ages 25 to 54, listening Monday through Sunday, 6:00 a.m. to 12:00
midnight.
(2) Includes one station for which we provide programming and sell advertising
under an LMA and one station for which we sell advertising under a JSA (each
of which we have an option to acquire). We have exercised our option to
purchase one other station we currently operate under an LMA.
(3) Completion of pending transactions in these markets is subject to certain
conditions.
2
<PAGE> 7
(4) Harrisburg/Carlisle and York are adjacent markets with numerous overlapping
radio signals. Includes one FM radio station and one AM radio station in
Harrisburg/Carlisle which we have entered into an agreement to acquire and
which we are currently operating pursuant to an LMA pending their
acquisition.
(5) Does not include one FM station that is not yet operational. Two of these
stations serve the surrounding communities outside of Little Rock.
(6) Includes four stations in each of Colorado Springs and Spokane for which we
sell advertising under a JSA.
OPERATING STRATEGY
In order to maximize our radio stations' appeal to advertisers, and thus
our revenue and cash flow, we have implemented the strategies described below.
We intend to continue to expand our existing strategies and develop new methods
to enhance revenue and reduce costs.
OWNERSHIP OF STRONG STATION GROUPS
We seek to secure and maintain a leadership position in our markets by
owning multiple stations in those markets. We believe multiple station ownership
enables us to provide a number of benefits to potential advertisers, such as a
larger collective inventory of advertising time and a broader range of
demographic listener groups and programming formats. We also believe that
multiple station ownership enhances our ability to:
- achieve significant cost savings by consolidating our
operations, management and facilities,
- attract and retain talented local management, on-air
personalities and sales personnel,
- market the advantages of radio versus other advertising
media, and
- leverage our existing programming and sales resources to
enhance the growth of underperforming stations.
AGGRESSIVE SALES AND MARKETING
We seek to maximize our share of local advertising revenue through various
sales and marketing initiatives including:
- expanding the sales forces of many of the stations we
acquire,
- providing extensive training for our sales personnel,
- utilizing sophisticated inventory management techniques
that provide frequent price adjustments based on
regional and local market conditions, and
- strengthening our relationships with advertisers by
holding on-site events designed to create customer
traffic through the advertisers' business locations.
TARGETED PROGRAMMING
To maintain or improve our position in each market, we conduct extensive
market research and competitive analyses to identify significant and sustainable
target audiences. We then tailor the programming, marketing and promotion of
each station to maximize its appeal to its target audience. Within each market,
we attempt to build strong franchises by:
- creating distinct, highly visible profiles for our on-air
personalities, particularly those broadcasting during morning
"drive time," which traditionally has been between 6:00 a.m. and
10:00 a.m.,
- formulating recognizable "brand names" for select stations such
as the "Bull" and "Cat Country," and
- actively participating in community events and charities.
3
<PAGE> 8
DECENTRALIZED OPERATIONS
We believe that radio is primarily a local business and that much of its
success is the result of the efforts of regional and local management and staff.
Accordingly, we decentralize much of our operations to these levels. Each of our
regional and local station groups is managed by a team of experienced
broadcasters who understand radio format trends, demographics and competitive
opportunities of the particular market. Regional and local managers are
responsible for preparing annual operating budgets, and a portion of their
compensation is linked to whether they meet or surpass their operating targets.
ACQUISITION STRATEGY
We focus our acquisition strategy on acquiring additional radio stations in
both our existing markets and new markets in which we believe we can effectively
apply our operating strategies. We anticipate that we will continue to focus on
mid-sized markets rather than attempt to expand into larger markets. Although
competition among potential purchasers for suitable radio station acquisitions
is intense throughout the United States, we believe that less competition
exists, particularly from the larger radio operators, in mid-sized markets.
Consequently, we expect there to be relatively more attractive acquisition
opportunities for us in these markets. We cannot assure you, however, that we
will be able to identify suitable and available acquisition opportunities or
that we will be able to complete any further acquisitions.
In evaluating acquisition opportunities in new markets, we assess our
potential to build leading radio station groups in those markets over time. We
believe that the creation of strong station groups in local markets is essential
to our operating success, and generally, we will not consider entering a new
market unless we anticipate that we can acquire multiple stations in that
market. We also analyze a number of other important factors, including the
number and quality of existing commercial radio signals, the nature of the
competition in the market and the general economic conditions of the market.
We believe that our acquisition strategy could result in a number of
benefits for us, including:
- diversified revenue and broadcast cash flow across a greater number of
stations and markets,
- improved broadcast cash flow margins through the consolidation of
facilities
and elimination of redundant expenses,
- broadened range of advertising packages which we can offer to
potential and existing advertisers,
- improved leverage in various key vendor negotiations,
- enhanced appeal to top management talent in the industry, and
- increased overall scale which should facilitate our capital raising
activities.
RECENT TRANSACTIONS
As of January 1, 1997, Citadel Communications acquired Deschutes River
Broadcasting, Inc. for approximately $26.0 million. Deschutes owned 18 radio
stations in Montana, Oregon and Washington. On June 20, 1997 Deschutes was
merged into the Company.
On July 3, 1997, we purchased Tele-Media Broadcasting Company for
approximately $115.8 million. Tele-Media owned or operated 16 FM and ten AM
radio stations in Pennsylvania, Rhode Island and Illinois.
In various other transactions consummated since January 1, 1997, we have
acquired in eight markets an aggregate of 30 stations, the right to construct an
additional station and certain related assets, including various Internet access
service providers, for an aggregate purchase price of $131.1 million, and we
have sold in three markets an aggregate of six stations for an aggregate sale
price of $3.0 million.
On July 3, 1997, we sold $101.0 million principal amount of our 10 1/4%
Senior Subordinated Notes due 2007 and 1.0 million shares of our 13 1/4%
Exchangeable Preferred Stock which, subject to certain conditions, are
exchangeable, at our option, into our 13 1/4% Subordinated Exchange Debentures
due 2009.
On July 7, 1998, Citadel Communications completed an initial public
offering of 6,880,796 shares of its common stock at $16.00 per share. Of such
shares, Citadel Communications sold 6,250,000 shares and
4
<PAGE> 9
certain stockholders of Citadel Communications sold 630,796 shares. On July 14,
1998, Citadel Communications sold 1,032,119 additional shares when the
underwriters exercised their overallotment option. Citadel Communications used
the aggregate net proceeds, which were approximately $106.9 million, to repay a
portion of the outstanding indebtedness under our credit facility. Citadel
Communications did not receive any of the proceeds from the sale of shares by
the selling stockholders.
We sold and issued $115.0 million principal amount of the outstanding notes
on November 19, 1998 in order to finance certain of our acquisitions, repay
certain of our indebtedness and provide cash for working capital purposes.
RISK FACTORS
You should consider all of the information in this prospectus before
tendering your outstanding notes in the Exchange Offer. The risks of an
investment in Citadel Broadcasting Company include our substantial leverage, our
history of net losses, competitive conditions and certain limitations on our
acquisition strategy. See "Risk Factors" for a discussion of these and other
risks involved in an investment in Citadel Broadcasting Company.
5
<PAGE> 10
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
On November 19, 1998, we completed the private offering of $115.0 million
of our 9-1/4% Subordinated Notes due 2008. We entered into a registration rights
agreement with the initial purchasers in the private offering in which we
agreed, among other things, to deliver to you this prospectus and to use our
best efforts to consummate the Exchange Offer within 210 days of the issuance of
the outstanding notes. You should read the discussion under the heading
"Prospectus Summary--Summary Description of the New Notes" and "Description of
the Notes" for further information regarding the registered notes.
We believe that the new notes may be resold by you without compliance with
the registration and prospectus delivery provisions of the Securities Act,
subject to certain conditions. You should read the discussion under the headings
"Prospectus Summary--Summary of Ability to Resell the New Notes" and "The
Exchange Offer--Resale of the New Notes" for further information regarding
resale of the registered notes.
The Exchange Offer................. We are offering to exchange an equal
principal amount of our 9-1/4% Senior
Subordinated Notes due 2008 which have
been registered under the Securities Act
for each such principal amount of our
outstanding 9-1/4% Senior Subordinated
Notes due 2008. In order to be exchanged,
an outstanding note must be properly
tendered and accepted. Subject to the
satisfaction of the conditions to the
Exchange Offer, we will exchange all
outstanding notes that are properly
tendered and not validly withdrawn.
Outstanding notes may be tendered only in
integral multiples of $1,000.
As of this date there are $115.0 million
principal amount of notes outstanding.
The Exchange Offer is not conditioned on
any minimum aggregate principal amount of
outstanding notes being tendered for
exchange.
We will issue registered notes as soon as
practicable after the expiration of the
Exchange Offer.
Registration Rights Agreement...... The Exchange Offer is intended to satisfy
certain rights you may have under the
registration rights agreement entered
into in connection with the issuance of
the outstanding notes. After the Exchange
Offer is complete, holders of new notes
will no longer be entitled to any
exchange or registration rights with
respect to the new notes.
Expiration Date.................... The Exchange Offer will expire at 5:00
p.m., New York City time, ,
1999, unless we decide to extend the
expiration date.
Accrued Interest on the New
Notes.............................. If you exchange your outstanding notes
for new notes in the Exchange Offer, you
will receive the same interest payment on
the next interest payment date following
the expiration date (expected to be May
15, 1999) that you would have received
had you not accepted the Exchange Offer.
Procedures for Tendering
Outstanding Notes.................. If you are a holder of an outstanding
note and wish to tender your note for
exchange pursuant to the Exchange
6
<PAGE> 11
Offer, you must transmit to The Bank of
New York, as exchange agent, on or prior
to the expiration date:
- a properly completed and duly executed
Letter of Transmittal, which
accompanies this prospectus, or a
facsimile of the Letter of Transmittal,
including all other documents required
by the Letter of Transmittal, to the
exchange agent at the address set forth
on the cover page of the Letter of
Transmittal; and either:
- a timely confirmation of book-entry
transfer of your outstanding notes into
the exchange agent's account at the
Depository Trust Company pursuant to
the procedure for book-entry transfers
described in this prospectus under the
heading "The Exchange
Offer--Procedure for Tendering," must
be received by the Exchange Agent on or
prior to the expiration date or
- certificates for such outstanding
notes.
Alternatively, if you wish to tender your
outstanding notes and (1) your
outstanding notes are not immediately
available, (2) you cannot deliver your
outstanding notes, the Letter of
Transmittal or any other required
documents to the exchange agent or (3)
you cannot complete the procedures for
book-entry transfer, prior to the
expiration date of the Exchange Offer,
you may effect a tender of your
outstanding notes by following the
guaranteed delivery procedures described
under the heading "The Exchange
Offer -- Guaranteed Delivery Procedures."
By executing the Letter of Transmittal,
each holder will represent to us that,
among other things, (1) the notes to be
issued in the Exchange Offer are being
obtained in the ordinary course of
business of the person receiving such new
notes, whether or not such person is the
holder, (2) neither the holder nor any
such other person is participating,
intends to participate or has any
arrangement or understanding with any
person to participate in a distribution
of such new notes and (3) neither the
holder nor any such other person is an
"affiliate," as defined in Rule 405 under
the Securities Act, of the Company.
Special Procedures for Beneficial
Owners............................. If you are a beneficial owner, whose
outstanding notes are registered in the
name of a broker, dealer, commercial
bank, trust company or other nominee, and
who wishes to tender such outstanding
notes in the Exchange Offer, you should
contact such registered holder promptly
and instruct such registered holder to
tender on your behalf. If you wish to
tender on your own behalf, you must,
prior to completing the procedures
described under "--Procedures for
Tendering Outstanding Notes," either make
appropriate arrangements to register
ownership of the outstanding notes in
your name or obtain a properly completed
bond power from the registered holder.
The
7
<PAGE> 12
transfer of registered ownership may take
considerable time and may not be
completed prior to the expiration date of
the Exchange Offer. See "The Exchange
Offer--Procedures for Tendering."
Withdrawal Rights.................. You may withdraw the tender of your notes
at any time prior to the close of
business, New York City time, on the
expiration date of the Exchange Offer.
Certain U.S. Federal Income Tax
Consequences..................... The exchange of new notes for outstanding
notes pursuant to the Exchange Offer will
generally not be a taxable exchange for
United States federal income tax
purposes. We believe you will not
recognize any taxable gain or loss or any
interest income as a result of such
exchange.
Use of Proceeds.................... We will not receive any proceeds from the
issuance of new notes pursuant to the
Exchange Offer. We will pay all expenses
incurred in connection with the Exchange
Offer.
Exchange Agent..................... The Bank of New York is serving as
exchange agent in connection with the
Exchange Offer. See "The Exchange
Offer--Exchange Agent."
SUMMARY OF ABILITY TO RESELL THE NEW NOTES
Based on an interpretation by the staff of the SEC set forth in no-action
letters issued to third parties, except as discussed below, we believe that if
you exchange your outstanding notes for registered notes, you may offer the new
notes for resale and resell or otherwise transfer the new notes without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that:
- you acquire the new notes in the ordinary course of business,
- you are not participating, do not intend to participate and have no
arrangement or understanding with any person to participate in a
distribution of the new notes,
- you are not a broker-dealer who purchased your outstanding notes
directly from us for resale pursuant to Rule 144A or any other
available exemption under the Securities Act, and
- you are not an "affiliate" of ours.
If our belief is inaccurate and you transfer any new note issued to you in
the Exchange Offer without delivering a prospectus meeting the requirement of
the Securities Act or without an exemption from registration of your new notes
from such requirements, you may incur liability under the Securities Act. We do
not assume or indemnify you against such liability.
Holders who use the Exchange Offer to participate in a distribution of new
notes received in exchange for outstanding notes (including broker-dealers that
acquired outstanding notes directly from us, but not as a result of
market-making or other trading activities) cannot rely on the position of the
staff of the SEC enunciated in the above-mentioned no-action letters. Such
broker-dealers must comply with the registration and prospectus delivery
requirements of the Securities Act in the absence of an exemption from such
requirements. Failure to comply with such requirements may result in such
holders incurring liabilities under the Securities Act for which we will not
indemnify them.
Each broker-dealer that is issued new notes in the Exchange Offer for its
own account in exchange for outstanding notes which were acquired by such
broker-dealer as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act of 1933 in connection with any resale of the new notes issued in
the Exchange Offer. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, such broker-dealer will not be
8
<PAGE> 13
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. A broker-dealer may use this prospectus, as it may be amended or
supplemented from time to time, for an offer to resell, resale or other transfer
of the new notes issued to it in the Exchange Offer. We have agreed that, for a
period of 120 days after the date of this prospectus, we will make this
prospectus and any amendment or supplement to this prospectus available to any
such broker-dealer for use in connection with any such resales. We believe that
no registered holder of the outstanding notes is an affiliate (as such term is
defined in Rule 405 of the Securities Act) of the Company. See "Plan of
Distribution."
SUMMARY DESCRIPTION OF THE NEW NOTES
General............................ The form and terms of the new notes will
be the same as the form and terms of the
outstanding notes except that (1) the new
notes will bear a different CUSIP Number
from the outstanding notes, (2) the new
notes will have been registered under the
Securities Act and, therefore, will not
bear legends restricting the transfer
thereof and (3) holders of the new notes
will not be entitled to any exchange or
registration rights with respect to the
new notes under the registration rights
agreement entered into in connection with
the private offering of the outstanding
notes. The new notes will evidence the
same debt as the outstanding notes, will
be entitled to the benefits of the
indenture governing the outstanding notes
and will be treated as a single class
thereunder with the outstanding notes.
See "Description of the Notes."
Issuer............................. Citadel Broadcasting Company, a
subsidiary of Citadel Communications
Corporation.
Notes Offered...................... $115,000,000 aggregate principal amount
of 9-1/4% Senior Subordinated Notes due
2008, which have been registered under
the Securities Act.
Maturity........................... November 15, 2008.
Interest........................... We will pay interest on the notes on May
15 and November 15 of each year,
beginning May 15, 1999.
Subsidiary Guarantees.............. Citadel License, Inc., which is our only
subsidiary, will fully and
unconditionally guarantee the notes on a
senior subordinated basis. Future
subsidiaries may also be required to
guarantee the notes.
Ranking............................ The notes will be subordinated to all our
debt and the subsidiary guarantees will
be subordinated to all debt of our
subsidiary guarantors, except for any
debt that expressly provides that it is
not senior to other debt. The notes will
rank pari passu with our outstanding
10-1/4% Senior Subordinated Notes due
2007.
On a pro forma basis, after giving effect
to the transactions described under the
caption "Pro Forma Financial
Information," on September 30, 1998, we
would have had $278.8 million of debt,
including $62.8 million of senior debt.
9
<PAGE> 14
Optional Redemption................ We may redeem any of the notes on or
after November 15, 2003 at the redemption
prices set forth under "Description of
the Notes--Optional Redemption."
Prior to November 15, 2001, we may redeem
notes with the net proceeds of one or
more public equity offerings at 109.25%
of their principal amount, plus accrued
interest, so long as at least 75% of the
aggregate principal amount of the issued
notes remains outstanding after each such
redemption.
Change of Control.................. Upon a Change of Control (as defined in
the indenture governing the notes), we
must make an offer to purchase the notes
at a purchase price equal to 101% of
their principal amount, plus accrued and
unpaid interest, if any, to the
repurchase date. However, if we make such
an offer, there can be no assurance that
we will have available funds sufficient
to pay the purchase price for all of the
notes that might be tendered in
acceptance of our offer.
Certain Covenants.................. The indenture governing the notes
contains covenants that, among other
things, will limit our ability and the
ability of any of our subsidiaries that
have been designated as a "restricted
subsidiary" under the indenture to:
- incur debt,
- pay cash dividends, purchase our
capital stock or make certain
investments or other restricted
payments,
- swap or sell assets,
- engage in transactions with affiliates,
- in the case of any restricted
subsidiary, agree to dividend and other
payment restrictions,
- issue or sell capital stock of any
restricted subsidiary,
- create liens on non-senior debt,
- create subordinated debt that is senior
to the notes, and
- merge, consolidate or sell all or
substantially all of our assets.
These covenants are subject to important
exceptions and qualifications described
under "Description of the Notes."
For more complete information regarding the new notes, see "Description of the
Notes."
10
<PAGE> 15
SUMMARY HISTORICAL FINANCIAL DATA
Our summary historical financial data presented below as of and for each of
the years ended December 31, 1993, 1994, 1995, 1996 and 1997 are derived from
our consolidated financial statements. These consolidated financial statements
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants. Our summary historical financial data presented below as of
September 30, 1998 and for the nine months ended September 30, 1997 and 1998 are
derived from our unaudited consolidated financial statements. In our opinion,
these unaudited consolidated financial statements contain all necessary
adjustments of a normal recurring nature to present the financial statements in
conformity with GAAP. Our consolidated financial statements as of December 31,
1996 and 1997 and for each of the years in the three-year period ended December
31, 1997 and the independent auditors' report thereon, as well as our unaudited
consolidated financial statements as of September 30, 1998 and for the nine
months ended September 30, 1997 and 1998, are included in this prospectus
beginning on page F-4. Our financial results are not comparable from year to
year because we acquired and disposed of various radio stations. You should read
the summary historical financial data below together with, and it is qualified
by reference to, our Consolidated Financial Statements and related notes,
"Selected Historical Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- --------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.................. $ 21,376 $ 32,998 $ 34,112 $ 45,413 $ 89,803 $ 60,025 $ 98,821
Station operating expenses... 17,081 24,331 26,832 33,232 65,245 43,306 69,412
Depreciation and
amortization............... 5,245 7,435 4,891 5,158 14,636 9,563 20,005
Corporate general and
administrative............. 961 2,504 2,274 3,248 3,530 2,562 3,351
-------- -------- -------- -------- --------- --------- --------
Operating income (loss)...... (1,911) (1,272) 115 3,775 6,392 4,594 6,053
Interest expense(1).......... 2,637 4,866 5,242 6,155 12,304 8,214 13,590
Other income, net............ 149 657 781 414 451 401 94
-------- -------- -------- -------- --------- --------- --------
Income (loss) before income
taxes and extraordinary
item....................... (4,399) (5,481) (4,346) (1,966) (5,461) (3,219) (7,443)
Income tax benefit........... -- -- -- -- (770) (105) (1,163)
-------- -------- -------- -------- --------- --------- --------
Income (loss) before
extraordinary item......... (4,399) (5,481) (4,346) (1,966) (4,691) (3,114) (6,280)
Extraordinary loss(2)........ -- -- -- (1,769) -- -- --
-------- -------- -------- -------- --------- --------- --------
Net income (loss)............ $ (4,399) $ (5,481) $ (4,346) $ (3,735) $ (4,691) $ (3,114) $ (6,280)
Dividend requirement for
exchangeable preferred
stock...................... -- -- -- -- 6,633 3,276 10,822
-------- -------- -------- -------- --------- --------- --------
Net loss applicable to common
shares(3).................. $ (4,399) $ (5,481) $ (4,346) $ (3,735) $ (11,324) $ (6,390) $(17,102)
======== ======== ======== ======== ========= ========= ========
Net loss per common
share(4)................... $ (110) $ (137) $ (109) $ (93) $ (283) $ (160) $ (428)
Shares used in per share
calculation................ 40,000 40,000 40,000 40,000 40,000 40,000 40,000
OTHER DATA:
Broadcast cash flow(5)....... $ 4,295 $ 8,667 $ 7,280 $ 12,181 $ 24,558 $ 16,719 $ 29,409
EBITDA(5).................... 3,334 6,163 5,006 8,933 21,028 14,157 26,058
Net cash provided by (used
in) operating activities... 361 324 (434) (1,394) 5,543 4,137 3,946
Net cash provided by (used
in) investing activities... (10,818) (14,037) 4,810 (61,168) (211,622) (133,350) (39,350)
Net cash provided by (used
in) financing activities... 10,070 14,393 (4,908) 63,145 212,176 154,324 35,127
Capital expenditures......... 679 2,857 1,691 2,038 2,070 1,478 1,747
Deficiency of earnings to
fixed charges(6)........... 4,399 5,481 4,346 1,966 12,094 6,495 18,265
</TABLE>
11
<PAGE> 16
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
-------- -------- -------- -------- -------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 857 $ 1,538 $ 1,005 $ 1,588 $ 7,685 $ 7,407
Working capital (deficiency)....... 1,701 3,382 2,928 (4,195) 22,593 31,057
Intangible assets, net............. 17,454 20,080 15,093 51,802 268,690 290,405
Total assets....................... 36,120 46,397 37,372 102,244 344,172 373,353
Long-term debt (including current
portion)......................... 30,468 47,805 43,046 91,072 189,699 118,480
Exchangeable preferred stock....... -- -- -- -- 102,010 112,965
Shareholder's equity (deficit)..... 3,492 (4,782) (9,249) 5,999 16,132 105,204
</TABLE>
- ---------------
(1) Includes debt issuance costs and debt discount amortization of $139,000,
$287,000, $132,000, $163,000 and $441,000 for the years ended December 31,
1993, 1994, 1995, 1996 and 1997, respectively, and $156,000 and $401,000 for
the nine months ended September 30, 1997 and 1998, respectively.
(2) On October 9, 1996, we extinguished our long-term debt of $31.3 million,
payable to a financial institution, and our note payable to a related party
of $7.0 million. The early retirement of the long-term debt resulted in a
$1.8 million extraordinary loss due to prepayment premiums and the write-off
of debt issuance costs.
(3) We have never declared cash dividends on our common stock.
(4) Basic and diluted net loss per common share are the same for all periods
presented due to our net losses.
(5) "Broadcast cash flow" consists of operating income (loss) before
depreciation, amortization and corporate general and administrative
expenses. "EBITDA" consists of operating income (loss) before depreciation
and amortization. Although broadcast cash flow and EBITDA are not measures
of performance calculated in accordance with GAAP, we believe that they are
useful to an investor in evaluating our Company because they are measures
widely used in the broadcasting industry to evaluate a radio company's
operating performance. However, you should not consider broadcast cash flow
and EBITDA in isolation or as substitutes for net income, cash flows from
operating activities and other income or cash flow statement data prepared
in accordance with GAAP as a measure of liquidity or profitability.
(6) Fixed charges include interest expense on debt, amortization of financing
costs, amortization of debt discount, 33% of rent expense, and dividend
requirements with respect to our 13-1/4% Exchangeable Preferred Stock.
12
<PAGE> 17
SUMMARY PRO FORMA FINANCIAL DATA
The following tables present our summary unaudited pro forma financial data
as of and for the periods indicated. The summary pro forma operating data
reflect adjustments to our summary historical operating data to give effect to
the following transactions as if such transactions had occurred on January 1,
1997:
- all radio station acquisitions and dispositions that we completed
since January 1, 1997,
- the offering of $101.0 million principal amount of our 10-1/4% Senior
Subordinated Notes due 2007, the offering of 1.0 million shares of our
13-1/4% Exchangeable Preferred Stock and the use of the net proceeds
from such offerings (the "1997 Offerings"),
- the repayment of outstanding borrowings under our credit facility with
the proceeds from Citadel Communications' initial public offering,
- the pending acquisitions of stations and related assets in Baton Rouge
and Lafayette, Saginaw/Bay City, Harrisburg/Carlisle and Charleston,
Binghamton, Muncie and Kokomo (the "Pending Acquisitions"), and
- the offering of $115.0 million principal amount of the outstanding
9-1/4% Senior Subordinated Notes due 2008 and the use of the net
proceeds from such offering (the "Original Offering").
The summary pro forma balance sheet data as of September 30, 1998 give
effect to the Pending Acquisitions, the October 1998 sale of our stations in
Quincy, Illinois (the "Quincy Sale"), the November 1998 acquisition of one AM
radio station and the disposition of one AM radio station in Little Rock and the
Original Offering, as if such transactions had occurred on that date.
The summary pro forma financial data are not necessarily indicative of
either future results of operations or the results that would have occurred if
those transactions had been consummated on the indicated dates. You should read
the following financial information together with our historical consolidated
financial statements and related notes, "Pro Forma Financial Information,"
"Selected Historical Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
prospectus.
13
<PAGE> 18
SUMMARY PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
THE COMPANY PRO FORMA AS ADJUSTED
-----------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, TWELVE MONTHS ENDED
DECEMBER 31, -------------------- SEPTEMBER 30,
1997 1997 1998 1998
------------ -------- -------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING DATA:
Net broadcasting revenue.................. $149,334 $110,171 $122,236 $161,399
Station operating expenses................ 104,120 77,763 83,585 109,942
Depreciation and amortization............. 37,629 28,535 29,050 38,144
Corporate general and administrative...... 4,796 3,428 3,951 5,319
-------- -------- -------- --------
Operating expenses.................... 146,545 109,726 116,586 153,405
-------- -------- -------- --------
Operating income.......................... 2,789 445 5,650 7,994
Interest expense.......................... 25,758 19,115 20,565 27,208
Other income, net......................... (451) (401) (94) (144)
-------- -------- -------- --------
Income (loss) before income taxes......... (22,518) (18,269) (14,821) (19,070)
Income taxes (benefit).................... (2,281) (971) (1,510) (2,820)
Dividend requirement for exchangeable
preferred stock......................... (13,858) (10,501) (10,822) (14,179)
-------- -------- -------- --------
Income (loss) from continuing operations
applicable to common shares............. $(34,095) $(27,799) $(24,133) $(30,429)
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED
SEPTEMBER 30, 1998
---------------------
(DOLLARS IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 7,272
Working capital............................................. 32,241
Intangible assets, net...................................... 436,387
Total assets................................................ 538,875
Long-term debt (including current portion).................. 276,254
Exchangeable preferred stock................................ 112,965
Shareholder's equity........................................ 105,991
</TABLE>
14
<PAGE> 19
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to exchange outstanding notes for new notes.
Any of the following risks could have a material adverse effect on our business,
financial condition or results of operations or on the value of the notes.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
We are highly leveraged. As of September 30, 1998, on a pro forma basis
after giving effect to the transactions described under the caption "Pro Forma
Financial Information," we would have had outstanding total debt of $278.8
million (excluding the discount on our 10-1/4% notes), preferred stock with an
aggregate liquidation preference of $113.0 million and shareholder's equity of
$106.0 million.
Our large amount of debt could significantly impact you for various
reasons, including:
- It limits our ability to obtain additional financing, if we need it,
for working capital, capital expenditures, acquisitions, debt service
requirements or other purposes,
- We need to dedicate a substantial portion of our operating cash flow
to fund interest expense, thereby reducing funds available for
operations, future business opportunities or other purposes,
- It limits our ability to compete with competitors who are less
leveraged than we are, and
- It limits our ability to react to changing market conditions, changes
in our industry and economic downturns.
Our ability to pay interest on the notes and to satisfy our other debt
obligations will depend upon our future operating performance. Prevailing
economic conditions and financial, business and other factors, many of which are
beyond our control, will affect our ability to make these payments. If in the
future we cannot generate sufficient cash flow from operations to make scheduled
payments on the notes or to meet our other obligations, we will need to
refinance our debt, obtain additional financing, delay planned acquisitions and
capital expenditures or sell assets. We cannot assure you that our business will
generate cash flow, or that we will be able to obtain funding sufficient to
satisfy our debt service requirements.
HISTORY OF NET LOSSES
We had net losses of $4.7 million for the year ended December 31, 1997 and
$6.3 million for the nine months ended September 30, 1998. We would have had net
losses from continuing operations on a pro forma basis of $20.2 million for the
year ended December 31, 1997 and $13.3 million for the nine months ended
September 30, 1998 after giving effect to the transactions described under the
caption "Pro Forma Financial Information," as if they had occurred on January 1,
1997.
The primary reasons for these losses are significant charges for
depreciation and amortization relating to the acquisition of radio stations and
interest charges on our outstanding debt. If we acquire additional stations,
these charges will probably increase. We expect to continue to experience net
losses through at least 1999.
COMPETITIVE CONDITIONS
The radio broadcasting industry is very competitive. Our radio stations
compete with other radio stations in each market for audience share and
advertising revenue. We also compete with other media such as television,
newspapers, direct mail and outdoor advertising.
The radio broadcasting industry is also facing competition from new media
technologies that are being developed such as the following:
- Audio programming by cable television systems, direct broadcasting
satellite systems and other digital audio broadcasting formats,
15
<PAGE> 20
- Satellite-delivered Digital Audio Radio Service, which could result
in the introduction of several new satellite radio services with
sound quality equivalent to that of compact discs, and
- In Band On Channel digital radio, which could provide multi-channel,
multi-format digital radio services in the same band width currently
occupied by traditional AM and FM radio services.
LIMITATIONS ON ACQUISITION STRATEGY
We intend to grow by acquiring radio stations in mid-sized markets. We
cannot predict whether we will be successful in pursuing our acquisition
strategy because that strategy is subject to a number of risks, including:
- Our acquisition strategy may not increase our broadcast cash flow or
yield other anticipated benefits,
- Because radio station acquisitions are subject to regulatory
approval, we may encounter unanticipated delays in completing
acquisitions,
- We may have difficulty integrating the operations, systems and
management of our acquired stations,
- Our acquisition strategy may divert management's attention from
other business concerns,
- We may lose key employees of acquired stations,
- We may be required to raise additional financing and our ability to
do so is limited by the terms of our debt instruments, and
- Competition for acquisition opportunities has increased and, as a
result, prices for radio stations have risen and may continue to
rise.
POTENTIAL DELAY IN COMPLETING PENDING TRANSACTIONS DUE TO ANTITRUST REVIEW
The completion of certain of our pending transactions is, and future
transactions we may consider will likely be, subject to the notification filing
requirements, applicable waiting periods and possible review by the United
States Department of Justice ("DOJ") or the Federal Trade Commission ("FTC")
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). DOJ or FTC review can cause delays in completing transactions and,
in some cases, may result in attempts by the DOJ or FTC to enjoin such
transactions or negotiate modifications to the proposed terms. Such delays,
injunctions or modifications could adversely affect the terms of a proposed
transaction or could require us to abandon an otherwise attractive opportunity.
We received a civil investigative demand from the DOJ regarding our
acquisition of KRST-FM in Albuquerque. We have provided all the information that
the DOJ requested. If the DOJ were to proceed with an investigation and
successfully challenge our acquisition of KRST-FM, we may be required to divest
one or more stations in Albuquerque. The DOJ is proceeding with an investigation
regarding our JSA relating to stations in Spokane, Washington, and Colorado
Springs, Colorado. If the DOJ were to successfully challenge us in this matter,
we may be required to terminate the Spokane/Colorado Springs JSA. Although we do
not believe that our acquisition strategy as a whole will be negatively affected
in any material way by antitrust review or by additional divestitures, we cannot
assure you that this will be the case.
IMPORTANCE OF CERTAIN MARKETS
A significant decline in net broadcasting revenue from our stations in
certain of our markets could have a material adverse effect on our financial
position and results of operations. For example, on a pro forma basis, after
giving effect to the transactions described under the caption "Pro Forma
Financial Information,"
16
<PAGE> 21
our radio stations in Albuquerque, Providence, Salt Lake City and Modesto would
have generated the following percentages of our total net broadcasting revenue
and broadcast cash flow in 1997:
<TABLE>
<CAPTION>
MARKET % OF NET BROADCASTING REVENUE % OF BROADCAST CASH FLOW
------ ------------------------------ -------------------------
<S> <C> <C>
Albuquerque.............. 12.3% 15.6%
Salt Lake City........... 8.3 6.4
Modesto.................. 5.6 8.0
Providence............... 4.6 5.3
</TABLE>
LICENSING AND OWNERSHIP ISSUES
Licenses. The radio broadcasting industry is subject to extensive
regulation by the Federal Communications Commission ("FCC") under the
Communications Act of 1934, as amended (the "Communications Act"). FCC approval
is required for issuance, renewal or transfer of radio broadcast station
operating licenses. We cannot operate our radio stations without FCC licenses.
The failure to renew our licenses on their expiration dates or the inclusion of
conditions or qualifications in our licenses could have a negative impact on our
business.
A third party filed a petition with the FCC requesting denial of renewal of
the licenses for four of our Salt Lake City stations. The complaint alleges that
these stations failed to comply with FCC equal opportunity employment rules. The
license renewals have been delayed due to the FCC's processing of that petition.
Ownership. The Communications Act and the FCC rules impose specific limits
on the number of stations an entity can own in a single market. Ownership rules
will affect our acquisition strategy because they may prevent us from acquiring
additional stations in a particular market. We may also be prevented from
engaging in a swap transaction if the swap would cause the other company to
violate these rules.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. The
interests of our officers, directors and shareholders are generally attributable
to us. Certain of our officers and directors may acquire attributable broadcast
interests, which will limit the number of radio stations that we may acquire in
any market in which such officers or directors hold or acquire attributable
broadcast interests.
In addition, the number of radio stations we may acquire in any market may
vary depending upon whether the interests in other radio stations or certain
other media properties of certain individuals affiliated with us are
attributable to those individuals under FCC rules. Moreover, under the FCC's
cross-interest policy, the FCC in certain instances may prohibit one party from
acquiring an attributable interest in one media outlet and a substantial
non-attributable economic interest in another media outlet in the same market.
The FCC is considering proposals to change its rules so that certain
cross-interests arising from non-voting stock ownership would be counted as
attributable ownership interests. Certain interests of ABRY Broadcast Partners
II, L.P. and its affiliates could be attributed to us if this rule is adopted,
possibly precluding us from acquiring stations in markets where any of such
entities already has attributable broadcast interests.
The FCC has also been more aggressive in examining issues of market revenue
share concentration when considering radio station acquisitions. The FCC has
delayed its approval of several pending radio station purchases by various
parties because of market concentration concerns. Moreover, in recent months the
FCC has followed an informal policy of giving specific public notice of its
intention to conduct additional ownership concentration analyses and soliciting
public comment on the issue of concentration and its effect on competition and
diversity in connection with certain applications for consent to radio station
acquisitions.
SUBORDINATION OF NOTES; ASSET ENCUMBRANCES
The notes will be subordinated to all of our senior debt and the guarantee
by Citadel License will be subordinated to all of its senior debt. The notes
will not be secured by any of our assets. Our obligations and the obligations of
Citadel License under our credit facility will be secured by substantially all
of our assets and its assets.
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<PAGE> 22
If we become insolvent or are liquidated, or if payments under our credit
facility are accelerated, our assets will be available to pay obligations under
the notes and our 10 1/4% notes only after all payments have been made on our
secured and other senior debt. Similarly, if Citadel License becomes insolvent
or is liquidated, its assets will be available to pay obligations on the notes
and the 10 1/4% notes only after all payments have been made on its secured and
senior debt. We cannot assure you that sufficient assets will remain to make
full payment on the notes and our 10 1/4% notes.
SUBSIDIARY GUARANTEES MAY BE UNENFORCEABLE DUE TO FRAUDULENT CONVEYANCE STATUTES
All of our licenses are held by our subsidiary, Citadel License. For this
reason, the ability of the note holders to enforce Citadel License's guarantee
of the notes may be important to the amount they are able to recover on their
investment in the notes.
The subsidiary guarantee may be subject to review under federal or state
fraudulent conveyance laws in the event of the bankruptcy or other financial
difficulty of the subsidiary guarantor. Although laws differ among various
jurisdictions, in general under fraudulent conveyance laws a court could
subordinate or avoid the guarantee if it finds that:
- the debt under such guarantee was incurred with actual intent to
hinder, delay or defraud creditors or the subsidiary guarantor did
not receive fair consideration or reasonably equivalent value for
its guarantee and
- the subsidiary guarantor was:
- insolvent or rendered insolvent because of its guarantee,
- engaged in a business or transaction for which its remaining
assets constituted unreasonably small capital, or
- intended to incur, or believed that it would incur, debts beyond
its ability to pay upon maturity.
A court is likely to find that a subsidiary guarantor did not receive fair
consideration or reasonably equivalent value for its guarantee to the extent
that its liability under the guarantee is greater than the direct benefit it
received from the issuance of notes. By its terms, the guarantee will limit the
liability of the subsidiary guarantor to the maximum amount that it can pay
without the guarantee being deemed a fraudulent transfer. A court may not give
effect to this limitation on liability. In this event, a court may find that the
issuance of the guarantee rendered the subsidiary guarantor insolvent. If a
court avoids the guarantee or holds it unenforceable, you will cease to have a
claim against the subsidiary guarantor and will be solely a creditor of Citadel
Broadcasting Company. If a court gives effect to this limit on liability, the
amount that the subsidiary guarantor is found to have guaranteed might be so low
that there will not be sufficient funds to pay the notes in full.
RESTRICTIONS IMPOSED ON US BY OUR DEBT INSTRUMENTS
Our credit facility and the agreements governing our other outstanding debt
and our preferred stock contain certain covenants that restrict, among other
things, our ability to incur additional debt, pay cash dividends, purchase our
capital stock, make certain investments or other restricted payments, swap or
sell assets, engage in transactions with affiliates, create liens on non-senior
debt or merge, consolidate or sell all or substantially all of our assets.
Our credit facility also requires us to get our banks' consent before we
make acquisitions or capital expenditures. This restriction may make it more
difficult to pursue our acquisition strategy. Our credit facility also requires
us to maintain specific financial ratios and to satisfy certain financial
condition tests. Events beyond our control could affect our ability to meet
those financial ratios and condition tests, and we cannot assure you that we
will meet them.
A breach of any of the covenants contained in our credit facility could
result in an event of default, which would allow our lenders to declare all
amounts outstanding under the credit facility to be immediately due and payable.
In addition, our lenders could proceed against the collateral granted to them to
secure that
18
<PAGE> 23
indebtedness. If the amounts outstanding under the credit facility are
accelerated, we cannot assure you that our assets will be sufficient to repay in
full the money owed to the banks or to our other debt holders.
YEAR 2000
We are in the process of assessing and remediating potential risks to our
business related to the Year 2000 problem. Although we believe that, as a result
of these efforts, our critical systems are or will be substantially Year 2000
ready, we cannot assure you that this will be the case. We believe that our
greatest potential Year 2000 risk is that third parties with whom we deal will
fail to be Year 2000 ready. For example, our business may be adversely affected
if our programming suppliers or key advertisers experience significant
disruptions in their businesses because of the Year 2000 problem. For more
information concerning the Year 2000 problem and its potential impact on our
business, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
DIFFICULTY OF SATISFYING PAYMENT OBLIGATIONS UPON A CHANGE OF CONTROL
If a Change of Control (as defined in the indenture governing the notes)
occurs, we may be required to make an offer to purchase all of the notes then
outstanding at a purchase price of 101% of their principal amount, plus accrued
interest. A change of ownership or control also will result in an event of
default under our credit facility. If a Change of Control occurs, we cannot
assure you that we will have enough money to repay our bank lenders and to pay
for the notes and 10 1/4% notes we may be required to buy. Our failure to make
or consummate an offer to repurchase the notes or to pay the Change of Control
purchase price when due would result in an Event of Default (as defined) under
the indenture governing the notes, and would give the Trustee under such
indenture the rights described under the heading "Description of the
Notes--Events of Default."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
There has not been any public market for the outstanding notes. The new
notes will constitute a new issue of securities with no established trading
market. We do not intend to list the new notes on any securities exchange or to
seek their admission to trading in any automated quotation system. The initial
purchasers have advised us that they currently intend to make a market in the
new notes, but they are not obligated to do so and may discontinue such
market-making at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Securities Exchange Act of 1934, as amended, and may be limited during the
Exchange Offer and at certain other times. Accordingly, we cannot assure you
that an active public or other market will develop for the new notes or as to
the liquidity of the trading market for the new notes. If a trading market does
not develop or is not maintained, holders of the new notes may experience
difficulty in reselling the new notes or may be unable to sell them at all. If a
market develops, any such market may be discontinued at any time.
If a public trading market develops for the new notes, future trading
prices of the new notes will depend on many factors, including, among other
things, prevailing interest rates, our operating results and the market for
similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including our financial condition, the new
notes may trade at a discount from their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES; CONSEQUENCES OF FAILURE TO EXCHANGE
We will issue the new notes in exchange for the outstanding notes pursuant
to the Exchange Offer only after our timely receipt of such outstanding notes,
properly completed and duly executed Letters of Transmittal and all other
required documents. Therefore, holders of outstanding notes desiring to tender
such outstanding notes in exchange for new notes should allow sufficient time to
ensure timely delivery. We are under no duty to give notification of defects or
irregularities with respect to the tenders of outstanding notes for exchange.
Outstanding notes that are not tendered or are tendered but not accepted
will, following the consummation of the Exchange Offer, continue to be subject
to the existing restrictions upon transfer thereof.
19
<PAGE> 24
In addition, upon consummation of the Exchange Offer, certain registration
rights under the registration rights agreement will terminate.
If you tender in the Exchange Offer for the purpose of participating in a
distribution of the new notes, you may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transactions.
Each holder of the outstanding notes (other than certain specified holders)
who wishes to exchange the outstanding notes for new notes in the Exchange Offer
will be required to represent in the Letter of Transmittal that (1) it is not an
affiliate of the Company, (2) the new notes to be received by it are being
acquired in the ordinary course of its business and (3) it is not participating,
does not intend to participate and has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of the new notes. Each broker-dealer that receives new notes for its own
account in exchange for outstanding notes, where such outstanding notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities ("Participating Broker-Dealer"), must acknowledge that it
will deliver a prospectus in connection with any resale of such new notes. See
"Plan of Distribution."
To the extent that outstanding notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for untendered or tendered but
unaccepted outstanding notes could be adversely affected. See "The Exchange
Offer."
20
<PAGE> 25
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of our obligations under
the registration rights agreement entered into in connection with the Original
Offering of the outstanding notes. We will not receive any cash proceeds from
the issuance of the new notes in the Exchange Offer.
The net proceeds of the Original Offering were approximately $111.0
million, after deducting the initial purchasers' discount and offering expenses.
We used approximately $16.7 million of these net proceeds to repay outstanding
indebtedness under the loan agreement with our senior lenders (the "Credit
Facility") and approximately $5.1 million to fund the purchase price of one AM
radio station in Little Rock, Arkansas. The balance of the net proceeds will be
used for other pending acquisitions, working capital and general corporate
purposes. Pending our use of these remaining funds, we have invested the net
proceeds in short-term, investment grade, interest-bearing securities.
The following table shows the use of proceeds of the Original Offering.
<TABLE>
<CAPTION>
AMOUNT
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Repayment of borrowings under the Credit Facility(1)........ $ 16,726
Saginaw/Bay City Acquisition................................ 35,000
Baton Rouge/Lafayette Acquisition(2)........................ 33,000
Little Rock Acquisition..................................... 5,100
Carlisle Acquisition........................................ 4,500
Working capital and general corporate purposes.............. 16,674
Initial purchasers' discount and expenses of the Offering... 4,000
--------
Total uses of proceeds............................ $115,000
========
</TABLE>
- ---------------
(1) As of September 30, 1998, $18.7 million was outstanding under the Credit
Facility. For the nine months ended September 30, 1998, the weighted average
interest rate under the Credit Facility was approximately 8.44%. Subject to
certain mandatory prepayments of amounts outstanding under the Credit
Facility, the balance of any amounts outstanding would have been due on
September 30, 2003. Amounts borrowed under the Credit Facility have been
used for acquisitions and working capital purposes. Because of our
application of the proceeds of the Original Offering, $140.0 million is
currently available for borrowing under the Credit Facility.
(2) The $33.0 million is net of $1.0 million in positive working capital that
the acquired company is required to have at closing of the acquisition. Does
not include $1.5 million related to noncompetition agreements to be entered
into in connection with the acquisition.
21
<PAGE> 26
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of September 30, 1998 on an actual basis and as adjusted to give effect to
the transactions described under the caption "Pro Forma Financial Information."
This table should be read in conjunction with our Consolidated Financial
Statements and related notes, "Pro Forma Financial Information" and other
information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current portion:
Credit Facility........................................... $ 18,726 $ 60,000
Other obligations......................................... 1,293 2,793
10-1/4% Notes............................................. 101,000 101,000
9-1/4% Notes.............................................. -- 115,000
-------- --------
Total long-term debt................................. 121,019 278,793
Exchangeable preferred stock................................ 112,965 112,965
Shareholder's equity........................................ 105,203 105,991
-------- --------
Total capitalization................................. $339,187 $497,749
======== ========
</TABLE>
22
<PAGE> 27
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements reflect the results of operations and balance sheet of the Company
after giving effect to (1) all radio station acquisitions and dispositions
completed after January 1, 1997 (including the Quincy Sale), the 1997 Offerings,
the repayment of outstanding borrowings under the Credit Facility with the
proceeds from Citadel Communications' initial public offering and the Original
Offering (collectively, the "Completed Transactions") and (2) the Pending
Acquisitions. The unaudited pro forma condensed consolidated financial
statements are based on the historical consolidated financial statements of the
Company and the financial statements of those entities acquired, or from which
assets were acquired, in connection with the Completed Transactions, and should
be read in conjunction with the financial statements and the notes thereto of
(1) the Company, (2) Tele-Media Broadcasting Company and its Partnership
Interests, (3) Deschutes River Broadcasting, Inc., (4) Snider Corporation, (5)
Snider Broadcasting Corporation and Subsidiary and CDB Broadcasting Corporation,
(6) Maranatha Broadcasting Company, Inc.'s, Radio Broadcasting Division, (7)
Pacific Northwest Broadcasting Corporation and Affiliates and (8) Wicks Radio
Group (a division of the Wicks Broadcast Group Limited Partnership), which are
included elsewhere in this prospectus.
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. For pro forma purposes, the Company's
consolidated statements of operations for the year ended December 31, 1997 and
the nine months ended September 30, 1997 and 1998 have been adjusted to give
effect to the Completed Transactions and the Pending Acquisitions as if each
occurred on January 1, 1997. The interest rate applied to borrowings under, and
repayments of, the Credit Facility in the pro forma consolidated statements of
operations was 8.4375%, which represents the interest rate in effect under the
Credit Facility as of January 1, 1997. For pro forma purposes, the Company's
consolidated balance sheet as of September 30, 1998 has been adjusted to give
effect to the Quincy Sale, the acquisition of KAAY-AM and the disposition of
KRNN-AM in Little Rock, the Original Offering and the Pending Acquisitions as if
each had occurred on September 30, 1998.
The unaudited pro forma information is presented for illustrative purposes
only and is not indicative of the operating results or financial position that
would have occurred if the Completed Transactions and the Pending Acquisitions
had been consummated on the dates indicated, nor is it indicative of future
operating results or financial position if the aforementioned transactions are
completed. The Company cannot predict whether the consummation of the Pending
Acquisitions will conform to the assumptions used in the preparation of the
unaudited pro forma condensed consolidated financial statements.
23
<PAGE> 28
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY
ADJUSTMENTS FOR AS ADJUSTED FOR ADJUSTMENTS FOR
ACTUAL COMPLETED COMPLETED THE PENDING PRO FORMA
THE COMPANY TRANSACTIONS(1) TRANSACTIONS ACQUISITIONS(2) THE COMPANY
----------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue............................... $ 98,821 $ (310) $ 98,511 $23,725 $122,236
Station operating expenses................ 69,412 (1,401) 68,011 15,574 83,585
Depreciation and amortization............. 20,005 519 20,524 8,526 29,050
Corporate general and administrative...... 3,351 -- 3,351 600 3,951
-------- ------- -------- ------- --------
Operating expenses...................... 92,768 (882) 91,886 24,700 116,586
-------- ------- -------- ------- --------
Operating income (loss)................... 6,053 572 6,625 (975) 5,650
Interest expense.......................... 13,590 (1,410) 12,180 8,385 20,565
Other (income) expense, net............... (94) -- (94) -- (94)
-------- ------- -------- ------- --------
Income (loss) before income taxes......... (7,443) 1,982 (5,461) (9,360) (14,821)
Income taxes (benefit).................... (1,163) -- (1,163) (347) (1,510)
Dividend requirement for
exchangeable preferred stock............ (10,822) -- (10,822) -- (10,822)
-------- ------- -------- ------- --------
Income (loss) from continuing operations
applicable to common shares............. $(17,102) $ 1,982 $(15,120) $(9,013) $(24,133)
======== ======= ======== ======= ========
</TABLE>
24
<PAGE> 29
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(1) Represents the net effect of (a) the disposition of WEST-AM in
Allentown/Bethlehem, (b) the acquisitions of WEMR-AM, WEMR-FM, WSGD-FM,
WDLS-FM and WCDL-FM in Wilkes-Barre/Scranton (the "Wilkes-Barre/Scranton
Acquisitions"), (c) the acquisitions of KQFC-FM, KKGL-FM, KBOI-FM, KIZN-FM
and KZMG-FM in Boise (the "Boise Acquisition"), (d) the Quincy Sale, (e) the
acquisition of KAAY-AM and the disposition of KRNN-AM in Little Rock, (f)
the repayment of outstanding borrowings under the Credit Facility with the
proceeds from Citadel Communications' initial public offering and (g) the
consummation of the Original Offering as if each transaction had taken place
on January 1, 1997 (does not reflect radio station acquisitions completed in
1997 or the 1997 Offerings). Depreciation and amortization for such
acquisitions are based upon preliminary allocations of the purchase price to
property and equipment and intangible assets which will be amortized over
periods of 1-25 years. Actual depreciation and amortization may differ
depending on the final allocation of the purchase price; however, management
does not believe these differences will be material. Prior to the
acquisition dates, the Company operated many of the acquired stations under
a JSA or LMA. The Company receives fees for such services. Includes net
revenue and station operating expenses for stations operated under JSAs to
reflect ownership of the stations as of January 1, 1997. Net revenue and
station expenses for stations operated under LMAs are included in the
Company's historical consolidated financial statements. For those stations
operated under JSAs or LMAs and subsequently acquired, associated fees and
redundant expenses were eliminated and estimated occupancy costs were
included to adjust the results of operations to reflect ownership of the
stations as of January 1, 1997. Dollars in the table below are shown in
thousands.
<TABLE>
<CAPTION>
OTHER REPAYMENT OF THE ORIGINAL THE COMPLETED
ACQUISITIONS(a) CREDIT FACILITY(b) OFFERING(c) TRANSACTIONS
----------------- ------------------- ------------ -------------
<S> <C> <C> <C> <C>
Net revenue.......................................... $ (310) $ -- $ -- $ (310)
Station operating expenses........................... (1,401) -- -- (1,401)
Depreciation and amortization........................ 519 -- -- 519
------- ------- ------- -------
Operating expenses................................. (882) -- -- (882)
------- ------- ------- -------
Operating income..................................... 572 -- -- 572
Interest expense..................................... 445 (4,487) 2,632 (1,410)
------- ------- ------- -------
Income before income taxes........................... 127 4,487 (2,632) 1,982
Income taxes (benefit)............................... -- -- -- --
------- ------- ------- -------
Income from continuing operations.................... $ 127 $ 4,487 $(2,632) $ 1,982
======= ======= ======= =======
</TABLE>
- ---------------
(a) Represents the net effect of the Boise Acquisition, the
Wilkes-Barre/Scranton Acquisitions, the disposition of WEST-AM in
Allentown/Bethlehem, the Quincy Sale and the acquisition of KAAY-AM and
the disposition of KRNN-AM in Little Rock.
(b) Represents the repayment of outstanding borrowings under the Credit
Facility with the proceeds from Citadel Communications' initial public
offering.
(c) Reflects the recording of the net increase in interest expense and the
amortization of deferred financing costs of $4.0 million related to the
notes.
(2) Represents the net effect of (a) the acquisition of KQXL-FM, WXOK-AM,
WEMX-FM, WKJN-FM, WIBR-AM in Baton Rouge and KFXZ-FM, KRRQ-FM, KNEK-AM and
KNEK-FM in Lafayette (the "Baton Rouge/Lafayette Acquisition"), (b) the
acquisition of WKQZ-FM, WMJK-FM, WIOG-FM, WMJA-FM, WGER-FM and WSGW-AM in
Saginaw/Bay City (the "Saginaw/Bay City Acquisition"), (c) the acquisition
of WHYL-AM and WHYL-FM in Harrisburg/Carlisle (the "Carlisle Acquisition")
and (d) the acquisition of WSSX-FM, WWWZ-FM, WMGL-FM, WSUY-FM, WNKT-FM,
WTMA-AM, WTMZ-AM and WXTC-AM in Charleston, WHWK-FM, WYOS-FM, WAAL-FM,
WNBF-AM and WKOP-AM in Binghamton, WMDH-FM and WMDH-AM in Muncie and WWKI-FM
in Kokomo (the "Charleston/ Binghamton/Muncie/Kokomo Acquisition") as if
each transaction had taken place on January 1, 1997. Depreciation and
amortization for such acquisitions are based upon preliminary allocations of
the purchase price to property and equipment and intangible assets which
will be amortized over periods of 1-25 years. Actual depreciation and
amortization may differ
25
<PAGE> 30
depending on the final allocation of the purchase price; however, management
does not believe these differences will be material. Dollars in the table
below are shown in thousands.
<TABLE>
<CAPTION>
CHARLESTON/
BINGHAMTON/
MUNCIE/
BATON ROUGE/LAFAYETTE SAGINAW/BAY CITY CARLISLE KOKOMO
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ADJUSTMENTS(a)
--------------------- ---------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Net revenue................... $ 4,947 $ 5,192 $ 636 $12,950 $ --
Station operating expenses.... 3,447 3,384 414 8,669 (340)
Depreciation and
amortization................ 2,380 1,898 223 4,025 --
Corporate general and
administrative.............. -- -- -- -- 600
------- ------- ------ ------- -----
Operating expenses.......... 5,827 5,282 637 12,694 260
Operating income (loss)....... (880) (90) (1) 256 (260)
Interest expense.............. 2,088 2,215 285 3,797 --
------- ------- ------ ------- -----
Income (loss) before income
taxes....................... (2,968) (2,305) (286) (3,541) (260)
Income taxes (benefit)........ (347) -- -- -- --
------- ------- ------ ------- -----
Income (loss) from continuing
operations.................. $(2,621) $(2,305) $ (286) $(3,541) $(260)
======= ======= ====== ======= =====
<CAPTION>
PENDING
ACQUISITIONS
------------
<S> <C>
Net revenue................... $23,725
Station operating expenses.... 15,574
Depreciation and
amortization................ 8,526
Corporate general and
administrative.............. 600
-------
Operating expenses.......... 24,700
Operating income (loss)....... (975)
Interest expense.............. 8,385
-------
Income (loss) before income
taxes....................... (9,360)
Income taxes (benefit)........ (347)
-------
Income (loss) from continuing
operations.................. $(9,013)
=======
</TABLE>
- ---------------
(a) Includes the elimination of $208,000 of expenses to reflect lower fees,
as a percentage of national advertising sales, paid by the Company to a
national representative for national advertising and the elimination of
$132,000 of station management expenses, and additional corporate
overhead of $600,000 to reflect increase in costs to administer the
additional stations.
26
<PAGE> 31
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY
ADJUSTMENTS FOR AS ADJUSTED FOR ADJUSTMENTS FOR
ACTUAL COMPLETED COMPLETED THE PENDING PRO FORMA
THE COMPANY TRANSACTIONS(1) TRANSACTIONS ACQUISITIONS(2) THE COMPANY
----------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue..................................... $60,025 $29,122 $ 89,147 $ 21,024 $110,171
Station operating expenses...................... 43,306 19,598 62,904 14,859 77,763
Depreciation and amortization................... 9,563 10,446 20,009 8,526 28,535
Corporate general and administrative............ 2,562 (334) 2,228 1,200 3,428
------- ------- -------- -------- --------
Operating expenses............................ 55,431 29,710 85,141 24,585 109,726
------- ------- -------- -------- --------
Operating income (loss)......................... 4,594 (588) 4,006 (3,561) 445
Interest expense................................ 8,214 2,516 10,730 8,385 19,115
Other (income) expense, net..................... (401) -- (401) -- (401)
------- ------- -------- -------- --------
Income (loss) before
income taxes.................................. (3,219) (3,104) (6,323) (11,946) (18,269)
Income taxes (benefit).......................... (105) (519) (624) (347) (971)
Dividend requirement for exchangeable preferred
stock......................................... (3,276) (7,225) (10,501) -- (10,501)
------- ------- -------- -------- --------
Income (loss) from continuing operations
applicable to common shares................... $(6,390) $(9,810) $(16,200) $(11,599) $(27,799)
======= ======= ======== ======== ========
</TABLE>
27
<PAGE> 32
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(1) Represents the net effect of (a) the Company's acquisition of Tele-Media
Broadcasting Company (the "Tele-Media Acquisition"), (b) the acquisitions of
KENZ-FM, KBER-FM, KBEE-FM and KFNZ-AM in Salt Lake City, (c) the acquisition
of KNHK-FM in Reno, (d) the acquisition of KTHK-FM in Tri-Cities, (e) the
acquisitions of WXEX-FM and WHKK-FM in Providence, (f) the Company's 1997
acquisition of various stations in Little Rock (the "Little Rock
Acquisitions"), (g) the acquisition of WLEV-FM in Allentown/Bethlehem, (h)
the disposition of WEST-AM in Allentown/Bethlehem, (i) the
Wilkes-Barre/Scranton Acquisitions, (j) the Boise Acquisition, (k) the
Quincy Sale, (l) the acquisition of KAAY-AM and the disposition of KRNN-AM
in Little Rock, (m) the consummation of the 1997 Offerings, (n) the
repayment of outstanding borrowings under the Credit Facility with the
proceeds from Citadel Communications' initial public offering and (o) the
consummation of the Original Offering as if each transaction had taken place
on January 1, 1997. Depreciation and amortization for such acquisitions are
based upon preliminary allocations of the purchase price to property and
equipment and intangible assets which will be amortized over periods of 1-25
years. Actual depreciation and amortization may differ depending on the
final allocation of the purchase price; however, management does not believe
these differences will be material. Prior to the acquisition dates, the
Company operated many of the acquired stations under a JSA or LMA. The
Company receives fees for such services. Includes net revenue and station
operating expenses for stations operated under JSAs to reflect ownership of
the stations as of January 1, 1997. Net revenue and station expenses for
stations operated under LMAs are included in the Company's historical
consolidated financial statements. For those stations operated under JSAs or
LMAs and subsequently acquired, associated fees and redundant expenses were
eliminated and estimated occupancy costs were included to adjust the results
of operations to reflect ownership of the stations as of January 1, 1997.
Dollars in the table below are shown in thousands.
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS FOR REPAYMENT OF
ACTUAL TELE-MEDIA LITTLE ROCK OTHER THE 1997 THE CREDIT
TELE-MEDIA(a) ACQUISITION ACQUISITIONS TRANSACTIONS(f) OFFERINGS FACILITY(i)
------------- --------------- --------------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue.......... $16,241 $ -- $5,293 $ 7,588 $ -- $ --
Station operating
expenses........... 12,679 (573)(b) 2,710 4,782 -- --
Depreciation and
amortization....... 2,208 2,278 (c) 2,037 3,923 -- --
Corporate general and
administrative..... 454 (788)(d) -- -- -- --
------- ------- ------ ------- ------- -------
Operating
expenses......... 15,341 917 4,747 8,705 -- --
------- ------- ------ ------- ------- -------
Operating income
(loss)............. 900 (917) 546 (1,117) -- --
Interest expense..... 10,375 (708)(e) 591 3,654 (7,298)(g) (6,730)
------- ------- ------ ------- ------- -------
Income (loss) before
income taxes....... (9,475) (209) (45) (4,771) 7,298 6,730
Income taxes
(benefit).......... -- (519) -- -- -- --
Dividend requirement
for exchangeable
preferred stock.... -- -- -- -- (7,225)(h) --
------- ------- ------ ------- ------- -------
Income (loss) from
continuing
operations......... $(9,475) $ 310 $ (45) $(4,771) $ 73 $ 6,730
======= ======= ====== ======= ======= =======
<CAPTION>
THE ORIGINAL THE COMPLETED
OFFERING(j) TRANSACTIONS
------------ -------------
<S> <C> <C>
Net revenue.......... $ -- $ 29,122
Station operating
expenses........... -- 19,598
Depreciation and
amortization....... -- 10,446
Corporate general and
administrative..... -- (334)
------- --------
Operating
expenses......... -- 29,710
------- --------
Operating income
(loss)............. -- (588)
Interest expense..... 2,632 2,516
------- --------
Income (loss) before
income taxes....... (2,632) (3,104)
Income taxes
(benefit).......... -- (519)
Dividend requirement
for exchangeable
preferred stock.... -- (7,225)
------- --------
Income (loss) from
continuing
operations......... $(2,632) $ (9,810)
======= ========
</TABLE>
- ---------------
(a) Represents the unaudited historical results of Tele-Media for the period
January 1, 1997 through July 3, 1997, including the historical operating
results of Wilkes-Barre/Scranton stations acquired by Tele-Media in
February and April 1997 which had been operated under LMA/JSA agreements
since August and December 1996. The operating results of Tele-Media are
included in the Company's results of operations beginning July 4, 1997,
the date of acquisition.
(b) Includes the elimination of $115,000 of expenses to reflect lower fees,
as a percentage of national advertising sales, paid by the Company to a
national representative for national advertising and the elimination of
$211,000 of LMA/JSA fees related to the Wilkes-Barre/Scranton stations
and $247,000 of expenses associated with the litigation between the
Company and Tele-Media. Had the Tele-Media Acquisition occurred on
January 1, 1997, these expenses would not have been incurred.
(c) Reflects increased depreciation and amortization resulting from the
purchase price allocation.
(d) Reflects the elimination of the management fees paid to affiliates by
Tele-Media of $454,000 and the recording of corporate overhead of
$200,000 which represents the Company's estimate of the incremental
expense necessary to oversee the Tele-Media stations and the
28
<PAGE> 33
elimination of $534,000 of expenses associated with the litigation
between the Company and Tele-Media. Had the 1997 Offerings and the
Tele-Media Acquisition occurred on January 1, 1997, these expenses would
not have been incurred.
(e) Reflects the elimination of Tele-Media interest expense of $5.5 million
and the recording of interest expense of $4.8 million that would have
been incurred if the acquisition of Tele-Media had occurred on January
1, 1997.
(f) Gives effect to the acquisitions of KENZ-FM, KBER-FM, KBEE-FM and
KFNZ-AM in Salt Lake City, KNHK-FM in Reno, KTHK-FM in Tri-Cities,
WXEX-FM and WHKK-FM in Providence, WLEV-FM in Allentown/Bethlehem, the
Boise Acquisition, the Wilkes-Barre/Scranton Acquisitions, the
disposition of WEST-AM in Allentown/Bethlehem, the Quincy Sale and the
acquisition of KAAY-AM and the disposition of KRNN-AM in Little Rock as
if each transaction had taken place on January 1, 1997.
(g) Reflects the reduction of the Company's pro forma interest expense, the
recording of interest expense related to the 10 1/4% Senior Subordinated
Notes (the "1997 Notes") and recording of the amortization of deferred
financing costs of $3.3 million related to the 1997 Notes.
(h) Reflects the recording of the dividends related to the Exchangeable
Preferred Stock as if the 1997 Offerings had taken place on January 1,
1997.
(i) Reflects the repayment of outstanding borrowings under the Credit
Facility with the proceeds from Citadel Communications' initial public
offering.
(j) Reflects the recording of the net increase in interest expense and the
amortization of deferred financing costs of $4.0 million related to the
notes.
(2) Represents the net effect of (a) the Baton Rouge/Lafayette Acquisition, (b)
the Saginaw/Bay City Acquisition, (c) the Carlisle acquisition and (d) the
Charleston/Binghamton/Muncie/Kokomo Acquisition as if each such transaction
had taken place on January 1, 1997. Depreciation and amortization for such
acquisitions are based upon preliminary allocations of the purchase price to
property and equipment and intangible assets which will be amortized over
periods of 1-25 years. Actual depreciation and amortization may differ
depending on the final allocation of the purchase price; however, management
does not believe these differences will be material. Dollars in the table
below are shown in thousands.
<TABLE>
<CAPTION>
CHARLESTON/BINGHAMTON/
BATON ROUGE/LAFAYETTE SAGINAW/BAY CITY CARLISLE MUNCIE/KOKOMO
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ADJUSTMENTS
--------------------- ---------------- ----------- ---------------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue................. $ 4,368 $ 4,934 $ 670 $11,052 $ --
Station operating
expenses.................. 3,323 3,322 392 8,156 (334)(a)
Depreciation and
amortization.............. 2,380 1,898 223 4,025 --
Corporate general and
administrative............ -- -- -- -- 1,200 (b)
------- ------- ------ ------- -----
Operating expenses........ 5,703 5,220 615 12,181 866
Operating income (loss)..... (1,335) (286) 55 (1,129) (866)
Interest expense............ 2,088 2,215 285 3,797 --
------- ------- ------ ------- -----
Income (loss) before income
taxes..................... (3,423) (2,501) (230) (4,926) (866)
Income taxes (benefit)...... (347) -- -- -- --
------- ------- ------ ------- -----
Income (loss) from
continuing operations..... $(3,076) $(2,501) $ (230) $(4,926) $(866)
======= ======= ====== ======= =====
<CAPTION>
PENDING
ACQUISITIONS
------------
<S> <C>
Net revenue................. $ 21,024
Station operating
expenses.................. 14,859
Depreciation and
amortization.............. 8,526
Corporate general and
administrative............ 1,200
--------
Operating expenses........ 24,585
Operating income (loss)..... (3,561)
Interest expense............ 8,385
--------
Income (loss) before income
taxes..................... (11,946)
Income taxes (benefit)...... (347)
--------
Income (loss) from
continuing operations..... $(11,599)
========
</TABLE>
- ---------------
(a) Includes the elimination of $202,000 of expenses to reflect lower fees,
as a percentage of national advertising sales, paid by the Company to a
national representative for national advertising and the elimination of
$132,000 of station management expenses.
(b) Reflects increased corporate overhead to administer additional stations.
29
<PAGE> 34
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY
ADJUSTMENTS FOR AS ADJUSTED FOR ADJUSTMENTS FOR
ACTUAL COMPLETED COMPLETED THE PENDING PRO FORMA
THE COMPANY TRANSACTIONS(1) TRANSACTIONS ACQUISITIONS(2) THE COMPANY
----------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue..................................... $ 89,803 $ 29,950 $119,753 $ 29,581 $149,334
Station operating expenses...................... 65,245 18,783 84,028 20,092 104,120
Depreciation and amortization................... 14,636 11,626 26,262 11,367 37,629
Corporate general and administrative............ 3,530 (334) 3,196 1,600 4,796
-------- -------- -------- -------- --------
Operating expenses.......................... 83,411 30,075 113,486 33,059 146,545
-------- -------- -------- -------- --------
Operating income (loss)......................... 6,392 (125) 6,267 (3,478) 2,789
Interest expense................................ 12,304 2,274 14,578 11,180 25,758
Other (income) expense, net..................... (451) -- (451) -- (451)
-------- -------- -------- -------- --------
Income (loss) before income taxes............... (5,461) (2,399) (7,860) (14,658) (22,518)
Income taxes (benefit).......................... (770) (1,048) (1,818) (463) (2,281)
Dividend requirement for exchangeable preferred
stock......................................... (6,633) (7,225) (13,858) -- (13,858)
-------- -------- -------- -------- --------
Income (loss) from continuing operations
applicable to common shares................... $(11,324) $ (8,576) $(19,900) $(14,195) $(34,095)
======== ======== ======== ======== ========
</TABLE>
30
<PAGE> 35
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(1) Represents the net effect of (a) the Tele-Media Acquisition, (b) the
acquisitions of KENZ-FM, KBER-FM, KBEE-FM and KFNZ-AM in Salt Lake City, (c)
the acquisition of KNHK-FM in Reno, (d) the acquisition of KTHK-FM in
Tri-Cities, (e) the acquisitions of WXEX-FM and WHKK-FM in Providence, (f)
Wilkes-Barre/Scranton Acquisitions, (g) the Little Rock Acquisitions, (h)
the Boise Acquisition, (i) the acquisition of WLEV-FM in
Allentown/Bethlehem, (j) the sale of WEST-AM in Allentown/Bethlehem, (k) the
Quincy Sale, (l) the acquisition of KAAY-AM and the disposition of KRNN-AM
in Little Rock, (m) the consummation of the 1997 Offerings, (n) repayment of
outstanding borrowings under the Credit Facility with the proceeds from
Citadel Communications' initial public offering and (o) the consummation of
the Original Offering as if each transaction had taken place on January 1,
1997. Net revenue and station expenses for stations operated under LMAs are
included in the Company's historical consolidated financial statements. For
those stations operated under JSAs or LMAs and subsequently acquired,
associated fees and redundant expenses were eliminated and estimated
occupancy costs were included to adjust the results of operations to reflect
ownership of the stations as of January 1, 1997. Dollars in the table below
are shown in thousands.
<TABLE>
<CAPTION>
ADJUSTMENTS REPAYMENT
FOR OF THE
ACTUAL TELE-MEDIA LITTLE ROCK OTHER THE 1997 CREDIT
TELE-MEDIA(a) ACQUISITION ACQUISITIONS ACQUISITIONS(f) OFFERINGS FACILITY
-------------- ----------- ------------ ---------------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenue.......... $16,241 $ -- $5,596 $ 8,113 $ -- $ --
Station operating
expenses............ 12,679 (573)(b) 2,835 3,842 -- --
Depreciation and
amortization........ 2,208 2,278 (c) 2,358 4,782 -- --
Corporate general and
administrative...... 454 (788)(d) -- -- -- --
------- ------ ------ ------- ------- -------
Operating
expenses.......... 15,341 917 5,193 8,624 -- --
------- ------ ------ ------- ------- -------
Operating income
(loss).............. 900 (917) 403 (511) -- --
Interest expense..... 10,375 (708)(e) 591 4,779 (7,298)(g) (8,974)(i)
------- ------ ------ ------- ------- -------
Income (loss) before
income taxes........ (9,475) (209) (188) (5,290) 7,298 8,974
Income taxes
(benefit)........... -- (519) (225) (304) -- --
Dividend requirement
for exchangeable
preferred stock..... -- -- -- -- (7,225)(h) --
------- ------ ------ ------- ------- -------
Income (loss) from
continuing
operations.......... $(9,475) $ 310 $ 37 $(4,986) $ 73 $ 8,974
======= ====== ====== ======= ======= =======
<CAPTION>
THE
THE ORIGINAL COMPLETED
OFFERING(j) TRANSACTIONS
------------ ------------
<S> <C> <C>
Net revenue.......... $ -- $29,950
Station operating
expenses............ -- 18,783
Depreciation and
amortization........ -- 11,626
Corporate general and
administrative...... -- (334)
------- -------
Operating
expenses.......... -- 30,075
------- -------
Operating income
(loss).............. -- (125)
Interest expense..... 3,509 2,274
------- -------
Income (loss) before
income taxes........ (3,509) (2,399)
Income taxes
(benefit)........... -- (1,048)
Dividend requirement
for exchangeable
preferred stock..... -- (7,225)
------- -------
Income (loss) from
continuing
operations.......... $(3,509) $(8,576)
======= =======
</TABLE>
- ---------------
(a) Represents the unaudited historical results of Tele-Media for the period
January 1, 1997 through July 3, 1997, including the historical operating
results of Wilkes-Barre/Scranton stations acquired by Tele-Media in
February and April 1997 which had been operated under LMA/JSA agreements
since August and December 1996. The operating results of Tele-Media are
included in the Company's results of operations beginning July 3, 1997,
the date of acquisition.
(b) Includes the elimination of $115,000 of expenses to reflect lower fees,
as a percentage of national advertising sales, paid by the Company to a
national representative for national advertising, the elimination of
$211,000 of LMA/JSA fees related to the Wilkes-Barre/Scranton stations
and the elimination of $247,000 of expenses associated with the
litigation between the Company and Tele-Media. Had the Tele-Media
Acquisition occurred on January 1, 1997, these expenses would not have
been incurred.
(c) Reflects increased depreciation and amortization resulting from the
purchase price allocation.
(d) Reflects the elimination of the management fees paid to affiliates by
Tele-Media of $454,000 and the recording of corporate overhead of
$200,000 which represents the Company's estimate of the incremental
expense necessary to oversee the Tele-Media stations and the elimination
of $534,000 of expenses associated with the litigation between the
Company and Tele-Media. Had the 1997 Offerings and the Tele-Media
Acquisition occurred on January 1, 1997, these expenses would not have
been incurred.
(e) Reflects the elimination of Tele-Media interest expense of $5.5 million
and the recording of interest expense of $4.8 million that would have
been incurred if the acquisition of Tele-Media had occurred on January
1, 1997.
31
<PAGE> 36
(f) Gives effect to (i) the acquisitions of WLEV-FM in Allentown/Bethlehem;
KBOI-AM, KQFC-FM and KKGL-FM in Boise; KENZ-FM, KBER-FM, KBEE-FM and
KFNZ-AM in Salt Lake City, KNHK-FM in Reno, KTHK-FM in Tri-Cities;
WXEX-FM and WHKK-FM in Providence; WEMR-AM/FM, WCTP-FM, WCTD-FM and
WCDL-AM in Wilkes-Barre/Scranton, KIZN-FM and KZMG-FM in Boise and
KAAY-AM in Little Rock, (ii) the sale of WEST-AM in Allentown/Bethlehem
and KRNN-AM in Little Rock and (iii) the Quincy Sale as if such
transactions had taken place on January 1, 1997.
(g) Reflects the reduction of the Company's pro forma interest expense, the
recording of interest expense related to the 1997 Notes and the
amortization of deferred financings costs of $3.3 million related to the
1997 Notes.
(h) Reflects the recording of the dividends on the Exchangeable Preferred
Stock as if the 1997 Offerings had taken place on January 1, 1997.
(i) Reflects the reduction of interest expense due to the pay down of the
Credit Facility with the proceeds received from Citadel Communications'
initial public offering.
(j) Reflects the recording of the net increase in interest expense and the
amortization of deferred financing costs of $4.0 million related to the
notes.
(2) Represents the net effect of (a) the Baton Rouge/Lafayette Acquisition, (b)
the Saginaw/Bay City Acquisition, (c) the Carlisle Acquisition, and (d) the
Charleston/Binghamton/Muncie/Kokomo Acquisition, as if each transaction had
taken place on January 1, 1997. Depreciation and amortization for such
acquisitions are based upon preliminary allocations of the purchase price to
property and equipment and intangible assets which will be amortized over
periods of 1-25 years. Actual depreciation and amortization may differ
depending on the final allocation of the purchase price; however, management
does not believe these differences will be material. Dollars in the table
below are shown in thousands.
<TABLE>
<CAPTION>
CHARLESTON/
BINGHAMTON/
BATON ROUGE/LAFAYETTE SAGINAW/BAY CITY CARLISLE MUNCIE/KOKOMO
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ADJUSTMENTS
--------------------- ---------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue.................... $ 6,064 $ 6,616 $ 899 $16,002 $ --
Station operating expenses..... 4,649 4,445 528 10,917 (447)(a)
Depreciation and
amortization................. 3,173 2,530 297 5,367 --
Corporate general and
administrative............... -- -- -- -- 1,600 (b)
------- ------- ------ ------- -------
Operating expenses........... 7,822 6,975 825 16,284 1,153
Operating income (loss)........ (1,758) (359) 74 (282) (1,153)
Interest expense............... 2,784 2,953 380 5,063 --
------- ------- ------ ------- -------
Income (loss) before income
taxes........................ (4,542) (3,312) (306) (5,345) (1,153)
Income taxes (benefit)......... (463) -- -- -- --
------- ------- ------ ------- -------
Income (loss) from continuing
operations................... $(4,079) $(3,312) $ (306) $(5,345) $(1,153)
======= ======= ====== ======= =======
<CAPTION>
PENDING
ACQUISITIONS
------------
<S> <C>
Net revenue.................... $ 29,581
Station operating expenses..... 20,092
Depreciation and
amortization................. 11,367
Corporate general and
administrative............... 1,600
--------
Operating expenses........... 33,059
Operating income (loss)........ (3,478)
Interest expense............... 11,180
--------
Income (loss) before income
taxes........................ (14,658)
Income taxes (benefit)......... (463)
--------
Income (loss) from continuing
operations................... $(14,195)
========
</TABLE>
- ---------------
(a) Includes the elimination of $271,000 of expenses to reflect lower fees,
as a percentage of national advertising sales, paid by the Company to a
national representative for national advertising and the elimination of
$176,000 of station management expenses.
(b) Reflects increased corporate overhead to administer additional stations.
32
<PAGE> 37
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITION OF
KAAY-AM AND ADJUSTMENTS ADJUSTMENTS FOR
ACTUAL ADJUSTMENTS FOR DISPOSITION OF FOR THE PENDING THE ORIGINAL PRO FORMA THE
THE COMPANY THE QUINCY SALE KRNN-AM ACQUISITIONS(1) OFFERING(2) COMPANY
----------- ---------------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents.............. $ 7,407 $ -- $ (4,909) $(17,000) $ 21,774 $ 7,272
Accounts and notes
receivable, net.......... 32,044 250 80 1,000 -- 33,374
Prepaid expenses........... 3,287 -- -- -- -- 3,287
-------- ------- -------- -------- -------- --------
Total current assets....... 42,738 250 (4,829) (16,000) 21,774 43,933
Property and equipment,
net...................... 36,834 (375) 220 14,500 -- 51,179
Intangible assets, net..... 290,405 (1,087) 4,620 142,449 -- 436,387
Other assets............... 3,376 -- -- -- 4,000 (3) 7,376
-------- ------- -------- -------- -------- --------
$373,353 $(1,212) $ 11 $140,949 $ 25,774 $538,875
======== ======= ======== ======== ======== ========
LIABILITIES AND
SHAREHOLDER'S EQUITY
Accounts payable and
accrued liabilities...... $ 11,399 $ -- $ 11 $ -- $ -- $ 11,410
Current maturities of other
long-term obligations.... 282 -- -- -- -- 282
-------- ------- -------- -------- -------- --------
Total current
liabilities.............. 11,681 -- 11 -- -- 11,692
-------- ------- -------- -------- -------- --------
Notes payable, less current
maturities............... 18,726 (2,000) -- 132,500 (89,226)(4) 60,000
10-1/4% Notes.............. 98,461 -- -- -- -- 98,461
9-1/4% Notes............... -- -- -- -- 115,000 115,000
Other long-term
obligations, less current
maturities............... 1,011 -- -- 1,500 -- 2,511
Deferred tax liability..... 25,306 -- -- 6,949 -- 32,255
Exchangeable preferred
stock.................... 112,965 -- -- -- -- 112,965
Shareholder's equity:
Common stock and
additional paid-in
capital................ 137,648 -- -- -- -- 137,648
Accumulated deficit...... (32,445) 788 -- -- -- (31,657)
-------- ------- -------- -------- -------- --------
$373,353 $(1,212) $ 11 $140,949 $ 25,774 $538,875
======== ======= ======== ======== ======== ========
</TABLE>
33
<PAGE> 38
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
(1) Represents the net effect of (i) the Baton Rouge/Lafayette Acquisition, (ii)
the Saginaw/Bay City Acquisition, (iii) the Carlisle Acquisition, and (iv)
the Charleston/Binghamton/Muncie/Kokomo Acquisition.
(2) Represents the issuance of the outstanding notes and the application of the
net proceeds from the Original Offering.
(3) Reflects the initial purchasers' discount and the expenses of the Original
Offering.
(4) Reflects the repayment of borrowings under the Credit Facility.
34
<PAGE> 39
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data of the Company presented below as of
and for each of the years in the five-year period ended December 31, 1997 are
derived from the consolidated financial statements of the Company, which
consolidated financial statements have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The selected historical financial data
of the Company presented below as of September 30, 1998 and for the nine months
ended September 30, 1997 and 1998 are derived from unaudited consolidated
financial statements of the Company which, in the opinion of management, contain
all necessary adjustments of a normal recurring nature to present the financial
statements in conformity with GAAP. The consolidated financial statements of the
Company as of December 31, 1996 and 1997 and for each of the years in the
three-year period ended December 31, 1997 and the independent auditors' report
thereon, as well as the unaudited consolidated financial statements of the
Company as of September 30, 1998 and for the nine months ended September 30,
1997 and 1998, are included elsewhere in this prospectus. The financial results
of the Company are not comparable from year to year because the Company acquired
and disposed of various radio stations. The selected historical financial data
below should be read in conjunction with, and is qualified by reference to, the
Company's Consolidated Financial Statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- --------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue............................. $ 21,376 $ 32,998 $ 34,112 $ 45,413 $ 89,803 $ 60,025 $ 98,821
Station operating expenses.............. 17,081 24,331 26,832 33,232 65,245 43,306 69,412
Depreciation and amortization........... 5,245 7,435 4,891 5,158 14,636 9,563 20,005
Corporate general and administrative.... 961 2,504 2,274 3,248 3,530 2,562 3,351
-------- -------- -------- -------- --------- --------- --------
Operating income (loss)................. (1,911) (1,272) 115 3,775 6,392 4,594 6,053
Interest expense(1)..................... 2,637 4,866 5,242 6,155 12,304 8,214 13,590
Other income, net....................... 149 657 781 414 451 401 94
-------- -------- -------- -------- --------- --------- --------
Income (loss) before income taxes and
extraordinary item.................... (4,399) (5,481) (4,346) (1,966) (5,461) (3,219) (7,443)
Income tax benefit...................... -- -- -- -- (770) (105) (1,163)
-------- -------- -------- -------- --------- --------- --------
Income (loss) before extraordinary
item.................................. (4,399) (5,481) (4,346) (1,966) (4,691) (3,114) (6,280)
Extraordinary loss(2)................... -- -- -- (1,769) -- -- --
-------- -------- -------- -------- --------- --------- --------
Net income (loss)....................... $ (4,399) $ (5,481) $ (4,346) $ (3,735) $ (4,691) $ (3,114) $ (6,280)
Dividend requirement for exchangeable
preferred stock....................... -- -- -- -- 6,633 3,276 10,822
-------- -------- -------- -------- --------- --------- --------
Net loss applicable to common
shares(3)............................. $ (4,399) $ (5,481) $ (4,346) $ (3,735) $ (11,324) $ (6,390) $(17,102)
======== ======== ======== ======== ========= ========= ========
Net loss per common share(4)............ $ (110) $ (137) $ (109) $ (93) $ (283) $ (160) $ (428)
Shares used in per share calculation.... 40,000 40,000 40,000 40,000 40,000 40,000 40,000
OTHER DATA:
Broadcast cash flow(5).................. $ 4,295 $ 8,667 $ 7,280 $ 12,181 $ 24,558 $ 16,719 $ 29,409
EBITDA(5)............................... 3,334 6,163 5,006 8,933 21,028 14,157 26,058
Net cash provided by (used in) operating
activities............................ 361 324 (434) (1,394) 5,543 4,137 3,946
Net cash provided by (used in) investing
activities............................ (10,818) (14,037) 4,810 (61,168) (211,622) (133,350) (39,350)
Net cash provided by (used in) financing
activities............................ 10,070 14,393 (4,908) 63,145 212,176 154,324 35,127
Capital expenditures.................... 679 2,857 1,691 2,038 2,070 1,478 1,747
Deficiency of earnings to fixed
charges(6)............................ 4,399 5,481 4,346 1,966 12,094 6,495 18,265
</TABLE>
35
<PAGE> 40
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
-------- -------- -------- -------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 857 $ 1,538 $ 1,005 $ 1,588 $ 7,685 $ 7,407
Working capital (deficiency).................. 1,701 3,382 2,928 (4,195) 22,593 31,057
Intangible assets, net........................ 17,454 20,080 15,093 51,802 268,690 290,405
Total assets.................................. 36,120 46,397 37,372 102,244 344,172 373,353
Long-term debt (including current
portion)(1)................................. 30,468 47,805 43,046 91,072 189,699 118,480
Exchangeable preferred stock.................. -- -- -- -- 102,010 112,965
Shareholder's equity (deficit)................ 3,492 (4,782) (9,249) 5,999 16,132 105,204
</TABLE>
- ---------------
(1) Includes debt issuance costs and debt discount amortization of $139,000,
$287,000, $132,000, $163,000 and $441,000 for the years ended December 31,
1993, 1994, 1995, 1996 and 1997, respectively, and $156,000 and $401,000 for
the nine months ended September 30, 1997 and 1998, respectively.
(2) On October 9, 1996, the Company extinguished its long-term debt of $31.3
million, payable to a financial institution, and its note payable to a
related party of $7.0 million. The early retirement of the long-term debt
resulted in a $1.8 million extraordinary loss due to prepayment premiums and
the write-off of debt issuance costs.
(3) The Company has never declared cash dividends on its common stock.
(4) Basic and diluted net loss per common share are the same for all periods
presented due to net losses of the Company.
(5) "Broadcast cash flow" consists of operating income (loss) before
depreciation, amortization and corporate general and administrative
expenses. "EBITDA" consists of operating income (loss) before depreciation
and amortization. Although broadcast cash flow and EBITDA are not measures
of performance calculated in accordance with GAAP, management believes that
they are useful to an investor in evaluating the Company because they are
measures widely used in the broadcasting industry to evaluate a radio
company's operating performance. However, broadcast cash flow and EBITDA
should not be considered in isolation or as substitutes for net income, cash
flows from operating activities and other income or cash flow statement data
prepared in accordance with GAAP as a measure of liquidity or profitability.
(6) Fixed charges include interest expense on debt, amortization of financing
costs, amortization of debt discount, 33% of rent expense, and dividend
requirements with respect to the Exchangeable Preferred Stock.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with
"Selected Historical Financial Data" and the Company's Consolidated Financial
Statements and related notes included elsewhere in this prospectus. Except for
the historical information contained herein, the discussions in this prospectus
contain forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below and in the section entitled "Risk Factors," as
well as those discussed elsewhere in this prospectus.
The principal source of the Company's revenue is the sale of broadcasting
time on its radio stations for advertising. As a result, the Company's revenue
is affected primarily by the advertising rates its radio stations charge.
Correspondingly, the rates are based upon a station's ability to attract
audiences in the demographic groups targeted by its advertisers, as measured
principally by periodic Arbitron Radio Market Reports. The number of
advertisements that can be broadcast without jeopardizing listening levels (and
the resulting ratings) is limited in part by the format of a particular station.
Each of the Company's stations has a general pre-determined level of on-air
inventory that it makes available for advertising, which may be different at
different times of the day and tends to remain stable over time. Much of the
Company's selling activity is based on demand for its radio stations' on-air
inventory and, in general, the Company responds to this demand by varying prices
rather than by changing the available inventory.
In the broadcasting industry, radio stations often utilize trade (or
barter) agreements to exchange advertising time for goods or services (such as
other media advertising, travel or lodging), in lieu of cash. In order to
preserve most of its on-air inventory for cash advertising, the Company
generally enters into trade agreements only if the goods or services bartered to
the Company will be used in the Company's business. The Company has minimized
its use of trade agreements and has generally sold over 90% of its advertising
time for cash. In addition, it is the Company's general policy not to preempt
advertising spots paid for in cash with advertising spots paid for in trade.
In 1997, the Company's radio stations derived approximately 84.7% of their
net broadcasting revenue from local and regional advertising in the markets in
which they operate, and the remainder resulted principally from the sale of
national advertising. Local and regional advertising is sold primarily by each
station's sales staff. To generate national advertising sales, the Company
engages a national advertising representative firm. The Company believes that
the volume of national advertising revenue tends to adjust to shifts in a
station's audience share position more rapidly than does the volume of local and
regional advertising revenue. Therefore, the Company focuses on sales of local
and regional advertising. During the year ended December 31, 1997 and the nine
months ended September 30, 1998, no single advertiser accounted for more than
9.2% of the net revenue of any of the Company's station groups or more than 1.4%
of total net revenue of the Company.
The Company's quarterly revenue varies throughout the year, as is typical
in the radio broadcasting industry. The Company's first calendar quarter
typically produces the lowest revenue for the year, and the second and fourth
calendar quarters generally produce the highest revenue for the year. The
advertising revenue of the Company is typically collected within 120 days of the
date on which the related advertising is aired and its corresponding revenue is
recognized. Most accrued expenses, however, are paid within 45 to 60 days. As a
result of this time lag, working capital requirements have increased as the
Company has grown and will likely increase further in the future.
The primary operating expenses incurred in the ownership and operation of
radio stations include employee salaries and commissions, programming expenses
and advertising and promotion expenses. The Company also incurs and will
continue to incur significant depreciation, amortization and interest expense as
a result of completed and future acquisitions of stations and existing and
future borrowings. The Company's
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consolidated financial statements tend not to be directly comparable from period
to period due to the Company's acquisition activity.
Historically and on a pro forma basis, the Company has generated net losses
primarily as a result of significant charges for depreciation and amortization
relating to the acquisition of radio stations and interest charges on
outstanding debt. The Company amortizes FCC licenses and goodwill attributable
to the acquisition of radio stations over a fifteen-year period. Based upon the
large number of acquisitions that were consummated within the last two years,
the Company anticipates that depreciation and amortization charges will continue
to be significant for several years. To the extent that the Company consummates
additional acquisitions, its depreciation and amortization charges are likely to
increase. The Company expects that it will continue to incur net losses through
at least 1999.
The Company's financial results are dependent on a number of factors,
including the general strength of the local and national economies, population
growth, ability to provide popular programming, local market and regional
competition, relative efficiency of radio broadcasting compared to other
advertising media, signal strength and government regulation and policies.
The Company consolidates the operations of stations operated under LMAs.
The Emerging Issues Task Force, a division of the Financial Accounting Standards
Board ("EITF"), is reviewing the accounting method for contractual management
arrangements and may determine that consolidation is appropriate only if certain
requirements for controlling financial interest are met. The provisions of the
Company's existing LMAs do not meet the proposed control requirements, thus if
the EITF proposal is approved as drafted, consolidation of stations operated
under LMAs may no longer be appropriate.
"Broadcast cash flow" consists of operating income (loss) before
depreciation, amortization and corporate expenses. "EBITDA" consists of
operating income (loss) before depreciation and amortization. Although broadcast
cash flow and EBITDA are not measures of performance calculated in accordance
with GAAP, management believes that they are useful to an investor in evaluating
the Company because they are measures widely used in the broadcasting industry
to evaluate a radio company's operating performance. However, broadcast cash
flow and EBITDA should not be considered in isolation or as substitutes for net
income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP as a measure of liquidity or
profitability.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
Net Broadcasting Revenue. Net broadcasting revenue increased $38.8 million
or 64.7% to $98.8 million for the nine months ended September 30, 1998 from
$60.0 million for the nine months ended September 30, 1997. The inclusion of
revenue from the acquisitions of radio stations and revenue generated from LMAs
and JSAs entered into during 1997 and 1998 provided $32.6 million of the
increase. For stations owned and operated over the comparable period in 1997 and
1998, net broadcasting revenue improved $6.2 million or 12.7% to $54.9 million
in 1998 from $48.7 million in 1997, primarily due to increased ratings and
improved selling efforts.
Station Operating Expenses. Station operating expenses increased $26.1
million or 60.3% to $69.4 million for the nine months ended September 30, 1998
from $43.3 million for the nine months ended September 30, 1997. The increase
was primarily attributable to the inclusion of station operating expenses of the
radio station acquisitions and the LMAs and JSAs entered into during 1997 and
1998.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased $12.7 million or 76.0% to $29.4 million for the nine months
ended September 30, 1998 from $16.7 million for the nine months ended September
30, 1997. As a percentage of net broadcasting revenue, broadcast cash flow
improved to 29.8% for the nine months ended September 30, 1998 compared to 27.8%
for the nine months ended September 30, 1997.
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Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.8 million or 30.8% to $3.4 million for the
nine months ended September 30, 1998 from $2.6 million for the nine months ended
September 30, 1997. The increase was due primarily to an increase in staffing
levels needed to support the Company's growth.
EBITDA. As a result of the factors described above, EBITDA increased $11.9
million or 83.8% to $26.1 million for the nine months ended September 30, 1998
from $14.2 million for the nine months ended September 30, 1997.
Depreciation and Amortization. Depreciation and amortization expense
increased $10.4 million or 108.3% to $20.0 million for the nine months ended
September 30, 1998 from $9.6 million for the nine months ended September 30,
1997, primarily due to radio station acquisitions consummated during 1997 and
1998.
Interest Expense. Interest expense increased approximately $5.4 million or
65.9% to $13.6 million for the nine months ended September 30, 1998 from $8.2
million for the nine months ended September 30, 1997, primarily due to interest
expense associated with additional borrowings to fund acquisitions consummated
in 1997 and 1998, offset by a repayment of the borrowings in the third quarter
of 1998 from the proceeds of Citadel Communications' initial public offering.
Net Loss. As a result of the factors described above, net loss increased
$3.2 million or 103.2% to $6.3 million for the nine months ended September 30,
1998 from $3.1 million for the nine months ended September 30, 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net Broadcasting Revenue. Net broadcasting revenue increased $44.3 million
or 97.7% to $89.8 million in 1997 from $45.4 million in 1996. The inclusion of
net revenue from the acquisitions of radio stations and net revenue generated
from LMAs and JSAs entered into during 1997 provided $41.8 million of the
increase. For stations owned and operated over the comparable period in 1997 and
1996, net broadcasting revenue improved approximately $2.5 million or 6.7% to
$40.7 million in 1997 from $38.2 million in 1996 primarily due to increased
ratings and improved selling efforts.
Station Operating Expenses. Station operating expenses increased $32.0
million or 96.3% to $65.2 million in 1997 from $33.2 million in 1996. The
increase was primarily attributable to the inclusion of station operating
expenses of the radio station acquisitions and the LMAs and JSAs entered into
during 1997.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased $12.4 million or 101.6% to $24.6 million in 1997 from $12.2
million in 1996. As a percentage of net broadcasting revenue, broadcast cash
flow increased to 27.3% in 1997 from 26.8% in 1996.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.3 million or 8.7% to $3.5 million in 1997
from $3.2 million in 1996. The increase is due primarily to an increase in
staffing levels required to support the Company's growth through acquisitions.
EBITDA. As a result of the factors described above, EBITDA increased $12.1
million or 135.4% to $21.0 million in 1997 from $8.9 million in 1996.
Depreciation and Amortization. Depreciation and amortization expense
increased $9.5 million or 183.8% to $14.6 million in 1997 from $5.2 million in
1996, primarily due to radio station acquisitions consummated during 1997.
Interest Expense. Interest expense increased $6.1 million or 99.9% to $12.3
million in 1997 from $6.2 million in 1996, primarily due to interest expense
associated with additional borrowings to fund acquisitions consummated during
1997.
Net Loss. As a result of the factors described above, net loss increased
$1.0 million or 25.6% to $4.7 million in 1997 from $3.7 million in 1996.
Included in the net loss for 1996 is a $1.8 million extraordinary loss related
to the repayment of long-term debt.
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YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Broadcasting Revenue. Net broadcasting revenue increased $11.3 million
or 33.1% to $45.4 million in 1996 from $34.1 million in 1995. The inclusion of
revenue from the acquisitions of radio stations and revenue generated from LMAs
and JSAs entered into during 1996 provided $7.8 million of the increase. For
stations owned and operated over the comparable period in 1995 and 1996, net
broadcasting revenue improved $3.5 million or 11.4% to $34.2 million in 1996
from $30.6 million in 1995 primarily due to increased ratings and improved
selling efforts.
Station Operating Expenses. Station operating expenses increased $6.4
million or 23.9% to $33.2 million in 1996 from $26.8 million in 1995. The
increase was primarily attributable to the inclusion of station operating
expenses of the radio station acquisitions and the LMAs and JSAs entered into
during 1996.
Broadcast Cash Flow. As a result of the factors described above, broadcast
cash flow increased $4.9 million or 67.1% to $12.2 million in 1996 from $7.3
million in 1995. As a percentage of net broadcasting revenue, broadcast cash
flow increased to 26.8% in 1996 from 21.4% in 1995.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.9 million or 39.1% to $3.2 million in 1996
from $2.3 million in 1995. Substantially all of the increase was due to
professional expenses incurred in 1996 related to the Company's capital raising
activities and a lawsuit between the Company and Tele-Media Broadcasting Company
("Tele-Media") and certain of its shareholders and officers which arose in
connection with Tele-Media's decision not to consummate a sale of its radio
stations to the Company pursuant to a 1995 agreement. In connection with the
Company's acquisition of Tele-Media, the litigation was settled.
EBITDA. As a result of the factors described above, EBITDA increased $3.9
million or 78.0% to $8.9 million in 1996 from $5.0 million in 1995.
Depreciation and Amortization. Depreciation and amortization expense
increased $0.3 million or 6.1% to $5.2 million in 1996 from $4.9 million in
1995, primarily due to radio station acquisitions consummated during 1996.
Interest Expense. Interest expense increased $1.0 million or 19.2% to $6.2
million in 1996 from $5.2 million in 1995, primarily due to interest expense
associated with additional borrowings to fund acquisitions consummated during
1996.
Net Loss. As a result of the factors described above, net loss decreased
$0.6 million or 14.1% to $3.7 million in 1996 from $4.3 million in 1995.
Included in the net loss for 1996 is $0.4 million of interest earned on loans
advanced by the Company to Deschutes River Broadcasting, Inc. ("Deschutes")
prior to the acquisition of Deschutes by the Company and a $1.8 million
extraordinary loss related to the repayment of long-term debt.
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided By Operations. For the nine months ended September 30,
1998, net cash provided by operations decreased to $3.9 million from $4.1
million for the comparable 1997 period primarily due to increases in accounts
receivable, prepaid expenses and accounts payable, offset by decreases in other
assets and accrued liabilities. Net cash provided by operations increased to
$5.5 million in 1997 from $1.4 million in 1996. The increase was primarily due
to an increase in amortization and depreciation as a result of acquisitions.
Net Cash Used in Investing Activities. For the nine months ended September
30, 1998, net cash used in investing activities decreased to $39.4 million from
$133.3 million in the comparable 1997 period. Net cash used in investing
activities in 1997 was $211.6 million, compared to $61.2 million in 1996. Net
cash used in investing activities was used primarily to acquire stations.
Net Cash Provided By Financing Activities. For the nine months ended
September 30, 1998, net cash provided by financing activities was $35.1 million
compared to $154.3 million in the comparable 1997
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period. This decrease is the result of the use of proceeds from Citadel
Communications' initial public offering to repay indebtedness in 1998 while the
proceeds from the 1997 Offerings were used for acquisitions and operations, as
well as for the repayment of indebtedness. The decrease was offset by increased
borrowings in the 1998 period. Net cash provided by financing activities in 1997
was $212.2 million, primarily from the proceeds of the 1997 Offerings, compared
to $63.1 million in 1996.
Principal Liquidity Requirements. The Company's principal liquidity
requirements are for acquisition financing, debt service, working capital and
general corporate purposes, including capital expenditures. The Company's
acquisition strategy has required, and will continue in the foreseeable future
to require, a significant portion of the Company's capital resources. The
Company expects that its debt service and capital expenditure obligations within
the next twelve months will include approximately $10.6 million for interest on
the notes, approximately $10.4 million for interest on the 10 1/4% Senior
Subordinated Notes (the "1997 Notes") and approximately $3.5 million for capital
expenditures. The Exchangeable Preferred Stock does not require cash dividends
through July 1, 2002. The Company expects the funds for debt service obligations
and capital expenditures to be provided from operations.
The Company and Citadel Communications have financed the Company's past
acquisitions through bank borrowings, sales of equity and debt securities,
internally generated funds and proceeds from asset sales. The Company used $5.1
million of the net proceeds of the Original Offering to pay the purchase price
of the Company's acquisition of KAAY-AM in Little Rock and to repay outstanding
indebtedness, and it intends to use a portion of the remaining net proceeds of
the Original Offering to pay the purchase price of certain of the Pending
Acquisitions. The Company expects that financing for other future acquisitions
will be provided through bank borrowings, the sale of debt and equity securities
and internally generated funds.
Credit Facility. At September 30, 1998, the Company had $18.7 million
outstanding under the Credit Facility. The Company used a portion of the net
proceeds of the Original Offering to repay all outstanding borrowings under the
Credit Facility. The Credit Facility provides for revolving borrowings of up to
$140.0 million.
The Credit Facility restricts the ability of the Company's wholly owned
subsidiary Citadel License, Inc. ("Citadel License") to pay cash dividends or
make other distributions in respect of its capital stock. The Company is not
dependent in any material respect on the receipt of dividends or other payments
from Citadel License. The Credit Facility also contains other customary
restrictive covenants, which, among other things, and with certain exceptions,
limit the ability of the Company and Citadel License (the "Borrowers") to incur
additional indebtedness and liens in connection therewith, enter into certain
transactions with affiliates, consolidate, merge or effect certain asset sales,
issue additional stock, make certain capital or overhead expenditures, make
certain investments, loans or prepayments or change the nature of their
business. The Borrowers are also required to satisfy certain financial
covenants, which require the Borrowers to maintain specified financial ratios
and to comply with certain financial tests, such as ratios for maximum leverage,
senior debt leverage, minimum interest coverage and minimum fixed charges.
- Maximum Leverage Test. The maximum leverage test requires that the
Borrowers not permit the ratio of Total Debt (as defined in the Credit
Facility) as of the last day of any month to the Adjusted Operating
Cash Flow (as defined in the Credit Facility) for the twelve-month
period ending as of the last day of such month to be greater than the
Applicable Ratio on such date. The Applicable Ratio through May 1999
is 6.00. For each six-month period thereafter through maturity, the
Applicable Ratio shall decrease by 0.25.
- Senior Debt Leverage Test. The senior debt leverage test requires that
the Borrowers not permit the ratio of the unpaid principal balance of
the Credit Facility or any specified portion thereof outstanding from
time to time as of the last day of any month to the Adjusted Operating
Cash Flow for the twelve-month period ending on such date to be
greater than 4.50 for the period through May 1999. For each six-month
period thereafter through maturity, such maximum ratio shall decrease
by 0.25.
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- Minimum Interest Coverage Test. The minimum interest coverage test
requires that the Borrowers not permit the ratio of their consolidated
Operating Cash Flow (as defined in the Credit Facility) for a
specified four-quarter period to Interest Expense (as defined in the
Credit Facility) and cash dividends on the Company's 13-1/4%
Exchangeable Preferred Stock (the "Exchangeable Preferred Stock") for
the same four-quarter period to be less than 2.0 for the quarter
ending December 1998. The minimum ratio shall be 2.25 for each quarter
ending thereafter through maturity.
- Minimum Fixed Charges Test. The minimum fixed charges test requires
that the Borrowers not permit the ratio of their consolidated
Operating Cash Flow for any specified four-quarter period to Fixed
Charges (as defined in the Credit Facility) for the same four-quarter
period to be less than 1.1 to 1.0.
The Borrowers are in compliance with the financial ratios and financial
condition tests in its debt obligations.
Other Indebtedness and Exchangeable Preferred Stock. The documents
governing the Company's other indebtedness and the terms of the Exchangeable
Preferred Stock also contain certain covenants that restrict the Company from
taking various actions, including, subject to specified exceptions, the
incurrence of additional indebtedness, the granting of additional liens, the
making of investments, the payment of dividends and other restricted payments,
mergers, acquisitions and other fundamental corporate changes, capital
expenditures and transactions with affiliates.
Additional Capital Resources. Management believes that cash from operating
activities, borrowings under the Credit Facility and the remaining net proceeds
of the Original Offering should be sufficient to permit the Company to meet its
financial obligations and to fund its operations for at least the next twelve
months. However, the Company may require additional capital resources in
connection with the further implementation of its acquisition strategy.
Year 2000 Matters. The Year 2000 computer issue primarily results from the
fact that information technology hardware and software systems and other
non-information technology products containing embedded microchip processors
were originally programmed using a two digit format, as opposed to four digits,
to indicate the year. Such programming will be unable to interpret dates beyond
the year 1999, which could cause system and product failure, other computer
errors and a disruption in the operation of such systems and products.
The Company's project team has identified its accounting and traffic
systems, satellite delivered programming, digital automation systems and
internet service provider systems as the mission critical systems to evaluate
for Year 2000 compliance. In addition, while there are several software programs
currently used throughout the Company which are not Year 2000 compliant, the
vendors of this software have committed to provide Year 2000 compliant updates
to the Company. The Company expects to have all such updates tested and
operational by June 1999.
The Company has identified five phases for the project team to address for
each of the Company's risk areas. These phases are (1) an inventory of the
Company's systems described above, (2) assessment of the systems to determine
the risk and apparent extent of Year 2000 problems, (3) remediation of
identified problems, (4) testing of systems for Year 2000 readiness and (5)
contingency planning for the worst-case scenarios.
Inventories have been completed for all mission critical Company software
applications and hardware systems, and the Company expects to complete an
inventory of at-risk non-information technology systems in the fourth quarter of
1998 or early in the first quarter of 1999. The project team is currently
assessing compliance issues related to the Company's information hardware and
software, and expects to complete such assessment in the first quarter of 1999.
The Company expects that some amount of the testing will be performed during
this assessment phase.
In each of its markets, the Company employs centralized accounting and
traffic (advertising scheduling) systems for all of its stations in the market.
In September 1998, the Company completed the replacement and
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upgrading of software certified as Year 2000 compliant by the software vendor.
The Company intends to complete Year 2000 testing of this software in the first
quarter of 1999. The total cost of the software upgrade was $0.3 million. In
connection with the software upgrade, much of the accounting and traffic
hardware systems were also upgraded or replaced. The total cost of the hardware
upgrade was $0.1 million. The Company anticipates that evaluation for Year 2000
compliance of the hardware and the new software used in its accounting and
traffic systems will be completed during the first quarter of 1999.
Satellite delivered programs, which are delivered to the Company's radio
stations from outside sources, represent a third party risk to the Company
arising from the Year 2000 issue. The Company is sending questionnaires to each
of the vendors of these programs during the fourth quarter of 1998 asking them
to update the Company on the status of their Year 2000 compliance. Until those
questionnaires are returned and reviewed, the Company is unable to determine the
potential for disruption in its programming arising from this third party risk.
If the Company does not receive reasonable assurances regarding Year 2000
compliance from any vendor of these programs, the Company would then develop
contingency plans for alternative programming.
The Company is currently reviewing a proposal to update and expand the
digital automation systems used in the Company. Although not directly related to
the Year 2000 problem, the Company believes the expansion and replacement of
these systems, which the Company anticipates would be completed by the end of
June 1999, would minimize or eliminate Year 2000 problems associated with these
systems. If the Company elects not to pursue such expansion, it anticipates that
the total cost of replacing the non-compliant digital components in its current
digital automation systems would be approximately $0.5 million and that the
replacement would be completed by the end of June 1999.
The Company recently completed an expansion of its internet service
provider division. All mission critical elements of such division are certified
Year 2000 compliant by the software and hardware vendors. The Company expects to
conduct testing of such software and hardware during the first quarter of 1999.
No material expansion is scheduled for this division prior to the year 2000.
In addition to identification of these mission critical systems, the
Company has identified the top 10 advertisers on each of its radio stations.
Questionnaires are being sent to each of these advertisers during the fourth
quarter of 1998 asking them to update the Company on the status of their Year
2000 compliance. In addition, questionnaires are also being sent to various
equipment vendors, banks and other lending institutions that provide substantial
products and services to the Company. Until the questionnaires are returned and
reviewed, the Company is unable to determine the effect of these third party
risks on the Company's operations. There can be no assurance that the Company
will be successful in finding alternative Year 2000 compliant advertisers,
suppliers and service providers, if required.
The Company also intends to solicit information regarding its critical
internal non-information technology systems such as telephones and HVAC prior to
March 31, 1999. Any required remediation and testing of the Company's
non-information technology systems is expected to be completed by June 1999.
The Company is in the process of determining its contingency plans, which
are expected to include the identification of the Company's most reasonably
likely worst-case scenarios. Preliminary contingency plans are expected to be
completed during the first quarter of 1999 and comprehensive plans are expected
to be completed by the second or third quarter of 1999. At this time, the
Company does not have sufficient information to assess the likelihood of such
worst-case scenarios. Currently, the Company believes that the most reasonably
likely sources of risk to the Company include (1) disruptions in the supply of
satellite delivered programs and (2) diminished demand for advertising time
arising from Year 2000 problems both specific to the Company's advertisers or
more generally related to the potential for economic disruptions related to the
Year 2000 issues.
Based on its current assessment efforts, the Company does not believe that
Year 2000 issues related to its internal systems will have a material adverse
effect on the Company's financial condition or results of operations. However,
as described above, the failure by third parties to be Year 2000 ready could
have a material adverse effect on the Company.
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BUSINESS
GENERAL
The Company is a radio broadcasting company that focuses on acquiring,
developing and operating radio stations in mid-sized markets. Upon completion of
the transactions described under the caption "The Pending Transactions" (the
"Pending Transactions"), the Company will own or operate 92 FM and 43 AM radio
stations in 26 markets, including clusters of four or more stations in 19
markets, and will have the right to construct one additional FM station. The
Company's stations comprise the first or second ranked radio station group in
terms of revenue share in 19 of its markets for which such information is
available. On a pro forma basis, after giving effect to the transactions
described under the caption "Pro Forma Financial Information" as if all such
transactions had occurred on January 1, 1997, the Company would have had net
broadcasting revenue and broadcast cash flow of $161.4 million and $51.5
million, respectively, for the twelve months ended September 30, 1998.
The Company's primary strategy is to secure and maintain a leadership
position in the markets it serves and to expand into additional mid-sized
markets where it believes a leadership position can be obtained. Upon entering a
market, the Company seeks to acquire stations which, when integrated with its
existing operations, allow it to reach a wider range of demographic groups that
appeal to advertisers, increase revenue and achieve substantial cost savings.
The Company has completed 31 station acquisitions in markets where it already
owned stations and has entered into a JSA and an LMA for eight and one
additional stations, respectively, in those markets. Primarily as a result of
this strategy, in the six markets in which the Company has owned radio stations
since 1994, the Company has increased its average revenue share and average
broadcast cash flow margin from 37.3% and 19.9%, respectively, for the year
ended December 31, 1995, to 52.1% and 34.2%, respectively, for the twelve months
ended September 30, 1998.
The Company believes that mid-sized markets represent attractive
opportunities because, as compared to the 50 largest markets in the United
States, they are generally characterized by:
- lower radio station purchase prices as a multiple of broadcast cash
flow,
- fewer sophisticated and well-capitalized competitors, including both
radio and competing advertising media such as newspapers and
television, and
- less direct format competition due to the smaller number of stations
in any given market.
The Company believes that the attractive operating characteristics of mid-sized
markets coupled with the opportunity to establish or expand in-market radio
station groups create the potential for substantial revenue growth and cost
efficiencies. As a result, management seeks to achieve broadcast cash flow
margins that are comparable to the higher margins that historically were
generally achievable only in the 50 largest markets.
The Company's portfolio of stations is diversified in terms of format,
target demographics and geographic location. Because of the size of its
portfolio and its individual radio station groups, the Company believes it is
not unduly reliant upon the performance of any single station. The Company also
believes that the diversity of its portfolio of radio stations helps insulate
the Company from downturns in specific markets and changes in format
preferences.
CORPORATE HISTORY AND RECENTLY COMPLETED TRANSACTIONS
The Company was incorporated in Nevada in 1991, and in 1992 it acquired all
of the radio stations then owned or operated by Citadel Associates Limited
Partnership and Citadel Associates Montana Limited Partnership (collectively,
"Predecessor") and certain other radio stations. Lawrence R. Wilson, Chief
Executive Officer of the Company, was a co-founder and one of the two general
partners of Predecessor. In 1993, Citadel Communications was incorporated and
the Company was reorganized as a wholly owned subsidiary of Citadel
Communications. Citadel Communications currently owns all of the issued and
outstanding common stock of the Company. The Company acquired ownership of
additional radio stations in each of 1993, 1994, 1996, 1997 and 1998. Citadel
License holds the Company's radio broadcast licenses and does not conduct any
independent business operations.
44
<PAGE> 49
As of January 1, 1997, Citadel Communications acquired Deschutes which
owned 18 radio stations in Montana, Oregon and Washington. The total
consideration paid was approximately $26.0 million. Following the acquisition,
Deschutes was operated as a sister company to the Company until June 20, 1997
when Deschutes was merged with and into the Company.
On July 3, 1997, the Company purchased all of the outstanding capital stock
of Tele-Media which owned or operated 16 FM and ten AM radio stations in
Pennsylvania, Rhode Island and Illinois. The purchase price for the Tele-Media
acquisition, following post-closing adjustments, was approximately $115.8
million, which included the repayment of certain indebtedness of Tele-Media and
the redemption of certain corporate bonds and warrants of Tele-Media. Upon
consummation of the Tele-Media acquisition,
Tele-Media was merged with and into the Company.
In various other transactions consummated since January 1, 1997, the
Company has acquired in eight markets an aggregate of 30 stations, the right to
construct an additional station and certain related assets, including various
Internet access service providers, for an aggregate purchase price of $131.1
million. The Company has sold in three markets an aggregate of six stations for
an aggregate sale price of $3.0 million.
On July 3, 1997, the Company sold $101.0 million principal amount of the
1997 Notes and 1.0 million shares of Exchangeable Preferred Stock which, subject
to certain conditions, at the option of the Company, are exchangeable into the
Company's 13-1/4% Subordinated Exchange Debentures due 2009 (the "Exchange
Debentures").
On July 7, 1998, Citadel Communications completed an initial public
offering of 6,880,796 shares of its common stock (the "Common Stock"), at $16.00
per share. Of such shares, Citadel Communications sold 6,250,000 shares and
certain stockholders of Citadel Communications sold 630,796 shares. On July 14,
1998, Citadel Communications sold 1,032,119 additional shares when the
underwriters exercised their over-allotment option. The aggregate net proceeds
to Citadel Communications were approximately $106.9 million, which were used to
repay a portion of the outstanding indebtedness under the Company's Credit
Facility. Citadel Communications did not receive any of the proceeds from the
sale of shares by the selling stockholders.
The Company sold $115.0 million principal amount of the outstanding 9-1/4%
Senior Subordinated Notes due 2008 on November 19, 1998 in order to finance
certain acquisitions, repay certain indebtedness and provide cash for working
capital purposes.
OPERATING STRATEGY
In order to maximize its radio stations' appeal to advertisers, and thus
its revenue and cash flow, the Company has implemented the strategies described
below. The Company intends to continue to expand its existing strategies and to
develop new methods to enhance revenue and reduce costs.
Ownership of Strong Station Groups. The Company seeks to secure and
maintain a leadership position in the markets it serves by owning multiple
stations in those markets. By strategically coordinating programming,
promotional and selling strategies among a group of local stations, the Company
attempts to capture a wide range of demographic listener groups which appeal to
advertisers. The Company believes that the diversification of its programming
formats and its collective inventory of available advertising time strengthen
relationships with advertisers and increase the Company's ability to maximize
the value of its inventory. The Company believes that having multiple stations
in a market also enhances its ability to market the advantages of radio
advertising versus other advertising media, such as newspapers and television,
thus potentially increasing radio's share of the total advertising dollars spent
in a given market.
The Company believes that its ability to leverage the existing programming
and sales resources of its station groups enables it to enhance the growth
potential of both new and underperforming stations while reducing the risks
associated with undertaking means of improving station performance, including
launching new formats. The Company also believes that operating leading station
groups allows it to attract and retain talented local management teams, on-air
personalities and sales personnel, which it believes are essential to operating
success. Furthermore, the Company seeks to achieve substantial cost savings
through the consolidation in each of its markets of facilities, management,
sales and administrative personnel and
45
<PAGE> 50
operating resources (such as on-air talent, programming and music research) and
through the reduction of other redundant expenses.
Aggressive Sales and Marketing. The Company seeks to maximize its share of
local advertising revenue in each of its markets through various sales and
marketing initiatives. The Company provides extensive training for its sales
personnel through in-house sales and time management programs, and it retains
various independent consultants who hold frequent seminars for, and are
available for consultation with, the Company's sales personnel. The Company also
emphasizes regular, informal exchanges of ideas among its management and sales
personnel across its various markets. Because advertising time is perishable,
the Company seeks to maximize its revenue by utilizing sophisticated inventory
management techniques that allow it to provide its sales personnel with frequent
price adjustments based on regional and local market conditions. To further
strengthen its relationship with advertisers, the Company also offers and
markets its ability to create customer traffic through on-site events staged at,
and broadcast from, the advertisers' business locations. The Company believes
that, prior to their acquisition by the Company, many of its acquired stations
had underperformed in sales, due primarily to undersized sales staffs
responsible for selling inventory on multiple stations. Accordingly, the Company
has significantly expanded the sales forces of many of its acquired stations.
Targeted Programming. To maintain or improve its position in each market,
the Company conducts extensive market research and competitive analyses in order
to identify significant and sustainable target audiences. The Company then
tailors the programming, marketing and promotion of each station to maximize its
appeal to its target audience. Within each market, the Company attempts to build
strong franchises by:
- creating distinct, highly visible profiles for its on-air
personalities, particularly those broadcasting during morning "drive
time" traditionally between 6:00 a.m. and 10:00 a.m.,
- formulating recognizable "brand names" for select stations such as the
"Bull" and "Cat Country," and
- actively participating in community events and charities.
Decentralized Operations. The Company believes that radio is primarily a
local business and that much of its success is the result of the efforts of
regional and local management and staff. Accordingly, the Company decentralizes
much of its operations to these levels. Each of the Company's regional and local
station groups is managed by a team of experienced broadcasters who understand
the musical tastes, demographics and competitive opportunities of the particular
market. Regional and local managers are responsible for preparing annual
operating budgets and a portion of their compensation is linked to meeting or
surpassing their operating targets. Corporate management approves each station
group's annual operating budget and imposes strict financial reporting
requirements to track station performance. Corporate management is responsible
for long range planning, establishing Company policies and serving as a resource
to local management. The Company has implemented local sales reporting systems
at each station to provide local and corporate management with daily sales
information.
ACQUISITION STRATEGY
In February 1996, as a result of the passage of the Telecommunications Act
of 1996 (the "Telecommunications Act"), radio broadcasting companies were
permitted to increase their ownership of stations within a single market from
four to a maximum of between five and eight stations, depending on market size.
The Telecommunications Act also eliminated the national ownership restriction
that generally had limited companies to the ownership of no more than 40
stations (20 AM and 20 FM) throughout the United States.
The Company's acquisition strategy is focused on acquiring additional radio
stations in both the Company's existing markets and in new markets in which the
Company believes it can effectively use its operating strategies. The Company
anticipates that it will continue to focus on mid-sized markets rather than
attempt to expand into larger markets. Although competition among potential
purchasers for suitable radio station acquisitions is intense throughout the
United States, the Company believes that less competition exists,
46
<PAGE> 51
particularly from the larger radio operators, in mid-sized markets. This affords
the Company relatively more attractive acquisition opportunities in these
markets. There can be no assurance, however, that the Company will be able to
identify suitable and available acquisition opportunities or that it will be
able to consummate any such acquisition opportunities. Additional risks and
uncertainties related to the Company's acquisition strategy are discussed under
"Risk Factors--Limitations on Acquisition Strategy" and "Risk Factors--
Potential Delay in Completing Pending Transactions Due to Antitrust Review."
In evaluating acquisition opportunities in new markets, the Company
assesses its potential to build leading radio station groups in those markets
over time. The Company believes that the creation of strong station groups in
local markets is essential to its operating success and generally will not
consider entering a new market unless it believes it can acquire multiple
stations in the market. The Company also analyzes a number of additional factors
which it believes are important to its success, including the number and quality
of commercial radio signals broadcasting in the market, the nature of the
competition in the market, the Company's ability to improve the operating
performance of the radio station or stations under consideration and the general
economic conditions of the market.
The Company believes that its acquisition strategy, if properly
implemented, could have a number of benefits, including:
- diversified revenue and broadcast cash flow across a greater number of
stations and markets,
- improved broadcast cash flow margins through the consolidation of
facilities and the elimination of redundant expenses,
- broadened range of advertising packages to offer advertisers,
- improved leverage in various key vendor negotiations,
- enhanced appeal to top industry management talent, and
- increased overall scale which should facilitate the Company's capital
raising activities.
RADIO INDUSTRY OVERVIEW
Radio stations generate the majority of their revenue from the sale of
advertising time to local and national spot advertisers and national network
advertisers. Radio serves primarily as a medium for local advertising. From 1987
to 1996, local advertising revenue as a percentage of total radio advertising
revenue has ranged from approximately 74% to 78%, as reported in Veronis Suhler
Industry Forecasts (11th ed.). The growth in total radio advertising revenue
tends to be fairly stable. Total radio advertising revenue in 1997 of $13.6
billion represented a 9.7% increase over 1996, as reported by the Radio
Advertising Bureau ("RAB").
Radio is considered an efficient means of reaching specifically identified
demographic groups. Stations are typically classified by their on-air format,
such as country, adult contemporary, oldies or news/talk. A station's format and
style of presentation enable it to target certain demographic and psychographic
groups. By capturing a specific listening audience share of a market's radio
audience, with particular concentration in a targeted demographic group, a
station is able to market its broadcasting time to advertisers seeking to reach
a specific audience. Advertisers and stations utilize data published by audience
measuring services, such as Arbitron, to estimate how many people within
particular geographical markets and demographic groups listen to specific
stations.
Stations determine the number of advertisements broadcast hourly that will
maximize available revenue dollars without jeopardizing listening levels.
Although the number of advertisements broadcast during a given time period may
vary, the total number of advertisements broadcast on a particular station
generally does not vary significantly from year to year.
A station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a station will
engage a firm that specializes in soliciting radio advertising sales on a
national level. National sales representatives obtain advertising principally
from advertising agencies located outside the station's market and receive
commissions based on the revenue from the advertising obtained.
47
<PAGE> 52
STATION PORTFOLIO
Upon completion of the Pending Transactions, the Company will own 86 FM and
38 AM radio stations in 26 mid-sized markets, operate 6 additional FM and 5
additional AM radio stations in its markets pursuant to LMAs or JSAs and have
the right to construct one additional FM radio station.
The following table sets forth certain information about stations owned or
operated by the Company after giving effect to the Pending Transactions. The
year acquired shown in the table below includes acquisitions made by the
Company's Predecessor. See "--Corporate History and Recently Completed
Transactions."
<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO
PRIMARY PRIMARY PRIMARY GROUP
STATION DEMO- DEMO- DEMO- MARKET
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET(1) TARGET(2) TARGET(2) SHARE(3)
- --------------------- ---- ----------------------- -------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PROVIDENCE, RI....... 31 33.7%
Owned
WPRO-AM............. News/Talk 1997 A 25-54 11 2.9%
WPRO-FM............. Contemporary Hits 1997 A 18-49 2 9.4
WWLI-FM............. Adult Contemporary 1997 W 25-54 2 9.9
WSKO-AM............. Sports 1997 M 25-54 15 1.6
WXEX-FM............. Rock 1997 M 18-34 5t 6.1
WHKK-FM............. Rock Oldies 1997/1997 A 25-54 9 3.2
SALT LAKE CITY, UT... 35 18.1%
Owned
KUBL-FM............. Country 1988 A 25-54 4t 5.4%
KCNR-AM............. Children's 1988 C 4-11 -- --
KFNZ-AM............. Sports 1997/1992 M 25-54 1 10.1
KBEE-FM............. Adult Contemporary 1997/1992 W 18-49 5 6.0
KBER-FM............. Album Oriented Rock 1997/1996 A 18-34 2 7.0
KENZ-FM............. Rock Alternative 1997/1996(JSA) A 18-34 1 8.0
WILKES-BARRE/
SCRANTON, PA........ 63 29.0%
Owned
WMGS-FM............. Adult Contemporary 1997 W 25-54 2 15.2%
WARM-AM............. News/Talk 1997 A 35-64 13t 1.4
WZMT-FM............. Album Oriented Rock 1997 M 18-34 3 8.0
WAZL-AM............. Nostalgia 1997 A 35-64 33t 0.4
WEMR-FM............. Contemporary Hits 1998/1997 W 18-34 -- --
WCTP-FM/
WCTD-FM(4)........ Country 1998/1997 A 35-64 6 3.4
WCDL-AM............. Country 1998/1997 A 35-64 -- --
*WBHT-FM............ Country pending/1997(LMA) A 35-64 10 2.3
WEMR-AM............. Simulcast with WBHT-FM 1998/1997 A 35-64 -- --
Operated
WKQV-AM(5).......... Sports 1997(JSA) M 25-54 -- --
WKQV-FM(5).......... Simulcast with WZMT-FM 1997(LMA) M 18-34 6 5.1
ALLENTOWN/ BETHLEHEM,
PA.................. 66 26.5%
Owned
WCTO-FM............. Country 1997 A 25-54 2 13.5%
WLEV-FM............. Adult Contemporary 1997/1997 W 25-54 3 11.7
ALBUQUERQUE, NM...... 70 55.9%
Owned
KKOB-AM............. News/Talk 1994 A 25-54 6 5.8%
KKOB-FM............. Adult Contemporary 1994 W 25-54 2 8.6
KMGA-FM............. Adult Contemporary 1994 W 25-54 4t 5.5
KHTL-AM............. News/Talk 1994 A 35-64 25t 0.7
KTBL-FM............. Country 1996/1995(JSA) A 25-54 7 5.0
KHFM-FM............. Classical 1996 A 25-54 12t 3.3
KNML-AM............. Sports 1996 M 25-54 18t 1.8
KRST-FM............. Country 1996/1996 A 25-54 1 10.6
HARRISBURG/ CARLISLE,
PA.................. 73 17.8%
Owned
WRKZ-FM............. Country 1997 A 25-54 7 5.3%
*WHYL-FM(6)......... Simulcast with WRKZ-FM pending/1998(LMA) A 25-54 14 1.7
*WHYL-AM(6)......... Nostalgia pending/1998(LMA) A 35-64 12 2.0
<CAPTION>
RADIO
GROUP RANK
RADIO GROUP/ IN MARKET
STATION CALL LETTERS REVENUE(3)
- --------------------- -----------
<S> <C>
PROVIDENCE, RI....... 1
Owned
WPRO-AM.............
WPRO-FM.............
WWLI-FM.............
WSKO-AM.............
WXEX-FM.............
WHKK-FM.............
SALT LAKE CITY, UT... 3
Owned
KUBL-FM.............
KCNR-AM.............
KFNZ-AM.............
KBEE-FM.............
KBER-FM.............
KENZ-FM.............
WILKES-BARRE/
SCRANTON, PA........ 2
Owned
WMGS-FM.............
WARM-AM.............
WZMT-FM.............
WAZL-AM.............
WEMR-FM.............
WCTP-FM/
WCTD-FM(4)........
WCDL-AM.............
*WBHT-FM............
WEMR-AM.............
Operated
WKQV-AM(5)..........
WKQV-FM(5)..........
ALLENTOWN/ BETHLEHEM,
PA.................. 2
Owned
WCTO-FM.............
WLEV-FM.............
ALBUQUERQUE, NM...... 1
Owned
KKOB-AM.............
KKOB-FM.............
KMGA-FM.............
KHTL-AM.............
KTBL-FM.............
KHFM-FM.............
KNML-AM.............
KRST-FM.............
HARRISBURG/ CARLISLE,
PA.................. 3
Owned
WRKZ-FM.............
*WHYL-FM(6).........
*WHYL-AM(6).........
</TABLE>
48
<PAGE> 53
<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO
PRIMARY PRIMARY PRIMARY GROUP
STATION DEMO- DEMO- DEMO- MARKET
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET(1) TARGET(2) TARGET(2) SHARE(3)
- --------------------- ---- ----------------------- -------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BATON ROUGE, LA...... 81 27.4%
Owned
*KQXL-FM............ Urban Adult pending A 25-54 4 6.3%
Contemporary
*WXOK-AM............ Gospel pending A 35-64 3 6.9
*WEMX-FM............ Urban pending A 18-34 1t 10.1
*WKJN-FM............ Country pending A 25-54 12 3.1
*WIBR-AM............ Sports pending M 25-54 11t 2.4
LITTLE ROCK, AR(7)... 82 40.3%
Owned
KARN-AM/KARN-FM/
KKRN-FM........... News/Talk/Sports 1997/1997 A 25-54 8 4.9%
KIPR-FM............. Urban 1997/1997 A 18-49 5 7.4
KOKY-FM............. Urban Adult 1997/1997 A 25-54 11t 3.9
Contemporary
KLAL-FM............. Modern Adult 1997 A 18-49 6 6.9
Contemporary
KAFN-FM(8).......... NA 1997 NA NA NA
KLIH-AM............. Gospel 1997 A 25-54 19t 0.8
KURB-FM............. Adult Contemporary 1997 A 25-54 4 7.5
KVLO-FM............. Soft Adult Contemporary 1997 W 25-54 4t 7.4
KAAY-AM............. Religious 1998 A 25-54 22t 0.5
SPOKANE, WA.......... 86 43.9%
Owned
KGA-AM.............. News/Talk 1992 A 25-54 9 4.7%
KDRK-FM............. Country 1992 A 25-54 3t 8.8
KAEP-FM............. Rock Alternative 1993 A 18-34 3 10.5
KJRB-AM............. Talk/Sports 1993/1993 A 35-64 14t 1.6
Operated
KKZX-FM(8).......... Classic Rock 1996(JSA) M 25-54 1 22.8
KEYF-AM/FM(4)(8).... Oldies 1996(JSA) A 25-54 5 7.2
KUDY-AM(8).......... Talk/Religion 1996(JSA) A 25-54 -- --
COLORADO SPRINGS, CO 93 60.9%
Owned
KKFM-FM............. Classic Rock 1986 M 25-54 1 14.1%
KKMG-FM............. Contemporary Hits 1994/1990 W 18-34 1 19.8
KKLI-FM............. Soft Adult Contemporary 1996 W 25-54 5 7.4
Operated
KVUU-FM(8).......... Adult Contemporary 1996(JSA) W 18-49 3 8.6
KSPZ-FM(8).......... Oldies 1996(JSA) A 25-54 3t 7.8
KVOR-AM(8).......... News/Talk 1996(JSA) A 35-64 5 6.4
KTWK-AM(8).......... Nostalgia 1996(JSA) A 35-64 15 1.3
CHARLESTON, SC....... 96 47.8%
Owned
*WSSX-FM............ Hot Adult Contemporary pending A 25-54 8 5.9%
*WWWZ-FM............ Urban pending A 18-34 1 15.8
*WMGL-FM............ Urban Adult pending A 25-54 3t 7.2
Contemporary
*WSUY-FM............ Soft Adult Contemporary pending W 25-54 1 11.9
*WNKT-FM............ Country pending A 25-54 14 2.1
*WTMA-AM............ News/Talk pending A 25-54 13 2.4
*WTMZ-AM............ News pending A 25-54 22t 0.3
*WXTC-AM............ Urban Gospel pending A 25-54 5t 7.0
LAFAYETTE, LA........ 97 14.2%
Owned
*KFXZ-FM............ Gospel pending A 35-64 18 2.0%
*KNEK-FM............ Urban Adult pending A 25-54 9 3.8
Contemporary
*KNEK-AM............ Urban Adult pending A 25-54 -- --
Contemporary
*KRRQ-FM............ Urban pending A 18-34 1 12.4
YORK, PA............. 102 10.2%
Owned
WQXA-FM............. Rock 1997 M 18-34 1 24.0%
WQXA-AM............. Nostalgia 1997 A 35-64 22t 0.9
MODESTO, CA(9)....... 120 52.4%
Owned
KATM-FM............. Country 1992 A 25-54 1 12.9%
KANM-AM............. Sports 1992 M 25-54 -- --
KHKK-FM/
KDJK-FM(4)........ Rock Oldies 1993/1993(KHKK) A 25-54 2 9.8
KHOP-FM............. Album Oriented Rock 1996 A 18-34 2 11.0
<CAPTION>
RADIO
GROUP RANK
RADIO GROUP/ IN MARKET
STATION CALL LETTERS REVENUE(3)
- --------------------- -----------
<S> <C>
BATON ROUGE, LA...... 2
Owned
*KQXL-FM............
*WXOK-AM............
*WEMX-FM............
*WKJN-FM............
*WIBR-AM............
LITTLE ROCK, AR(7)... 2
Owned
KARN-AM/KARN-FM/
KKRN-FM...........
KIPR-FM.............
KOKY-FM.............
KLAL-FM.............
KAFN-FM(8)..........
KLIH-AM.............
KURB-FM.............
KVLO-FM.............
KAAY-AM.............
SPOKANE, WA.......... 1
Owned
KGA-AM..............
KDRK-FM.............
KAEP-FM.............
KJRB-AM.............
Operated
KKZX-FM(8)..........
KEYF-AM/FM(4)(8)....
KUDY-AM(8)..........
COLORADO SPRINGS, CO 1
Owned
KKFM-FM.............
KKMG-FM.............
KKLI-FM.............
Operated
KVUU-FM(8)..........
KSPZ-FM(8)..........
KVOR-AM(8)..........
KTWK-AM(8)..........
CHARLESTON, SC....... 1
Owned
*WSSX-FM............
*WWWZ-FM............
*WMGL-FM............
*WSUY-FM............
*WNKT-FM............
*WTMA-AM............
*WTMZ-AM............
*WXTC-AM............
LAFAYETTE, LA........ 4
Owned
*KFXZ-FM............
*KNEK-FM............
*KNEK-AM............
*KRRQ-FM............
YORK, PA............. 4
Owned
WQXA-FM.............
WQXA-AM.............
MODESTO, CA(9)....... 1
Owned
KATM-FM.............
KANM-AM.............
KHKK-FM/
KDJK-FM(4)........
KHOP-FM.............
</TABLE>
49
<PAGE> 54
<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO
PRIMARY PRIMARY PRIMARY GROUP
STATION DEMO- DEMO- DEMO- MARKET
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET(1) TARGET(2) TARGET(2) SHARE(3)
- --------------------- ---- ----------------------- -------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SAGINAW/ BAY CITY,
MI.................. 123 41.7%
Owned
*WKQZ-FM............ Rock pending M 18-49 1 20.9%
*WMJK-FM/
*WMJA-FM.......... Classic Rock pending M 25-54 4t 7.9
*WIOG-FM............ Hot Adult Contemporary pending A 25-54 1t 12.0
*WGER-FM............ Soft Adult Contemporary pending W 25-54 5 8.6
*WSGW-AM............ News/Talk pending A 25-54 8 4.7
BOISE, ID............ 125 42.0%
Owned
KIZN-FM............. Country 1998/1997 A 25-54 5t 6.5%
KZMG-FM............. Contemporary Hits 1998/1997 W 18-34 1 22.1
KKGL-FM............. Classic Rock 1998/1997 M 25-54 15t 2.1
KQFC-FM............. Country 1998/1997 A 25-54 3 8.0
KBOI-AM............. News/Talk 1998/1997 A 35-64 5 6.7
RENO, NV............. 129 36.3%
Owned
KBUL-FM............. Country 1992 A 25-54 1 12.2%
KKOH-AM............. News/Talk 1992 A 25-54 6 6.7
KNEV-FM............. Adult Contemporary 1993/1993 W 18-49 1t 12.1
KNHK-FM............. Rock Oldies 1997/1997 A 25-54 7 6.4
Operated
KXXL-FM............. Country 1998(LMA) A 25-54 -- --
EUGENE, OR........... 143 28.6%
Owned
KUGN-AM............. News/Talk 1997 A 35-64 7 4.9%
KKTT-FM............. Country 1997 A 25-54 9t 4.0
KEHK-FM............. Rock Oldies 1997 A 25-54 4 7.1
BINGHAMTON, NY....... 164 63.0%
Owned
*WHWK-FM............ Country pending A 25-54 3 13.1%
*WYOS-FM............ Oldies pending A 25-54 6 5.7
*WAAL-FM............ Album Oriented Rock pending M 25-54 1 17.2
*WNBF-AM............ News/Talk pending A 25-54 8 4.5
*WKOP-AM............ Nostalgia pending A 35-64 9t 2.0
JOHNSTOWN, PA........ 168 19.5%
Owned
WQKK-FM............. Rock 1997 A 18-34 2t 15.1%
WGLU-FM............. Contemporary Hits 1997 A 18-34 4 9.7
TRI-CITIES, WA....... 202 42.2%
Owned
KEYW-FM............. Adult Contemporary 1997 A 25-54 4 7.6%
KFLD-AM............. Sports 1997 M 25-54 5t 6.6
KORD-FM............. Country 1997 A 25-54 9 4.9
KXRX-FM............. Album Oriented Rock 1997 M 18-34 1 27.0
KTHK-FM............. Rock Oldies 1997/1997 A 25-54 12t 2.8
MEDFORD, OR.......... 204 40.8%
Owned
KAKT-FM............. Country 1997 A 25-54 3t 8.0%
KBOY-FM............. Classic Rock 1997 M 25-54 2 10.6
KCMX-AM............. News/Talk 1997 A 35-64 3t 6.7
KCMX-FM............. Adult Contemporary 1997 W 25-54 2 13.6
KTMT-AM............. Sports 1997 M 25-54 11t 1.5
KTMT-FM............. Contemporary Hits 1997 W 18-34 2t 14.8
STATE COLLEGE, PA.... 235 30.8%
Owned
WRSC-AM/
WBLF-AM(4)........ News/Talk 1997 A 25-54 6t 3.4%
WQWK-FM............. Rock 1997 A 25-54 4 9.1
WIKN-FM............. Adult Contemporary 1997 W 18-49 -- --
<CAPTION>
RADIO
GROUP RANK
RADIO GROUP/ IN MARKET
STATION CALL LETTERS REVENUE(3)
- --------------------- -----------
<S> <C>
SAGINAW/ BAY CITY,
MI.................. 1
Owned
*WKQZ-FM............
*WMJK-FM/
*WMJA-FM..........
*WIOG-FM............
*WGER-FM............
*WSGW-AM............
BOISE, ID............ 2
Owned
KIZN-FM.............
KZMG-FM.............
KKGL-FM.............
KQFC-FM.............
KBOI-AM.............
RENO, NV............. 1
Owned
KBUL-FM.............
KKOH-AM.............
KNEV-FM.............
KNHK-FM.............
Operated
KXXL-FM.............
EUGENE, OR........... 1
Owned
KUGN-AM.............
KKTT-FM.............
KEHK-FM.............
BINGHAMTON, NY....... 1
Owned
*WHWK-FM............
*WYOS-FM............
*WAAL-FM............
*WNBF-AM............
*WKOP-AM............
JOHNSTOWN, PA........ 3
Owned
WQKK-FM.............
WGLU-FM.............
TRI-CITIES, WA....... 1
Owned
KEYW-FM.............
KFLD-AM.............
KORD-FM.............
KXRX-FM.............
KTHK-FM.............
MEDFORD, OR.......... 2
Owned
KAKT-FM.............
KBOY-FM.............
KCMX-AM.............
KCMX-FM.............
KTMT-AM.............
KTMT-FM.............
STATE COLLEGE, PA.... 1
Owned
WRSC-AM/
WBLF-AM(4)........
WQWK-FM.............
WIKN-FM.............
</TABLE>
50
<PAGE> 55
<TABLE>
<CAPTION>
STATION
STATION AUDIENCE
RANK IN SHARE IN RADIO
PRIMARY PRIMARY PRIMARY GROUP
STATION DEMO- DEMO- DEMO- MARKET
RADIO GROUP/ MSA PROGRAMMING YEAR GRAPHIC GRAPHIC GRAPHIC REVENUE
STATION CALL LETTERS RANK FORMAT ACQUIRED/LMA TARGET(1) TARGET(2) TARGET(2) SHARE(3)
- --------------------- ---- ----------------------- -------------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BILLINGS, MT......... 242 50.5%
Owned
KCTR-FM/
KBUL-AM(4)........ Country 1997 A 25-54 2 17.0%
KKBR-FM............. Oldies 1997 A 25-54 4 9.0
KBBB-FM............. Adult Contemporary 1997 W 25-54 6 8.0
KMHK-FM............. Rock Oldies 1997 A 25-54 7t 5.0
MUNCIE, IN........... NA NA
Owned
*WMDH-FM............ Country pending A 25-54 NA NA
*WMDH-AM............ News/Talk pending A 25-54 NA NA
KOKOMO, IN........... NA NA
Owned
*WWKI-FM............ Country pending A 25-54 NA NA
<CAPTION>
RADIO
GROUP RANK
RADIO GROUP/ IN MARKET
STATION CALL LETTERS REVENUE(3)
- --------------------- -----------
<S> <C>
BILLINGS, MT......... 1
Owned
KCTR-FM/
KBUL-AM(4)........
KKBR-FM.............
KBBB-FM.............
KMHK-FM.............
MUNCIE, IN........... NA
Owned
*WMDH-FM............
*WMDH-AM............
KOKOMO, IN........... NA
Owned
*WWKI-FM............
</TABLE>
- ---------------
* Indicates a station which is the subject of a Pending Transaction. The
consummation of each of the Pending Transaction is subject to certain
conditions. Although the Company believes these conditions are customary for
transactions of this type and will be satisfied, there can be no assurance
that such closing conditions will be satisfied. See "The Pending
Transactions."
"t" denotes tied with one or more other radio stations.
"NA" denotes information that is not available.
"--" denotes information that is not meaningful.
(1) The letter "A" designates adults, the letter "W" designates women, the
letter "M" designates men and the letter "C" designates children. The
numbers following each letter designate the range of ages included within
the demographic group.
(2) The generally accepted method of measuring the relative size of a radio
station's audience is by reference to total persons, within specific
demographic groups, Monday--Sunday, 6:00 a.m.--12:00 midnight Average
Quarter Hour ("AQH") shares, as published by Arbitron. Arbitron
periodically samples radio listeners in defined market areas, principally
through the use of diaries returned by selected listeners. A station's AQH
share is a percentage computed by dividing the average number of persons
listening to a particular station for at least five minutes during an
average quarter hour in a given time period by the average number of such
persons for all stations in the market area. Station Rank in Primary
Demographic Target is the ranking of a station among all stations in its
target demographic group based upon the station's AQH shares. Arbitron
compiles ratings data for various demographic groups. All information
concerning ratings and audience listening information used in this
prospectus is given pursuant to the method described above and derived from
the Arbitron Reports.
(3) Radio Group Market Revenue Share was derived for each radio group by
summing the market share of revenue of each station included within the
group. Radio Group Rank in Market Revenue is the ranking, by radio group
market revenue, of each of the Company's radio groups in its market among
all other radio groups in such market.
(4) Combined stations are simulcast. Rank and audience share information is
given on a combined basis.
(5) WKQV-FM and WKQV-AM in Wilkes-Barre/Scranton are operated pursuant to an
LMA and a JSA, respectively, and the Company has the option to purchase
these stations.
(6) Pending their acquisition by the Company, the Company operates WHYL-AM and
WHYL-FM pursuant to an LMA. See "The Pending Transactions."
(7) KAFN-FM is not yet operational. Two of the stations serve the surrounding
communities outside of Little Rock.
(8) The Company sells advertising on behalf of the listed stations under a JSA.
(9) KATM-FM, KHKK-FM/KDJK-FM and KHOP-FM also broadcast in the adjacent
Stockton, California market where, in the Spring 1997 Arbitron Report, they
ranked 1, 2 and 2 in their primary demographic targets, respectively.
The following is a description of the markets served by the Company's radio
stations and those stations which are the subject of the Pending Transactions.
Providence, Rhode Island. The Company owns four FM and two AM radio
stations in Providence. Providence has an MSA rank of 31, and had market revenue
of approximately $39.5 million in 1997, an approximate 2.1% increase over 1996.
There are 37 stations in the Providence market, including ten viable FM and
three viable AM stations. The six stations owned by the Company rank first in
the market in terms of their combined gross revenue, with approximately 33.7% of
the market revenue in 1997.
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<PAGE> 56
Salt Lake City, Utah. The Company owns four FM and two AM radio stations in
Salt Lake City. Salt Lake City has an MSA rank of 35, and had market revenue of
approximately $62.4 million in 1997, an approximate 8.1% increase over 1996.
There are 43 stations in the Salt Lake City market, including 16 viable FM and
four viable AM stations. The six stations owned by the Company rank third in the
market in terms of their combined gross revenue, with approximately 18.1% of the
market revenue in 1997.
Wilkes-Barre/Scranton, Pennsylvania. The Company owns five FM and four AM
radio stations and operates two FM radio stations and one AM radio station under
an LMA and a JSA, respectively, in Wilkes-Barre/Scranton. The Company has
exercised an option to purchase one of the FM radio stations it currently
operates. See "The Pending Transactions." Wilkes-Barre/Scranton has an MSA rank
of 63, and had market revenue of approximately $25.6 million in 1997, an
approximate 8.0% increase over 1996. There are 40 stations in the
Wilkes-Barre/Scranton market, including ten viable FM and four viable AM
stations. The twelve stations owned or operated by the Company rank second in
the market in terms of their combined gross revenue, with approximately 29.0% of
market revenue in 1997.
Allentown/Bethlehem, Pennsylvania. The Company owns two FM radio stations
in Allentown/ Bethlehem. Allentown/Bethlehem has an MSA rank of 66, and had
market revenue of approximately $24.3 million in 1997, an approximate 7.5%
increase over 1996. There are 19 stations in the Allentown market, including six
viable FM and three viable AM stations. The two stations owned by the Company
rank second in the market in terms of their combined gross revenue, with
approximately 26.5% of market revenue in 1997.
Albuquerque, New Mexico. The Company owns five FM and three AM radio
stations in Albuquerque. Albuquerque has an MSA rank of 70, and had market
revenue of approximately $34.6 million in 1997, an approximate 5.8% increase
over 1996. There are 37 stations in the Albuquerque market, including 17 viable
FM and three viable AM stations. The eight stations owned by the Company rank
first in the market in terms of their combined gross revenue, with approximately
55.9% of the market revenue in 1997.
Harrisburg/Carlisle, Pennsylvania and York, Pennsylvania. The Company owns
one FM radio station in Harrisburg and one FM radio station and one AM radio
station in York and has entered into an agreement to purchase one FM radio
station and one AM radio station in Carlisle which stations it currently
operates under an LMA. See "The Pending Transactions." Harrisburg/Carlisle and
York are adjacent markets with numerous overlapping radio signals. The Company
expects to continue operating these stations as a single station group.
Harrisburg/Carlisle has an MSA rank of 73, and had market revenue of
approximately $24.4 million in 1997, an approximate 0.4% decrease from 1996.
There are 23 stations in the Harrisburg/Carlisle market, including eight viable
FM and three viable AM stations. The station owned by the Company together with
the two stations it has entered into an agreement to acquire rank third in the
market in terms of gross revenue, with approximately 17.8% of the market revenue
in 1997.
York has an MSA rank of 102, and had market revenue of approximately $16.6
million in 1997, an approximate 7.8% increase over 1996. There are 16 stations
in the York market, including seven viable FM stations and one viable AM
station. The two stations owned by the Company rank fourth in the market in
terms of their combined gross revenue, with approximately 10.2% of the market
revenue in 1997.
Baton Rouge, Louisiana. The Company has entered into an agreement to
purchase three FM and two AM radio stations in Baton Rouge. Baton Rouge has an
MSA rank of 81, and had market revenue of approximately $22.6 million in 1997,
an approximate 7.1% increase over 1996. There are 21 stations in the Baton Rouge
market, including nine viable FM and two viable AM stations. The five stations
to be acquired by the Company rank second in the market in terms of their
combined gross revenue, with approximately 27.4% of the market revenue in 1997.
See "The Pending Transactions."
Little Rock, Arkansas. The Company owns seven FM and three AM radio
stations and has the right to construct and operate one additional FM radio
station in Little Rock. Little Rock has an MSA rank of 82, and had market
revenue of approximately $21.1 million in 1997, an approximate 7.1% increase
over 1996. There are 33 stations in the Little Rock market, including 13 viable
FM stations and one viable AM station. The nine operating stations owned by the
Company (not including the station to be sold) together with the
52
<PAGE> 57
station it has entered into an agreement to acquire rank second in the market in
terms of their combined gross revenue, with approximately 40.3% of market
revenue in 1997.
The Company also owns the Arkansas Radio Network, which was established in
1968 and is a state-wide news network with affiliates in nearly every county in
Arkansas. The Arkansas Radio Network feeds hourly newscasts in addition to
agricultural programs, market reports, weather and special events.
Spokane, Washington. The Company owns two FM and two AM radio stations and
sells advertising on behalf of two FM and two AM radio stations under a JSA in
Spokane. Spokane has an MSA rank of 86, and had market revenue of approximately
$16.5 million in 1997, an approximate 7.8% increase over 1996. There are 28
stations in the Spokane market, including 12 viable FM and four viable AM
stations. The four stations owned by the Company plus the four stations marketed
under a JSA rank first in the market in terms of their combined gross revenue,
with approximately 43.9% of the market revenue in 1997.
Colorado Springs, Colorado. The Company owns three FM radio stations and
sells advertising on behalf of two FM and two AM radio stations under a JSA in
Colorado Springs. Colorado Springs has an MSA rank of 93, and had market revenue
of approximately $15.4 million in 1997, an approximate 6.9% increase over 1996.
There are 21 stations in the Colorado Springs market, including 11 viable FM and
two viable AM stations. The three stations owned by the Company plus the four
stations marketed under a JSA rank first in the market in terms of their
combined gross revenue, with approximately 60.9% of the market revenue in 1997.
Charleston, South Carolina. The Company has entered into an agreement to
purchase five FM and three AM radio stations in Charleston. Charleston has an
MSA rank of 96 and had market revenue of approximately $18.0 million in 1997, an
approximate 5.9% increase over 1996. There are 27 stations in the Charleston
Market, including 12 viable FM stations and one viable AM station. The eight
stations to be acquired by the Company rank first in the market in terms of
their combined gross revenue, with approximately 47.8% of the market revenue in
1997. See "The Pending Transactions."
Lafayette, Louisiana. The Company has entered into an agreement to
purchase three FM radio stations and one AM radio station in Lafayette.
Lafayette has an MSA rank of 97, and had market revenue of approximately $11.5
million in 1997, an approximate 7.5% increase over 1996. There are 33 stations
in the Lafayette market, including 12 viable FM stations and one viable AM
station. The four stations to be acquired by the Company rank fourth in the
market in terms of their combined gross revenue, with approximately 14.2% of the
market revenue in 1997. See "The Pending Transactions."
Modesto, California. The Company owns four FM radio stations and one AM
radio station in Modesto. Modesto has an MSA rank of 120, and had market revenue
of approximately $16.6 million in 1997, an approximate 6.4% increase over 1996.
There are 22 stations in the Modesto market, including nine viable FM and two
viable AM stations. The five stations owned by the Company rank first in the
market in terms of their combined gross revenue, with approximately 52.4% of the
market revenue in 1997.
Saginaw/Bay City, Michigan. The Company has entered into an agreement to
purchase five FM radio stations and one AM radio station in Saginaw/Bay City.
Saginaw/Bay City has an MSA rank of 123, and had market revenue of approximately
$18.7 million in 1997, an approximate 1.6% increase over 1996. There are 20
stations in the Saginaw/Bay City market, including ten viable FM and three
viable AM stations. The six stations to be acquired by the Company rank first in
the market in terms of their combined gross revenue, with approximately 41.7% of
the market revenue in 1997. See "The Pending Transactions."
Boise, Idaho. The Company owns four FM radio stations and one AM radio
station in Boise. Boise has an MSA rank of 125, and had market revenue of
approximately $15.7 million in 1997, an approximate 5.4% increase over 1996.
There are 26 stations in the Boise market, including 11 viable FM and three
viable AM stations. The five stations owned by the Company rank second in the
market in terms of their combined gross revenue, with approximately 42.0% of
market revenue in 1997.
Reno, Nevada. The Company owns three FM radio stations and one AM radio
station in Reno. The Company also operates an additional FM radio station in
Reno pursuant to an LMA. Reno has an MSA rank
53
<PAGE> 58
of 129, and had market revenue of approximately $15.1 million in 1997, an
approximate 3.4% increase over 1996. There are 25 stations in the Reno market,
including 13 viable FM and two viable AM stations. The four stations owned by
the Company together with the station it operates rank first in the market in
terms of their combined gross revenue, with approximately 36.3% of the market
revenue in 1997.
Eugene, Oregon. The Company owns two FM radio stations and one AM radio
station in Eugene. Eugene has an MSA rank of 143, and had market revenue of
approximately $10.5 million in 1997, an approximate 1.9% decrease from 1996.
There are 19 stations in the Eugene market, including eight viable FM and three
viable AM stations. The three stations owned by the Company rank first in the
market in terms of their combined gross revenue, with approximately 28.6% of the
market revenue in 1997.
Binghamton, New York. The Company has entered into an agreement to
purchase three FM and two AM radio stations in Binghamton. Binghamton has an MSA
rank of 164, and had market revenue of approximately $8.8 million in 1997, an
approximate increase of 4.8% over 1996. There are 16 stations in the Binghamton
market, including seven viable FM stations and three viable AM stations. The
five stations to be acquired by the Company rank first in the market in terms of
their combined gross revenue, with approximately 63.0% of the market revenue in
1997. See "The Pending Transactions."
Johnstown, Pennsylvania. The Company owns two FM radio stations in
Johnstown, Pennsylvania. Johnstown has an MSA rank of 168, and had market
revenue of approximately $6.4 million in 1997, an approximate 6.7% increase over
1996. There are 21 stations in the Johnstown market, including six viable FM and
two viable AM stations. The two stations owned by the Company rank third in the
market in terms of their combined gross revenue, with approximately 19.5% of the
market revenue in 1997.
Tri-Cities, Washington. The Company owns four FM radio stations and one AM
radio station in Tri-Cities. Tri-Cities (includes the communities of Richland,
Kennewick and Pasco, Washington) has an MSA rank of 202, and had market revenue
of approximately $5.8 million in 1997, an approximate 5.5% increase over 1996.
There are 19 stations in the Tri-Cities market, including, according to BIA's
Investing in Radio 1998 Market Report (3rd ed.), nine viable FM stations. The
five stations owned by the Company rank first in the market in terms of their
combined gross revenue, with approximately 42.2% of the market revenue in 1997.
Medford, Oregon. The Company owns four FM and two AM radio stations in
Medford. Medford has an MSA rank of 204, and had market revenue of approximately
$6.0 million in 1997, an approximate 9.1% increase over 1996. There are 17
stations in the Medford market, including, according to BIA's Investing in Radio
1998 Market Report (3rd ed.), nine viable FM stations. The six stations owned by
the Company rank second in the market in terms of their combined gross revenue,
with approximately 40.8% of the market revenue in 1997.
State College, Pennsylvania. The Company owns two FM and two AM radio
stations in State College, Pennsylvania. State College has an MSA rank of 235,
and had market revenue of approximately $4.9 million in 1997, an approximate
4.3% increase over 1996. There are 13 stations in the State College market. The
four stations owned by the Company rank first in the market in terms of their
combined gross revenue, with approximately 30.8% of the market revenue in 1997.
Billings, Montana. The Company owns four FM radio stations and one AM
radio station in Billings. Billings has an MSA rank of 242, and had market
revenue of approximately $6.0 million in 1997, an approximate 5.3% increase over
1996. There are 14 stations in the Billings market, including seven viable FM
and three viable AM stations. The five stations owned by the Company rank first
in the market in terms of their combined gross revenue, with approximately 50.5%
of the market revenue in 1997.
Muncie, Indiana. The Company has entered into an agreement to purchase one
FM and one AM radio station in Muncie. MSA rank, market revenue, station
ownership and viable station data are not available for the Muncie market. See
"The Pending Transactions."
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<PAGE> 59
Kokomo, Indiana. The Company has entered into an agreement to purchase one
FM radio station in Kokomo. MSA rank, market revenue, Station ownership and
viable station data are not available for the Kokomo market. See "The Pending
Transactions."
ADVERTISING SALES
Virtually all of the Company's revenue is generated from the sale of local,
regional and national advertising for broadcast on its radio stations. In 1997,
approximately 84.7% of the Company's net broadcasting revenue was generated from
the sale of local and regional advertising. Additional broadcasting revenue is
generated from the sale of national advertising, network compensation payments
and other miscellaneous transactions. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--General." The major categories
of the Company's advertisers include telephone companies, restaurants, fast
food, automotive and grocery. Each station's local sales staff solicits
advertising either directly from the local advertiser or indirectly through an
advertising agency. The Company pays a higher commission rate to the sales staff
for generating direct sales because the Company believes that through direct
advertiser relationships it can better understand the advertiser's business
needs and more effectively design an advertising campaign to help the advertiser
sell its product. The Company employs personnel in each of its markets to
produce commercials for the advertisers. National sales are made by a firm
specializing in radio advertising sales on the national level in exchange for a
commission from the Company that is based on the Company's gross revenue from
the advertising obtained. Regional sales, which the Company defines as sales in
regions surrounding the Company's markets to companies that advertise in the
Company's markets, are generally made by the Company's local sales staff.
Depending on the programming format of a particular station, the Company
estimates the optimum number of advertisements available for sale. The number of
advertisements that can be broadcast without jeopardizing listening levels (and
the resulting ratings) is limited in part by the format of a particular station.
The Company's stations strive to maximize revenue by managing their on-air
inventory of advertising time and adjusting prices based on local market
conditions and on the Company's ability, through its marketing efforts, to
provide advertisers with an effective means of reaching a targeted demographic
group. Each of the Company's stations has a general target level of on-air
inventory that it makes available for advertising. This target level of
inventory for sale may be different at different times of the day but tends to
remain stable over time. Much of the Company's selling activity is based on
demand for its radio stations' on-air inventory and, in general, the Company
responds to this demand by varying prices rather than by varying its target
inventory level for a particular station. Therefore, most changes in revenue are
explained by demand-driven pricing changes rather than by changes in the
available inventory.
The Company believes that radio is one of the most efficient and
cost-effective means for advertisers to reach specific demographic groups.
Advertising rates charged by radio stations are based primarily on
- a station's share of audiences in the demographic groups targeted by
advertisers (as measured by ratings surveys estimating the number of
listeners tuned to the station at various times),
- the number of stations in the market competing for the same
demographic groups,
- the supply of and demand for radio advertising time, and
- certain qualitative factors. Rates are generally highest during
morning and afternoon commuting hours.
A station's listenership is reflected in ratings surveys that estimate the
number of listeners tuned to the station and the time they spend listening. Each
station's ratings are used by its advertisers and advertising representatives to
consider advertising with the station and are used by the Company to chart
audience growth, set advertising rates and adjust programming. The radio
broadcast industry's principal ratings service is Arbitron, which publishes
periodic ratings surveys for significant domestic radio markets. These surveys
are the Company's primary source of ratings data.
55
<PAGE> 60
COMPETITION
The radio broadcasting industry is highly competitive. The success of each
of the Company's stations depends largely upon its audience ratings and its
share of the overall advertising revenue within its market. The Company's
audience ratings and advertising revenue are subject to change, and any adverse
change in a particular market affecting advertising expenditures or an adverse
change in the relative market positions of the stations located in a particular
market could have a material adverse effect on the revenue of the Company's
radio stations located in that market. There can be no assurance that any one of
the Company's radio stations will be able to maintain or increase its current
audience ratings or advertising revenue market share.
The Company's stations compete for listeners and advertising revenue
directly with other radio stations within their respective markets. Radio
stations compete for listeners primarily on the basis of program content that
appeals to a particular demographic group. By building a strong listener base
consisting of a specific demographic group in each of its markets, the Company
is able to attract advertisers seeking to reach those listeners. Companies that
operate radio stations must be alert to the possibility of another station
changing its format to compete directly for listeners and advertisers. Another
station's decision to convert to a format similar to that of one of the
Company's radio stations in the same geographic area may result in lower ratings
and advertising revenue, increased promotion and other expenses and,
consequently, lower broadcast cash flow for the Company.
Factors that are material to a radio station's competitive position include
management experience, the station's local audience rank in its market,
transmitter power, assigned frequency, audience characteristics, local program
acceptance and the number and characteristics of other radio stations in the
market area. The Company attempts to improve its competitive position in each
market by extensively researching its stations' programming, by implementing
advertising campaigns aimed at the demographic groups for which its stations
program and by managing its sales efforts to attract a larger share of
advertising dollars. However, the Company competes with some organizations that
have greater financial resources than the Company.
Recent changes in FCC policies and rules permit increased ownership and
operation of multiple local radio stations. Management believes that radio
stations that elect to take advantage of joint arrangements such as LMAs or JSAs
may in certain circumstances have lower operating costs and may be able to offer
advertisers more attractive rates and services. Although the Company currently
operates multiple stations in each of its markets and intends to pursue the
creation of additional multiple station groups, the Company's competitors in
certain markets include operators of multiple stations or operators who already
have entered into LMAs or JSAs. The Company also competes with other radio
station groups to purchase additional stations. Some of these groups are owned
or operated by companies that have substantially greater financial and other
resources than the Company.
Although the radio broadcasting industry is highly competitive, some
barriers to entry exist. The operation of a radio broadcast station requires a
license from the FCC, and the number of radio stations that can operate in a
given market is limited by the availability of FM and AM radio frequencies
allotted by the FCC to communities in that market, as well as by the FCC's
multiple ownership rules regulating the number of stations that may be owned and
controlled by a single entity. The FCC's multiple ownership rules have changed
significantly as a result of the Telecommunications Act. For a discussion of FCC
regulation and the provisions of the Telecommunications Act, see "--Federal
Regulation of Radio Broadcasting."
The Company's stations also compete for advertising revenue with other
media, including newspapers, broadcast television, cable television, magazines,
direct mail, coupons and outdoor advertising. In addition, the radio
broadcasting industry is subject to competition from new media technologies that
are being developed or introduced, such as the delivery of audio programming by
cable television systems, by satellite and by digital audio broadcasting
("DAB"). DAB may deliver by satellite to nationwide and regional audiences,
multi-channel, multi-format, digital radio services with sound quality
equivalent to compact discs. The delivery of information through the Internet
also could create a new form of competition. The radio broadcasting industry
historically has grown despite the introduction of new technologies for the
delivery of entertainment and information. A growing population and greater
availability of radios, particularly car and
56
<PAGE> 61
portable radios, have contributed to this growth. There can be no assurance,
however, that the development or introduction in the future of any new media
technology will not have an adverse effect on the radio broadcasting industry.
The FCC has recently authorized spectrum for the use of a new technology,
satellite digital audio radio services ("DARS"), to deliver audio programming.
DARS may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats to local and national audiences. It is
not known at this time whether this digital technology also may be used in the
future by existing radio broadcast stations either on existing or alternate
broadcasting frequencies. There are proposals before the FCC to permit a new
"low power" radio service which could open up opportunities for low cost
neighborhood service on frequencies which would not interfere with existing
stations. No FCC action has been taken on this proposal to date.
The Company cannot predict what other matters might be considered in the
future by the FCC, nor can it assess in advance what impact, if any, the
implementation of any of these proposals or changes might have on its business.
See "--Federal Regulation of Radio Broadcasting."
FEDERAL REGULATION OF RADIO BROADCASTING
Introduction. The ownership, operation and sale of broadcast stations,
including those licensed to the Company, are subject to the jurisdiction of the
FCC, which acts under authority derived from the Communications Act. The
Communications Act was amended in 1996 by the Telecommunications Act to make
changes in several broadcast laws. Among other things, the FCC assigns frequency
bands for broadcasting; determines whether to approve changes in ownership or
control of station licenses; regulates equipment used by stations; adopts and
implements regulations and policies that directly or indirectly affect the
ownership, operation and employment practices of stations; and has the power to
impose penalties for violations of its rules under the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. Failure to
observe these or other rules and policies can result in the imposition of
various sanctions, including fines, the grant of "short" (less than the maximum)
license renewal terms or, for particularly egregious violations, the denial of a
license renewal application, the revocation of a license or the denial of FCC
consent to acquire additional broadcast properties. Reference should be made to
the Communications Act, FCC rules and the public notices and rulings of the FCC
for further information concerning the nature and extent of federal regulation
of broadcast stations.
License Grant and Renewal. Until recently, radio broadcast licenses were
granted for maximum terms of seven years, but acting under the authority of the
Telecommunications Act, the FCC recently revised its rules to extend the maximum
term for future renewals to eight years. Licenses may be renewed through an
application to the FCC. Prior to the Telecommunications Act, during certain
periods when a renewal application was pending, competing applicants could file
for the radio frequency being used by the renewal applicant. The
Telecommunications Act prohibits the FCC from considering such competing
applications if the FCC finds that the station has served the public interest,
convenience and necessity, that there have been no serious violations by the
licensee of the Communications Act or the rules and regulations of the FCC, and
that there have been no other violations by the licensee of the Communications
Act or the rules and regulations of the FCC that, when taken together, would
constitute a pattern of abuse.
Petitions to deny license renewals can be filed by interested parties,
including members of the public. Such petitions may raise various issues before
the FCC. The FCC is required to hold hearings on renewal applications if the FCC
is unable to determine that renewal of a license would serve the public
interest, convenience and necessity, or if a petition to deny raises a
"substantial and material question of fact" as to whether the grant of the
renewal application would be prima facie inconsistent with the public interest,
convenience and necessity. Also, during certain periods when a renewal
application is pending, the transferability of the applicant's license is
restricted. A petition to deny renewal has been filed against four of the
Company's Salt Lake City stations, alleging that they failed to comply with FCC
equal opportunity employment rules, and FCC processing of that petition has
delayed action on those license renewals. Except
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for that case, the Company is not currently aware of any facts that would
prevent the timely renewal of its licenses to operate its radio stations,
although there can be no assurance that the Company's licenses will be renewed.
See "Risk Factors--Licensing and Ownership Issues."
The FCC classifies each AM and FM station. An AM station operates on either
a clear channel, regional channel or local channel. A clear channel is one on
which AM stations are assigned to serve wide areas. Clear channel AM stations
are classified as either: Class A stations, which operate on an unlimited time
basis and are designated to render primary and secondary service over an
extended area; Class B stations, which operate on an unlimited time basis and
are designed to render service only over a primary service area; or Class D
stations, which operate either during daytime hours only, during limited times
only or on an unlimited time basis with low nighttime power. A regional channel
is one on which Class B and Class D AM stations may operate and serve primarily
a principal center of population and the rural areas contiguous to it. A local
channel is one on which AM stations operate on an unlimited time basis and serve
primarily a community and the suburban and rural areas immediately contiguous
thereto. Class C AM stations operate on a local channel and are designed to
render service only over a primary service area that may be reduced as a
consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1 and C.
The following table sets forth the market, call letters, FCC license
classification, antenna height above average terrain (HAAT), power and frequency
of each of the stations owned or operated by the Company, assuming the
consummation of the Pending Transactions, and the date on which each station's
FCC license expires.
<TABLE>
<CAPTION>
EXPIRATION
HAAT DATE OF
FCC IN POWER IN FCC
MARKET(1) STATION CLASS METERS KILOWATTS(2) FREQUENCY LICENSE
- --------- ------- ----- ------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Providence, RI............................ WPRO-AM B NA 5.0 630 kHz 04-01-06
WPRO-FM B 168 39.0 92.3 MHz 04-01-06
WSKO-AM B NA 5.0 790 kHz 04-01-06
WWLI-FM B 152 50.0 105.1 MHz 04-01-06
WXEX-FM A 163 2.3 99.7 MHz 04-01-06
WHKK-FM A 90 4.2 100.3 MHz 04-01-06
Salt Lake City, UT........................ KCNR-AM B NA 10.0/0.195 860 kHz 10-01-97(3)
KUBL-FM C 1140 26.0 93.3 MHz 10-01-97(3)
KENZ-FM C 869 45.0 107.5 MHz 10-01-97(3)
KBER-FM C 1140 25.0 101.1 MHz 10-01-97(3)
KFNZ-AM B NA 5.0 1320 kHz 10-01-05
KBEE-FM C 894 40.0 98.7 MHz 10-01-05
Wilkes-Barre/Scranton, PA................. WAZL-AM C NA 1.0 1490 kHz 08-01-98(3)
WZMT-FM B 222 19.5 97.9 MHz 08-01-06
WARM-AM B NA 5.0 590 kHz 08-01-06
WMGS-FM B 422 5.3 92.9 MHz 08-01-98(3)
WBHT-FM(4)(5) A 336 0.50 97.1 MHz 08-01-06
WKQV-AM(4) B NA 10.0/0.5 1550 kHz 08-01-06
WKQV-FM(4) A 308 0.30 95.7 kHz 08-01-06
WCTP-FM A 235 0.52 94.3 MHz 08-01-98(3)
WCTD-FM A 207 1.45 93.7 MHz 08-01-06
WCDL-AM B NA 5.0/.037 1440 kHz 08-01-98(3)
WEMR-AM B NA 5.0/1.0 1460 kHz 08-01-06
WEMR-FM A 354 0.24 107.7 MHz 08-01-06
Allentown/Bethlehem, PA................... WCTO-FM B 152 50.0 96.1 MHz 08-01-06
WLEV-FM B 327 10.9 100.7 MHz 08-01-06
</TABLE>
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<PAGE> 63
<TABLE>
<CAPTION>
EXPIRATION
HAAT DATE OF
FCC IN POWER IN FCC
MARKET(1) STATION CLASS METERS KILOWATTS(2) FREQUENCY LICENSE
- --------- ------- ----- ------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Albuquerque, NM........................... KKOB-AM B NA 50.0 770 kHz 10-01-05
KKOB-FM C 1265 20.2 93.3 MHz 10-01-97(3)
KHTL-AM B NA 1.0/0.5 920 kHz 10-01-05
KMGA-FM C 1259 22.5 99.5 MHz 10-01-97(3)
KTBL-FM C 1276 20.4 103.3 MHz 10-01-97(3)
KHFM-FM C 1260 20.0 96.3 MHz 10-01-97(3)
KRST-FM C 1268 22.0 92.3 MHz 10-01-97(3)
KNML-AM B NA 1.0/0.5 1050 kHz 10-01-05
Harrisburg/Carlisle and York, PA.......... WRKZ-FM B 283 14.1 106.7 MHz 08-01-06
WHYL-FM(4)(5) A 100 H3.0/V2.75 102.3 MHz 08-01-06
WHYL-AM(4)(5) B NA 5.0 960 kHz 08-01-06
WQXA-AM B NA 1.0 1250 kHz 08-01-98(3)
WQXA-FM B 215 25.1 105.7 MHz 08-01-98(3)
Baton Rouge, LA........................... KQXL-FM(5) C2 148 50.0 106.5 MHz 06-01-04
WXOK-AM(5) B NA 5.0/1.0 1460 kHz 06-01-04
WEMX-FM(5) C1 299 100.0 94.1 MHz 06-01-04
WKJN-FM(5) C 306 100.0 103.3 MHz 06-01-04
WIBR-AM(5) B NA 5.0/1.0 1300 kHz 06-01-04
Little Rock, AR........................... KARN-FM A 100 3.0 102.5 MHz 06-01-04
KARN-AM B NA 5.0 920 kHz 06-01-04
KKRN-FM A 100 6.0 101.7 MHz 06-01-04
KIPR-FM C1 286 100.0 92.3 MHz 06-01-04
KOKY-FM A 118 4.10 102.1 MHz 06-01-04
KLAL-FM C2 95 50.0 107.7 MHz 06-01-04
KAFN-FM(6) A 100 6.0 102.5 MHz 06-01-04
KLIH-AM B NA 2.0/1.2 1250 kHz 06-01-04
KURB-FM C 392 100.0 98.5 MHz 06-01-04
KVLO-FM C2 150 50.0 102.9 MHz 06-01-04
KAAY-AM A NA 50.0 1090 kHz 06-01-04
Spokane, WA............................... KGA-AM A NA 50.0 1510 kHz 02-01-06
KDRK-FM C 725 56.0 93.7 MHz 02-01-06
KJRB-AM B NA 5.0 790 kHz 02-01-06
KAEP-FM C 582 100.0 105.7 MHz 02-01-06
KKZX-FM(4) C 492 100.0 98.9 MHz 02-01-98(3)
KEYF-AM(4) B NA 5.0 1050 kHz 02-01-06
KEYF-FM(4) C 490 100.0 101.1 MHz 02-01-98(3)
KUDY-AM(4) B NA 5.0 1280 kHz 02-01-06
Colorado Springs, CO...................... KKFM-FM C 698 71.0 98.1 MHz 04-01-05
KKMG-FM C 695 57.0 98.9 MHz 04-01-05
KKLI-FM C2 678 1.6 106.3 MHz 04-01-05
KVUU-FM(4) C 610 68.0 99.9 MHz 04-01-05
KSPZ-FM(4) C 649 72.0 92.9 MHz 04-01-05
KVOR-AM(4) B NA 5.0/1.0 1300 kHz 04-01-05
KTWK-AM(4) B NA 3.3/1.5 740 kHz 04-01-05
Charleston, SC............................ WSSX-FM(5) C 317 100.0 95.1 MHz 12-01-03
WWWZ-FM(5) C2 150 50.0 93.3 MHz 12-01-03
WMGL-FM(5) C3 128.9 6.5 101.7 MHz 12-01-03
WSUY-FM(5) C 539.5 100.0 96.9 MHz 12-01-03
WNKT-FM(5) C 299.9 100.0 107.5 MHz 12-01-03
WTMA-AM(5) B NA 5.0/1.0 1250 kHz 12-01-03
WTMZ-AM(5) B NA 0.50 910 kHz 12-01-03
WXTC-AM(5) B NA 5.0 1390 kHz 12-01-03
Lafayette, LA............................. KFXZ-FM(5) A 151 2.6 106.3 MHz 06-01-04
KNEK-FM(5) C3 100 25.0 104.7 MHz 06-01-04
KNEK-AM(5) B NA 0.25 1190 kHz 06-01-04
KRRQ-FM(5) C2 135 50.0 95.5 MHz 06-01-04
Modesto, CA............................... KANM-AM B NA 1.0 970 kHz 12-01-05
KATM-FM B 152 50.0 103.3 MHz 12-01-05
KHKK-FM B 152 50.0 104.1 MHz 12-01-05
KDJK-FM A 624 0.071 103.9 MHz 12-01-05
KHOP-FM B 193 29.5 95.1 MHz 12-01-05
</TABLE>
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<PAGE> 64
<TABLE>
<CAPTION>
EXPIRATION
HAAT DATE OF
FCC IN POWER IN FCC
MARKET(1) STATION CLASS METERS KILOWATTS(2) FREQUENCY LICENSE
- --------- ------- ----- ------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Saginaw/Bay City, MI...................... WKQZ-FM(5) C2 169 39.2 93.3 MHz 10-01-04
WMJK-FM(5) A 151 2.6 100.9 MHz 10-01-04
WIOG-FM(5) B 244 86 102.5 MHz 10-01-04
WMJA-FM(5) A 126 2.9 104.5 MHz 10-01-04
WGER-FM(5) A 116 2.05 106.3 MHz 10-01-04
WSGW-AM(5) B NA 5.0/1.0 790 kHz 10-01-04
Boise, ID................................. KIZN-FM C 762 44.0 92.3 MHz 10-01-05
KZMG-FM C 802 50.0 93.1 MHz 10-01-05
KKGL-FM C 768 44.0 96.9 MHz 10-01-05
KQFC-FM C 762 47.0 97.9 MHz 10-01-05
KBOI-AM B NA 50.0 960 kHz 10-01-05
Reno, NV.................................. KKOH-AM B NA 50.0 780 kHz 10-01-05
KNEV-FM C 695 60.0 95.5 MHz 10-01-05
KBUL-FM C 699 72.0 98.1 MHz 10-01-05
KNHK-FM C 809 44.7 92.9 MHz 10-01-05
KXXL-FM(4) A 129 3.6 93.7 MHz 10-01-05
Eugene, OR................................ KUGN-AM B NA 5.0/1.0 590 kHz 02-01-06
KKTT-FM C 308 100.0 97.9 MHz 02-01-06
KEHK-FM C1 301 95.0 102.3 MHz 02-01-06
Binghamton, NY............................ WHWK-FM(5) B 292.6 10.0 98.1 MHz 06-01-06
WYOS-FM(5) A 254 0.93 104.1 MHz 11-26-96(7)
WAAL-FM(5) B 332 7.1 99.1 MHz 06-01-06
WNBF-AM(5) B NA 5.0 1290 kHz 06-01-06
WKOP-AM(5) B NA 5.0/0.5 1360 kHz 06-01-06
Johnstown, PA............................. WQKK-FM B 152 50.0 99.1 MHz 08-01-06
WGLU-FM A 318 0.58 92.1 MHz 08-01-06
Tri-Cities, WA............................ KFLD-AM B NA 10.0/0.25 870 kHz 02-01-06
KEYW-FM A 59 3.0 98.3 MHz 02-01-06
KORD-FM C 335 100.0 102.7 MHz 02-01-06
KXRX-FM C 408 50.0 97.1 MHz 02-01-06
KTHK-FM C2 339 8.0 97.9 MHz 02-01-06
Medford, OR............................... KTMT-AM B NA 1.0 880 kHz 02-01-06
KTMT-FM C 994 31.0 93.7 MHz 02-01-06
KBOY-FM C1 299 60.0 95.7 MHz 02-01-06
KCMX-AM B NA 1.0 580 kHz 02-01-06
KCMX-FM C1 435 31.6 101.9 MHz 02-01-06
KAKT-FM C1 166 51.7 105.1 MHz 02-01-98(3)
State College, PA......................... WRSC-AM B NA 2.0/1.0 1390 kHz 08-01-06
WQWK-FM A 123 2.0 97.1 MHz 08-01-06
WBLF-AM B NA 1.0 970 kHz 08-01-06
WIKN-FM A 100 3.0 107.9 MHz 08-01-06
Billings, MT.............................. KBUL-AM B NA 5.0 970 kHz 04-01-05
KCTR-FM C1 152 100.0 102.9 MHz 04-01-05
KKBR-FM C2 122 28.0 97.1 MHz 04-01-05
KBBB-FM C1 146 100.0 103.7 MHz 04-01-05
KMHK-FM C 300 100.0 95.5 MHz 04-01-05
Muncie, IN................................ WMDH-FM(5) B 152.4 50.0 102.5 MHz 08-01-04
WMDH-AM(5) B NA 0.25 1550 kHz 08-01-04
Kokomo, IN................................ WWKI-AM(5) B 143.3 50.0 100.5 MHz 08-01-04
</TABLE>
- ---------------
(1) Actual city of license may be different from the metropolitan market served.
(2) Pursuant to FCC rules and regulations, many AM radio stations are licensed
to operate at a reduced power during nighttime broadcasting hours, which
results in reducing the radio station's coverage during those hours of
operation. Both power ratings are shown, where applicable.
(3) License renewal applications have been filed for the listed stations showing
a license expiration date of October 1, 1997, February 1, 1998 or August 1,
1998, and the expiration of the licenses is stayed during the pendency of
such renewal proceedings. A petition to deny the renewal applications for
four of the Company's Salt Lake City stations has been filed with the FCC,
citing alleged violations of the FCC's policies concerning equal employment
opportunities ("EEO"). In September 1998, the U.S. Court of Appeals for the
District of Columbia Circuit, in Lutheran Church-Missouri Synod v. FCC, held
most aspects of the FCC's EEO rules to be
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<PAGE> 65
unconstitutional, thus invalidating them. The status of pending petitions to
deny license renewals based on alleged EEO violations was rendered uncertain
by the Court's decision. The FCC is currently considering how to deal with
such petitions, and has proposed adoption of new EEO rules that address the
Court's concerns. Should the FCC find that these Company Salt Lake City
stations lacked EEO policies and procedures that were effective, the FCC
could penalize the stations in the form of fines (generally $10,000 -
$15,000), reporting conditions (the stations would be required to file with
the FCC periodic EEO documentation), and/or short-term renewal (renewal of
license for less than the standard 8-year period). In rare cases, the FCC
may order hearings on EEO violations.
(4) The Company provides certain sales and marketing services to stations
KVUU-FM, KSPZ-FM, KVOR-AM and KTWK-AM in Colorado Springs, Colorado,
stations KKZX-FM, KEYF-AM, KEYF-FM and KUDY-AM in Spokane, Washington and
station WKQV-AM in Wilkes-Barre/Scranton, Pennsylvania, pursuant to JSAs.
The Company provides certain sales, programming and marketing services to
stations WBHT-FM and WKQV-FM in Wilkes-Barre/Scranton, Pennsylvania and
KXXL-FM in Reno, Nevada, and, pending their acquisition by the Company,
stations WHYL-AM and WHYL-FM in Carlisle, Pennsylvania, pursuant to LMAs.
The Company has exercised its option to purchase WBHT-FM in
Wilkes-Barre/Scranton.
(5) Indicates a station which is the subject of a Pending Transaction. The
consummation of each of the Pending Transactions is subject to certain
conditions. Although the Company believes these conditions are customary for
transactions of this type and will be satisfied, there can be no assurance
that such closing conditions will be satisfied.
(6) KAFN-FM is under construction and has not yet commenced operations.
(7) WYOS-FM operates pursuant to a construction permit. An application for a
license to cover the construction permit has been filed with the FCC.
Expiration of the construction permit is stayed during the pendency of that
application.
Ownership Matters. The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a broadcast license without the
prior approval of the FCC. In determining whether to assign, transfer, grant or
renew a broadcast license, the FCC considers a number of factors pertaining to
the licensee, including compliance with various rules limiting common ownership
of media properties, the "character" of the licensee and those persons holding
"attributable" interests therein, and compliance with the Communications Act's
limitation on alien ownership, as well as compliance with other FCC policies,
including equal employment opportunity requirements.
Once a station purchase agreement has been signed, an application for FCC
consent to assignment of license or transfer of control (depending upon whether
the underlying transaction is an asset purchase or stock acquisition) is filed
with the FCC. Approximately 10 to 15 days after this filing, the FCC normally
publishes a notice assigning a file number to the application and advising that
the application has been "accepted for filing." This notice begins a 30-day
statutory waiting period, which provides the opportunity for third parties to
file formal petitions to deny the transaction; informal objections may be filed
any time prior to grant of an application. The FCC staff will normally review
the application in this period and seek further information and amendments to
the application if it has questions.
Once the 30-day public notice period ends, the staff will complete its
processing, assuming that no petitions or informal objections were received and
that the application is otherwise consistent with FCC rules and policies. The
staff often grants the application by delegated authority approximately 10 to 20
days after the public notice period ends. At this point, the parties are legally
authorized to close the purchase, although the FCC action is not legally a
"final order." If there is a backlog of applications, the processing period can
extend to 30 days or more.
Public notice of the FCC staff grant is usually issued about a week after
the grant is made, stating that the grant was effective when the staff made the
grant. On the date of this notice, another 30-day period begins, within which
time interested parties can file petitions seeking either staff reconsideration
or full FCC review of the staff action. During this time the grant can still be
modified, set aside or stayed, and is not a "final order." In the absence of a
stay, however, the seller and buyer are not prevented from closing despite the
absence of a final order. Also, within 40 days after the public notice of the
grant, the full FCC can review and reconsider the staff's grant on its own
motion. Thus, during the additional 10 days beyond the 30-day period available
to third parties, the grant is still not "final." In the event that review by
the full FCC is requested and the FCC subsequently affirms the staff's grant of
the application, interested parties may thereafter seek judicial review in the
United States Court of Appeals for the District of Columbia Circuit within
thirty days of public notice of the full FCC's action. In the event the Court
affirms the FCC's action, further judicial review may be sought by seeking
rehearing en banc from the Court of Appeals or by certiorari from the United
States Supreme Court.
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<PAGE> 66
In the absence of the submission of a timely request for reconsideration,
administrative review or judicial review, the FCC staff's grant of an
application becomes final by operation of law. Upon the occurrence of that
event, counsel is able to deliver an opinion that the FCC's grant is no longer
subject to administrative or judicial review, although such action can
nevertheless be set aside in rare circumstances, such as fraud on the agency by
a party to the application.
The pendency of a license renewal application can alter the aforementioned
timetables because the FCC normally will not issue an unconditional assignment
grant if the station's license renewal is pending.
Under the Communications Act, a broadcast license may not be granted to or
held by a corporation that has more than one-fifth of its capital stock owned or
voted by aliens or their representatives, by foreign governments or their
representatives, or by non-U.S. corporations. Under the Communications Act, a
broadcast license also may not be granted to or held by any corporation that is
controlled, directly or indirectly, by any other corporation more than
one-fourth of whose capital stock is owned or voted by aliens or their
representatives, by foreign governments or their representatives, or by non-U.S.
corporations. These restrictions apply in modified form to other forms of
business organizations, including partnerships. Each of the Company and Citadel
Communications therefore may be restricted from having more than one-fourth of
its stock owned or voted by aliens, foreign governments or non-U.S.
corporations. The Certificate of Incorporation of the Company and the
Certificate of Incorporation of Citadel Communications contain provisions which
permit the Company and Citadel Communications to prohibit alien ownership and
control consistent with the prohibitions contained in the Communications Act.
The Communications Act and FCC rules also generally restrict the common
ownership, operation or control of radio broadcast stations serving the same
local market, of a radio broadcast station and a television broadcast station
serving the same local market, and of a radio broadcast station and a daily
newspaper serving the same local market. Under these "cross-ownership" rules,
absent waivers, neither the Company nor Citadel Communications would be
permitted to acquire any daily newspaper or television broadcast station (other
than low power television) in a local market where it then owned any radio
broadcast station. The FCC's rules provide for the liberal grant of a waiver of
the rule prohibiting common ownership of radio and television stations in the
same geographic market in the top 25 television markets if certain conditions
are satisfied. The Telecommunications Act extends this waiver policy to stations
in the top 50 television markets, although the FCC has not yet implemented this
change.
In response to the Telecommunications Act, the FCC amended its multiple
ownership rules to eliminate the national limits on ownership of AM and FM
stations. The FCC's broadcast multiple ownership rules restrict the number of
radio stations one person or entity may own, operate or control on a local
level. These limits are:
(1) in a market with 45 or more commercial radio stations, an entity
may own up to eight commercial radio stations, not more than five of which
are in the same service (FM or AM);
(2) in a market with between 30 and 44 (inclusive) commercial radio
stations, an entity may own up to seven commercial radio stations, not more
than four of which are in the same service;
(3) in a market with between 15 and 29 (inclusive) commercial radio
stations, an entity may own up to six commercial radio stations, not more
than four of which are in the same service;
(4) in a market with 14 or fewer commercial radio stations, an entity
may own up to five commercial radio stations, not more than three of which
are in the same service, except that an entity may not own more than 50% of
the stations in such market.
None of these multiple ownership rules requires any change in the Company's
current ownership of radio broadcast stations. However, these rules will limit
the number of additional stations which the Company may acquire in the future in
certain of its markets.
Because of these multiple and cross-ownership rules, a purchaser of voting
stock of either the Company or Citadel Communications which acquires an
"attributable" interest in the Company or Citadel Communications may violate the
FCC's rule if it also has an attributable interest in other television or radio
62
<PAGE> 67
stations, or in daily newspapers, depending on the number and location of those
radio or television stations or daily newspapers. Such a purchaser also may be
restricted in the companies in which it may invest, to the extent that these
investments give rise to an attributable interest. If an attributable
shareholder of the Company or Citadel Communications violates any of these
ownership rules, the Company or Citadel Communications may be unable to obtain
from the FCC one or more authorizations needed to conduct its radio station
business and may be unable to obtain FCC consents for certain future
acquisitions.
The FCC generally applies its television/radio/newspaper cross-ownership
rules and its broadcast multiple ownership rules by considering the
"attributable," or cognizable interests held by a person or entity. A person or
entity can have an interest in a radio station, television station or daily
newspaper by being an officer, director, partner or shareholder of a company
that owns that station or newspaper. Whether that interest is cognizable under
the FCC's ownership rules is determined by the FCC's attribution rules. If an
interest is attributable, the FCC treats the person or entity who holds that
interest as the "owner" of the radio station, television station or daily
newspaper in question, and therefore subject to the FCC's ownership rules.
With respect to a corporation, officers and directors and persons or
entities that directly or indirectly can vote 5% or more of the corporation's
stock (10% or more of such stock in the case of insurance companies, investment
companies, bank trust departments and certain other "passive investors" that
hold such stock for investment purposes only) generally are attributed with
ownership of whatever radio stations, television stations and daily newspapers
the corporation owns.
With respect to a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is "materially
involved" in the media-related activities of the partnership. Debt instruments,
nonvoting stock, options and warrants for voting stock that have not yet been
exercised, limited partnership interests where the limited partner is not
"materially involved" in the media-related activities of the partnership, and
minority (under 5%) voting stock, generally do not subject their holders to
attribution. However, the FCC is currently reviewing its rules on attribution of
broadcast interests, and it may adopt stricter criteria. See "--Proposed
Changes" below.
In addition, the FCC has a "cross-interest" policy that under certain
circumstances could prohibit a person or entity with an attributable interest in
a broadcast station or daily newspaper from having a "meaningful"
nonattributable interest in another broadcast station or daily newspaper in the
same local market. Among other things, "meaningful" interests could include
significant equity interests (including non-voting stock, voting stock and
limited partnership interests) and significant employment positions. This policy
may limit the permissible investments a purchaser of the Company's or Citadel
Communications' voting stock may make or hold.
The FCC has also been more aggressive in examining issues of market revenue
share concentration when considering radio station acquisitions. The FCC has
delayed its approval of several pending radio station purchases by various
parties because of market concentration concerns. Moreover, in recent months the
FCC has followed an informal policy of giving specific public notice of its
intention to conduct additional ownership concentration analyses and soliciting
public comment on the issue of concentration and its effect on competition and
diversity in connection with certain applications for consent to radio station
acquisitions.
Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." Since 1981, the FCC gradually has relaxed or
eliminated many of the more formalized procedures it developed to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. However, licensees continue to be required to present
programming that is responsive to community problems, needs and interests and to
maintain certain records demonstrating such responsiveness. Complaints from
listeners concerning a station's programming will be considered by the FCC when
it evaluates the licensee's renewal application, but such complaints may be
filed and considered at any time.
Stations also must pay regulatory and application fees and follow various
FCC rules that regulate, among other things, political advertising, the
broadcast of obscene or indecent programming, sponsorship identification and
technical operations (including limits on radio frequency radiation). In
addition, licensees
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<PAGE> 68
must develop and implement programs designed to promote equal employment
opportunities and must submit reports to the FCC on these matters annually and
in connection with a renewal application. The broadcast of contests and
lotteries also is regulated by FCC rules.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
"short" (less than the maximum) renewal terms or, for particularly egregious
violations, the denial of a license renewal application or the revocation of a
license.
In 1985, the FCC adopted rules regarding human exposures to levels of radio
frequency ("RF") radiation. These rules require applicants for new broadcast
stations, renewals of broadcast licenses or modifications of existing licenses
to inform the FCC at the time of filing such applications whether a new or
existing broadcast facility would expose people to RF radiation in excess of
certain guidelines. In August 1996, the FCC adopted more restrictive radiation
limits. These limits became effective on September 1, 1997 and govern
applications filed after that date. The Company anticipates that such
regulations will not have a material effect on its business.
Local Marketing Agreements. Over the past five years, a number of radio
stations, including certain of the Company's stations, have entered into what
commonly are referred to as "local marketing agreements" (LMAs) or "time
brokerage agreements." These agreements take various forms. Separately-owned and
licensed stations may agree to function cooperatively in terms of programming,
advertising sales and other matters, subject to compliance with the antitrust
laws and the FCC's rules and policies, including the requirement that the
licensee of each station maintains independent control over the programming and
other operations of its own station. The FCC has held that such agreements do
not violate the Communications Act as long as the licensee of the station that
is being substantially programmed by another entity maintains complete
responsibility for, and control over, operations of its broadcast stations and
otherwise ensures compliance with applicable FCC rules and policies.
A station that brokers substantial time on another station in its market or
engages in an LMA with a station in the same market will be considered to have
an attributable ownership interest in the brokered station for purposes of the
FCC's ownership rules, discussed above. As a result, a broadcast station may not
enter into an LMA that allows it to program more than 15% of the broadcast time,
on a weekly basis, of another local station that it could not own under the
FCC's local multiple ownership rules. FCC rules also prohibit the broadcast
licensee from simulcasting more than 25% of its programming on another station
in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations
serve substantially the same geographic area, whether the licensee owns the
stations or owns one and programs the other through an LMA arrangement.
Another example of a cooperative agreement between differently owned radio
stations in the same market is a joint sales agreement (JSA), whereby one
station sells advertising time in combination, both on itself and on a station
under separate ownership. In the past, the FCC has determined that issues of
joint advertising sales should be left to antitrust enforcement. The Company has
entered into several JSAs whereby it sells time on behalf of other local
stations. Currently, JSAs are not deemed by the FCC to be attributable. However,
the FCC has outstanding a notice of proposed rulemaking, which, if adopted,
would require the Company to terminate any JSA it might have with a radio
station with which the Company could not have an LMA. Currently, the only
Company groups that would be so affected would be its groups in Spokane and
Colorado Springs. See "--General" and "--Station Portfolio."
Proposed Changes. In December, 1994, the FCC initiated a proceeding to
solicit comment on whether it should revise its radio and television ownership
"attribution" rules by among other proposals
- raising the basic benchmark for attributing ownership in a corporate
licensee from 5% to 10% of the licensee's voting stock,
- increasing from 10% to 20% of the licensee's voting stock the
attribution benchmark for "passive investors" in corporate licensees,
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- restricting the availability of the attribution exemption when a
single party controls more than 50% of the voting stock, and
- considering LMAs, JSAs, debt and non-voting stock interests to be
attributable under certain circumstances. No decision has been made by
the FCC in these matters. At this time, no determination can be made
as to what effect, if any, this proposed rulemaking will have on the
Company.
The Congress and the FCC from time to time have under consideration, and
may in the future consider and adopt, new laws, regulations and policies
regarding a wide variety of matters that could, directly or indirectly, affect
the operation, ownership and profitability of the Company's radio stations,
result in the loss of audience share and advertising revenues for the Company's
radio stations, and affect the ability of the Company to acquire additional
radio stations or finance such acquisitions. Such matters include: proposals to
impose spectrum use or other fees on FCC licensees; the FCC's equal employment
opportunity rules and matters relating to political broadcasting; technical and
frequency allocation matters; proposals to restrict or prohibit the advertising
of beer, wine and other alcoholic beverages on radio; changes in the FCC's
cross-interest, multiple ownership and cross-ownership policies; changes to
broadcast technical requirements; proposals to allow telephone or cable
television companies to deliver audio and video programming to the home through
existing phone or other communication lines; proposals to limit the tax
deductibility of advertising expenses by advertisers; and proposals to auction
the right to use the radio broadcast spectrum to the highest bidder, instead of
granting FCC licenses and subsequent license renewals without such bidding.
The FCC, on April 2, 1997, awarded two licenses for the provision of
satellite digital audio radio services ("DARS"). Under rules adopted for this
service, licensees must begin construction of their space stations within one
year, begin operating within four years, and be operating their entire system
within six years. The Company cannot predict whether the service will be
subscription or advertiser supported. Digital technology also may be used in the
future by terrestrial radio broadcast stations either on existing or alternate
broadcasting frequencies, and the FCC has stated that it will consider making
changes to its rules to permit AM and FM radio stations to offer digital sound
following industry analysis of technical standards. In addition, the FCC has
authorized an additional 100 kHz of bandwidth for the AM band and on March 17,
1997, adopted an allotment plan for the expanded band which identified the 88 AM
radio stations selected to move into the band. At the end of a five-year
transition period, those licensees will be required to return to the FCC either
the license for their existing AM band station or the license for the expanded
AM band station.
The Company cannot predict whether any proposed changes will be adopted or
what other matters might be considered in the future, nor can it judge in
advance what impact, if any, the implementation of any of these proposals or
changes might have on its business.
The foregoing is a brief summary of certain provisions of the
Communications Act and of specific FCC rules and policies. This description does
not purport to be comprehensive and reference should be made to the
Communications Act, the FCC's rules and the public notices and rulings of the
FCC for further information concerning the nature and extent of federal
regulation of radio broadcast stations.
Federal Antitrust Considerations. The Company is aware that the FTC and
the DOJ, which evaluate transactions to determine whether those transactions
should be challenged under the federal antitrust laws, have been increasingly
active recently in their review of radio station acquisitions, particularly
where an operator proposes to acquire additional stations in its existing
markets.
For an acquisition meeting certain size thresholds, the HSR Act, and the
rules promulgated thereunder require the parties to file Notification and Report
Forms with the FTC and the DOJ and to observe specified waiting period
requirements before consummating the acquisition. During the initial 30-day
period after the filing, the agencies decide which of them will investigate the
transaction. If the investigating agency determines that the transaction does
not raise significant antitrust issues, then it will either terminate the
waiting period or allow it to expire after the initial 30 days. On the other
hand, if the agency determines that the transaction requires a more detailed
investigation, then, at the conclusion of the initial 30-day period, it
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will issue a formal request for additional information (a "Second Request"). The
issuance of a Second Request extends the waiting period until the twentieth
calendar day after the date of substantial compliance by all parties to the
acquisition. Thereafter, such waiting period may only be extended by court order
or with the consent of the parties. In practice, complying with a Second Request
can take a significant amount of time. In addition, if the investigating agency
raises substantive issues in connection with a proposed transaction, then the
parties frequently engage in lengthy discussions or negotiations with the
investigating agency concerning possible means of addressing those issues,
including but not limited to persuading the agency that the proposed acquisition
would not violate the antitrust laws, restructuring the proposed acquisition,
divestiture of other assets of one or more parties, or abandonment of the
transaction. Such discussions and negotiations can be time consuming, and the
parties may agree to delay consummation of the acquisition during their
pendency.
At any time before or after the consummation of a proposed acquisition, the
FTC or the DOJ could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
acquisition or seeking divestiture of the business acquired or other assets of
the Company. Acquisitions that are not required to be reported under the HSR Act
may be investigated by the FTC or the DOJ under the antitrust laws before or
after consummation. In addition, private parties may under certain circumstances
bring legal action to challenge an acquisition under the antitrust laws.
The Company has received early termination of the applicable waiting period
under the HSR Act in regard to the pending acquisition of stations in
Saginaw/Bay City, Michigan, and is awaiting such early termination of the
applicable waiting period under the HSR Act in regard to the pending acquisition
of stations in Charleston, South Carolina, Binghamton, New York and Muncie and
Kokomo, Indiana. No other Pending Acquisition is subject to the HSR Act.
As part of its increased scrutiny of radio station acquisitions, the DOJ
has stated publicly that it believes that commencement of operations under LMAs,
JSAs and other similar agreements customarily entered into in connection with
radio station transfers prior to the expiration of the waiting period under the
HSR Act could violate the HSR Act. In connection with acquisitions subject to
the waiting period under the HSR Act, the Company will not commence operation of
any affected station to be acquired under an LMA or similar agreement until the
waiting period has expired or been terminated.
The Company has received civil investigative demands ("CID") from the
Antitrust Division of the DOJ. One CID addresses the Company's acquisition of
KRST-FM in Albuquerque, New Mexico, and the second investigation addresses the
Company's JSA relating to stations in Spokane, Washington and Colorado Springs,
Colorado. See "--Legal Proceedings."
SEASONALITY
Seasonal revenue fluctuations are common in the radio broadcasting industry
and are primarily the result of fluctuations in advertising expenditures by
retailers. The Company's revenue is typically lowest in the first quarter and
highest in the second and fourth quarters. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation--General."
TRADEMARKS
The Company owns a number of trademarks and service marks, including the
federally registered marks "Cat Country," "Supertalk" and the Cat Country logo.
The Company also owns a number of marks registered in various states. The
Company considers such trademarks and service marks to be important to its
business. See "--Operating Strategy--Targeted Programming."
EMPLOYEES
At December 1, 1998, the Company employed approximately 1,640 persons. None
of such employees are covered by collective bargaining agreements, and the
Company considers its relations with its employees to be good.
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The Company employs several on-air personalities with large loyal audiences
in their respective markets. The Company generally enters into employment
agreements with these personalities to protect its interests in those
relationships that it believes to be valuable. The loss of one of these
personalities could result in a short-term loss of audience share, but the
Company does not believe that any such loss would have a material adverse effect
on the Company's financial condition or results of operations.
PROPERTIES AND FACILITIES
The types of properties required to support each of the Company's radio
stations include offices, studios, transmitter sites and antenna sites. A
station's studios are generally housed with its offices in business districts.
The transmitter sites and antenna sites are generally located so as to provide
maximum market coverage.
The Company currently owns certain studio facilities in Spokane,
Washington; Billings, Montana; Tri-Cities, Washington; East Providence, Rhode
Island; Little Rock, Arkansas; Boise, Idaho; and Patton Township (State
College), Lower Yoder Township (Johnstown), Williams Township (Allentown) and
Tunkhannock (Wilkes-Barre/Scranton), Pennsylvania, and it owns certain
transmitter and antenna sites in Reno, Nevada; Salt Lake City, Utah; Spokane and
Tri-Cities, Washington; Tracy (Modesto), California; Billings, Montana; Santa Fe
and Albuquerque, New Mexico; Medford, Oregon; East Providence and Johnston,
Rhode Island; Little Rock, Arkansas; and Patton Township (State College), Croyle
Township (Johnstown), Mt. Joy Township (Harrisburg/York), Williams Township and
Salisbury Township (Allentown) and Hanover Township, Plymouth Township,
Carbondale and Tunkhannock (Wilkes-Barre/Scranton), Pennsylvania. The Company
will acquire additional real estate in connection with certain of the Pending
Acquisitions. The Company leases its remaining studio and office facilities,
including office space in Tempe, Arizona which is not related to the operations
of a particular station, and it leases its remaining transmitter and antenna
sites. The Company does not anticipate any difficulties in renewing any facility
leases or in leasing alternative or additional space, if required. The Company
owns substantially all of its other equipment, consisting principally of
transmitting antennae, transmitters, studio equipment and general office
equipment.
No one property is material to the Company's operations. The Company
believes that its properties are generally in good condition and suitable for
its operations; however, the Company continually looks for opportunities to
upgrade its properties and intends to upgrade studios, office space and
transmission facilities in certain markets.
Substantially all of the Company's properties and equipment serve as
collateral for the Company's obligations under the Credit Facility. See
"Description of Indebtedness--Existing Loan Agreement."
LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business, but the Company is not a party to any
lawsuit or proceeding which, in the opinion of the Company, is likely to have a
material adverse effect on the Company.
The Company has received CIDs from the DOJ pursuant to which the DOJ has
requested information from the Company to determine whether the Company has
violated certain antitrust laws. The first CID was issued on September 27, 1996
and concerns the Company's acquisition of all of the assets of KRST-FM in
Albuquerque, New Mexico on October 9, 1996 (the "KRST Acquisition"). The CID
requested written answers to interrogatories and the production of certain
documents concerning the radio station market in Albuquerque, in general, and
the KRST Acquisition, in particular, to enable the DOJ to determine, among other
things, whether the KRST Acquisition would result in excessive concentration in
the market. The Company has responded to the CID. The DOJ requested supplemental
information on January 27, 1997, to which the Company also responded. There have
been no communications since that time and, at present, the Company has been
given no indication from the DOJ regarding its intended future actions. If the
DOJ were to proceed with and successfully challenge the KRST Acquisition, the
Company may be required to divest one or more radio stations in Albuquerque.
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The second investigation was initiated on October 9, 1996 and concerned the
Company's JSA relating to a total of eight radio stations in Spokane, Washington
and Colorado Springs, Colorado and which became effective in January 1996.
Pursuant to the investigation, the DOJ has requested information to determine
whether the JSAs constituted a de facto merger, resulting in a combination or
contract in restraint of trade. The Company has provided the requested
information and has met with the DOJ concerning this matter. If the DOJ were to
proceed with and successfully challenge the JSA, the Company may be required to
terminate the JSA. At this time, the Company cannot predict the impact on the
Company, if any, of these proceedings or any future DOJ demands. See "Risk
Factors--Limitations on Acquisition Strategy" and "Risk Factors--Potential Delay
in Completing Pending Transactions Due to Antitrust Review."
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THE PENDING TRANSACTIONS
There are several transactions currently pending which, if consummated,
would result in the Company purchasing 23 FM and 11 AM radio stations.
THE WILKES-BARRE/SCRANTON ACQUISITION
WBHT-FM, Wilkes-Barre/Scranton, Pennsylvania. On August 13, 1998, the
Company entered into an Asset Purchase Agreement with Fairview Communications,
Inc. pursuant to which the Company has agreed to acquire certain assets used or
useful in the operation of radio station WBHT-FM serving the Wilkes-Barre/
Scranton market for an aggregate cash purchase price of approximately $1.2
million plus the aggregate amount of payments due from the Company to Fairview
under a Time Brokerage Agreement (LMA) between the parties with respect to the
period from August 1, 1998 until the later of December 31, 1998 or the date of a
final order from the FCC consenting to the acquisition by the Company of
WBHT-FM. The Company has operated this station under an LMA since July 1997.
The asset purchase agreement contains customary representations and
warranties of the parties, and consummation of the acquisition by the Company of
WBHT-FM is subject to certain conditions including (1) the receipt of FCC
consent to the assignment of the station license to the Company and (2) the
receipt of consents to the assignment to the Company of certain contracts
relating to WBHT-FM. An application seeking approval was filed with the FCC on
August 31, 1998. A grant of such application was received on October 23, 1998,
and the Company anticipates the acquisition of WBHT-FM will close in January
1999. Upon completion of this transaction, the Company will own six FM and four
AM radio stations and will operate one FM radio station and one AM radio station
under an LMA and JSA, respectively, in Wilkes-Barre/Scranton.
THE SAGINAW/BAY CITY ACQUISITION
WGER-FM, WMJA-FM, WKQZ-FM, WMJK-FM, WIOG-FM and WSGW-AM, Saginaw/Bay City,
Michigan. On October 9, 1998, the Company entered into an Asset Purchase
Agreement with 62nd Street Broadcasting of Saginaw, L.L.C. and 62nd Street
Broadcasting of Saginaw License, L.L.C. pursuant to which the Company has agreed
to acquire substantially all of the assets of WGER-FM, WMJA-FM and WSGW-AM
licensed to Saginaw, Michigan, WKQZ-FM licensed to Midland, Michigan, WMJK-FM
licensed to Pinconning, Michigan and WIOG-FM licensed to Bay City, Michigan for
an aggregate purchase price of approximately $35.0 million in cash. The Company
has delivered an irrevocable letter of credit in favor of the sellers, issued by
BankBoston, N.A. in the amount of $2.0 million to secure the Company's
obligations under the asset purchase agreement.
The asset purchase agreement contains customary representations and
warranties of the parties, and consummation of the acquisition of the stations
is subject to certain conditions including (1) the receipt of FCC consent to the
assignment of the station licenses to the Company and (2) the receipt of
consents to the assignment to the Company of certain material contracts relating
to the stations. An application seeking FCC approval was filed with the FCC on
October 16, 1998. The Company received early termination of the applicable HSR
waiting period on November 20, 1998. The Company anticipates that the
acquisition of these stations will close in the first quarter of 1999. The
Company does not own any other radio stations in Saginaw/Bay City.
THE HARRISBURG/CARLISLE ACQUISITION
WHYL-FM and WHYL-AM, Carlisle, Pennsylvania. On October 29, 1998, the
Company and Citadel License entered into an Asset Purchase Agreement with Zeve
Broadcasting Company ("Zeve Broadcasting") and H. Lincoln Zeve pursuant to which
the Company has agreed to purchase from Zeve Broadcasting substantially all of
the assets of radio stations WHYL-FM and WHYL-AM serving the Harrisburg/Carlisle
market for an aggregate purchase price of approximately $4.25 million in cash.
The Company has delivered to Zeve Broadcasting an irrevocable letter of credit
in favor of Zeve Broadcasting, issued by BankBoston, N.A., in the amount of
$250,000 to secure the Company's obligations under the asset purchase agreement.
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The asset purchase agreement contains customary representations and
warranties of the parties, and consummation of the transaction is subject to
certain conditions including (1) the receipt of FCC consent to the transfer of
the licenses for WHYL-FM and WHYL-AM to the Company and (2) the receipt of
consents to the assignment to the Company of certain contracts relating to
WHYL-FM and WHYL-AM. An application seeking FCC approval was filed with the FCC
on November 9, 1998. The Company has also entered into an LMA with Zeve
Broadcasting pursuant to which the Company markets commercial advertising time
and provides programming for WHYL-FM and WHYL-AM pending their acquisition by
the Company.
On October 29, 1998, the Company entered into an Agreement of Sale with H.
Lincoln Zeve to purchase real estate used by Zeve Broadcasting in the operation
of WHYL-FM and WHYL-AM for a purchase price of approximately $250,000 in cash.
The Company anticipates that the acquisition of WHYL-FM and WHYL-AM and the
real estate used by Zeve Broadcasting in the operation of the stations will
close in the first quarter of 1999. At the closing, the Company expects to enter
into a one-year employment agreement with Mr. Zeve. Upon consummation of this
transaction, the Company will own two FM radio stations and one AM radio station
in the Harrisburg/Carlisle market, and it will own one FM radio station and one
AM radio station in the adjacent York, Pennsylvania market.
THE BATON ROUGE AND LAFAYETTE ACQUISITION
KQXL-FM, WEMX-FM, WKJN-FM, WXOK-AM and WIBR-AM Baton Rouge, Louisiana and
KFXZ-FM, KNEK-FM, KRRQ-FM and KNEK-AM Lafayette, Louisiana. On November 5, 1998,
the Company entered into a Purchase Agreement with Citywide Communications, Inc.
("Citywide"), P M Investments, Ltd., Providence Investment, Ltd., Peter
Moncrieffe, Donald R. Nelson, Willie E. Tucker, Jr., FINOVA Capital Corporation
and certain warrantholders of Citywide pursuant to which the Company has agreed
to purchase all of the issued and outstanding shares of capital stock of
Citywide and all of the outstanding warrants to acquire shares of capital stock
of Citywide. The aggregate purchase price is approximately $34.5 million. This
amount includes the repayment of outstanding debt of Citywide and $1.5 million
in payments related to noncompetition agreements to be entered into in
connection with the acquisition, but it is net of the $1.0 million in positive
working capital that Citywide is required to have at closing of the acquisition.
The Company has caused to be delivered to Citywide an irrevocable letter of
credit in favor of Citywide, issued by BankBoston, N.A., in the amount of $1.0
million to secure the Company's obligations under the purchase agreement.
Citywide currently, directly or through its wholly-owned subsidiaries, is the
licensee of and owns and operates KQXL-FM, WEMX-FM, WKJN-FM, WXOK-AM, WIBR-AM,
KFXZ-FM, KNEK-FM, KRRQ-FM and KNEK-AM serving the Baton Rouge and Lafayette,
Louisiana markets.
The purchase agreement contains customary representations and warranties of
the parties, and consummation of the transaction is subject to certain
conditions including (1) the receipt of FCC consent to the transfer of control
of the station licenses to the Company, (2) the receipt of consents to the
change of control under certain contracts to which Citywide or its wholly-owned
subsidiaries are a party and (3) the existence at closing of a minimum of $1.0
million in positive working capital. An application seeking FCC approval was
filed with the FCC on November 18, 1998. The Company anticipates that the
acquisition of Citywide will close in the first quarter of 1999. At the closing,
the Company expects to enter into a three-year employment agreement with one of
the principals of Citywide. Immediately after closing, Citywide and its
wholly-owned subsidiaries will be merged into the Company. The Company does not
own any other radio stations in either Baton Rouge or Lafayette.
THE CHARLESTON/BINGHAMTON/MUNCIE/KOKOMO ACQUISITION
WSSX-FM, WWWZ-FM, WMGL-FM, WSUY-FM, WNKT-FM, WTMA-AM, WTMZ-AM and WXTC-AM,
Charleston, South Carolina, WHWK-FM, WYOS-FM, WAAL-FM, WNBF-AM and WKOP-AM,
Binghamton, New York, WMDH-FM and WMDH-AM, Muncie, Indiana and WWKI-FM, Kokomo,
Indiana. On November 23, 1998, the Company entered into an Asset Purchase
Agreement with Wicks Broadcast Group
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Limited Partnership and certain related entities (collectively, "Wicks") to
acquire substantially all of the assets of WSSX-FM, WWWZ-FM, WMGL-FM, WSUY-FM,
WNKT-FM, WTMA-AM, WTMZ-AM and WXTC-AM, Charleston, South Carolina, WHWK-FM,
WYOS-FM, WAAL-FM, WNBF-AM and WKOP-AM, Binghamton, New York, WMDH-FM and
WMDH-AM, Muncie, Indiana and WWKI-FM, Kokomo, Indiana, for an aggregate purchase
price of approximately $77.0 million in cash. The Company has delivered an
irrevocable letter of credit in favor of Wicks, issued by BankBoston, N.A., in
the amount of $5.0 million to secure the Company's obligations under the asset
purchase agreement.
The asset purchase agreement contains customary representations and
warranties of the parties, and consummation of the acquisition of the stations
is subject to certain conditions including (1) the receipt of FCC consent to the
assignment of the station license to the Company, (2) the expiration or
termination of the applicable waiting periods under the HSR Act and (3) the
receipt of consents to the assignment to the Company of certain contracts
relating to the stations. An application seeking FCC approval was filed with the
FCC on December 2, 1998. The Company anticipates that the acquisition of these
stations will close in the second quarter of 1999. The Company does not own any
other radio stations in these markets.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, ages and positions of the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lawrence R. Wilson................. 53 Chief Executive Officer and
Chairman
Donna L. Heffner................... 39 Vice President, Chief Financial
Officer, Treasurer and Secretary
D. Robert Proffitt................. 45 President and Chief Operating
Officer
Stuart R. Stanek................... 42 Vice President; President--East
Region
Peter J. Benedetti................. 35 Vice President; President--Central
Region
Edward T. Hardy.................... 50 Vice President; President--West
Region
Patricia Diaz Dennis............... 52 Director
Scott E. Smith..................... 43 Director
Ted L. Snider, Sr.................. 70 Director
John E. von Schlegell.............. 44 Director
</TABLE>
Lawrence R. Wilson co-founded and was a general partner of Predecessor from
1984 to July 1992 and has been the Chief Executive Officer and Chairman of the
Board of the Company since it was incorporated in August 1991 and Chief
Executive Officer, President and Chairman of Citadel Communications since it was
incorporated in May 1993. Mr. Wilson also served as President of the Company
from 1991 to October 1998. From 1974 to 1979, Mr. Wilson was Executive Vice
President and General Counsel of Combined Communications Corporation, a national
media company, where he handled all acquisitions and mergers and oversaw the
broadcast, newspaper and outdoor billboard divisions as a part of a five person
management committee. From 1979 to 1986, he was engaged in the private practice
of law.
Donna L. Heffner joined Predecessor in 1988 as its Controller. Ms. Heffner
has served as Treasurer and Secretary of the Company since it was incorporated
in August 1991 and of Citadel Communications since it was incorporated in May
1993. She has served as Chief Financial Officer of the Company and Citadel
Communications since July 1992 and May 1993, respectively. In January 1997, Ms.
Heffner became Vice President of the Company and Citadel Communications. Ms.
Heffner also served as a director of the Company from 1992 to 1993 and as a
director of Citadel Communications for several months in 1993. From 1982 to 1985
and in 1987, she was employed by Price Waterhouse, and in 1986, she was employed
by Lowrimore, Warwick & Company as an accountant.
D. Robert Proffitt joined Predecessor in 1988 as Vice President--General
Manager of KKFM-FM in Colorado Springs. In 1991, he was appointed Vice President
of the Company, and in 1993, he was appointed Vice President of Citadel
Communications, Mr. Proffitt took over as General Manager of the Company's
Albuquerque operations in 1994. Mr. Proffitt served as President of Central
Region for the Company from June 1997 to October 1998, and he became President
and Chief Operating Officer of the Company in October 1998.
Stuart R. Stanek joined Predecessor in 1986 as a General Manager of KKFM-FM
in Colorado Springs. In 1988, he became General Manager of KCNR-AM/KUBL-FM in
Salt Lake City, in 1991, he was appointed Vice President of the Company, in 1992
he was elected to the Board of Directors of the Company and in 1993, he was
appointed Vice President and elected to the Board of Directors of Citadel
Communications. He served as a Director of the Company and Citadel
Communications until August 1996. Mr. Stanek became President of East Region for
the Company in June 1997.
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Peter J. Benedetti joined the Company in April 1995 as Sales Manager for
KMGA-FM in Albuquerque and also became Sales Manager for KHFM-FM in Albuquerque
upon the Company's acquisition of that station in June 1996. From January 1997
to July 1997, Mr. Benedetti was Director of Sales of the Company's Salt Lake
City radio station group, and from July 1997 to October 1998, he served as Vice
President and General Manager of that radio station group. In October 1998 Mr.
Benedetti became Vice President and President of the Central Region for the
Company. Prior to joining the Company, he served as an account executive for
Jacor Communications' KBPI-FM in Denver, Colorado. Mr. Benedetti currently
serves on the Board of Directors of the Utah Broadcasters Association and the
Salt Lake City Radio Broadcasters Association.
Edward T. Hardy founded and was elected President and Chief Executive
Officer of Deschutes in 1994. Mr. Hardy joined Citadel Communications in January
1997 as President of Deschutes following Citadel Communications' acquisition of
Deschutes. Mr. Hardy became President of West Region for the Company and Vice
President of the Company and Citadel Communications in June 1997. From 1984 to
1993, Mr. Hardy was Vice President--General Manager of KUPL AM/FM in Portland.
Patricia Diaz Dennis became a director of the Company and Citadel
Communications in November 1997. Since September 1995, Ms. Dennis has served as
Senior Vice President and Assistant General Counsel for regulation and public
policy of SBC Communications Inc., a company which provides telecommunications
products and services. From March 1993 until joining SBC Communications Inc.,
Ms. Dennis served as special counsel for communications matters for the law firm
of Sullivan & Cromwell. Ms. Dennis served as a commissioner of the FCC from June
1986 to September 1989 and as Assistant Secretary of State for Human Rights and
Humanitarian Affairs in the United States Department of State from August 1992
to January 1993. Ms. Dennis also serves as director for various entities,
including Massachusetts Mutual Life Insurance Company and National Public Radio.
Scott E. Smith has served as a member of the Board of Directors of the
Company since 1992 and of Citadel Communications since 1993. He is an Executive
Vice President of Baker, Fentress & Company ("Baker Fentress"). Since 1989, Mr.
Smith has managed the private placement portfolio of Baker Fentress.
Ted L. Snider, Sr. became a director of the Company and Citadel
Communications in November 1997 following the Company's October 1997 acquisition
of Snider Corporation. Mr. Snider had been Chairman of Snider Corporation since
its incorporation in 1971. Snider Corporation owned two FM and two AM radio
stations, the right to construct an additional FM radio station and the Arkansas
Radio Network.
John E. von Schlegell has served as a member of the Board of Directors of
the Company and Citadel Communications since January 1997. He co-founded and,
since 1991, has managed, Endeavour Capital Fund Limited Partnership ("Endeavour
Capital"), a firm that invests equity capital in privately held businesses
throughout the northwest. Prior to 1991, Mr. von Schlegell was a general partner
at Golder, Thoma & Cressey, a private equity firm based in Chicago.
Ms. Dennis receives an annual fee of $20,000 for her services as a director
of the Company and Citadel Communications and the other non-employee directors
of the Company and Citadel Communications receive an annual fee of $12,000 for
their services as directors of the Company and Citadel Communications. Directors
who are also employees of the Company will not receive additional consideration
for serving as directors, except that all directors will be reimbursed for
travel and out-of-pocket expenses in connection with their attendance at Board
and committee meetings.
BOARD COMPOSITION
The five persons presently constituting the Board of Directors of the
Company were elected pursuant to the terms of a Fourth Amended and Restated
Voting Agreement dated as of October 15, 1997 (the "Voting Agreement"), by and
among Citadel Communications, the Voting Trustee under the Voting Trust
Agreement (as defined) and certain other stockholders of Citadel Communications.
In connection with Citadel Communications' initial public offering, the Voting
Agreement and a related Stockholders Agreement among Citadel Communications and
certain of its stockholders (the "Stockholders Agreement") were terminated. The
Voting Trust Agreement will continue in effect until terminated in accordance
with its terms.
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Each director of the Company holds office until the next annual meeting of
stockholders and until his or her successor has been elected and qualified.
Officers are elected by the Board of Directors and serve at its discretion.
In the event that, after July 1, 2002, two or more semi-annual dividends
payable on the Exchangeable Preferred Stock are in arrears and unpaid, or upon
the occurrence of certain other events (including failure to comply with certain
covenants and failure to pay the mandatory redemption price when due), then the
holders of a majority of the then outstanding shares of Exchangeable Preferred
Stock, voting separately as a class, will be entitled to elect two additional
directors of the Company, who shall serve until such time as all dividends in
arrears or any other failure, breach or default giving rise to such voting
rights is remedied or waived.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
paid to the Company's Chief Executive Officer and each of the other four persons
who were executive officers of the Company during 1997 (collectively, the "Named
Executives"). Information with respect to 1996 compensation is not given for
Messrs. Proffitt and Hardy as such persons did not begin service as executive
officers of the Company until 1997. No compensation information is given for Mr.
Benedetti as he did not begin services as an executive officer of the Company
until 1998.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- ------------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION
- ------------------ ---- -------- -------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence R. Wilson...... 1997 $341,256 $120,000(2) -0 - -0 - $3,278(3)
Chief Executive 1996 325,000 81,250(4) $412,041(5) 450,000 2,786(3)
Officer and
President
Donna L. Heffner........ 1997 $140,535 $ 50,000(2) -0 - -0 - $3,086(6)
Vice President and 1996 120,000 20,000(4) -0 - 66,000 2,505(6)
Chief Financial
Officer
D. Robert Proffitt...... 1997 $192,211 $ 15,000(2) -0 - -0 - $2,541(7)
Vice President and
President of
Central Region
Stuart R. Stanek........ 1997 $190,007 $ 30,000(2) -0 - -0 - $2,529(8)
Vice President and 1996 165,000 35,000(4) -0 - 72,000 2,553(8)
President of the
East Region
Edward T. Hardy......... 1997 $150,000 $ 5,000(2) -0 - -0 - $1,026(9)
Vice President and
President of the
West Region
</TABLE>
- ---------------
(1) In accordance with applicable regulations, the amounts set forth in this
column do not include perquisites and other personal benefits received by
the Named Executives unless the aggregate value of such perquisites and
other benefits exceeded the lesser of $50,000 or 10% of the total salary and
bonus reported for the Named Executive.
(2) Bonuses were earned in 1997 and paid in 1997 and 1998. Does not reflect
bonuses earned in 1996 but paid in 1997.
(3) Represents the Company's contribution of $3,200 and $2,708 in 1997 and 1996,
respectively, to the Company's 401(k) Plan, which contributions vest over
five years, and the Company's payment of $78 in each year of premiums for
term life insurance.
(4) Bonuses were earned in 1996, but paid in 1997. Does not reflect bonuses
earned in 1995, but paid in 1996.
(5) Represents $3,404 for personal use of Company-provided vehicle and for goods
and services received through the Company's trade agreements, and the
forgiveness of $408,637 of indebtedness in 1996. See "Certain Transactions."
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(6) Represents the Company's contribution of $3,008 and $2,427 in 1997 and 1996,
respectively, to the Company's 401(k) Plan, which contributions vest over
five years, and the Company's payment of $78 in each year of premiums for
term life insurance.
(7) Represents the Company's contribution of $2,463 in 1997 to the Company's
401(k) Plan, which contribution vests over five years, and the Company's
payment of $78 of premiums for term life insurance.
(8) Represents the Company's contribution of $2,451 and $2,475 in 1997 and 1996,
respectively, to the Company's 401(k) Plan, which contributions vest over
five years, and the Company's payment of $78 in each year of premiums for
term life insurance.
(9) Represents the Company's contribution of $1,000 in 1997 to the Company's
401(k) Plan, which contribution vests over five years, and the Company's
payment of $26 of premiums for term life insurance.
Stock Options. No stock options were granted to the Named Executives during
1997. The following table shows the number and value of unexercised stock
options to purchase shares of Common Stock of Citadel Communications (rounded to
the nearest whole share) held by the Named Executives as of December 31, 1997
(other than Peter J. Benedetti who became an executive officer of the Company in
1998). No options were exercised by the Named Executives in 1997.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS(1)
------------------------- -------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
<S> <C> <C>
Lawrence R. Wilson................ 334,231/407,717 $4,507,143/$4,435,058
Donna L. Heffner.................. 97,832/109,222 1,363,571/1,361,230
D. Robert Proffitt................ 72,016/100,010 982,064/1,202,873
Stuart R. Stanek.................. 98,420/113,614 1,368,773/1,412,698
Edward T. Hardy................... 115,089/88,800 1,463,706/912,568
</TABLE>
- ---------------
(1) There was no public trading market for the Common Stock as of December 31,
1997. Accordingly, these values have been calculated on the basis of the
initial public offering price of $16.00 per share, less the applicable
exercise price.
EMPLOYMENT AGREEMENT
In June 1996, the Company entered into an employment agreement with
Lawrence R. Wilson which has an initial term ending in June 2001. Mr. Wilson's
current annual base salary under the agreement is $358,313 which is to be
increased by 5% in January of each year during the term of the agreement. The
agreement also provides for an annual bonus calculated as a percentage of Mr.
Wilson's base salary in effect at the end of the year and based on certain
annual performance criteria of the Company.
Mr. Wilson's employment with the Company will terminate upon Mr. Wilson's
becoming permanently disabled or upon (1) a liquidation or dissolution of
Citadel Communications, (2) a sale, transfer or other disposition of all of the
assets of the Company on a consolidated basis or (3) any transaction or series
of transactions whereby any person or entity other than ABRY Broadcast Partners
II, L.P. ("ABRY II") or its affiliates or affiliates of the Company, becomes the
direct or indirect beneficial owner of securities of the Company or Citadel
Communications representing 50% or more of the combined voting power of the
Company's or Citadel Communications' then outstanding securities. In such event,
Mr. Wilson or his beneficiary will be entitled to receive Mr. Wilson's then base
salary through the end of the month in which the termination occurs. In
addition, upon the affirmative vote or written consent of not less than 66 2/3%
of the members of the Citadel Communications Board of Directors, Mr. Wilson's
employment may be terminated with or without cause. If any such termination is
without cause, Mr. Wilson will be entitled to receive his then current base
salary through the end of the then current term of the employment agreement.
1996 EQUITY INCENTIVE PLAN
Citadel Communications has adopted the 1996 Equity Incentive Plan (the
"Plan") pursuant to which all employees of the Company are eligible to receive
awards in the form of non-qualified options and incentive options to purchase
Common Stock, stock appreciation rights, restricted securities and other
stock-based
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<PAGE> 80
awards as determined by the Board of Directors. The Plan is administered by the
Board of Directors of Citadel Communications, which determines the price and
type of awards granted and the key managerial employees eligible to receive
awards and the terms thereof, including vesting, all in a manner consistent with
the Plan. The Citadel Communications Board may delegate responsibility for
administration of the Plan to a committee of the Citadel Communications Board.
The total number of shares of Common Stock of Citadel Communications that remain
reserved and available for issuance under the Plan (or which may be used to
provide a basis of measurement for an award) is 1,571,715 shares. Shares subject
to any option which terminates or expires unexercised will be available for
subsequent grants. The exercise price of incentive stock options granted under
the Plan is to be at least 100% of the fair market value of the Common Stock on
the date of grant (110% of the fair market value of the Common Stock in the case
of an incentive stock option to an individual who at the time of the grant owns
more than 10% of the combined voting power of the Company's capital stock). The
Citadel Communications Board may provide that an optionee may pay for shares
upon exercise of an option in cash or by check or by such other medium or by any
combination of media as authorized by the Citadel Communications Board. The
grant of an option may be accompanied by a reload option, which gives an
optionee who pays the exercise price of an option with shares of Common Stock an
additional option to acquire the same number of shares that was used to pay for
the original option at an exercise price of not less than the fair market value
of Common Stock as of the reload option grant date. An unexercised option
normally expires upon termination of employment, provided that the Citadel
Communications Board may permit the holder of the option to exercise it during
the 90 days following termination. Under certain circumstances, including
termination of employment upon retirement, disability or death, the option may
be exercised during an extended period. In the event of termination of
employment under certain circumstances following certain change in control
events, an option generally may be exercised in full during the 90 days
following termination. The Plan also provides for the grant of performance units
and shares of restricted stock, none of which have been granted.
401(k) PLAN
Effective in 1993, the Company adopted a 401(k) Savings Plan (the
"Retirement Plan") for the purpose of providing, at the option of the employee,
retirement benefits to full-time employees of the Company and its subsidiaries
who have been employed for a period of one year or longer. Contributions to the
Retirement Plan are made by the employee and, on a voluntary basis, by the
Company. The Company currently matches 100% of that part of the employee's
deferred compensation which does not exceed 2% of such employee's salary.
A contribution to the Retirement Plan of $0.3 million was made by the
Company during the year ended December 31, 1997.
DIRECTOR COMPENSATION
Ms. Dennis received an annual fee of $20,000 for services as a member of
the Company's and Citadel Communications' Board of Directors. In addition, on
November 25, 1997, Ms. Dennis was granted an immediately exercisable option to
purchase 7,500 shares of Common Stock of Citadel Communications at an exercise
price of $10.00 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, Scott E. Smith, John E. von Schlegell and Patricia Diaz Dennis
and former directors Mark A. Leavitt and Royce Yudkoff were members of the
Compensation Committee of the Citadel Communications Board of Directors, which
determines compensation matters for the Company. Such persons are or were also
directors of the Company. Mr. Yudkoff is President of ABRY Holdings, Inc., the
general partner of ABRY Capital, L.P., the general partner of ABRY II, a
significant stockholder of Citadel Communications, and ABRY Citadel Investment
Partners, L.P. ("ABRY/CIP"), formerly a significant stockholder of Citadel
Communications. See "Principal Stockholders." Mr. von Schlegell is President and
a shareholder of Endeavour Capital. See "Principal Stockholders."
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<PAGE> 81
Investment Banking Relationships. Mark A. Leavitt, a director of the
Company from 1992 to November 1997, is a Managing Director of Prudential
Securities Incorporated. Prudential Securities has provided investment banking
services to the Company since 1996 and may provide such services in the future.
Such services have been provided on terms customary in the industry. Prudential
Securities acted as an initial purchaser in the Original Offering and was an
initial purchaser in the 1997 Offerings and an underwriter of Citadel
Communications' initial public offering. In each of 1995 and 1996, Oppenheimer &
Co., Inc. ("Oppenheimer") provided investment banking services to the Company.
During such years, Mr. Leavitt was a Managing Director of Oppenheimer. Such
services were provided on terms customary in the industry. Oppenheimer was also
a party to the Voting Agreement and the Stockholders Agreement and is a party to
the Citadel Communications Registration Rights Agreement (as defined) and the
Securities Purchase and Exchange Agreement (as defined).
Repayment of Certain Indebtedness. In October 1996, the Company repaid its
indebtedness to Baker Fentress, which consisted of $7.0 million in principal
amount and $20,534 in accrued and unpaid interest. The Company also paid Baker
Fentress a $420,000 prepayment penalty. Baker Fentress beneficially owns more
than five percent of the outstanding Common Stock of Citadel Communications.
Scott E. Smith, a director of the Company, is an Executive Vice President of
Baker Fentress. See "Principal Stockholders."
Registration Rights Agreement. Citadel Communications is a party to a
Registration Rights Agreement, dated June 28, 1996, as amended (the "Citadel
Communications Registration Rights Agreement"), with Lawrence R. Wilson, Rio
Bravo Enterprise Associates, L.P. ("Rio Bravo"), ABRY II, ABRY/CIP, Baker
Fentress, Bank of America National Trust and Savings Association ("Bank of
America") (and certain of its employees and its affiliates), Oppenheimer, Edward
T. Hardy, Endeavour Capital, Ted L. Snider, Sr. and others, which requires
Citadel Communications to register their shares of its Common Stock under the
Securities Act for offer and sale to the public (including by way of an
underwritten public offering), upon a one-time demand by such stockholders, and
which entitles such parties to join in any registration of equity securities of
the Company. Mr. Wilson owns all of the capital stock of Rio Bravo, Inc., the
sole general partner of Rio Bravo.
Securities Purchase and Exchange Agreement. Pursuant to a Securities
Purchase and Exchange Agreement, dated June 28, 1996, as amended (the
"Securities Purchase and Exchange Agreement"), among the Company, Citadel
Communications, ABRY II, ABRY/CIP, Baker Fentress, Oppenheimer, Endeavour
Capital, Edward T. Hardy, Bank of America, Ted L. Snider, Sr. and certain other
parties, Citadel Communications redeemed outstanding preferred stock held by
Bank of America and certain other parties, repaid the $2.0 million principal
balance and the $17,500 in accrued interest on Citadel Communications' Junior
Subordinated Convertible Note Due 1996 dated May 24, 1996 issued to ABRY II,
financed four radio station acquisitions, and paid certain working capital
requirements. The transactions were financed by Citadel Communications' issuance
of shares of preferred stock to ABRY II and to ABRY/CIP for a total
consideration of approximately $49.5 million, and through borrowings under a
$20.0 million revolving line of credit with ABRY II and ABRY/CIP.
Simultaneously, four then existing series of capital stock of Citadel
Communications held by Baker Fentress, Oppenheimer, Bank of America and certain
other parties were reclassified.
The Securities Purchase and Exchange Agreement established a commitment
(the "Facility A Commitment") by ABRY II and ABRY/CIP in favor of Citadel
Communications for a revolving line of credit in the aggregate principal amount
of $20.0 million and against which ABRY II and ABRY/CIP made pro rata advances
(the "Facility A Advances"). At June 30, 1997, there were four Facility A
Advances outstanding, the aggregate principal balance of which was approximately
$12.8 million. Contemporaneously with the consummation of the 1997 Offerings, a
portion of the proceeds was used to repay advances made to the Company by
Citadel Communications with the proceeds of the Facility A Advances. Citadel
Communications repaid the Facility A Advances concurrently with the 1997
Offerings. Thereafter, the Facility A Commitment terminated and ABRY II and
ABRY/CIP have no further obligation to make Facility A Advances.
Voting Trust Agreement. In 1997, Citadel Communications paid ABRY II (for
the account of ABRY II and ABRY/CIP) $75,000 to defray the fees and expenses
associated with the Voting Trust, including any fees
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<PAGE> 82
payable to the Voting Trustee and the Back-Up Trustees. Each of Christopher P.
Hall, J. Walter Corcoran and Harlan A. Levy, directors of the Company and
Citadel Communications for a portion of 1997, served as either the Voting
Trustee or a Back-Up Trustee in 1997. Mr. Levy currently serves as the Voting
Trustee. For additional information concerning the Voting Trust Agreement, see
"Management--Board Composition" and "Principal Stockholders."
Management and Consulting Services Agreement. In June 1996, the Company
entered into a Management Services and Consulting Agreement with ABRY Partners,
Inc. (the "Management and Consulting Services Agreement") which was terminated
in March 1997. Pursuant to the agreement, ABRY Partners, Inc. provided
consultation to the Company's Board of Directors and management on business and
financial matters. The Company paid $37,500 and $62,500 to ABRY Partners, Inc.
under this agreement in 1996 and 1997, respectively, and reimbursed ABRY
Partners, Inc. for reasonable out-of-pocket costs and expenses. ABRY Partners,
Inc. is an affiliate of ABRY II and ABRY/CIP.
Deschutes Transactions. In connection with the acquisition of Deschutes,
(1) Edward T. Hardy, an officer, director and shareholder of Deschutes prior to
its acquisition by Citadel Communications and currently an executive officer of
the Company, and (2) Endeavour Capital, a shareholder of Deschutes prior to its
acquisition by Citadel Communications and currently a stockholder of Citadel
Communications, each received merger consideration consisting of shares of
capital stock of Citadel Communications valued at approximately $206,500 and
approximately $7.2 million, respectively. John E. von Schlegell, a director of
the Company and Citadel Communications, is President and a shareholder of the
general partner of Endeavour Capital. Mr. Hardy also received immediately
exercisable options to purchase 68,754 shares of Common Stock at an exercise
price of $1.64 per share and 24,135 shares of Common Stock at an exercise price
of $5.72 per share in exchange for options to acquire shares of Deschutes
capital stock. Following the Deschutes merger, he was granted options to
purchase an aggregate of 111,000 shares of Common Stock at an exercise price of
$5.72 per share, which options vest 20% per year beginning with the first
anniversary of the date of the grant. In contemplation of the proposed
acquisition of Deschutes, during 1996, the Company made advances to Deschutes to
enable Deschutes to acquire various radio stations and pay-off existing debt. At
December 31, 1996, an aggregate of approximately $18.3 million was due under
these advances, which was credited against the cash portion of the purchase
price for Deschutes.
In connection with the acquisition of Deschutes, Citadel Communications
entered into an Agreement Not to Compete with DVS Management, Inc. ("DVS"), the
general partner of Endeavour Capital, a shareholder of Deschutes prior to its
acquisition by Citadel Communications, pursuant to which DVS has agreed not to
compete in radio broadcasting in any geographic area or market served or
competed in by one or more of the Company's stations. In consideration for such
agreement not to compete with the Company's stations, the Company paid DVS
$100,000 in 1997 and is obligated to pay DVS $100,000 in 1998. John E. von
Schlegell, a director of the Company, is President and a shareholder of DVS.
In February 1995, the Company sold the assets of six radio stations located
in Montana to Deschutes for the aggregate purchase price of $5.4 million. At the
time of the transaction, Mr. Hardy was a director, executive officer and
shareholder of Deschutes and Endeavour Capital was a shareholder of Deschutes.
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<PAGE> 83
CERTAIN TRANSACTIONS
CERTAIN LOAN TRANSACTIONS
Lawrence R. Wilson, an executive officer and director of the Company, was
indebted to the Company in the amount of $394,297 (including accrued interest of
$46,440) as of December 31, 1995 (the "Principal Shareholder Loan").
Approximately $70,000 of the principal amount of the Principal Shareholder Loan
was advanced by Predecessor to Mr. Wilson in June 1992 for personal purposes,
approximately $27,860 of the Principal Shareholder Loan was advanced by
Predecessor to Mr. Wilson in April 1993 to finance Mr. Wilson's purchase of
capital stock of the Company from a former stockholder and approximately
$250,000 was advanced by the Company to Mr. Wilson in 1994 for personal
purposes. The Principal Shareholder Loan, which bore interest at the rate of
8.5% per annum, was forgiven in June 1996, at which time an aggregate of
$408,637 principal and accrued interest was outstanding. Mr. Wilson's
indebtedness under the Principal Shareholder Loan was secured by certain shares
of capital stock of the Company owned by Mr. Wilson.
In 1995, Mr. Wilson made a short-term unsecured loan of $365,000 to the
Company at an annual interest rate of 10%. The Company repaid such loan in full
in 1996.
SALE AND LEASEBACK OF AIRPLANE
In December 1995, the Company sold to Wilson Aviation, L.L.C., a company
owned by Mr. Wilson and his spouse, an airplane formerly owned by the Company,
for a cash purchase price of approximately $1.3 million. Contemporaneously with
the sale of the airplane, the Company entered into an agreement to lease the
airplane from Wilson Aviation, L.L.C. from December 29, 1995 to December 31,
2001. Under the terms of the lease, the Company is required to pay monthly rent
in the amount of $17,250 and, in addition, to bear all of the costs of the
maintenance, repair and operation of the airplane during the term of the lease.
The sale and leaseback were not independently established in an arm's length
transaction; however, the transaction was reviewed and approved by the Company's
senior lender and the Company believes, based upon such review, that the terms
of the transaction are reasonable and at least as favorable to the Company as
could be obtained generally from unaffiliated parties.
REAL ESTATE PURCHASE IN CONNECTION WITH ACQUISITION
In order to facilitate the Company's acquisition of KKLI-FM from Tippie
Communications, Inc. ("Tippie") in 1996, Mr. Wilson purchased from a shareholder
of Tippie certain associated real estate located in Colorado Springs, Colorado,
which the Company did not desire to acquire. The purchase price for the real
estate was $350,000. The purchase price and terms of the transaction were
negotiated between Mr. Wilson and the seller of the real estate, and neither the
Company nor Mr. Wilson obtained an independent appraisal of such real estate. In
acquiring the real estate involved, Mr. Wilson did not obtain funds directly or
indirectly from the Company to purchase such property. The Company believes that
its acquisition of KKLI-FM, in the context of the acquisition of the real estate
by Mr. Wilson, was fair to the Company.
LITTLE ROCK AND PROVIDENCE ACQUISITIONS
Ted L. Snider, Sr., who became a director of the Company in November 1997,
and his spouse were the shareholders of Snider Corporation and, in connection
with the Company's acquisition of Snider Corporation and certain other assets
from Mr. Snider and his spouse in October 1997, Mr. Snider and his spouse
received approximately $7.4 million in cash and approximately $4.5 million in
shares of a newly created series of preferred stock of Citadel Communications
which have been converted into shares of Common Stock. Mr. Snider's son, Ted
Snider, Jr., and nephew, Calvin Arnold, were principal shareholders of Snider
Broadcasting Corporation ("Snider Broadcasting") and of CDB Broadcasting
Corporation ("CDB") and, in connection with the Company's acquisition of Snider
Broadcasting and certain assets from CDB in October 1997, they received
approximately $5.5 million in shares of a newly created series of preferred
stock of Citadel Communications which have been converted into shares of Common
Stock. In addition, the Company repaid approximately $2.6 million of
indebtedness of Snider Broadcasting and CDB received
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<PAGE> 84
approximately $4.9 million in cash. Mr. Arnold is employed by the Company as
General Manager of the Company's radio stations in the Little Rock area.
Prior to its acquisition by the Company, Snider Corporation transferred to
Mr. Snider and his spouse its rights to operate under an LMA an FM radio station
under construction. Accordingly, the cash portion of the purchase price for
Snider Corporation was reduced by $100,000. Because a designated third party did
not take an assignment and assume the Sniders' rights under the LMA, the Company
accepted an assignment of the LMA and paid the Sniders $100,000. The Company
subsequently assigned its right to operate this station to an unrelated party.
Effective June 2, 1997, the Company began operating the radio stations
formerly owned by Snider Corporation, Snider Broadcasting and CDB under LMAs
under which an aggregate of approximately $823,000 was paid by the Company to
such entities. The Company believes that the terms of the foregoing transactions
were at least as favorable to the Company as could have been obtained generally
from unaffiliated parties. In May 1998, the Company entered into an agreement
pursuant to which an entity controlled by Ted Snider, Jr. will provide to the
Company telephone access services and other related services. The term of the
agreement is five years and, unless terminated, the agreement will automatically
renew for additional five-year terms. The Company believes that the terms of
this agreement reflect arm's-length negotiations and are at least as favorable
to the Company as could be obtained generally from unaffiliated providers of
similar services.
In connection with the Company's September 1997 acquisition of WXEX-FM and
related assets in Providence, Rhode Island, each of Philip Urso and Phillip
Norton acquired ownership of more than five percent of the then outstanding
shares of a newly created series of preferred stock of Citadel Communications,
shares of which series have been converted into shares of Common Stock. Mr. Urso
and Mr. Norton are employed by the Company. Mr. Urso and certain of his family
members were shareholders of Bear Broadcasting Company ("Bear"), which sold
WHKK-FM to the Company in November 1997 for approximately $4.0 million in cash.
From September 15, 1997 until the acquisition of WHKK-FM, the Company operated
WHKK-FM under an LMA pursuant to which the Company reimbursed Bear an aggregate
of approximately $17,000 for certain costs and expenses of station operation.
The Company believes that the terms of the foregoing transactions were at least
as favorable to the Company as could have been obtained generally from
unaffiliated parties.
CONSULTING ARRANGEMENT
During the fiscal year ended December 31, 1996, Michael J. Ahearn, a
director of the Company from 1996 to November 1997, provided financial
consulting services to the Company for which he was paid $83,520. On June 28,
1996, Mr. Ahearn was also granted an option to purchase 12,000 shares of Common
Stock at an exercise price of $5.72 per share. Such option is fully vested. The
Company believes that such services were provided to the Company on terms at
least as favorable to the Company as could have been obtained generally from
unaffiliated parties.
LEGAL SERVICES
During each of the fiscal years ended December 31, 1995 and 1996, the
Company retained the law firm of Gallagher & Kennedy, P.A. to represent the
Company on various matters. Michael J. Ahearn was a shareholder of such firm and
a director of the Company in such years.
PREPAYMENT AND REDEMPTION OF CERTAIN SECURITIES
On June 28, 1996, pursuant to the Securities Purchase and Exchange
Agreement, the Company prepaid certain Senior Subordinated Notes in the
principal amount of $4.0 million, and funded Citadel Communications' redemption
of a portion of the stock purchase warrants, issued under a Senior Subordinated
Note and Warrant Purchase Agreement dated as of October 1, 1993. These Senior
Subordinated Notes and warrants were held, in part, by Bank of America. As of
June 28, 1996 (after giving effect to the redemption), Bank of America held a
warrant to purchase 138,101 shares of nonvoting common stock of Citadel
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Communications which was convertible into voting common stock upon the
occurrence of certain events, and such conversion would have resulted in Bank of
America owning in excess of five percent of the then outstanding shares of
voting common stock. The warrant was subsequently converted into a warrant to
purchase 414,303 shares of Common Stock. Immediately thereafter, the warrant was
transferred to, and exercised for a nominal exercise price by, BankAmerica
Investment Corporation, and the 414,303 shares of Common Stock were sold in
Citadel Communications' initial public offering.
STOCK REPURCHASE
In June 1996, the Company repurchased shares of capital stock of the
Company then held by Mesirow Capital Partners VI ("Mesirow VI") for an aggregate
of approximately $10.7 million. Mesirow VI had acquired such shares in 1993.
William P. Sutter, Jr., a former director of the Company, was an officer of the
general partner of Mesirow VI. Mesirow VI had been a party to the Citadel
Communications Registration Rights Agreement, the Voting Agreement and the
Stockholders Agreement.
See also "Management--Compensation Committee Interlocks and Insider
Participation" for a description of certain other transactions involving the
directors, executive officers and certain stockholders of the Company.
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PRINCIPAL STOCKHOLDERS
Citadel Communications owns all of the currently issued and outstanding
common stock of the Company and has pledged such common stock to secure its
guaranty of indebtedness under the Credit Facility. See "Description of
Indebtedness--Existing Loan Agreement." The only other outstanding capital stock
of the Company is its Exchangeable Preferred Stock.
The only outstanding capital stock of Citadel Communications is its Common
Stock. The following table sets forth certain information with respect to the
beneficial ownership of Citadel Communications' Common Stock as of December 15,
1998 by (1) each person, entity or group known to the Company to beneficially
own more than five percent of the Common Stock, (2) each director of the
Company, (3) each Named Executive and (4) all directors and executive officers
of the Company as a group.
Except as indicated below, the persons named have sole voting and
investment power with respect to the shares shown as beneficially owned by them.
The percentages are rounded to the nearest tenth of a percent. Holders of the
Common Stock are entitled to one vote per share on all matters submitted to a
vote of stockholders generally.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP OF
COMMON STOCK(1)
---------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------ ---------- -------
<S> <C> <C>
Lawrence R. Wilson(2)....................................... 2,748,401 10.5%
140 South Ash Avenue
Tempe, AZ 85281
Donna L. Heffner(3)......................................... 177,359 *
D. Robert Proffitt(4)....................................... 180,705 *
Stuart R. Stanek(5)......................................... 209,100 *
Peter J. Benedetti.......................................... 7,427 *
Edward T. Hardy............................................. 193,045 *
Patricia Diaz Dennis........................................ 7,500 *
Scott E. Smith(6)........................................... 2,239,236 8.7
John E. von Schlegell(7).................................... 1,095,836 4.3
Ted L. Snider, Sr.(8)....................................... 349,251 1.4
Rio Bravo Enterprise........................................ 2,709,869 10.4
Associates, L.P.(2)
1256 E. Dines Point Road
Greenbank, WA 98253
Baker, Fentress & Company................................... 2,239,236 8.7
200 West Madison
Suite 3510
Chicago, IL 60602
ABRY Broadcast Partners II, L.P.(9)......................... 8,460,839 32.9
18 Newbury Street
Boston, MA 02116
Harlan A. Levy(10).......................................... 8,460,839 32.9
Putnam Investments, Inc.(11)................................ 2,021,284 7.9
One Post Office Square
Boston, MA 02109
All directors and executive officers as a group (10
persons)(12).............................................. 7,207,860 26.9
</TABLE>
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<PAGE> 87
- ---------------
* Less than 1%
(1) The number of shares and percentages are calculated in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), on a stockholder by stockholder basis, assuming that each
stockholder converted all securities owned by such stockholder that are
convertible into Common Stock at the option of the holder within 60 days of
December 15, 1998, and that no other stockholder so converts. The numbers
and percentages of shares owned assume that outstanding options have been
exercised by such respective stockholders as follows: Lawrence R.
Wilson--479,636 shares (including options held by Rio Bravo); D. Robert
Proffitt--108,820 shares; Donna L. Heffner--139,243 shares; Stuart R.
Stanek--142,027 shares; Peter J. Benedetti--1,800 shares; Edward T.
Hardy--155,867 shares; Patricia Diaz Dennis--7,500 shares; Rio
Bravo--441,194 shares; and all directors and executive officers as a
group--1,034,893 shares.
(2) Includes 2,268,675 shares of outstanding Common Stock and 441,194 shares of
Common Stock which may be acquired upon exercise of options that are
currently exercisable or that are exercisable within 60 days of December
15, 1998, which shares and options are owned by Rio Bravo. Mr. Wilson owns
all of the capital stock of Rio Bravo, Inc., the sole general partner of
Rio Bravo.
(3) Ms. Heffner's shares are jointly owned by Ms. Heffner and her spouse.
(4) Mr. Proffitt's shares are jointly owned by Mr. Proffitt and his spouse.
(5) Mr. Stanek's shares are jointly owned by Mr. Stanek and his spouse.
(6) Represents shares held by Baker Fentress, as described in the table. Mr.
Smith is an Executive Vice President of Baker Fentress and, since 1989, has
managed its private placement portfolio.
(7) Represents shares held by Endeavour Capital, as described in the table. Mr.
von Schlegell, a director of the Company, is the Managing Partner of
Endeavour Capital and the President and a shareholder of the General
Partner of Endeavour Capital.
(8) Does not include 121,713 shares owned by Mr. Snider's spouse.
(9) These shares are held pursuant to the Voting Trust Agreement. By its terms,
the Voting Trust Agreement shall continue in effect until terminated upon
the written agreement of the Company and the holders of voting trust
certificates which represent a majority of the shares held in the voting
trust as determined in accordance with the Voting Trust Agreement. The
Voting Trust also terminates with respect to any shares upon transfer of
such shares to a person who is not an affiliate of ABRY II or ABRY/CIP or
upon a distribution of shares by ABRY II or ABRY/CIP to its partners.
ABRY/CIP has sold or has distributed all of its shares to its partners.
During the term of the Voting Trust Agreement, the Voting Trustee has the
right to vote the shares of stock subject to that Agreement (the "Voting
Trust Shares") and to take part in any shareholders' meetings, including
the right to vote the Voting Trust Shares for the election of directors of
the Company. The Voting Trustee may assign his rights and delegate his
obligations to a successor Voting Trustee, who shall be a Back-Up Trustee
or other person appointed in the manner provided under the terms of the
Voting Trust Agreement. Dispositive power with respect to these shares is
held by Royce Yudkoff, the President of ABRY Holdings, Inc., the general
partner of ABRY Capital, L. P., the general partner of ABRY II.
(10) Represents shares held by Mr. Levy as Voting Trustee under the Voting Trust
Agreement. See footnote (9).
(11) As reported on Schedule 13G filed with the SEC on October 9, 1998 by Putnam
Investments, Inc. ("PII") on behalf of itself and Marsh & McLennan
Companies, Inc. ("MMC"), Putnam Investment Management, Inc. ("PIM") and
Putnam Advisory Company, Inc. ("PAC"), the shares indicated are under
shared voting and dispositive power among PII, PIM and PAC. PIM and PAC are
subsidiaries of PII, and PII is a subsidiary of MMC. The number of shares
shown assume that there has been no change in the number of shares
beneficially owned since the filing of the Schedule 13G. Pursuant to Rule
13d-4 under the Exchange Act, MMC and PII declared that their filing of the
Schedule 13G shall not be deemed to be an admission of beneficial ownership
of the shares reported.
(12) Includes shares discussed in footnotes (2), (6) and (7).
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<PAGE> 88
DESCRIPTION OF INDEBTEDNESS
EXISTING LOAN AGREEMENT
On October 9, 1996, the Company, Deschutes f/k/a Deschutes Acquisition
Corporation (now merged into the Company), Citadel License and Deschutes
License, Inc. (now merged into Citadel License) (collectively, the "Borrowers")
entered into the Credit Facility with FINOVA Capital Corporation, as
administrative agent (the "Agent"), and other lending institutions party thereto
(the "Lenders").
On July 3, 1997, the Borrowers, the Agent and the Lenders entered into
amendments to the Credit Facility which permitted the issuance of the 1997 Notes
and the Exchangeable Preferred Stock subject to certain limitations and
restrictions regarding, among other things, redemption of or payment prior to
maturity of principal on the 1997 Notes or the Exchange Debentures, if issued,
the redemption of or exchange of the Exchangeable Preferred Stock and the
payment of cash dividends on the Exchangeable Preferred Stock. The amendments to
the Credit Facility provided for a revolving loan (the "Revolving Loan"),
initially in the principal amount of $150.0 million, which includes a $5.0
million letter of credit facility (the "L/C Facility"). A subsequent amendment
increased the L/C Facility to $10.0 million. A portion of the proceeds of the
1997 Offerings was used to repay a portion of Borrowers' indebtedness under the
Credit Facility.
Concurrently with the consummation of the Original Offering, the Borrowers,
the Agent and the Lenders entered into amendments to the Credit Facility which
permitted the issuance of the outstanding notes subject to certain limitations
and restrictions regarding, among other things, redemption of or payment prior
to maturity of principal on the notes. See "Description of the Notes." As of
December 1, 1998, the Credit Facility allowed for borrowings of up to $140.0
million.
Revolving Loan
As of December 1, 1998, no amounts were outstanding under the Revolving
Loan under the Credit Facility. The Revolving Loan will be due on September 30,
2003 (the "Maturity Date") and it may be drawn upon, subject to certain
conditions, for certain acquisitions, working capital and other permitted uses.
On the last business day of each quarter, the Revolving Loan commitment is to be
reduced by an amount increasing from $2.5 million at December 31, 1997 to
approximately $8.1 million at June 30, 2003. The Credit Facility also provides
for certain additional mandatory reductions in the Revolving Loan commitment.
The Borrowers will be required to pay any amount by which the outstanding
principal balance exceeds the Revolving Loan commitment, as adjusted. The
remaining principal balance of the Revolving Loan shall be due and payable on
the Maturity Date. At the Borrowers' election (a) any portion of the Revolving
Loan which has been prepaid or repaid may be reborrowed and (b) the maximum
amount of the Revolving Loan commitment may be permanently reduced.
The Lenders' obligation to make additional loans under the Credit Facility
or issue letters of credit under the L/C Facility is subject to certain
conditions, including, without limitation, that the Adjusted Total Leverage
Ratio not exceed the Applicable Ratio as calculated on the last day of the most
recent month preceding the applicable date for funding or letter of credit
issuance. The Adjusted Total Leverage Ratio is the ratio as of the end of any
month of the Adjusted Total Debt (as defined in the Credit Facility) as of such
date to the Adjusted Operating Cash Flow (as defined in the Credit Facility) for
the twelve-month period ending on such date. The Applicable Ratio through May
1999 is 6.00. For each six-month period thereafter through maturity, the
Applicable Ratio shall decrease by 0.25.
L/C Facility
The L/C Facility provides for, subject to certain limitations, the issuance
of letters of credit to be used by the Borrowers as security for the obligations
of the Borrowers under agreements entered into in connection with certain radio
station acquisitions and for such other purposes as may be approved by the Agent
("Permitted Letters of Credit"). The Borrowers will be required to pay a
quarterly fee equal to 1.25% of the amount of each Permitted Letter of Credit
from time to time outstanding. As of the date of this prospectus,
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<PAGE> 89
letters of credit in the aggregate amount of $8.25 million are issued and
outstanding in connection with certain of the Pending Transactions.
Prepayments
Voluntary prepayments of the amended Credit Facility are permitted without
premium or penalty. Mandatory prepayment of the amended Credit Facility will be
required if the Total Leverage Ratio (as defined in the Credit Facility) as of
the end of each year is 4.5 or greater. The amount of the mandatory prepayment
shall be the lesser of (a)(1) 66-2/3% of the Excess Cash Flow (as defined in the
Credit Facility) if the Total Leverage Ratio as of the end of such year exceeds
5.5 and (2) 50% of the Excess Cash Flow if the Total Leverage Ratio as of the
end of each such year is 4.5 to 5.5, inclusive, or (b) an amount by which Cash
Equivalents (as defined in the Credit Facility), as of the last day of March in
which the Borrowers are required to deliver financial statements, exceeds $5.0
million. Notwithstanding the foregoing, upon retirement of the Credit Facility,
the Company will be required to pay a fee in the maximum amount of $0.7 million
as of December 1, 1998, which amount will decline quarterly based on the amount
of outstanding borrowings under the amended Credit Facility.
Interest Rates
The Credit Facility bears interest at a rate equal to the applicable Base
Rate (as defined in the Credit Facility) in effect from time to time plus the
Applicable Margin (as defined in the Credit Facility) or, at the written
election of the Borrowers, at a rate equal to the applicable LIBOR Rate (as
defined in the amended Credit Facility) in effect from time to time as
determined by the Agent for the respective Interest Period (as defined in the
Credit Facility), plus the Applicable Margin. The Borrowers' right to elect a
LIBOR Rate will be subject to certain limitations. The Applicable Margins for
the Credit Facility are expected to range between 0.50% and 1.75% for the Base
Rate and 1.50% and 2.75% for the LIBOR Rate, depending on the Total Leverage
Ratio from time to time. Except as otherwise provided with respect to voluntary
and mandatory prepayments, interest on the Credit Facility is payable quarterly
in arrears on the last business day of each quarter. At December 1, 1998, the
interest rate under the Credit Facility was 8.03%.
Other Fees
The Borrowers are required to pay to the Agent an unused commitment fee on
the last business day of each quarter, which equals the product of the Maximum
Revolving Loan Commitment (as defined in the Credit Facility) for the preceding
quarter minus the average outstanding principal balance of the Revolving Loan
during such preceding quarter, multiplied by 0.125%. This multiplier will be
reduced to 0.09375% if the Total Leverage Ratio calculated as of the last day of
the quarter preceding such quarter was less than 4.5. The Borrowers are required
to pay an annual agency fee of $50,000 in October of each year.
Security and Guarantee
Subject to certain permitted liens, the Credit Facility is secured by (a) a
first priority pledge on all of the Borrowers' capital stock other than the
Exchangeable Preferred Stock, (b) a first priority security interest in all the
existing and after acquired property of the Borrowers, including, without
limitation, accounts, machinery, equipment, inventory, general intangibles,
investment property and insurance on the life of Lawrence R. Wilson and (c) all
proceeds of the foregoing. The Credit Facility is also guaranteed by Citadel
Communications pursuant to a guaranty (the "Guaranty").
Change of Control
The Credit Facility provides that a change in control or ownership will be
an Event of Default. A change in control or ownership shall occur if (a) Citadel
Communications shall cease to own all of the capital stock of the Company (other
than the Exchangeable Preferred Stock), (b) the Company shall cease to own or
control all of the capital stock of its subsidiaries, (c) any person (including
entities) or affiliates of such person, except Mr. Wilson or ABRY II or their
respective affiliates, own capital stock possessing more than
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<PAGE> 90
35.0% of the voting power of all voting stock of Citadel Communications or (d)
Mr. Wilson shall die, become permanently disabled or cease, for a period in
excess of 60 days, to devote his full business time to the operation of the
Borrowers' broadcasting business, unless Mr. Wilson is replaced by a person
reasonably acceptable to certain Lenders within 90 days after the occurrence of
any such event.
Covenants
The Credit Facility contains customary restrictive covenants, which, among
other things, and with certain exceptions, will limit the ability of the
Borrowers to incur additional indebtedness and liens in connection therewith,
enter into certain transactions with affiliates, pay dividends, consolidate,
merge or affect certain asset sales, issue additional stock, make certain
capital or overhead expenditures, make certain investments, loans or prepayments
and change the nature of their business. The Borrowers are also required to
satisfy certain financial covenants, which will require the Borrowers to
maintain specified financial ratios and to comply with certain financial tests,
such as ratios for maximum leverage, senior debt leverage, minimum interest
coverage and minimum fixed charges.
Events of Default
The Credit Facility contains customary Events of Default, including without
limitation: (a) failure of Borrowers to pay all or any portion of the principal
balance of the amended Credit Facility when due or to pay any other of the
Borrowers' Obligations (as defined in the amended Credit Facility) within five
days after becoming due and payable; (b) failure of Borrowers to observe or
perform certain affirmative covenants or agreements, specifically those
pertaining to legal existence, good standing, insurance, environmental matters,
the interest hedge contract and all negative covenants; (c) failure of Borrowers
or Citadel Communications to observe or perform any other covenant or agreement
contained in the amended Credit Facility or related documents which is not
remedied within 30 days of written notice; (d) breach of warranty or
representation and/or false or misleading statements by Borrowers or Citadel
Communications made in connection with the amended Credit Facility or related
documents; (e) certain defaults, including payment defaults, by Borrowers, under
other agreements relating to indebtedness; (f) failure of Borrowers or Citadel
Communications to generally pay debts as they become due or to be adjudicated
insolvent; (g) Borrowers' or Citadel Communications' filing, or consent to the
filing against it, of a petition for relief or reorganization or arrangement or
any other petition in bankruptcy or insolvency under the law of any jurisdiction
or making of an assignment for the benefit of creditors, or the appointment of a
custodian, receiver or trustee for the Borrowers or Citadel Communications under
certain circumstances; (h) failure of the Borrowers or Citadel Communications to
discharge certain judgments and awards against any of them; (i) revocation,
termination, suspension or adverse modification of any license which is material
to the continuation of the Borrowers' broadcasting business; (j) seizure or
failure to maintain any item of collateral provided as security under the
amended Credit Facility; (k) complete interruption of on-air broadcast
operations in two or more markets at any time for more than 72 hours during any
consecutive ten-day period; (l) existence of certain conditions which result in
actual or potential liability to Borrower or any ERISA affiliate for its pension
plan which creates a material adverse effect in the opinion of certain Lenders;
(m) a change of ownership or control; (n) failure of the Guaranty to remain in
full force and effect; and (o) Citadel Communications's denial or disaffirmance
of obligations under the Guaranty or its failure to make payment when due.
Upon the occurrence of an Event of Default, with certain limitations, the
Borrowers' obligations under the Credit Facility which are at that time
outstanding may become automatically accelerated.
1997 NOTES
On July 3, 1997, the Company offered and sold $101.0 million aggregate
principal amount of 10-1/4% Senior Subordinated Notes due 2007. The 1997 Notes
were issued pursuant to an Indenture dated as of July 1, 1997 among the Company,
Citadel License and The Bank of New York, as trustee (the "1997 Notes
Indenture"). Interest on the 1997 Notes is payable semi-annually at a rate of
10-1/4% per annum, and the 1997 Notes mature on July 1, 2007.
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<PAGE> 91
The 1997 Notes are unconditionally guaranteed on a senior subordinated
basis by Citadel License, and will be similarly guaranteed by future Restricted
Subsidiaries (as defined in the 1997 Notes Indenture). The 1997 Notes are
unsecured senior subordinated obligations of the Company and are subordinated to
all Senior Debt (as defined in the 1997 Notes Indenture) of the Company,
including indebtedness under the Credit Facility.
The 1997 Notes are redeemable, in whole or in part, at the option of the
Company, at any time on or after July 1, 2002, at the redemption prices set
forth in the 1997 Notes Indenture (ranging from 105.125% to 101.025%), plus
accrued and unpaid interest, if any, to the date of redemption. In addition, at
any time prior to July 1, 2000, the Company may, at its option, redeem a portion
of the 1997 Notes with the net proceeds of one or more Public Equity Offerings
(as defined in the 1997 Notes Indenture), at a redemption price equal to 110.25%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of redemption; provided, however, that after any such redemption there
is outstanding at least $75.0 million aggregate principal amount of the 1997
Notes. Upon the occurrence of a Change of Control (as defined in the 1997 Notes
Indenture), the Company is required to make an offer to purchase all of the then
outstanding 1997 Notes at a price equal to 101.0% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the repurchase date.
The Company also is required to offer to repurchase 1997 Notes at 100.0% of
their principal amount plus accrued and unpaid interest to the date of
redemption in the event that the net proceeds of certain asset sales of the
Company or its Restricted Subsidiaries are not used within 12 months after the
occurrence of such sales to permanently reduce Senior Debt of the Company and/or
to make an investment in or acquire replacement assets or assets that will be
used in the broadcast business or businesses reasonably related thereto.
The 1997 Notes Indenture contains certain covenants which, among other
things, restrict the ability of the Company and its subsidiaries with respect
to:
- the incurrence of additional debt,
- restricted payments,
- dividend and other payment restrictions affecting certain
subsidiaries,
- asset dispositions,
- certain asset swaps,
- transactions with affiliates,
- issuances and sales of stock of certain subsidiaries,
- liens, and
- consolidations, mergers or sales of assets.
Events of default under the 1997 Notes Indenture include, among other
things, payment defaults, covenant defaults, cross-defaults to certain other
indebtedness, judgment defaults and certain events of bankruptcy and insolvency.
EXCHANGEABLE PREFERRED STOCK
On July 3, 1997, the Company also offered and sold 1.0 million shares of
13-1/4% Series A Exchangeable Preferred Stock, no par value. The Exchangeable
Preferred Stock was sold for, and has a liquidation preference of, $100.0 per
share. Dividends on the Exchangeable Preferred Stock accumulate from the date of
issuance and are payable semi-annually at a rate of 13-1/4% of the liquidation
preference per share. Dividends on the Exchangeable Preferred Stock are payable
in cash or, at the option of the Company, on or prior to July 1, 2002, in
additional shares of Exchangeable Preferred Stock. On January 1, 1998 and July
1, 1998, the Company issued an additional 65,514, shares and 70,590 shares,
respectively, of Exchangeable Preferred Stock in payment of dividends on the
then outstanding shares of Exchangeable Preferred Stock and it is
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<PAGE> 92
expected that on January 1, 1999 the Company will issue an additional 75,267
shares of Exchangeable Preferred Stock in payment of dividends on the then
outstanding shares of Exchangeable Preferred Stock.
The Exchangeable Preferred Stock is redeemable, in whole or in part, at the
option of the Company, at any time on or after July 1, 2002, at the redemption
prices set forth in the Certificate of Designation governing the Exchangeable
Preferred Stock (the "Certificate of Designation") (ranging from 107.729% to
101.104%), plus accumulated and unpaid dividends, if any, to the date of
redemption. In addition, at any time prior to July 1, 2000, the Company may, at
its option, redeem up to an aggregate of 35% of the shares of Exchangeable
Preferred Stock with the net proceeds of one or more Public Equity Offerings (as
defined in the Certificate of Designation), at a redemption price equal to
113.25% of the liquidation preference thereof, plus accumulated and unpaid
dividends, if any, to the date of redemption; provided, however, that after any
such redemption there is outstanding at least $75.0 million aggregate
liquidation preference of the Exchangeable Preferred Stock. The Company is
required, subject to certain conditions, to redeem all of the Exchangeable
Preferred Stock outstanding on July 1, 2009, at a redemption price equal to 100%
of the liquidation preference thereof, plus accumulated and unpaid dividends, if
any, to the date of redemption. Upon the occurrence of a Change of Control (as
defined in the Certificate of Designation), the Company is required to make an
offer to purchase all of the then outstanding shares of Exchangeable Preferred
Stock at a price equal to 101.0% of the liquidation preference thereof, plus
accumulated and unpaid dividends, if any, to the repurchase date.
Subject to certain conditions, the Exchangeable Preferred Stock is
exchangeable in whole, but not in part, at the option of the Company, on any
dividend payment date, for the Company's 13-1/4% Subordinated Exchange
Debentures due 2009. See "--Exchange Debentures."
The Certificate of Designation contains certain covenants which, among
other things, restrict the ability of the Company and its subsidiaries with
respect to:
- the incurrence of additional debt,
- restricted payments,
- issuances and sales of stock of certain subsidiaries, and
- consolidations, mergers or sales of assets.
In the event that, after July 1, 2002, two or more semi-annual dividends
payable on the Exchangeable Preferred Stock are in arrears and unpaid, or upon
the occurrence of certain other events (including failure to comply with certain
covenants and failure to pay the mandatory redemption price when due), then the
holders of a majority of the then outstanding shares of Exchangeable Preferred
Stock, voting separately as a class, will be entitled to elect two additional
directors of the Company, who shall serve until such time as all dividends in
arrears or any other failure, breach or default giving rise to such voting
rights is remedied or waived.
EXCHANGE DEBENTURES
Subject to certain conditions, the Exchangeable Preferred Stock is
exchangeable in whole, but not in part, at the option of the Company, on any
dividend payment date, for Exchange Debentures in an aggregate principal amount
equal to the then effective liquidation preference of the Exchangeable Preferred
Stock, plus accumulated and unpaid dividends, if any, to the date fixed for
exchange. If such exchange occurs, the Exchange Debentures will be issued
pursuant to an Indenture dated as of July 1, 1997 among the Company, Citadel
License and The Bank of New York, as trustee (the "Exchange Indenture").
Interest on the Exchange Debentures will be payable semi-annually at a rate of
13-1/4% per annum, and the Exchange Debentures will mature on July 1, 2009.
Interest on the Exchange Debentures will be payable in cash or, at the option of
the Company, on or prior to July 1, 2002, in additional Exchange Debentures.
The Exchange Debentures will be unconditionally guaranteed on a senior
subordinated basis by Citadel License, and will be similarly guaranteed by
future Restricted Subsidiaries (as defined in the Exchange Indenture). The
Exchange Debentures will be unsecured subordinated obligations of the Company
and will be
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subordinated to all existing and future Senior Debt and Senior Subordinated Debt
(each as defined in the Exchange Indenture) of the Company, including the 1997
Notes.
The Exchange Debentures will be redeemable, in whole or in part, at the
option of the Company, at any time on or after July 1, 2002, at the redemption
prices set forth in the Exchange Indenture, plus accrued and unpaid interest, if
any, to the date of redemption. In addition, at any time prior to July 1, 2000,
the Company may, at its option, redeem Exchange Debentures having an aggregate
principal amount of up to 35.0% of the aggregate principal amount of Exchange
Debentures issued upon exchange of the Exchangeable Preferred Stock or in
payment of interest on the Exchange Debentures, with the net proceeds of one or
more Public Equity Offerings (as defined in the Exchange Indenture), at a
redemption price equal to 113.25% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of redemption; provided, however, that
after any such redemption there is outstanding at least $75.0 million aggregate
principal amount of the Exchange Debentures. Upon the occurrence of a Change of
Control (as defined in the Exchange Indenture), the Company will be required to
make an offer to purchase all of the then outstanding Exchange Debentures at a
price equal to 101.0% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the repurchase date.
The Company also will be required to offer to repurchase Exchange
Debentures at 100.0% of their principal amount plus accrued and unpaid interest
to the date of redemption in the event that the net proceeds of certain asset
sales of the Company or its Restricted Subsidiaries are not used within 12
months after the occurrence of such sales to permanently reduce Senior Debt or
Senior Subordinated Debt of the Company and/or to make an investment in or
acquire replacement assets or assets that will be used in the broadcast business
or businesses reasonably related thereto.
The Exchange Indenture contains certain covenants which, among other
things, restricts the ability of the Company and its subsidiaries with respect
to:
- the incurrence of additional debt,
- restricted payments,
- dividend and other payment restrictions affecting certain
subsidiaries,
- asset dispositions,
- certain asset swaps,
- transactions with affiliates,
- issuances and sales of stock of certain subsidiaries,
- liens, and
- consolidations, mergers or sales of assets.
Events of default under the Exchange Indenture include, among other things,
payment defaults, covenant defaults, cross-defaults to certain other
indebtedness, judgment defaults and certain events of bankruptcy and insolvency.
OTHER INDEBTEDNESS
In connection with its acquisition of Tele-Media, the Company incurred a
$1.0 million contingent payment obligation which accrues interest at 5.0% per
year. The Company will be obligated to make such payment to the former holders
of certain corporate bonds and warrants of Tele-Media only if a particular $2.0
million payment relating to the Company's Providence, Rhode Island operations is
received from a third party.
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THE EXCHANGE OFFER
BACKGROUND
The Company originally sold the outstanding 9-1/4% Senior Subordinated
Notes due 2008 on November 19, 1998 in a transaction exempt from the
registration requirements of the Securities Act. Prudential Securities
Incorporated and BT Alex. Brown Incorporated (the "Initial Purchasers")
subsequently resold such notes to qualified institutional buyers in reliance on
Rule 144A and pursuant to Regulation S under the Securities Act. As of the date
of this prospectus, $115,000,000 aggregate principal amount of unregistered
notes are outstanding.
The Company, Citadel License and the Initial Purchasers entered into a
registration rights agreement pursuant to which the Company agreed, for the
benefit of the holders, that it would, at its own cost,
- file, within 90 days after November 19, 1998, the original issue date
of the outstanding notes, a registration statement with the SEC with
respect to the Exchange Offer,
- use its best efforts to cause the exchange offer registration
statement to be declared effective under the Securities Act within 180
days after November 19, 1998, and
- use its best efforts to consummate the Exchange Offer within 210 days
after November 19, 1998.
The summary herein of certain provisions of the registration rights
agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the registration rights agreement, a copy
of which is filed as an exhibit to the registration statement of which this
prospectus is a part.
RESALE OF THE NEW NOTES
Based on no-action letters issued by the staff of the SEC to third parties,
the Company believes that a holder of outstanding notes (unless such holder is
an "affiliate" of the Company within the meaning of Rule 405 of the Securities
Act) who exchanges its notes for new notes pursuant to the Exchange Offer
generally may offer the new notes for resale, sell the new notes and otherwise
transfer the new notes without further registration under the Securities Act and
without delivery of a prospectus that satisfies the requirements of Section 10
of the Securities Act. However, the Company believes that a holder may so offer,
sell or transfer the new notes only if such holder acquires the new notes in the
ordinary course of its business and is not participating, does not intend to
participate and has no arrangement or understanding with any person to
participate in a distribution of the new notes.
Any holder of outstanding notes using the Exchange Offer to participate in
a distribution of new notes (including a broker-dealer that acquired outstanding
notes directly from the Company, but not as a result of market-making activities
or other trading activities) cannot rely on such no-action letters.
Consequently, such a holder must comply with the registration and prospectus
delivery requirements of the Securities Act in the absence of an exemption from
such requirements.
Each Participating Broker-Dealer may be a statutory underwriter and must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with the resale of new notes received in exchange
for outstanding notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act. A
Participating Broker-Dealer may use this prospectus, as it may be amended from
time to time, in connection with resales of new notes it receives in exchange
for outstanding notes pursuant to the Exchange Offer. The Company will make this
prospectus available to any Participating Broker-Dealer in connection with any
such resale for a period of 120 days after the Expiration Date. See "Plan of
Distribution".
Each holder of the outstanding notes who wishes to exchange its notes for
new notes in the Exchange Offer will be required to represent and acknowledge,
for itself and for each beneficial owner of such
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<PAGE> 95
outstanding notes, whether or not such beneficial owner is the holder
("Beneficial Owner"), in the Letter of Transmittal that:
- the new notes to be acquired by the holder and each Beneficial Owner,
if any, are being acquired in the ordinary course of business,
- neither the holder nor any Beneficial Owner is an "affiliate," as
defined in Rule 405 of the Securities Act, of the Company or any of
its subsidiaries,
- any person participating in the Exchange Offer with the intention or
purpose of distributing new notes received in exchange for outstanding
notes (including a broker-dealer that acquired outstanding notes
directly from the Company, but not as a result of market-making
activities or other trading activities) cannot rely on the no-action
letters referenced above and must comply with the registration and
prospectus delivery requirements of the Securities Act, in connection
with a secondary resale of the new notes acquired by such person,
- if the holder is not a broker-dealer, the holder and each Beneficial
Owner, if any, are not participating, do not intend to participate and
have no arrangement or understanding with any person to participate in
any distribution of the new notes received in exchange for outstanding
notes, and
- if the holder is a broker-dealer that will receive new notes for its
own account in exchange for outstanding notes, the outstanding notes
to be so exchanged were acquired by it as a result of market-making or
other trading activities and it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of
such new notes pursuant to the Exchange Offer. However, by so
representing and acknowledging and by delivering a prospectus, the
holder will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
Under the registration rights agreement, the Company is required to allow
Participating Broker-Dealers to use this prospectus in connection with the
resale of such new notes. See "Plan of Distribution."
SHELF REGISTRATION STATEMENT
In the event that (1) applicable law or interpretations of the staff of the
SEC do not permit the Company to effect the Exchange Offer, (2) the Exchange
Offer is not consummated within 210 days after November 19, 1998, (3) any holder
of outstanding notes (other than an Initial Purchaser) is not eligible to
participate in the Exchange Offer or (4) any Initial Purchaser so requests (with
respect to any outstanding notes which it acquired directly from the Company)
following the consummation of the Exchange Offer provided certain circumstances
are met, the Company will, at its cost:
- file, as promptly as practicable and, in any event, within 90 days
after such obligation arises, a shelf registration statement covering
resales of the outstanding notes,
- use its best efforts to cause the shelf registration statement to be
declared effective under the Securities Act within 45 days after the
filing occurs, and
- use its best efforts to keep effective the shelf registration
statement until the earlier of two years after its effective date,
such time as all of the applicable outstanding notes have been sold
thereunder and such time as all of the applicable outstanding notes
become eligible for resale pursuant to Rule 144 under the Securities
Act without volume restrictions.
The Company will, in the event of the filing of the shelf registration
statement, provide to each holder of the outstanding notes copies of the
prospectus which is a part of the shelf registration statement, notify each such
holder when the shelf registration statement has become effective and take
certain other actions as are required to permit unrestricted resales of the
outstanding notes. A holder that sells its outstanding notes pursuant to the
shelf registration statement generally will be required to be named as a selling
security-holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil
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<PAGE> 96
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the registration rights agreement which are
applicable to such a holder (including certain indemnification obligations). In
addition, each holder of outstanding notes will be required to deliver certain
information to be used in connection with the shelf registration statement in
order to have its outstanding notes included in the shelf registration
statement.
INCREASE IN INTEREST RATE
In the event that (1) the Exchange Offer is not consummated or a shelf
registration statement is not declared effective on or prior to the 210th
calendar day following November 19, 1998 or (2) either (a) the exchange offer
registration statement ceases to be effective at any time prior to the time that
the Exchange Offer is consummated or (b) if applicable, the shelf registration
statement has been declared effective and such shelf registration statement
ceases to be effective at any time prior to the second anniversary of its
effective date, the interest rate borne by the outstanding notes will be
increased in accordance with the following table:
<TABLE>
<CAPTION>
INITIAL INCREASE SUBSEQUENT INCREASES
EVENT IN INTEREST RATE IN INTEREST RATE
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
1. Exchange Offer not 0.25% per annum following Additional 0.25% per annum
consummated or shelf such 210-day period for each 90-day period that
registration statement not additional interest continues
declared effective on or to accrue
prior to 210th day
following November 19, 1998
2. Exchange offer 0.25% per annum immediately Additional 0.25% per annum
registration statement after such an occurrence for each 90-day period that
ceases to be effective additional interest continues
prior to consummation of to accrue
Exchange Offer or shelf
registration statement
ceases to be effective at
any time prior to the
second anniversary of its
effective date
</TABLE>
However, in no event will the interest rate borne by the outstanding notes
be increased by an aggregate of more than one and one-half percent (1.5%).
Upon the consummation of the Exchange Offer or the effectiveness of a shelf
registration statement, as the case may be, after the 210-day period described
in clause (1) in the prior paragraph, or the effectiveness of the registration
statement or the shelf registration statement following an event described in
clause (2) in the prior paragraph, the interest rate borne by the outstanding
notes from the date of such consummation or effectiveness, as the case may be,
will be reduced to the original interest rate if the Company is otherwise in
compliance with the above. However, if after any such reduction in interest
rate, a different event specified in clause (1) or (2) in the prior paragraph
occurs, the interest rate may again be increased pursuant to the foregoing
provisions.
If applicable, in the event that the shelf registration statement ceases to
be usable for a period in excess of 30 days, whether or not consecutive, in any
given year, then the interest rate borne by the outstanding notes will be
increased by one-quarter of one percent (0.25%) per annum on the 31st day in the
applicable year such shelf registration statement ceases to be usable. Such
interest rate will increase by an additional one-quarter of one percent (0.25%)
per annum for each additional 90 days that such shelf registration statement is
not usable, subject to the same aggregate maximum increase in the interest rate
of one and one-half percent (1.5%) per annum referred to above. Upon the Company
declaring that the shelf registration statement is usable after the interest
rate has been so increased, the interest rate borne by the outstanding notes
will be reduced to the original interest rate if the Company is otherwise in
compliance with the above. However, if after any such reduction in interest
rate, the shelf registration statement again ceases to be usable
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<PAGE> 97
beyond the period permitted above, the interest rate may again be increased and
thereafter reduced pursuant to the foregoing provisions.
Any amounts of additional interest due as described above will be payable
in cash on the same interest payments dates as the outstanding notes.
TERMS OF THE EXCHANGE OFFER
Upon the exchange offer registration statement being declared effective,
the Company will offer the new notes in exchange for surrender of the
outstanding notes. The Company will keep the Exchange Offer open for not less
than 30 days and not more than 45 days (or longer if required by applicable law)
after the date notice of the Exchange Offer is mailed to the holders of the
outstanding notes.
Upon the terms and subject to the conditions set forth in this prospectus
and in the Letter of Transmittal, the Company will accept any and all
outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date (as defined in "--Expiration Date;
Extensions; Amendments"). The Company will issue an equal principal amount of
new notes in exchange for such principal amount of outstanding notes accepted in
the Exchange Offer. Holders may tender some or all of their outstanding notes
pursuant to the Exchange Offer. Outstanding notes may be tendered only in
integral multiples of $1,000.
The form and terms of the new notes will be the same as the form and terms
of the outstanding notes except that (1) the new notes will bear a different
CUSIP Number from the outstanding notes, (2) the new notes will have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and (3) the holders of the new notes will not be entitled
to certain rights under the registration rights agreement, which rights will
terminate when the Exchange Offer is consummated. The new notes will evidence
the same debt as the outstanding notes and will be entitled to the benefits of
the indenture governing such outstanding notes.
In connection with the Exchange Offer, holders of outstanding notes do not
have any appraisal or dissenters' rights under the indenture governing such
outstanding notes or the General Corporation Law of Nevada. The Company intends
to conduct the Exchange Offer in accordance with the applicable requirements of
the Exchange Act and the rules and regulations of the SEC thereunder.
The Company shall be deemed to have accepted validly tendered outstanding
notes when, as and if the Company has given oral or written notice thereof to
The Bank of New York, exchange agent for the Exchange Offer (the "Exchange
Agent"). The Exchange Agent will act as agent for the tendering holders for the
purpose of receiving the new notes from the Company.
If any tendered outstanding notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted outstanding notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender outstanding notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
outstanding notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than transfer taxes in certain circumstances, in
connection with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
As used in this prospectus, the term "Expiration Date" shall mean 5:00
p.m., New York City time, on , 1999, unless the Company, in its sole
discretion, extends the Exchange Offer, in which case the term "Expiration Date"
shall mean the latest date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by written notice and will mail to the registered holders
an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration date.
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<PAGE> 98
The Company reserves the right, in its sole discretion, (1) to delay
accepting any outstanding notes, to extend the Exchange Offer or to terminate
the Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving written notice of such delay, extension
or termination to the Exchange Agent or (2) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by written notice thereof
to the registered holders.
INTEREST ON THE NEW NOTES
Interest on the new notes will accrue from and including their issuance
date. Additionally, interest on the new notes will accrue from the last interest
payment date on which interest was paid on the outstanding notes surrendered in
exchange therefor. Alternatively, if no interest has been paid on the
outstanding notes, interest on the new notes will accrue from November 19, 1998,
the date of original issuance of the outstanding notes to but not including the
issuance date of the new notes. Holders whose outstanding notes are accepted for
exchange will be deemed to have waived the right to receive interest accrued on
such outstanding notes. Accordingly, holders who exchange their outstanding
notes will receive the same interest payment on the next interest payment date
following the Expiration Date that they would have received had they not
accepted the Exchange Offer. Interest on the new notes is payable semi-annually
on each May 15 and November 15 commencing on May 15, 1999.
PROCEDURES FOR TENDERING
Only a holder of outstanding notes may tender such outstanding notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must do the following:
- complete, sign and date the Letter of Transmittal, or a facsimile
thereof,
- have the signatures thereon guaranteed if required by the Letter of
Transmittal, and
- except as discussed in "--Guaranteed Delivery Procedures," mail or
otherwise deliver the Letter of Transmittal, or facsimile, together
with the outstanding notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
To be tendered effectively, the outstanding notes, Letter of Transmittal
and other required documents must be completed and received by the Exchange
Agent at the address set forth below under "--Exchange Agent" prior to 5:00
p.m., New York City time, on the Expiration Date. Delivery of the outstanding
notes may be made by book-entry transfer in accordance with the procedures
described below. Confirmation of such book-entry transfer must be received by
the Exchange Agent prior to the Expiration Date.
By executing a Letter of Transmittal, each holder will make to the Company
the representations set forth above in the fourth paragraph under the heading
"--Resale of the New Notes."
The tender by a holder and the acceptance thereof by the Company will
constitute the agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRES DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH
TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, HOLDERS SHOULD
ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO
THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any Beneficial Owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct it to
tender on such Beneficial Owner's behalf. See "Instructions to Registered
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<PAGE> 99
Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner"
included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the outstanding notes tendered pursuant thereto are tendered (1) by a
registered holder who has not completed the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (2) for the account of an Eligible
Institution (as defined). In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a recognized Medallion
Program approved by the Securities Transfer Association Inc. (an "Eligible
Institution").
If a Letter of Transmittal is signed by a person other than the registered
holder of any outstanding notes listed therein, such outstanding notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such outstanding
notes with the signature thereon guaranteed by an Eligible Institution.
If a Letter of Transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and evidence
satisfactory to the Company of their authority to so act must be submitted with
the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this prospectus to establish accounts with respect to
the outstanding notes at the book-entry transfer facility, The Depository Trust
Company (the "Book-Entry Transfer Facility"), for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of outstanding notes by causing such Book-Entry
Transfer Facility to transfer such outstanding notes into the Exchange Agent's
account with respect to the outstanding notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the
outstanding notes may be effected through book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered outstanding notes and withdrawal of tendered
outstanding notes will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the absolute
right to reject any and all outstanding notes not properly tendered or any
outstanding notes the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the right in its
sole discretion to waive any defects, irregularities or conditions of tender as
to particular outstanding notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of outstanding notes must
be cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of outstanding notes, neither the Company, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification. Tenders
of outstanding notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any outstanding notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
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<PAGE> 100
GUARANTEED DELIVERY PROCEDURES
A holder who wishes to tender its outstanding notes and (1) whose
outstanding notes are not immediately available, (2) who cannot deliver such
holder's outstanding notes, the Letter of Transmittal or any other required
documents to the Exchange Agent or (3) who cannot complete the procedures for
book-entry transfer, prior to the Expiration Date, may effect a tender if:
- the tender is made through an Eligible Institution,
- prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate
number(s) of such outstanding notes and the principal amount of
outstanding notes tendered, stating that the tender is being made
thereby and guaranteeing that, within five New York Stock Exchange
trading days after the Expiration Date, the Letter of Transmittal (or
facsimiles thereof) together with the certificate(s) representing the
outstanding notes (or a confirmation of book-entry transfer of such
outstanding notes into the Exchange Agent's account at the Book-Entry
Transfer Facility), and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and
- the Exchange Agent receives, within five New York Stock Exchange
trading days after the Expiration Date, a properly completed and
executed Letter of Transmittal (or facsimile thereof), as well as the
certificate(s) representing all tendered outstanding notes in proper
form for transfer (or a confirmation of book-entry transfer of such
outstanding notes into the Exchange Agent's account at the Book-Entry
Transfer Facility), and all other documents required by the Letter of
Transmittal.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of outstanding notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of outstanding notes in the Exchange Offer, a letter
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must
- specify the name of the person having deposited the outstanding notes
to be withdrawn (the "Depositor"),
- identify the outstanding notes to be withdrawn (including the
certificate number(s) and principal amount of such outstanding notes
or, in the case of outstanding notes transferred by book-entry
transfer, the name and number of the account at the Book-Entry
Transfer Facility to be credited),
- be signed by the holder in the same manner as the original signature
on the Letter of Transmittal by which such outstanding notes were
tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee
register the transfer of such outstanding notes into the name of the
person withdrawing the tender, and
- specify the name in which any such outstanding notes are to be
registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any outstanding notes so withdrawn
will be deemed not to have been validly tendered for purposes of the Exchange
Offer, and no new notes will be issued with respect thereto unless the
outstanding notes so withdrawn are validly retendered. Any outstanding notes
which have been tendered but which are not accepted for exchange will be
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<PAGE> 101
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn outstanding notes may be retendered by following one
of the procedures described above under "-- Procedures for Tendering" at any
time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange new notes for, any outstanding
notes and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such outstanding notes, if the Exchange Offer, or the making
of any exchange by a holder of outstanding notes, violates applicable law or any
applicable interpretation of the staff of the SEC.
EXCHANGE AGENT
The Bank of New York has been appointed as exchange agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
For Information by Telephone:
(212)
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery Service:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
(7 East) Corporate Trust Services Window
New York, New York 10286 Ground Level
Attention: Reorganization Section New York, New York 10286
Attention: Reorganization Section, 7 East
</TABLE>
By Facsimile Transmission:
(212)
(Facsimile Confirmation)
(212)
Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.
Delivery to an address or transmission of instructions via facsimile other than
as set forth above will not constitute a valid delivery.
The Bank of New York also acts as Trustee under the indenture governing the
notes.
FEES AND EXPENSES
The Company will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail. However, additional solicitation may be made
by telegraph, telecopy, telephone or in person by officers and regular employees
of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses includes fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
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ACCOUNTING TREATMENT
The new notes will be recorded at the same carrying value as the
outstanding notes as reflected in the Company's accounting records on the date
of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be amortized
over the term of the notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of outstanding notes who are eligible to participate in the
Exchange Offer but who do not tender their outstanding notes will not have any
further registration rights, and such outstanding notes will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for such outstanding notes could be adversely affected.
The outstanding notes that are not exchanged for new notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such outstanding
notes may be resold only:
- to the Company (upon redemption thereof or otherwise),
- so long as the outstanding notes are eligible for resale pursuant to
Rule 144A under the Securities Act, to a person inside the United
States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A,
- in accordance with Rule 144 under the Securities Act, or pursuant to
another exemption from the registration requirements of the Securities
Act (and based upon an opinion of counsel reasonably acceptable to the
Company),
- outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act, or
- pursuant to an effective registration statement under the Securities
Act,
in each case in accordance with any applicable securities laws of any state of
the United States.
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<PAGE> 103
DESCRIPTION OF THE NOTES
The outstanding notes were, and the new notes (collectively, the "Notes")
will be, issued under an indenture dated as of November 19, 1998 (the
"Indenture") between the Company, Citadel License (the initial Subsidiary Notes
Guarantor referred to below) and The Bank of New York, as trustee (the
"Trustee"), a copy of which is available from the Company. Upon the
effectiveness of the exchange offer registration statement, the Indenture will
be subject to and governed by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). As used in this "Description of the Notes" section, the
term "Company" refers to Citadel Broadcasting Company, but not any current or
future subsidiary (unless the context otherwise requires). The following summary
of the material provisions of the Indenture does not purport to be complete and
is subject to, and qualified in its entirety by reference to, the provisions of
the Indenture, including the definitions of certain terms contained therein and
those terms made part of the Indenture by reference to the Trust Indenture Act.
For definitions of certain capitalized terms used in the following summary, see
"--Certain Definitions" below.
GENERAL
The Notes will mature on November 15, 2008, will be initially limited to
$115,000,000 aggregate principal amount and will be subordinate and junior in
right of payment to all existing and future Senior Debt of the Company. Each
Note will bear interest at the rate of 9-1/4% per annum. Interest on the new
notes will accrue from and including their issuance date.
Additionally, interest on the new notes will accrue from the last interest
payment date on which interest was paid on the outstanding notes surrendered in
exchange therefor. Alternatively, if no interest has been paid on the
outstanding notes, interest on the new notes will accrue from November 19, 1998,
the date of original issuance of the outstanding notes, to but not including the
issuance date of the new notes. Holders whose outstanding notes are accepted for
exchange will be deemed to have waived the right to receive interest accrued on
such outstanding notes. Accordingly, holders who exchange their outstanding
notes will receive the same interest payment on the next interest payment date
following the Expiration Date that they would have received had they not
accepted the Exchange Offer.
Interest is payable semi-annually on May 15 and November 15 of each year,
commencing May 15, 1999, until the principal thereof is paid or duly provided
for, to the person in whose name the Note (or any predecessor Note) is
registered at the close of business on the May 1 or November 1 next preceding
such interest payment date. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The principal of and premium, if any, and interest on the Notes will be
payable, and the Notes will be exchangeable and transferable, at the office or
agency of the Company in the City of New York maintained for such purposes
(which initially will be the office of the Trustee located at 101 Barclay
Street, New York, New York 10286); provided, however, that, at the option of the
Company, interest may be paid by check mailed to the address of the person
entitled thereto as such address appears in the security register for the Notes.
The new notes will be issued only in registered form without coupons and only in
denominations of $1,000 and integral multiples thereof. No service charge will
be made for any registration of transfer or exchange or redemption of Notes, but
the Company may require payment in certain circumstances of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith.
Subject to the covenants described below under "Certain Covenants" and
applicable laws, the Company may, from time to time, issue additional Senior
Subordinated Notes (the "Additional Notes") under the Indenture. The Notes and
any Additional Notes would be treated as a single class for all purposes under
the Indenture.
As of the date hereof, the Company's only Subsidiary is a Restricted
Subsidiary and a Subsidiary Notes Guarantor. However, under certain
circumstances, the Company will be able to designate future Subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to any
of the restrictive covenants
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set forth in the Indenture. The circumstances in which the Company may designate
a Subsidiary as an Unrestricted Subsidiary are described below under the
"Unrestricted Subsidiaries" covenant.
Any outstanding notes that remain outstanding after consummation of the
Exchange Offer and new notes issued in connection with the Exchange Offer will
be treated as a single class of securities under the Indenture.
The Notes will not be entitled to the benefit of any sinking fund.
GUARANTEES
Payment of the principal of (and premium, if any, on) and interest on the
Notes, when and as the same become due and payable, is unconditionally
guaranteed, jointly and severally, on a senior subordinated basis by the
Subsidiary Notes Guarantors. The obligations of each Subsidiary Notes Guarantor
under its Subsidiary Notes Guarantee are limited so as not to constitute a
fraudulent conveyance under applicable law. See "Risk Factors--Subsidiary
Guarantees May Be Unenforceable Due to Fraudulent Conveyance Statutes."
The Indenture requires that each Wholly Owned Restricted Subsidiary be a
Subsidiary Notes Guarantor, as well as each other Restricted Subsidiary that
guarantees any other Debt of the Company.
The Indenture provides that no Subsidiary Notes Guarantor may consolidate
with or merge with or into any other person (other than the Company or another
Subsidiary Notes Guarantor) or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets in one or more
related transactions to another person unless: (a) subject to the provisions of
the following paragraph, the person formed by or surviving such consolidation or
merger or to which all or substantially all of such assets are disposed (if
other than the Company or a Subsidiary Notes Guarantor) assumes all of the
obligations of such Subsidiary Notes Guarantor under the Indenture and its
Subsidiary Notes Guarantee, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee and (b) immediately after
giving effect to such transaction, no Default or Event of Default has occurred
and is continuing.
The Indenture provides that, in the event of (a) a sale, transfer or other
disposition of all of the Capital Stock of a Subsidiary Notes Guarantor to a
person that is not an Affiliate of the Company, (b) a sale, transfer or other
disposition of all or substantially all of the assets of a Subsidiary Notes
Guarantor to a person that is not an Affiliate of the Company or (c) the
designation of such Subsidiary Notes Guarantor as an Unrestricted Subsidiary, in
any such case in compliance with the terms of the Indenture, then such
Subsidiary Notes Guarantor will be deemed automatically and unconditionally
released and discharged from all of its obligations under the Indenture and its
Subsidiary Notes Guarantee without any further action on the part of the Trustee
or any holder of the Notes; provided that the Net Cash Proceeds of any such
sale, transfer or other disposition are applied in accordance with the
"Limitation on Certain Asset Sales" covenant.
SUBORDINATION
The Notes are, to the extent set forth in the Indenture, subordinate in
right of payment to the prior payment in full of all Senior Debt. Upon any
payment or distribution of assets of the Company to creditors upon any
liquidation, dissolution, winding-up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency or similar
proceedings of the Company (except in connection with the consolidation or
merger of the Company or its liquidation or dissolution following the
conveyance, transfer or lease of its properties and assets substantially as an
entirety, upon the terms and conditions described under "Consolidation, Merger
and Sale of Assets"), the holders of Senior Debt will first be entitled to
receive payment in full, in cash or cash equivalents, of all amounts due or to
become due on or in respect of such Senior Debt before the holders of Notes are
entitled to receive any payment of principal of (or premium, if any) or interest
on the Notes or on account of the purchase or redemption or other acquisition of
Notes by the Company or any Subsidiary of the Company. In the event that,
notwithstanding the foregoing, the Trustee or the holder of any Note receives
any payment or distribution of assets of the Company of any kind or character
(excluding equity or subordinated securities of the Company provided for in a
plan of reorganization or readjustment that, in the case of subordinated
securities, are subordinated in
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right of payment to all Senior Debt to at least the same extent as the Notes are
so subordinated), before all the Senior Debt is paid in full, then such payment
or distribution will be held in trust for the holders of Senior Debt and will be
required to be paid over or delivered forthwith to the trustee in bankruptcy or
other person making payment or distribution of assets of the Company for
application to the payment of all Senior Debt remaining unpaid, to the extent
necessary to pay the Senior Debt in full.
The Company may not make any payments on account of the Notes or on account
of the purchase or redemption or other acquisition of Notes if a default in the
payment when due of principal of (or premium, if any) or interest on Specified
Senior Debt has occurred and is continuing or a default in the payment when due
of commitment, facility or other fees, letter of credit fees or agency fees
under the Credit Facility, or a default in payments when due with respect to
letter of credit reimbursement arrangements with the Credit Facility Agent has
occurred and is continuing (a "Senior Payment Default"). In addition, if any
default (other than a Senior Payment Default) with respect to any Specified
Senior Debt permitting the holders thereof (or a trustee or agent on behalf
thereof) to accelerate the maturity thereof (a "Senior Nonmonetary Default") has
occurred and is continuing and the Company and the Trustee have received written
notice thereof from the Credit Facility Agent or from an authorized person on
behalf of any holder of Specified Senior Debt, then the Company may not make any
payments on account of the Notes or on account of the purchase or redemption or
other acquisition of Notes for a period (a "blockage period") commencing on the
date the Company and the Trustee receive such written notice (a "Blockage
Notice") and ending on the earliest of (x) 179 days after such date (the
"Initial Period"), (y) the date, if any, on which the Specified Senior Debt to
which such default relates is discharged or such default is waived or otherwise
cured and (z) the date, if any, on which such blockage period has been
terminated by written notice to the Company or the Trustee from the Credit
Facility Agent or from the person who gave the Blockage Notice. Any number of
additional payment blockage periods may be commenced during the Initial Period;
provided, however, that no such additional payment blockage periods shall extend
beyond the Initial Period. After the expiration of the Initial Period, no
payment blockage period may be commenced until at least 181 consecutive days
shall have elapsed from the last day of the Initial Period. No Senior
Nonmonetary Default that existed or was continuing on the date of the
commencement of any blockage period with respect to the Specified Senior Debt
initiating such blockage period will be, or can be, made the basis for the
commencement of a subsequent blockage period, unless such default has been cured
or waived for a period of not less than 90 consecutive days. In the event that,
notwithstanding the foregoing, the Company makes any payment to the Trustee or
the holder of any Note prohibited by these blockage provisions, then such
payment will be held in trust for the holders of Senior Debt and will be
required to be paid over and delivered forthwith to the holders of the Senior
Debt remaining unpaid, to the extent necessary to pay in full all the Senior
Debt.
The Subsidiary Notes Guarantees are, to the extent set forth in the
Indenture, subordinated in right of payment to the prior payment in full of all
senior debt of the Subsidiary Notes Guarantors, upon terms substantially
comparable to the subordination of the Notes to all Senior Debt.
By reason of such subordination, in the event of insolvency, creditors of
the Company or a Subsidiary Notes Guarantor who are not holders of Senior Debt
or the Notes may recover less, ratably, than holders of Senior Debt and may
recover more, ratably, than the holders of the Notes.
The subordination provisions described above will cease to be applicable to
the Notes and the Subsidiary Notes Guarantees upon any defeasance or covenant
defeasance of the Notes as described under "--Defeasance or Covenant Defeasance
of Indenture."
As used herein, the term "Specified Senior Debt" means (i) all Senior Debt
under the Credit Facility and (ii) any other issue of Senior Debt having a
principal amount of at least $10,000,000.
At September 30, 1998, on a pro forma basis, after giving effect to the
transactions described under the caption "Pro Forma Financial Information," the
aggregate principal amount of Senior Debt outstanding would have been
approximately $62.8 million. The Company may from time to time hereafter incur
additional Debt constituting Senior Debt under the Credit Facility or otherwise,
subject to the "Limitation on Debt" covenant described below.
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OPTIONAL REDEMPTION
The Company may, at its election, redeem the Notes (subject to contractual
and other restrictions with respect thereto and to the legal availability of
funds therefore), as a whole or from time to time in part, at any time on or
after November 15, 2003 on not less than 30 nor more than 60 days' prior notice,
at the redemption prices (expressed as percentages of the principal amount
thereof) set forth below, together with accrued and unpaid interest, if any, to
the redemption date, if redeemed during the 12-month period beginning on
November 15 of the years indicated below (subject to the right of holders of
record on the relevant record date to receive interest due on an interest
payment date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- -----------
<S> <C>
2003............................................. 104.625%
2004............................................. 103.083
2005............................................. 101.541
2006............................................. 100.000
</TABLE>
In addition, at any time and from time to time prior to November 15, 2001,
the Company may at its option redeem Notes with the net proceeds of one or more
Public Equity Offerings at a redemption price equal to 109.25% of the principal
amount thereof, together with accrued and unpaid interest, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on an interest payment date); provided that,
immediately after giving effect to any such redemption, at least 75% of the
aggregate principal amount of the Notes remains outstanding. The Company must
make any such redemption within 90 days of the related Public Equity Offering.
If less than all the Notes are to be redeemed, the Trustee shall select the
particular Notes to be redeemed not more than 60 days prior to the redemption
date by such method as the Trustee deems fair and appropriate.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the full definition of all such terms as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means Debt of a person (a) existing at the time such person
is merged with or into the Company or becomes a Subsidiary, (b) assumed in
connection with the acquisition of assets from such person or (c) secured by a
Lien encumbering assets acquired from such person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this definition,
"control," when used with respect to any specified person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer") by the Company or a
Restricted Subsidiary, directly or indirectly, in one or a series of related
transactions, to any person other than the Company or a Restricted Subsidiary of
(a) any Capital Stock of any of its Restricted Subsidiaries, (b) all or
substantially all of the properties and assets of the Company and its Restricted
Subsidiaries representing a division or line of business or (c) any other
properties or assets of the Company or any of its Restricted Subsidiaries, other
than in the ordinary course of business. For the purposes of this definition,
the term "Asset Sale" does not include any transfer of properties or assets (a)
that is governed by the provisions of the Indenture described under (1)
"Consolidation, Merger and Sale of Assets" or (2) "Limitation on Asset Swaps,"
(b) between or among the Company and any of its Restricted
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Subsidiaries pursuant to transactions that do not violate any other provision of
the Indenture, (c) to an Unrestricted Subsidiary, if permitted under the
"Limitation on Restricted Payments" covenant, (d) representing obsolete or
permanently retired equipment, (e) the gross proceeds of which (exclusive of
indemnities) do not exceed $100,000 for any particular item or $500,000 in the
aggregate for any fiscal year or (f) having a value of up to $500,000, including
cash, to a joint venture in which the Company or a Restricted Subsidiary has an
equity interest, which joint venture is engaged in the Internet service provider
business.
"Asset Swap" means the execution of one or more definitive agreements,
subject only to FCC approval, if applicable, and other customary closing
conditions, which the Company in good faith believes will be satisfied, for a
substantially concurrent purchase and sale, or exchange, or "deferred exchange"
(for no more than 180 days) under section 1031(a)(3) of the Internal Revenue
Code of 1986, as amended (the "Code"), of assets used in the broadcast or
related businesses between the Company or any of its Restricted Subsidiaries and
one or more other persons or groups of affiliated persons; provided that any
amendment to or waiver of any closing conditions that individually or in the
aggregate are material to the Asset Swap will be deemed to be a new Asset Swap.
"Banks" means the banks and other financial institutions that from time to
time are lenders under the Credit Facility.
"Capital Stock" of any person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents (however
designated) of such person's equity (however designated).
"Capitalized Lease Obligation" means, with respect to any person, an
obligation incurred or assumed under or in connection with any capital lease of
real or personal property that, in accordance with GAAP, has been recorded as a
capitalized lease on the balance sheet of such person.
"Change of Control" means the occurrence of any of the following events:
(a) Any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Lawrence R. Wilson, Scott E.
Smith, John E. von Schlegell, Baker, Fentress & Company, ABRY Broadcast
Partners II, L.P., ABRY/Citadel Investment Partners, L.P., The Endeavour
Capital Fund Limited Partnership and any trustee, in its capacity as
trustee under the Voting Trust Agreement ("Permitted Holders") or Citadel
Communications, is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a person will be deemed
to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than a majority
of the voting power of all classes of Voting Stock of the Company;
(b) During any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors,
or whose nomination for election by the stockholders of the Company, was
approved by a vote of at least 66-2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of the
Company then in office; or
(c) The Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution.
"Closing Date" means November 19, 1998, the date on which the outstanding
notes were originally issued under the Indenture.
"Consolidated Adjusted Net Income" means, for any period, the net income
(or net loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the portion of net income (or
loss) of any person (other than the Company or a Restricted Subsidiary),
including Unrestricted Subsidiaries, in which the Company or any of its
Restricted Subsidiaries has an ownership interest, except to
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the extent of the amount of dividends or other distributions actually paid to
the Company or any of its Restricted Subsidiaries in cash during such period,
(d) the net income (or loss) of any person combined with the Company or any of
its Restricted Subsidiaries on a "pooling of interests" basis attributable to
any period prior to the date of combination, and (e) the net income (but not the
net loss) of any Restricted Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such Restricted Subsidiary is
at the date of determination restricted, directly or indirectly, except to the
extent that such net income could be paid to the Company or a Restricted
Subsidiary thereof; provided that, if any Restricted Subsidiary is not a Wholly
Owned Restricted Subsidiary, Consolidated Adjusted Net Income will be reduced
(to the extent not otherwise reduced in accordance with GAAP) by an amount equal
to (A) the amount of the Consolidated Adjusted Net Income otherwise attributable
to such Restricted Subsidiary multiplied by (B) the quotient of (1) the number
of shares of outstanding common stock of such Restricted Subsidiary not owned on
the last day of such period by the Company or any of its Restricted Subsidiaries
divided by (2) the total number of shares of outstanding common stock of such
Restricted Subsidiary on the last day of such period.
"Consolidated Cash Flow" means, for any period, the sum of, without
duplication, Consolidated Adjusted Net Income for such period, plus (or, in the
case of clause (d) below, plus or minus) the following items to the extent
included in computing Consolidated Adjusted Net Income for such period: (a) the
aggregate interest expense and preferred stock dividends of the Company and its
Restricted Subsidiaries for such period, plus (b) the provision for federal,
state, local and foreign income taxes of the Company and its Restricted
Subsidiaries for such period, plus (c) the aggregate depreciation and
amortization expense of the Company and any of its Restricted Subsidiaries for
such period, plus (d) any other non-cash charges for such period, and minus
non-cash credits for such period, other than non-cash charges or credits
resulting from changes in prepaid assets or accrued liabilities in the ordinary
course of business; provided that income tax expense, interest expense and
preferred stock dividends, depreciation and amortization expense, and non-cash
charges and credits of a Restricted Subsidiary will be included in Consolidated
Cash Flow only to the extent (and in the same proportion) that the net income of
such Restricted Subsidiary was included in calculating Consolidated Adjusted Net
Income for such period. Solely for purposes of determining whether the Company
could incur Debt pursuant to the first paragraph of the "Limitation on Debt"
covenant, if the Company is permitted to give pro forma effect to an In-Market
Acquisition of a radio station pursuant to clause (iii) of the second paragraph
of such covenant, such calculation may also give pro forma effect to projected
quantifiable improvements in operating results of such radio station due to cost
reductions calculated in good faith by the Company and certified by an officers'
certificate filed with the Trustee. As used in the preceding sentence, the term
"In-Market Acquisition" means the acquisition of a radio station or group of
radio stations serving an MSA in which the Company or its Subsidiaries has
owned, or has operated under a LMA, one or more radio stations for at least the
preceding six months.
"Consolidated Cash Flow Ratio" means, at any date, the ratio of (a) the
aggregate amount of Debt of the Company and its Restricted Subsidiaries on a
consolidated basis as of the end of the immediately preceding four fiscal
quarters for which internal financial statements of the Company are available
(the "Reference Period") to (b) the aggregate amount of Consolidated Cash Flow
for such Reference Period.
"Consolidated Fixed Charges" means, for any period, without duplication,
the sum of (a) the amount which, in conformity with GAAP, would be set forth
opposite the caption "interest expense" (or any like caption) on a consolidated
statement of operations of the Company and its Restricted Subsidiaries for such
period, including, without limitation, (1) amortization of debt discount, (2)
the net cost of interest rate contracts (including amortization of discounts),
(3) the interest portion of any deferred payment obligation, (4) amortization of
debt issuance costs, (5) the interest component of Capitalized Lease Obligations
of the Company and any of its Restricted Subsidiaries, and (6) the portion of
any rental obligation of the Company and any of its Restricted Subsidiaries in
respect of any sale and leaseback transaction allocable during such period to
interest expense (determined as if it were treated as a Capitalized Lease
Obligation) plus (b) all interest on any Debt of any other person guaranteed by
the Company or any of its Restricted Subsidiaries; provided, however, that
Consolidated Fixed Charges will not include any gain or loss from extinguishment
of debt, including any write-off of debt issuance costs.
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"Credit Facility" means the loan agreement dated October 9, 1996, among the
Company, the Banks and the Credit Facility Agent, as amended, and as such
agreement may be amended, restated, supplemented, replaced or refinanced or
otherwise modified from time to time.
"Credit Facility Agent" means the then acting Agent as defined in and under
the Credit Facility or any successor thereto.
"Debt" means (without duplication), with respect to any person, whether
recourse is to all or a portion of the assets of such person and whether or not
contingent, (a) every obligation of such person for money borrowed, (b) every
obligation of such person evidenced by bonds, debentures, notes or other similar
instruments, (c) every reimbursement obligation of such person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such person, (d) every obligation of such person issued or assumed as
the deferred purchase price of property or services, (e) every Capitalized Lease
Obligation of such person, (f) all Disqualified Stock of such person valued at
its maximum fixed repurchase price, plus accumulated and unpaid dividends, (g)
all Hedging Obligations of such person, and (h) every obligation of the types
referred to in clauses (a) through (g) of another person and all dividends of
another person (1) the payment of which, in either case, such person has
guaranteed or (2) which is secured by any Lien on any property or asset of such
person, the amount of such Debt being deemed to be the lesser of the actual
amount of the guarantee or the value of such property or asset subject to such
Lien, as the case may be, and the amount of the Debt so guaranteed or secured,
as the case may be. For purposes of this definition, the "maximum fixed
repurchase price" of any Disqualified Stock that does not have a fixed
repurchase price will be calculated in accordance with the terms of such
Disqualified Stock as if such Disqualified Stock were repurchased on any date on
which Debt is required to be determined pursuant to the Indenture, and if such
price is based upon, or measured by, the fair market value of such Disqualified
Stock, such fair market value will be determined reasonably and in good faith by
the board of directors of the issuer of such Disqualified Stock. Notwithstanding
the foregoing, trade accounts payable and accrued liabilities arising in the
ordinary course of business, any liability for federal, state or local taxes or
other taxes owed by such person and the Exchangeable Preferred Stock will not be
considered Debt for purposes of this definition. The amount outstanding at any
time of any Debt issued with original issue discount is the aggregate principal
amount at maturity of such Debt, less the remaining unamortized portion of the
original issue discount of such Debt at such time, as determined in accordance
with GAAP.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors, to make a finding or otherwise
take action under the Indenture, a member of the Board of Directors who does not
have any material direct or indirect financial interest in or with respect to
such transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock that,
either by its terms or by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, (a) is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to one year
after the final Stated Maturity of the Notes, (b) is redeemable at the option of
the holder thereof at any time prior to one year after such final Stated
Maturity or (c) at the option of the holder thereof, is convertible into or
exchangeable for debt securities at any time prior to one year after such final
Stated Maturity; provided that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to cause the issuer thereof to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to one year
after the Stated Maturity of the Notes will not constitute Disqualified Stock if
the "asset sale" or "change of control" provisions applicable to such Capital
Stock are no more favorable to the holders of such Capital Stock than the
provisions contained in the "Limitation on Certain Asset Sales" and "Purchase of
Notes upon a Change of Control" covenants described below and such Capital Stock
specifically provides that the issuer will not repurchase or redeem any such
Capital Stock pursuant to such provision prior to the Company's repurchase of
such Notes as are required to
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be repurchased pursuant to the "Limitation on Certain Asset Sales" and "Purchase
of Notes upon a Change of Control" covenants described below.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
were in effect on the Closing Date.
"guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limitation, the payment of
amounts drawn down under letters of credit.
"Hedging Obligations" means the obligations of any person under (a)
interest rate swap agreements, interest rate cap agreements and interest rate
collar agreements and (b) other agreements or arrangements designed to protect
such person against fluctuations in interest rates or the value of foreign
currencies.
"Investment" (in any person) means (a) directly or indirectly, any advance,
loan or other extension of credit (including, without limitation, by way of
guarantee or similar arrangement) or capital contribution to any person, the
purchase or other acquisition of any stock, bonds, notes, debentures or other
securities issued by such person or the acquisition (by purchase or otherwise)
of all or substantially all of the business or assets of such person or the
making of any investment in such person, (b) the designation of any Restricted
Subsidiary as an Unrestricted Subsidiary and (c) the transfer of any assets or
properties from the Company or a Restricted Subsidiary to any Unrestricted
Subsidiary, other than the transfer of assets or properties made in the ordinary
course of business. Investments will exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices.
"License Subsidiary" means Citadel License, Inc.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation, assignment for security, claim,
preference, priority or other encumbrance upon or with respect to any property
of any kind, real or personal, movable or immovable, now owned or hereafter
acquired. A person will be deemed to own subject to a Lien any property that
such person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations when received in the form of, or stock or other
assets when disposed of for, cash or cash equivalents (except to the extent that
such obligations are financed or sold with recourse to the Company or any of its
Restricted Subsidiaries), net of (a) brokerage commissions and other fees and
expenses (including fees and expenses of legal counsel and investment banks)
related to such Asset Sale, (b) provisions for all taxes payable as a result of
such Asset Sale, (c) payments made to retire Debt where payment of such Debt is
secured by the assets that are the subject of such Asset Sale, (d) amounts
required to be paid to any person (other than the Company or any of its
Restricted Subsidiaries) owning a beneficial interest in the assets that are
subject to the Asset Sale and (e) appropriate amounts to be provided by the
Company or any of its Restricted Subsidiaries, as the case may be, as a reserve
required in accordance with GAAP against any liabilities associated with such
Asset Sale and retained by the seller after such Asset Sale, including pension
and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.
"Pari Passu Debt" means Debt of the Company that ranks pari passu in right
of payment with the Notes.
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"Permitted Investments" means any of the following:
(a) Investments in (1) securities with a maturity of one year or less
issued or directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof); (2)
certificates of deposit, time deposits, overnight bank deposits or bankers'
acceptances with a maturity of 270 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus of not less than $500,000,000; and (3) commercial paper
with a maturity of 270 days or less issued by a corporation that is not an
Affiliate of the Company and is organized under the laws of any state of
the United States or the District of Columbia and having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Ratings Services.
(b) Investments by the Company or any of its Restricted Subsidiaries
in another person, if as a result of such Investment (1) such other person
becomes a Restricted Subsidiary that is a Subsidiary Notes Guarantor or (2)
such other person is merged or consolidated with or into, or transfers or
conveys all or substantially all of its assets to, the Company or a
Restricted Subsidiary that is a Subsidiary Notes Guarantor.
(c) Investments by the Company or any of its Restricted Subsidiaries
in a Subsidiary Notes Guarantor and Investments by any Restricted
Subsidiary in the Company.
(d) Investments in assets owned or used in the ordinary course of
business.
(e) Investments in existence on the Closing Date.
(f) Promissory notes received as a result of Asset Sales permitted
under the "Limitation on Certain Asset Sales" covenant.
(g) Direct or indirect loans to employees, or to a trustee for the
benefit of such employees, of the Company or any of its Restricted
Subsidiaries in an aggregate amount outstanding at any time not exceeding
$1,000,000.
(h) Investments by the Company or any of its Restricted Subsidiaries
in a joint venture that is engaged in the internet service provider
business in an aggregate amount outstanding at any time not exceeding
$500,000.
(i) Other Investments that do not exceed $2,000,000 at any one time
outstanding.
"Public Equity Offering" means an underwritten public offering of Qualified
Equity Interests of either (a) the Company or (b) Citadel Communications the net
proceeds from which (after deducting any underwriting discounts and commissions)
are used by Citadel Communications to purchase Qualified Equity Interests of the
Company; provided that, in either case, such net proceeds exceed $10,000,000.
"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any person means any and all Capital Stock of such
person, other than Disqualified Stock.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Senior Debt" means the principal of and premium, if any, and interest on
(including interest accruing after the filing of a petition initiating any
proceeding pursuant to any bankruptcy law, whether or not allowed) and other
amounts due on or in connection with any Debt of the Company (other than the
Notes or Pari Passu Debt), whether outstanding on the Closing Date or thereafter
incurred, unless, in the case of any particular Debt, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Debt will be subordinate in right of payment to any Debt or
other general unsecured obligations of the Company. Without limiting the
generality of the foregoing, "Senior Debt" includes the principal of and
premium, if any, fees and interest (including interest accruing after the
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occurrence of an event of default or after the filing of a petition initiating
any proceeding pursuant to any bankruptcy law, whether or not allowed) on all
obligations of every nature of the Company from time to time owed to the Banks
under the Credit Facility. Notwithstanding the foregoing, "Senior Debt" will not
include (a) Debt that is Disqualified Stock, (b) Debt consisting of trade
payables, (c) Debt of the Company to a Subsidiary or any other Affiliate of the
Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt
that, at the time of the incurrence, is incurred by the Company in violation of
the Indenture other than any Debt incurred under the Credit Facility not in
excess of $150,000,000 (less any amounts applied to the permanent reduction of
such Debt pursuant to the "Limitation on Certain Asset Sales" covenant under the
Indenture) if the Company has certified to the Credit Facility Agent, at the
time such Debt is incurred, that the Company is permitted to incur such Debt
under the Indenture.
"Significant Subsidiary" means any Restricted Subsidiary of the Company
that, together with its Subsidiaries, (a) for the most recent fiscal year of the
Company, accounted for more than 10% of the consolidated net sales of the
Company and its Restricted Subsidiaries, (b) as of the end of such fiscal year,
was the owner of more than 10% of the consolidated assets of the Company and its
Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the
most recently available consolidated financial statements of the Company for
such fiscal year, (c) was organized or acquired after the beginning of such
fiscal year and would have been a Significant Subsidiary if it had been owned
during the entire fiscal year or (d) holds one or more licenses material to the
Company's business.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and, when used with respect to any other Debt, means the date
specified in the instrument governing such Debt as the fixed date on which the
principal of such Debt or any installment of interest thereon is due and
payable.
"Subordinated Debt" means Debt of the Company that is subordinated in right
of payment to the Notes.
"Subsidiary" means any person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company
and/or one or more other Subsidiaries of the Company.
"Subsidiary Notes Guarantee" means a guarantee of the Notes by a Restricted
Subsidiary in accordance with the provisions of the Indenture.
"Subsidiary Notes Guarantor" means the License Subsidiary and each other
Restricted Subsidiary that issues a Subsidiary Notes Guarantee as described
under the "Subsidiary Notes Guarantees" covenant.
"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by
the Board of Directors of the Company as an Unrestricted Subsidiary in
accordance with the "Unrestricted Subsidiaries" covenant and (b) any Subsidiary
of an Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).
"Weighted Average Life" means, as of the date of determination with respect
to any Debt or Disqualified Stock, the quotient obtained by dividing (a) the sum
of the products of (i) the number of years from the date of determination to the
date or dates of each successive scheduled principal or liquidation value
payment of such Debt or Disqualified Stock, respectively, multiplied by (ii) the
amount of each such principal or liquidation value payment by (b) the sum of all
such principal or liquidation value payments.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all
of the outstanding voting securities (other than directors' qualifying shares or
an immaterial number of shares required to be owned by other persons pursuant to
applicable law) of which are owned, directly or indirectly, by the Company.
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CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON DEBT. (a) The Company will not, and will not permit any of
its Restricted Subsidiaries to, create, issue, assume, guarantee or in any
manner become directly or indirectly liable for the payment of, or otherwise
incur (collectively, "incur"), any Debt (including Acquired Debt and the
issuance of Disqualified Stock), except that the Company or a Subsidiary Notes
Guarantor may incur Debt or issue Disqualified Stock if, at the time of such
event, the Consolidated Cash Flow Ratio would have been less than 7.0 to 1.0.
In making the foregoing calculation, pro forma effect will be given to: (1)
the incurrence of such Debt and (if applicable) the application of the net
proceeds therefrom, including to refinance other Debt, as if such Debt had been
incurred and the application of proceeds therefrom occurred on the first day of
the four-fiscal quarter period used to calculate the Consolidated Cash Flow
Ratio, (2) the incurrence, repayment or retirement of any other Debt by the
Company or any of its Restricted Subsidiaries since the first day of such
four-quarter period as if such Debt was incurred, repaid or retired at the
beginning of such four-quarter period and (3) the acquisition (whether by
purchase, merger or otherwise) or disposition (whether by sale, merger or
otherwise) of any company, entity or business acquired or disposed of by the
Company or any of its Restricted Subsidiaries, as the case may be, since the
first day of such four-quarter period, as if such acquisition or disposition
occurred at the beginning of such four-quarter period. In making a computation
under the foregoing clause (1) or (2), the amount of Debt under a revolving
credit facility will be computed based upon the average daily balance of such
Debt during such four-quarter period.
(b) Notwithstanding the foregoing, the Company may, and may, to the extent
expressly permitted below, permit any of its Restricted Subsidiaries to, incur
any of the following Debt ("Permitted Debt"):
(1) Debt of the Company or any Subsidiary Notes Guarantor under the
Credit Facility (including guarantees thereof by the Subsidiaries) in an
aggregate principal amount at any one time outstanding not to exceed
$110,000,000 less any amounts applied to the permanent reduction of such
Debt pursuant to the "Limitation on Certain Asset Sales" covenant.
(2) Debt of the Company or any of its Restricted Subsidiaries
outstanding on the Closing Date, other than Debt described under clause (1)
above.
(3) Debt owed by the Company to any of its Restricted Subsidiaries or
owed by any Subsidiary to the Company or a Restricted Subsidiary (provided
that such Debt is Subordinated Debt and is held by the Company or such
Restricted Subsidiary) or owed to the Company or a Subsidiary Notes
Guarantor by a Restricted Subsidiary that is not a Subsidiary Notes
Guarantor, provided the incurrence of such Debt did not violate the
"Limitation on Restricted Payments" covenant.
(4) Debt represented by the Notes (other than any Additional Notes)
and the Subsidiary Notes Guarantees.
(5) Hedging Obligations of the Company or any of its Restricted
Subsidiaries incurred in the ordinary course of business.
(6) Capitalized Lease Obligations of the Company or any of its
Restricted Subsidiaries in an aggregate amount not exceeding $3,000,000 at
any one time outstanding.
(7) Debt under purchase money mortgages or secured by purchase money
security interests so long as (x) such Debt is not secured by any property
or assets of the Company or any of its Restricted Subsidiaries other than
the property or assets so acquired and (y) such Debt is created within 60
days of the acquisition of the related property; provided that the
aggregate principal amount of Debt under this clause (7) does not exceed
$2,000,000 at any one time outstanding.
(8) Debt of the Company or any Subsidiary Notes Guarantor, not
permitted by any other clause of this definition, in an aggregate principal
amount not to exceed $5,000,000 at any one time outstanding.
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(9) Debt of the Company or any of its Restricted Subsidiaries
consisting of guarantees, indemnities or obligations in respect of purchase
price adjustments in connection with the acquisition or disposition of
assets, including, without limitation, shares of Capital Stock.
(10) Acquired Debt of a person, other than Debt incurred in connection
with, or in contemplation of, such person becoming a Restricted Subsidiary
or the acquisition of assets from such person, as the case may be, provided
that the Company on a pro forma basis could incur $1.00 of additional Debt
(other than Permitted Debt) pursuant to the first paragraph of this
covenant.
(11) Any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by the
Company or any Restricted Subsidiary of any outstanding Debt of the Company
or such Restricted Subsidiary, other than Debt incurred pursuant to clause
(1), (5), (6), (7), (8) or (9) of this definition, including any successive
refinancings thereof, so long as (A) any such new Debt is in a principal
amount that does not exceed the principal amount so refinanced, plus the
amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Debt refinanced or the amount of
any premium reasonably determined by the Company as necessary to accomplish
such refinancing, plus the amount of expenses of the Company incurred in
connection with such refinancing, (B) in the case of any refinancing of
Subordinated Debt, such new Debt is made subordinate to the Notes at least
to the same extent as the Debt being refinanced, (C) in the case of any
refinancing of the Notes or any Pari Passu Debt, such Debt is Pari Passu
Debt or Subordinated Debt and (D) such refinancing Debt does not have a
Weighted Average Life less than the Weighted Average Life of the Debt being
refinanced and does not have a final scheduled maturity earlier than the
final scheduled maturity, or permit redemption at the option of the holder
earlier than the earliest date of redemption at the option of the holder,
of the Debt being refinanced.
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, take any
of the following actions:
(a) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Company or any of its
Restricted Subsidiaries, other than (1) dividends or distributions payable
solely in Qualified Equity Interests of the issuer of such shares of
Capital Stock, (2) dividends or distributions by a Restricted Subsidiary
payable to the Company or another Restricted Subsidiary or (3) pro rata
dividends or distributions on common stock of a Restricted Subsidiary held
by minority stockholders, provided that such dividends do not in the
aggregate exceed the minority stockholders' pro rata share of such
Restricted Subsidiary's net income from the first day of the Company's
fiscal quarter during which the Closing Date occurs;
(b) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock (or any options,
warrants or other rights to acquire shares of Capital Stock) of (1) the
Company or any of its Unrestricted Subsidiaries or (2) any Restricted
Subsidiary that are held by any Affiliate of the Company (other than, in
either case, any such Capital Stock owned by the Company or any of its
Restricted Subsidiaries);
(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Debt; and
(d) make any Investment (other than a Permitted Investment) in any
person
(such payments or other actions described in (but not excluded from) clauses (a)
through (d) being referred to as "Restricted Payments"), unless at the time of,
and immediately after giving effect to, the proposed Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing,
(2) the Company could incur at least $1.00 of additional Debt
(other than Permitted Debt) pursuant to the first paragraph of the
"Limitation on Debt" covenant, and
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(3) the aggregate amount of all Restricted Payments declared or
made after the Closing Date does not exceed the sum of:
(A) the remainder of (x) 100% of the aggregate Consolidated Cash
Flow for the period beginning on the first day of the Company's
fiscal quarter during which the Closing Date occurred and ending on
the last day of the Company's most recent fiscal quarter for which
internal financial statements are available ending prior to the date
of such proposed Restricted Payment (the "Computation Period") minus
(y) the product of 1.4 times the sum of (1) Consolidated Fixed
Charges for the Computation Period and (2) all dividends or other
distributions paid in cash by the Company or any of its Restricted
Subsidiaries on any Disqualified Stock of the Company or any of its
Restricted Subsidiaries for the Computation Period; plus
(B) the aggregate net proceeds received by the Company after the
Closing Date (including the fair market value of property other than
cash as determined by the Company's Board of Directors, whose good
faith determination will be conclusive) from the issuance or sale
(other than to a Subsidiary) of Qualified Equity Interests of the
Company (excluding from this computation any net proceeds of a Public
Equity Offering received by the Company that are used by it to redeem
the Notes, as discussed above); plus
(C) the aggregate net proceeds received by the Company after the
Closing Date (including the fair market value of property other than
cash as determined by the Company's Board of Directors, whose good
faith determination will be conclusive) from the issuance or sale
(other than to a Subsidiary) of debt securities or Disqualified Stock
that have been converted into or exchanged for Qualified Stock of the
Company, together with the aggregate net cash proceeds received by
the Company at the time of such conversion or exchange; plus
(D) without duplication, the Net Cash Proceeds received by the
Company or a Wholly Owned Restricted Subsidiary upon the sale of any
of its Unrestricted Subsidiaries; plus
(E) $5,000,000.
Notwithstanding the foregoing, the Company and any of its Restricted
Subsidiaries may take any of the following actions, so long as (with respect to
clauses (f) and (g) below) no Default or Event of Default has occurred and is
continuing or would occur:
(a) The payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not have
been prohibited by the foregoing provision.
(b) The repurchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, Qualified Equity Interests of the
Company.
(c) The purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Debt in exchange for, or out of the
net cash proceeds of a substantially concurrent issuance and sale (other
than to a Restricted Subsidiary) of shares of, Qualified Stock of the
Company.
(d) The purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Debt in exchange for, or out of the
net cash proceeds of a substantially concurrent issuance or sale (other
than to a Subsidiary) of, Subordinated Debt, so long as the Company or a
Restricted Subsidiary would be permitted to refinance such original
Subordinated Debt with such new Subordinated Debt pursuant to clause (11)
of the definition of Permitted Debt.
(e) The repurchase of any Subordinated Debt at a purchase price not
greater than 101% of the principal amount of such Subordinated Debt in the
event of a "change of control" in accordance with provisions similar to the
"Purchase of Notes upon a Change of Control" covenant; provided that, prior
to such repurchase, the Company has made the Change of Control Offer as
provided in such covenant
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with respect to the Notes and has repurchased all Notes validly tendered
for payment in connection with such Change of Control Offer.
(f) The payment by the Company to Citadel Communications for the
purpose of the purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of Citadel Communications,
options on any such shares or related stock appreciation rights or similar
securities held by officers or employees or former officers or employees
(or their estates or beneficiaries under their estates) or by any employee
benefit plan, upon death, disability, retirement or termination of
employment or pursuant to the terms of any employee benefit plan or any
other agreement under which such shares of stock or related rights were
issued; provided that the aggregate cash consideration paid for such
purchase, redemption, acquisition, cancellation or other retirement of such
shares of Capital Stock after the date of the Closing Date does not exceed
$1,000,000 in any fiscal year.
(g) Loans or advances to officers, directors and employees of Citadel
Communications, the Company or any of its Restricted Subsidiaries made in
the ordinary course of business after the Closing Date in an aggregate
principal amount not to exceed $1,000,000 at any one time outstanding.
(h) Payments to or on behalf of Citadel Communications to pay its
operating and administrative expenses attributable to the Company
including, without limitation, legal and audit expenses, directors' fees,
fees payable in respect of the trustee and back-up trustees under the
Voting Trust Agreement, and Commission compliance expenses, in an amount
not to exceed the greater of $1,000,000 per fiscal year and 1% of the net
revenues of the Company for the preceding fiscal year.
The payments described in clauses (b), (c), (e), (f) and (g) of this paragraph
will be Restricted Payments that will be permitted to be taken in accordance
with this paragraph but will reduce the amount that would otherwise be available
for Restricted Payments under the foregoing clause (3), and the payments
described in clauses (a), (d) and (h) of this paragraph will be Restricted
Payments that will be permitted to be taken in accordance with this paragraph
and will not reduce the amount that would otherwise be available for Restricted
Payments under the foregoing clause (3).
For the purpose of making any calculations under the Indenture (1) if a
Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will
be deemed to have made an Investment in an amount equal to the fair market value
of the net assets of such Restricted Subsidiary at the time of such designation
as determined by the Board of Directors of the Company, whose good faith
determination will be conclusive, (2) any property transferred to or from an
Unrestricted Subsidiary will be valued at fair market value at the time of such
transfer, as determined by the Board of Directors of the Company, whose good
faith determination will be conclusive and (3) subject to the foregoing, the
amount of any Restricted Payment, if other than cash, will be determined by the
Board of Directors of the Company, whose good faith determination will be
conclusive.
If the aggregate amount of all Restricted Payments calculated under the
foregoing provision includes an Investment in an Unrestricted Subsidiary or
other person that thereafter becomes a Restricted Subsidiary, such Investment
will no longer be counted as a Restricted Payment for purposes of calculating
the aggregate amount of Restricted Payments.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise), to the extent such net reduction is not included in
Consolidated Adjusted Net Income; provided that the total amount by which the
aggregate amount of all Restricted Payments may be reduced may not exceed the
lesser of (x) the cash proceeds received by the Company and any of its
Restricted Subsidiaries in connection with such net reduction and (y) the
initial amount of such Investment.
In computing Consolidated Adjusted Net Income for purposes of the foregoing
clause (3)(A), (1) the Company may use audited financial statements for the
portions of the relevant period for which audited financial statements are
available on the date of determination and unaudited financial statements and
other current financial data based on the books and records of the Company for
the remaining portion of such
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period and (2) the Company will be permitted to rely in good faith on the
financial statements and other financial data derived from the books and records
of the Company that are available on the date of determination. If the Company
makes a Restricted Payment that, at the time of the making of such Restricted
Payment, would in the good faith determination of the Company be permitted under
the requirements of the Indenture, such Restricted Payment will be deemed to
have been made in compliance with the Indenture notwithstanding any subsequent
adjustments made in good faith to the Company's financial statements affecting
Consolidated Adjusted Net Income of the Company for any period.
PURCHASE OF NOTES UPON A CHANGE OF CONTROL. If a Change of Control occurs
at any time, then each holder of Notes will have the right to require that the
Company purchase such holder's Notes, in whole or in part in integral multiples
of $1,000, at a purchase price in cash equal to 101% of the principal amount of
such Notes, plus accrued and unpaid interest, if any, to the date of purchase,
pursuant to the offer described below (the "Change of Control Offer") and the
other procedures set forth in the Indenture.
Within 30 days following any Change of Control, the Company will notify the
Trustee thereof and give written notice of such Change of Control to each holder
of Notes by first-class mail, postage prepaid, at its address appearing in the
security register, stating, among other things, (1) the purchase price and the
purchase date, which will be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed or such later date as is
necessary to comply with requirements under the Exchange Act; (2) that any Notes
not tendered will continue to accrue interest; (3) that, unless the Company
defaults in the payment of the purchase price, any Notes accepted for payment
pursuant to the Change of Control Offer will cease to accrue interest after the
Change of Control purchase date; and (4) certain other procedures that a holder
of Notes must follow to accept a Change of Control Offer or to withdraw such
acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes that might be tendered by holders of the Notes seeking to accept
the Change of Control Offer. The Credit Facility prohibits the purchase of Notes
by the Company prior to full repayment of indebtedness under the Credit Facility
and, upon a Change of Control, all amounts outstanding under the Credit Facility
become due and payable. There can be no assurance that in the event of a Change
of Control the Company will be able to obtain the necessary consents from the
lenders under the Credit Facility to consummate a Change of Control Offer. The
failure of the Company to make or consummate the Change of Control Offer or pay
the applicable Change of Control purchase price when due would result in an
Event of Default and would give the Trustee and the holders of the Notes the
rights described under "Events of Default."
In addition to the obligations of the Company under the Indenture with
respect to the Notes in the event of a Change of Control, the Credit Facility
contains a provision designating a change of control as described therein as an
event of default, which would obligate the Company to repay amounts outstanding
under the Credit Facility upon an acceleration of the indebtedness outstanding
thereunder.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction that constitutes a Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Notes the right to
require the Company to repurchase such Notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Company (including, in certain circumstances, an
acquisition of the Company by management or its affiliates) that may adversely
affect holders of the Notes, if such transaction is not a transaction defined as
a Change of Control. See "Certain Definitions" above for the definition of
"Change of Control." A transaction involving the Company's management or its
affiliates, or a transaction involving a recapitalization of the Company, would
result in a Change of Control if it is the type of transaction specified in such
definition.
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The Company will comply with the applicable tender offer rules including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change of Control Offer.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create any restriction (other than restrictions existing under
Debt as in effect on the Closing Date or in refinancings or replacements of such
Debt) that would materially impair the ability of the Company to make a Change
of Control Offer to purchase the Notes or, if such Change of Control Offer is
made, to pay for the Notes tendered for purchase.
LIMITATION ON CERTAIN ASSET SALES. (a) The Company will not, and will not
permit any of its Restricted Subsidiaries to, engage in any Asset Sale unless
(1) the consideration received by the Company or such Restricted Subsidiary for
such Asset Sale is not less than the fair market value of the assets sold (as
determined by the Board of Directors of the Company, whose good faith
determination will be conclusive) and (2) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 80% (A) cash or cash equivalents and/or (B) the assumption
by the transferee of Debt of the Company or a Restricted Subsidiary ranked
senior to or pari passu with the Notes and release of the Company or such
Restricted Subsidiary from all liability on such Debt.
(b) If the Company or any of its Restricted Subsidiaries engages in an
Asset Sale, the Company may, at its option, within 12 months after such Asset
Sale, (1) apply all or a portion of such Net Cash Proceeds to the permanent
reduction of amounts outstanding under the Credit Facility or to the repayment
of other Senior Debt of the Company or a Subsidiary Notes Guarantor or (2)
invest (or enter into one or more legally binding agreements to invest) all or a
portion of such Net Cash Proceeds in properties and assets to replace the
properties and assets that were the subject of the Asset Sale or in properties
and assets that will be used in the broadcast business or businesses reasonably
related thereto. If any such legally binding agreement to invest such Net Cash
Proceeds is terminated, the Company may, within 90 days of such termination or
within 12 months of such Asset Sale, whichever is later, invest such Net Cash
Proceeds as provided in clause (1) or (2) (without regard to the parenthetical
contained in such clause (2)) above. The amount of such Net Cash Proceeds not so
used as set forth above in this paragraph (b) constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $5,000,000, the
Company will, within 30 days thereafter, make an offer to purchase from all
holders of Notes, on a pro rata basis, in accordance with the procedures set
forth in the Indenture, the maximum principal amount (expressed as a multiple of
$1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase
price in cash equal to 100% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date such offer to purchase is consummated. To
the extent that the aggregate principal amount of the Notes tendered pursuant to
such offer to purchase is less than the Excess Proceeds, the Company may use
such deficiency for general corporate purposes. If the aggregate principal
amount of the Notes validly tendered and not withdrawn by holders thereof
exceeds the Excess Proceeds, the Notes to be purchased will be selected on a pro
rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds will be reset to zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act to the extent applicable in connection with the repurchase of Notes
pursuant to an offer to purchase Notes.
LIMITATION ON ASSET SWAPS. The Company will not, and will not permit any
of its Restricted Subsidiaries to, engage in any Asset Swap, unless:
(a) at the time of entering into the Asset Swap and immediately after
giving effect to the proposed Asset Swap, no Default or Event of Default
has occurred and is continuing or would occur as a consequence thereof,
(b) the Company would, at the time of entering into the Asset Swap and
after giving pro forma effect to the proposed Asset Swap, as if such Asset
Swap had occurred at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Debt (other than
Permitted Debt) pursuant to the first paragraph of the "Limitation on Debt"
covenant,
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(c) the respective aggregate fair market values of the assets being
purchased and sold by the Company or any of its Restricted Subsidiaries are
substantially the same at the time of entering into the Asset Swap (or any
difference in such aggregate fair market values is substantially
compensated for by an equalizing (1) payment of cash, (2) assumption of
liabilities or (3) taking of assets subject to liabilities), and
(d) at the time of the consummation of the first to occur of the
relinquishment or the replacement of assets constituting part of the
proposed Asset Swap, the percentage of any decline in the fair market value
of the asset or assets being acquired by the Company and its Restricted
Subsidiaries shall not be significantly greater than the percentage of any
decline in the fair market value of the assets being disposed of by the
Company, calculated from the time the last agreement constituting part of
the Asset Swap was entered into.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into or suffer to exist any transaction with, or for the benefit of, any
Affiliate of the Company unless (a) such transaction is on terms that are no
less favorable to the Company or such Restricted Subsidiary, as the case may be,
than those that could have been obtained in an arm's length transaction with
third parties who are not Affiliates and (b) either (1) with respect to any
transaction or series of transactions involving aggregate payments in excess of
$1,000,000, but less than $5,000,000, the Company delivers an officers'
certificate to the Trustee certifying that such transaction or transactions
comply with clause (a) above or (2) with respect to a transaction or series of
transactions involving aggregate payments equal to or greater than $5,000,000,
such transaction or transactions have been approved by the Board of Directors
(including a majority of the Disinterested Directors) of the Company or the
Company has obtained a written opinion from a nationally recognized investment
banking firm to the effect that such transaction or transactions are fair to the
Company or such Restricted Subsidiary from a financial point of view.
The foregoing covenant does not restrict any of the following:
(A) Transactions among the Company and/or any of its Restricted
Subsidiaries.
(B) The Company from paying reasonable and customary regular
compensation, fees, indemnification and similar arrangements and payments
thereunder to directors of the Company or any of its Restricted
Subsidiaries who are not employees of the Company or any of its Restricted
Subsidiaries.
(C) Employment agreements or compensation or employee benefits
arrangements with any officer, director or employee of the Company or its
Restricted Subsidiaries entered into in the ordinary course of business
(including customary benefits thereunder) (it being understood that
benefits of the nature in place as of the Closing Date shall be deemed
permissible hereunder).
(D) The performance of the Company's obligations under (a) that
certain lease agreement effective December 29, 1995 with Wilson Aviation,
L.L.C. relating to the lease of an airplane, (b) that certain agreement not
to compete dated December 31, 1996 with DVS Management, Inc. and (c) that
certain Voting Trust Agreement dated March 17, 1997 among Citadel
Communications, ABRY II, ABRY/CIP and others and the related letter
agreement dated March 17, 1997 among Citadel Communications, ABRY II,
ABRY/CIP and others (the "Affiliate Agreements"); provided that any
amendments or modifications to the terms of the Affiliate Agreements (1)
are no less favorable to the Company than those that could have been
obtained in an arm's length transaction with third parties who are not
Affiliates and (2) are approved by the Board of Directors (including a
majority of the Disinterested Directors) of the Company.
(E) The Company from making payments to Citadel Communications to pay
its operating and administrative expenses attributable to the Company
including, without limitation, legal and audit expenses, directors' fees
and Commission compliance expenses, in an amount not to exceed the greater
of $1,000,000 million per fiscal year and 1% of the net revenues of the
Company for the preceding fiscal year.
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(F) The Company or a Restricted Subsidiary from transferring up to
$500,000 of properties and assets, including cash, to a joint venture in
which the Company or a Restricted Subsidiary has an equity interest and in
which one or more directors or officers of the Company or Citadel
Communications has an equity interest, which joint venture is engaged in
the internet service provider business.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any of its Restricted Subsidiaries to (a) pay dividends, in
cash or otherwise, or make any other distributions on or in respect of its
Capital Stock, (b) pay any Debt owed to the Company or any other Restricted
Subsidiary, (c) make loans or advances to the Company or any other Restricted
Subsidiary or (d) transfer any of its properties or assets to the Company or any
other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of any of the following:
(1) The Credit Facility and any agreement in effect on the Closing
Date and listed on a schedule attached to the Indenture.
(2) Customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any of its Restricted Subsidiaries.
(3) The refinancing or successive refinancings of Debt referred to in
clause (1) or (4), so long as such encumbrances or restrictions are no less
favorable to the Company or any of its Restricted Subsidiaries than those
contained in such original agreement.
(4) Any agreement or other instrument of a person acquired by the
Company or any of its Restricted Subsidiaries in existence at the time of
such acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any person, or the
properties or assets of any person, other than the person, or the property
or assets of the person, so acquired.
(5) Any agreement providing for the incurrence of Debt by a Restricted
Subsidiary pursuant to paragraph (b) of the "Limitation on Debt" covenant,
provided that such Restricted Subsidiary becomes a Subsidiary Notes
Guarantor.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company will not sell, and will not permit any of its
Restricted Subsidiaries, directly or indirectly, to issue or sell, any shares of
Capital Stock of a Restricted Subsidiary (including options, warrants, or other
rights to purchase shares of such Capital Stock) except (1) to the Company or a
Wholly Owned Restricted Subsidiary, (2) issuances or sales to foreign nationals
of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent
required by applicable law, or issuances or sales to directors of directors'
qualifying shares, (3) if, immediately after giving effect to such issuance or
sale, neither the Company nor any Subsidiary owns any shares of Capital Stock of
such Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) or (4) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary and any Investment in such person remaining
after giving effect to such issuance or sale would have been permitted to be
made under the "Limitation on Restricted Payments" covenant if made on the date
of such issuance or sale.
In addition, the Company will not, and will not permit any of its
Restricted Subsidiaries to, sell, transfer or otherwise dispose of any of its
properties or assets to an Unrestricted Subsidiary other than in the ordinary
course of business.
UNRESTRICTED SUBSIDIARIES. (a) The Board of Directors of the Company may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary so long as
(1) neither the Company nor any of its Restricted Subsidiaries is
directly or indirectly liable for any Debt of such Subsidiary,
(2) no default with respect to any Debt of such Subsidiary would
permit (upon notice, lapse of time or otherwise) any holder of any other
Debt of the Company or any of its Restricted Subsidiaries to
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declare a default on such other Debt or cause the payment thereof to be
accelerated or payable prior to its stated maturity,
(3) any Investment in such Subsidiary made as a result of designating
such Subsidiary an Unrestricted Subsidiary will not violate the provisions
of the "Limitation on Restricted Payments" covenant,
(4) neither the Company nor any of its Restricted Subsidiaries has a
contract, agreement, arrangement, understanding or obligation of any kind,
whether written or oral, with such Subsidiary other than those that might
be obtained at the time from persons who are not Affiliates of the Company,
and
(5) neither the Company nor any of its Restricted Subsidiaries has any
obligation to subscribe for additional shares of Capital Stock or other
equity interest in such Subsidiary, or to maintain or preserve such
Subsidiary's financial condition or to cause such Subsidiary to achieve
certain levels of operating results.
Notwithstanding the foregoing, the Company may not designate the License
Subsidiary, or any Subsidiary to which any properties or assets (other than
current assets) owned by the Company or the License Subsidiary on the Closing
Date have been transferred, as an Unrestricted Subsidiary.
(b) The Board of Directors of the Company may designate any of its
Unrestricted Subsidiaries as a Restricted Subsidiary; provided that such
designation will be deemed to be an incurrence of Debt by a Restricted
Subsidiary of any outstanding Debt of such Unrestricted Subsidiary and such
designation will only be permitted if (1) such Debt is permitted under the
"Limitation on Debt" covenant and (2) no Default or Event of Default will have
occurred and be continuing following such designation.
LIMITATION ON OTHER SENIOR SUBORDINATED DEBT. The Company and each
Subsidiary Notes Guarantor will not, directly or indirectly, incur or otherwise
permit to exist any Debt that is subordinate in right of payment to any Debt of
the Company or such Subsidiary Notes Guarantor, as the case may be, unless such
Debt is also pari passu with the Notes or the Subsidiary Notes Guarantee of the
Notes by such Subsidiary Notes Guarantor, as the case may be, or subordinate in
right of payment to the Notes or such Subsidiary Notes Guarantee of the Notes,
as the case may be, to at least the same extent as the Notes or such Subsidiary
Notes Guarantee are subordinate in right of payment to Senior Debt or all senior
debt of the Subsidiary Notes Guarantors, as the case may be, as set forth in the
Indenture.
SUBSIDIARY NOTES GUARANTEES. The Subsidiary Notes Guarantors will, jointly
and severally, unconditionally guarantee the due and punctual payment of the
principal of, premium, if any, and interest on the Notes on a senior
subordinated basis pursuant to the Subsidiary Notes Guarantees as described
under "--Subordination." The Subsidiary Notes Guarantors may be released from
their obligations under the Subsidiary Notes Guarantees as described under
"--Defeasance and Covenant Defeasance of the Indenture" and a Subsidiary Notes
Guarantor may be released from its obligations under its Subsidiary Notes
Guarantee as described under "Guarantees."
The Company will (a) cause each person that, after the Closing Date,
becomes a Wholly Owned Restricted Subsidiary of the Company, as well as each
other Restricted Subsidiary that guarantees any other Debt of the Company, to
execute and deliver a supplemental indenture and thereby become a Subsidiary
Notes Guarantor bound by the Subsidiary Notes Guarantee of the Notes in the form
set forth in the Indenture (without such Subsidiary Notes Guarantor being
required to execute and deliver its Subsidiary Notes Guarantee endorsed on the
Notes) and (b) deliver to the Trustee an opinion of counsel, in form and
substance reasonably satisfactory to the Trustee, that the Subsidiary Notes
Guarantee of such Subsidiary Notes Guarantor is a valid and legally binding
obligation of such Subsidiary Notes Guarantor.
GUARANTEES OF DEBT BY RESTRICTED SUBSIDIARIES. The Company will not permit
any of its Restricted Subsidiaries that is not a Subsidiary Notes Guarantor,
directly or indirectly, to guarantee, assume or in any other manner become
liable for the payment of any Debt of the Company or any Debt of any other
Restricted Subsidiary, unless (a) such Restricted Subsidiary simultaneously
executes and delivers a Subsidiary Notes
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Guarantee and (b) with respect to any guarantee of Subordinated Debt by a
Restricted Subsidiary, any such guarantee is subordinated to such Restricted
Subsidiary's Subsidiary Notes Guarantee at least to the same extent as such
Subordinated Debt is subordinated to the Notes, provided that the foregoing
provision will not be applicable to any guarantee by any such Restricted
Subsidiary that existed at the time such person became a Restricted Subsidiary
and was not incurred in connection with, or in contemplation of, such person
becoming a Restricted Subsidiary.
LIMITATION ON LIENS. The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, affirm or suffer to exist any Lien of
any kind securing any Pari Passu Debt or Subordinated Debt (including any
assumption, guarantee or other liability with respect thereto by any Restricted
Subsidiary) upon any property or assets (including any intercompany notes) of
the Company or any of its Restricted Subsidiaries now owned or acquired after
the Closing Date, or any income or profits therefrom, unless the Notes are
directly secured equally and ratably with (or prior to in the case of
Subordinated Debt) the obligation or liability secured by such Lien; provided
that the foregoing will not apply to Liens securing Debt of a person acquired by
the Company or any of its Restricted Subsidiaries in existence at the time of
such acquisition (but not created in contemplation thereof), which Lien is not
applicable to any person, or the properties or assets of any person, other than
the person, or the property or assets of the person, so acquired.
REPORTS. At all times from and after the earlier of (a) the date of the
commencement of the Exchange Offer or the effectiveness of a shelf registration
statement relating to the Notes (the "Registration") and (b) the date 180 days
after the Closing Date, in either case, whether or not the Company is then
required to file reports with the SEC, the Company will file with the SEC all
such reports and other information as it would be required to file with the SEC
by Sections 13(a) or 15(d) under the Exchange Act if it were subject thereto.
The Company will supply the Trustee and each holder, or will supply to the
Trustee for forwarding to each such holder, without cost to such holder, copies
of such reports and other information. In addition, at all times prior to the
earlier of the date of the Registration and the date 180 days after the Closing
Date, the Company will, at its cost, deliver to each holder of the Notes
quarterly and annual reports substantially equivalent to those that would be
required by the Exchange Act. In addition, at all times prior to the
Registration, upon the request of any holder or any prospective purchaser of the
Notes designated by a holder, the Company will supply to such holder or such
prospective purchaser the information required under Rule 144A under the
Securities Act.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with or merge with or into any other
person or, directly or indirectly, convey, transfer or lease its properties and
assets substantially as an entirety to any person or persons, unless:
(a) Either (1) the Company is the surviving corporation or (2) the
person (if other than the Company) formed by such consolidation or into
which the Company is merged or the person that acquires by sale,
assignment, transfer, lease or other disposition the properties and assets
of the Company substantially as an entirety (the "Surviving Entity") (A) is
a corporation, partnership or trust organized and validly existing under
the laws of the United States, any state thereof or the District of
Columbia and (B) expressly assumes, by a supplemental indenture in form
satisfactory to the Trustee, all of the Company's obligations under the
Indenture and the Notes.
(b) Immediately after giving effect to such transaction and treating
any obligation of the Company or a Restricted Subsidiary in connection with
or as a result of such transaction as having been incurred at the time of
such transaction, no Default or Event of Default has occurred and is
continuing.
(c) Immediately after giving effect to such transaction on a pro forma
basis (on the assumption that the transaction occurred at the beginning of
the most recently ended four full fiscal quarter period for which internal
financial statements are available), the Company (or the Surviving Entity
if the Company is not the continuing obligor under the Indenture) could
incur at least $1.00 of additional Debt (other than Permitted Debt)
pursuant to the first paragraph of the "Limitation on Debt" covenant.
(d) If the Company is not the continuing obligor under the Indenture,
each Subsidiary Notes Guarantor, unless it is the other party to the
transaction described above, has by supplemental indenture
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confirmed that its Subsidiary Notes Guarantee applies to the Surviving
Entity's obligations under the Indenture and the Notes.
(e) If any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of the "Limitation on Liens" covenant are complied with.
(f) The Company delivers, or causes to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the requirements of the Indenture.
In the event of any transaction described in and complying with the
conditions listed in the first paragraph of this covenant in which the Company
is not the continuing obligor under the Indenture, the Surviving Entity will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and thereafter the Company will, except in the
case of a lease, be discharged from all its obligations and covenants under the
Indenture and Notes.
EVENTS OF DEFAULT
Each of the following will be "Events of Default" under the Indenture:
(a) Default in the payment of any interest on any Note when it becomes
due and payable, and continuance of such default for a period of 30 days.
(b) Default in the payment of the principal of (or premium, if any,
on) any Note when due.
(c) Failure to perform or comply with the Indenture provisions
described under "Consolidation, Merger and Sale of Assets."
(d) Default in the performance, or breach, of any covenant or
agreement of the Company or any Subsidiary Notes Guarantor contained in the
Indenture or any Subsidiary Notes Guarantee (other than a default in the
performance, or breach, of a covenant or agreement that is specifically
dealt with elsewhere herein), and continuance of such default or breach for
a period of 60 days after written notice has been given to the Company by
the Trustee or to the Company and the Trustee by the holders of at least
25% in aggregate principal amount of the Notes then outstanding.
(e) (1) An event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of Debt of
the Company or any Significant Subsidiary, which issue has an aggregate
outstanding principal amount of not less than $5,000,000, and such default
has resulted in such Debt becoming, whether by declaration or otherwise,
due and payable prior to the date on which it would otherwise become due
and payable or (2) a default in any payment when due at final maturity of
any such Debt.
(f) Failure by the Company or any of its Restricted Subsidiaries to
pay one or more final judgments the uninsured portion of which exceeds in
the aggregate $5,000,000, which judgment or judgments are not paid,
discharged or stayed for a period of 60 days.
(g) Any Subsidiary Notes Guarantee ceases to be in full force and
effect or is declared null and void or any Subsidiary Notes Guarantor
denies that it has any further liability under any Subsidiary Notes
Guarantee, or gives notice to such effect (other than by reason of the
termination of the Indenture or the release of any Subsidiary Notes
Guarantee in accordance with the Indenture), and such condition has
continued for a period of 30 days after written notice of such failure
requiring the Subsidiary Notes Guarantor and the Company to remedy the same
has been given (1) to the Company by the Trustee or (2) to the Company and
the Trustee by the holders of 25% in the aggregate principal amount of the
Notes then outstanding.
(h) The occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
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If an Event of Default (other than as specified in clause (h) above) occurs
and is continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee at the
request of such holders shall, declare the principal of all of the outstanding
Notes immediately due and payable, by a notice in writing to the Company (and to
the Trustee if given by the Holders) and, if the Credit Facility is in effect,
to the Credit Facility Agent, and, upon any such declaration, such principal
will become due and payable immediately. If an Event of Default specified in
clause (h) above occurs and is continuing, then such principal will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holder of Notes.
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration and its consequences if (1) the Company has paid or deposited
with the Trustee a sum sufficient to pay (A) all overdue interest on all Notes,
(B) all unpaid principal of (and premium, if any, on) any outstanding Notes that
has become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Notes, (C) to the extent that payment of such
interest is lawful, interest upon overdue interest and overdue principal amount
at the rate borne by the Notes and (D) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; and (2) all Events of Default,
other than the non-payment of principal of (or premium, if any, on) or interest
on the Notes that have become due solely by such declaration of acceleration,
have been cured or waived. No such rescission will affect any subsequent default
or impair any right consequent thereon.
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may, on behalf of the holders of all of the Notes, waive
any past defaults under the Indenture, except a default in the payment of the
principal of (and premium, if any) or interest on any Note, or in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee will mail to each holder of the Notes notice of the
Default or Event of Default within 90 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of (and
premium, if any, on) or interest on any Notes, the Trustee may withhold the
notice to the holders of the Notes if a committee of its trust officers in good
faith determines that withholding such notice is in the interests of the holders
of the Notes.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and the Subsidiary Notes Guarantors of their
respective obligations under the Indenture and as to any default in such
performance. The Company is also required to notify the Trustee within five days
of any officer of the Company having knowledge of any Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations
of the Company and any Subsidiary Notes Guarantors with respect to the
outstanding Notes ("defeasance"). Such defeasance means that the Company will be
deemed to have paid and discharged the entire Debt represented by the
outstanding Notes, except for
(a) the rights of holders of outstanding Notes to receive payments in
respect of the principal of (and premium, if any, on) and interest on such
Notes when such payments are due,
(b) the Company's obligations to issue temporary Notes, register the
transfer or exchange of any Notes, replace mutilated, destroyed, lost or
stolen Notes, maintain an office or agency for payments in respect of the
Notes and segregate and hold such payments in trust,
(c) the rights, powers, trusts, duties and immunities of the Trustee,
and
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(d) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to
terminate the obligations of the Company and any Subsidiary Notes Guarantor with
respect to certain covenants set forth in the Indenture and described under
"Certain Covenants" above, and any omission to comply with such obligations
would not constitute a Default or an Event of Default with respect to the Notes
("covenant defeasance").
In order to exercise either defeasance or covenant defeasance,
(a) the Company must irrevocably deposit or cause to be deposited with
the Trustee, as trust funds in trust, specifically pledged as security for,
and dedicated solely to, the benefit of the holders of the Notes, money in
an amount, or U.S. government securities that through the scheduled payment
of principal and interest thereon will provide money in an amount, or a
combination thereof, sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay and discharge the principal
of (and premium, if any, on) and interest on the outstanding Notes at
maturity (or upon redemption, if applicable) of such principal or
installment of interest,
(b) no Default or Event of Default has occurred and is continuing on
the date of such deposit or, insofar as an event of bankruptcy under clause
(h) of "Events of Default" above is concerned, at any time during the
period ending on the 91st day after the date of such deposit,
(c) such defeasance or covenant defeasance must not result in a breach
or violation of, or constitute a default under, the Indenture or any
material agreement or instrument to which the Company or any Subsidiary
Notes Guarantor is a party or by which it is bound or cause the Trustee or
the trust so created to be subject to the Investment Company Act of 1940,
as amended,
(d) in the case of defeasance, the Company must deliver to the Trustee
an opinion of counsel stating that the Company has received from, or there
has been published by, the Internal Revenue Service a ruling, or since the
date hereof, there has been a change in applicable federal income tax law,
to the effect, and based thereon such opinion must confirm that, the
holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance had not
occurred,
(e) in the case of covenant defeasance, the Company must have
delivered to the Trustee an opinion of counsel to the effect that the
holders of the Notes outstanding will not recognize income, gain or loss
for federal income tax purposes as a result of such covenant defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred, and
(f) the Company must have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) and, upon the request of the Company, the
Trustee, at the expense of the Company, will execute proper instruments
acknowledging satisfaction and discharge of the Indenture when (a) either (1)
all the Notes theretofore authenticated and delivered (other than destroyed,
lost or stolen Notes that have been replaced or paid and Notes that have been
subject to defeasance as described under "Defeasance or Covenant Defeasance of
Indenture") have been delivered to the Trustee for cancellation or (2) all Notes
not theretofore delivered to the Trustee for cancellation (A) have become due
and payable, (B) will become due and payable at Stated Maturity within one year
or (C) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in trust
for the purpose in an amount
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sufficient to pay and discharge the entire Debt on such Notes not theretofore
delivered to the Trustee for cancellation, for principal (and premium, if any,
on) and interest to the date of such deposit (in the case of Notes that have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be; (b) the Company has paid or caused to be paid all sums payable
under the Indenture by the Company; and (c) the Company has delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating that
all conditions precedent provided in the Indenture relating to the satisfaction
and discharge of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture and any Subsidiary Notes
Guarantee may be made by the Company, any affected Subsidiary Notes Guarantor
and the Trustee with the consent of the holders of a majority in aggregate
outstanding principal amount of the Notes; provided, however, that no such
modification or amendment may, without the consent of the holder of each
outstanding Note affected thereby,
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where or change the coin or
currency in which, any Note or any premium or interest thereon is payable,
or impair the right to institute suit for the enforcement of any such
payment after the Stated Maturity thereof (or, in the case of redemption,
on or after the Redemption Date),
(b) reduce the percentage in principal amount of outstanding Notes,
the consent of whose holders is required for any such amendment or for any
waiver of compliance with certain provisions of, or certain defaults and
their consequences provided for under, the Indenture,
(c) modify any of the provisions of the Indenture relating to the
subordination of the Notes or the Subsidiary Notes Guarantees in a manner
materially adverse to the holders, or
(d) waive a default in the payment of principal of, or premium, if
any, or interest on the Notes or reduce the percentage or aggregate
principal amount of outstanding Notes the consent of whose holders is
necessary for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults.
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
Without the consent of any holders, the Company and the Trustee, at any
time and from time to time, may enter into one or more indentures supplemental
to the Indenture for any of the following purposes:
(a) to evidence the succession of another person to the Company and
the assumption by any such successor of the covenants of the Company in the
Indenture and in the Notes, or
(b) to add to the covenants of the Company for the benefit of the
holders, or to surrender any right or power herein conferred upon the
Company, or
(c) to add additional Events of Default, or
(d) to provide for uncertificated Notes in addition to or in place of
the certificated Notes, or
(e) to evidence and provide for the acceptance of appointment under
the Indenture by a successor Trustee; or
(f) to secure the Notes; or
(g) to cure any ambiguity, to correct or supplement any provision in
the Indenture that may be defective or inconsistent with any other
provision in the Indenture, or to make any other provisions with respect to
matters or questions arising under the Indenture, provided that such
actions pursuant to this clause do not adversely affect the interests of
the holders in any material respect; or
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(h) to comply with any requirements of the Commission in order to
effect and maintain the qualification of the Indenture under the Trust
Indenture Act.
THE TRUSTEE
The Bank of New York, the Trustee under the Indenture, is the initial
paying agent and registrar for the Notes. The Bank of New York is a lender under
the Credit Facility.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. Under the Indenture, the holders of a majority in outstanding
principal amount of the Notes will have the right to direct the time, method and
place of conducting any proceeding or exercising any remedy available to the
Trustee, subject to certain exceptions. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein, contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that, if it acquires any conflicting
interest (as defined), it must eliminate such conflict or else resign.
GOVERNING LAW
The Indenture, the Notes and the Subsidiary Notes Guarantees are governed
by, and construed in accordance with, the laws of the State of New York.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain U.S. federal income tax consequences
associated with the acquisition, ownership and disposition of the Notes by
holders who hold such Notes as capital assets. The following summary does not
discuss all of the aspects of federal income taxation that may be relevant to a
holder of the Notes in light of his or her particular circumstances, or to
certain types of holders (including dealers in securities, insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, S
corporations, and except as discussed below, foreign corporations, persons who
are not citizens or residents of the United States and persons who hold the
Notes as part of a hedge, straddle, "synthetic security" or other integrated
investment) which are subject to special treatment under the federal income tax
laws. This discussion also does not address the tax consequences to nonresident
aliens or foreign corporations that are subject to United States federal income
tax on a net basis on income with respect to a Note because such income is
effectively connected with the conduct of a U.S. trade or business. Such holders
generally are taxed in a similar manner to U.S. Holders (as defined below);
however, certain special rules may apply. In addition, this discussion is
limited to holders who hold the Notes as capital assets within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This
summary also does not describe any tax consequences under state, local or
foreign tax laws.
The discussion is based upon the Code, Treasury Regulations, IRS rulings
and pronouncements and judicial decisions all in effect as of the date hereof,
all of which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively in a manner
that could adversely affect a holder of the Notes. The Company has not sought
and will not seek any rulings or opinions from the IRS or counsel with respect
to the matters discussed below. There can be no assurance that the IRS will not
take positions concerning the tax consequences of the purchase, ownership or
disposition of the Notes that are different from those discussed herein.
HOLDERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
U.S. FEDERAL INCOME TAX CONSEQUENCES THAT MAY APPLY TO THEM, AS WELL AS THE
APPLICATION OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
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THE EXCHANGE OFFER
The exchange of the new notes for outstanding notes pursuant to the
Exchange Offer will not be treated as an "exchange" for U.S. federal income tax
purposes because the new notes will not be considered to differ materially in
kind or extent from the outstanding notes. Rather, the new notes received by a
holder will be treated as a continuation of the outstanding notes in the hands
of such holder. Therefore, the same U.S. federal income tax consequences apply
to the new notes as are applicable to the outstanding notes; and a holder should
have the same adjusted tax basis and holding period in the new notes as the
holder had in the outstanding notes immediately before the exchange.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
A U.S. Holder is any holder who or which is (1) a citizen or individual
resident of the United States for U.S. federal income tax purposes; (2) a
corporation, partnership or other business entity created or organized under the
laws of the United States or of any political subdivision thereof; (3) an estate
other than a "foreign estate" as defined in Section 7701(a)(31) of the Code; or
(4) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust.
Taxation of Stated Interest. In general, U.S. Holders of the Notes will be
required to include interest received thereon in taxable income as ordinary
income at the time it accrues or is received, in accordance with the holder's
regular method of accounting for U.S. federal income tax purposes.
Effect of Optional Redemption, Repurchase and Registration Rights. Under
certain circumstances the Company may be entitled to redeem a portion of the
Notes. In addition, under certain circumstances, each holder of Notes may
require the Company to repurchase all or any part of such holder's Notes.
Further, the outstanding notes provide for additional interest if the Company
fails to comply with certain obligations under the registration rights agreement
entered into in connection with the Original Offering. Treasury Regulations
contain special rules for determining the yield to maturity and maturity on a
debt instrument in the event the debt instrument provides for a contingency that
could result in the acceleration or deferral of one or more payments or in
additional interest. The Company does not believe that these rules are likely to
apply to either the Company's rights to redeem the Notes or to the holders'
rights to require the Company to repurchase the Notes or to the provision for
additional interest upon such failure. Therefore, the Company does not intend to
treat such provisions of the Notes as affecting the computation of the yield to
maturity or maturity date of the Notes.
Sale or other Taxable Disposition of the Notes. The sale, exchange (other
than pursuant to the Exchange Offer), redemption, retirement or other taxable
disposition of a Note will result in the recognition of gain or loss to a U.S.
Holder in an amount equal to the difference between (a) the amount of cash and
fair market value of property received in exchange therefor (except to the
extent attributable to the payment of accrued but unpaid stated interest not
previously included in income) and (b) the holder's adjusted tax basis in such
Note.
A holder's initial tax basis in a Note purchased by such holder will be
equal to the price paid for the Note.
Any gain or loss on the sale or other taxable disposition of a Note
generally will be capital gain or loss. Payments on such disposition for accrued
interest not previously included in income will be treated as ordinary interest
income.
Backup Withholding. The backup withholding rules require a payor to deduct
and withhold a tax if (1) the payee fails to furnish a taxpayer identification
number ("TIN") in the prescribed manner, (2) the IRS notifies the payor that the
TIN furnished by the payee is incorrect, (3) the payee has failed to report
properly the receipt of "reportable payments" and the IRS has notified the payor
that withholding is required, or (4) the payee fails to certify under the
penalty of perjury that such payee is not subject to backup withholding. If any
one of the events discussed above occurs with respect to a holder of Notes, the
Company, its paying agent or other withholding agent will be required to
withhold a tax equal to 31% of any
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"reportable payment" made in connection with the Notes of such holder. A
"reportable payment" includes, among other things, amounts paid in respect of
interest on a Note. Any amounts withheld from a payment to a holder under the
backup withholding rules will be allowed as a refund or credit against such
holder's federal income tax, provided that the required information is furnished
to the IRS. Certain holders (including, among others, corporations and certain
tax-exempt organizations) are not subject to backup withholding.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS
This section discusses rules applicable to a Non-U.S. Holder (as defined
below) of Notes. This summary does not address the tax consequences to
stockholders, partners or beneficiaries in a Non-U.S. Holder. For purposes
hereof, a "Non-U.S. Holder" is any person who is not a U.S. Holder and is not
subject to U.S. federal income tax on a net basis on income with respect to a
Note because such income is effectively connected with the conduct of a U.S.
trade or business.
Interest. Payments of interest to a Non-U.S. Holder that do not qualify for
the portfolio interest exception discussed below will be subject to withholding
of U.S. federal income tax at a rate of 30% unless a U.S. income tax treaty
applies to reduce, or eliminate, the rate of withholding. To claim a treaty
reduced rate, the Non-U.S. Holder must provide a properly executed IRS Form 1001
or applicable successor form.
Subject to the discussion below concerning backup withholding, interest
that is paid to a Non-U.S. Holder on a Note will not be subject to U.S. income
or withholding tax if the interest qualifies as "portfolio interest." Generally,
interest on the Notes that is paid by the Company will qualify as a portfolio
interest if (1) the Non-U.S. Holder does not own, actually or constructively,
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote; (2) the Non-U.S. Holder is not a controlled foreign
corporation that is related to the Company actually or constructively through
stock ownership for U.S. federal income tax purposes; (3) the Non-U.S. Holder is
not a bank receiving interest on a loan entered into in the ordinary course of
business; and (4) either (a) the beneficial owner of the Note provides the
Company or its paying agent with a properly executed certification on IRS Form
W-8 (or a suitable substitute form), signed under penalties of perjury, that the
beneficial owner is not a "U.S. person" for U.S. federal income tax purposes and
that provides the beneficial owner's name and address, or (b) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its business holds the Note and certifies
to the Company or its agent under penalties of perjury that the IRS Form W-8 (or
a suitable substitute) has been received by it from the beneficial owner of the
Note or a qualifying intermediary and furnishes the payor a copy thereof.
Treasury regulations that will be effective with respect to payments made
after December 31, 1999 (the "Withholding Regulations") provide alternative
methods for satisfying the certification requirements described in clause (4)
above. The Withholding Regulations also will require, in the case of Notes held
by a foreign partnership, that (a) the certification described in clause (4)
above be provided by each partner and (b) the partnership provide certain
information, including its taxpayer identification number. A look-through rule
will apply in the case of tiered partnerships.
Sale, Exchange or Retirement of Notes. Any gain realized by a Non-U.S.
Holder on the sale, exchange or retirement of the Notes, will generally not be
subject to U.S. federal income tax or withholding unless (1) the Non-U.S. Holder
is an individual who was present in the U.S. for 183 days or more in the taxable
year of the disposition and meets certain other requirements; or (2) the
Non-U.S. Holder is subject to tax pursuant to certain provisions of the Code
applicable to certain individuals who renounce their U.S. citizenship or
terminate long-term U.S. residency. If a Non-U.S. Holder falls under (2) above,
the holder will be taxed on the net gain derived from the sale under the
graduated U.S. federal income tax rates that are applicable to U.S. citizens and
resident aliens, and may be subject to withholding under certain circumstances.
If a Non-U.S. Holder falls under (1) above, the holder generally will be subject
to U.S. federal income tax at a rate of 30% (or reduced treaty rate) on the gain
derived from the sale and may be subject to withholding in certain
circumstances.
U.S. Information Reporting and Backup Withholding Tax. Back-up withholding
generally will not apply to payments on a Note issued in registered form that is
beneficially owned by a Non-U.S. Holder if the
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certification of Non-U.S. Holder status is provided to the Company or its agent
as described above in "Certain U.S. Federal Income Tax Consequences for Non-U.S.
Holders--Interest," provided that the payor does not have actual knowledge that
the holder is a U.S. person. The Company may be required to report annually to
the IRS and to each Non-U.S. Holder the amount of interest paid to, and the tax
withheld, if any, with respect to each Non-U.S. Holder.
If payments of principal and interest are made to the beneficial owner of a
Note by or through the foreign office of a custodian, nominee or other agent of
such beneficial owner, or if the proceeds of the sale, exchange or other
disposition of a Note are paid to the beneficial owner of a Note through a
foreign office of a "broker" (as defined in the pertinent Regulations), the
proceeds will not be subject to backup withholding (absent actual knowledge that
the payee is a U.S. person). Information reporting (but not backup withholding)
will apply, however, to a payment by a foreign office of a custodian, nominee,
agent or broker that is (1) a U.S. person, (2) a controlled foreign corporation
for U.S. federal income tax purposes, or (3) a foreign person that derives 50%
or more of its gross income from the conduct of a U.S. trade or business for a
specified three-year period or (effective for payments after December 31, 1999)
by a foreign partnership with certain U.S. connections, unless the broker has in
its records documentary evidence that the holder is a Non-U.S. Holder and
certain conditions are met (including that the broker has no actual knowledge
that the holder is a U.S. person) or the holder otherwise establishes an
exemption. Payment through the U.S. office of a custodian, nominee, agent or
broker is subject to both backup withholding at a rate of 31% and information
reporting, unless the holder certifies that it is a Non-U.S. Holder under
penalties of perjury or otherwise establishes an exemption.
Any amount withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a credit against, or refund of, such holder's
U.S. federal income tax liability, provided that certain information is provided
by the holder to the IRS.
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PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives new notes for its own
account pursuant to the Exchange Offer must deliver a prospectus in connection
with any resale of such new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of new notes received in exchange for outstanding notes
where such outstanding notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 120 days after the date of this prospectus, it will make this
prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, for a
period of 90 days after the date of this prospectus, all dealers effecting
transactions in the new notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of new notes by
Participating Broker-Dealers. New notes received by Participating Broker-Dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the new notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such Participating Broker-Dealer and/or the purchasers of any such new
notes. Any Participating Broker-Dealer that resells the new notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such new notes may be deemed to
be an "underwriter" within the meaning of the Securities Act, and any profit on
any such resale of new notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 120 days after the Expiration Date, the Company will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
LEGAL MATTERS
Certain legal matters with respect to the new notes, including federal
income tax consequences, will be passed upon for the Company by Eckert Seamans
Cherin & Mellott, LLC, Pittsburgh, Pennsylvania.
INDEPENDENT AUDITORS
The consolidated financial statements of Citadel Broadcasting Company as of
December 31, 1996 and 1997, and for each of the years in the three-year period
ended December 31, 1997, have been included in this prospectus in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of Deschutes River Broadcasting, Inc.
and Subsidiaries as of December 31, 1995 and 1996, and for each of the years in
the two-year period ended December 31, 1996, have been included in this
prospectus in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
The consolidated financial statements of Maranatha Broadcasting Company,
Inc.'s Radio Broadcasting Division, as of December 31, 1996, and for the year
then ended, have been included in this prospectus in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
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The consolidated financial statements of Tele-Media Broadcasting Company
and its partnership interests as of December 31, 1995 and 1996 and for each of
the years in the three-year period ended December 31, 1996 included in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein, and have been included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The financial statements of Snider Corporation and Snider Broadcasting
Corporation and Subsidiary and CDB Broadcasting Corporation as of December 31,
1995 and 1996 and for each of the years in the two-year period ended December
31, 1996 have been included in this prospectus in reliance upon the reports of
Erwin & Company, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
The combined financial statements of Pacific Northwest Broadcasting
Corporation and Affiliates as of December 31, 1996 and for the year ended
December 31, 1996 have been included in this prospectus in reliance upon the
report of Balukoff, Lindstrom & Co., P.A., independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
The financial statements of Wicks Radio Group (a division of Wicks
Broadcast Group Limited Partnership) as of December 31, 1997 and for the year
then ended have been included in this prospectus in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
AVAILABLE INFORMATION
The Company has filed with the SEC a Registration Statement on Form S-4
(together with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act with respect to the new notes offered
hereby. This prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC, and to which reference is hereby made.
Statements contained in this prospectus as to the contents of any contract,
agreement or any other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to such exhibit to the
Registration Statement for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.
The Company also files annual, quarterly and special reports and other
information with the SEC.
The Registration Statement and any document the Company files with the SEC
can be read and copied at the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of the Registration Statement and
any document the Company files with the SEC can be obtained from the Public
Reference Section of the SEC at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20459, at prescribed rates. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The Company files its reports and has filed the Registration Statement with
the SEC electronically. The SEC maintains a web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. The address of that web site is
http://www.sec.gov.
The Company intends, and is required by the terms of the indenture
governing the notes, to furnish the holders of the new notes with annual reports
containing consolidated financial statements audited by its independent
certified public accountants and with quarterly reports containing unaudited
condensed consolidated financial statements for each of the first three quarters
of each fiscal year.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
Independent Auditors' Report................................ F-4
Consolidated Balance Sheets as of December 31, 1996 and
1997...................................................... F-5
Consolidated Statements of Operations for the years ended
December 31, 1995, 1996 and 1997.......................... F-6
Consolidated Statements of Shareholder's Equity for the
years ended
December 31, 1995, 1996 and 1997.......................... F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997.......................... F-8
Notes to Consolidated Financial Statements.................. F-10
Consolidated Balance Sheets as of December 31, 1997 and
September 30, 1998 (unaudited)............................ F-25
Consolidated Statements of Operations for the nine months
ended September 30, 1997 and 1998 (unaudited)............. F-26
Consolidated Statements of Comprehensive Income for the nine
months ended September 30, 1997 and 1998 (unaudited)...... F-27
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 and 1998 (unaudited)............. F-28
Notes to Unaudited Consolidated Financial Statements........ F-29
DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES
Independent Auditors' Report................................ F-32
Consolidated Balance Sheets as of December 31, 1995 and
1996...................................................... F-33
Consolidated Statements of Operations for the years ended
December 31, 1995 and 1996................................ F-34
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995 and 1996.................... F-35
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1996................................ F-36
Notes to Consolidated Financial Statements.................. F-37
TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP
INTERESTS
Independent Auditors' Report................................ F-45
Consolidated Balance Sheets as of December 31, 1995 and
1996...................................................... F-46
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996.......................... F-47
Consolidated Statements of Deficiency in Net Assets for the
years ended December 31, 1994,
1995 and 1996............................................. F-48
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996.......................... F-49
Notes to Consolidated Financial Statements.................. F-50
Condensed Consolidated Balance Sheet as of June 30, 1997
(unaudited)............................................... F-57
Condensed Consolidated Statements of Operations and Changes
in Deficit for the six months ended June 30, 1996 and 1997
(unaudited)............................................... F-58
Condensed Consolidated Statements of Cash Flows for the six
months ended
June 30, 1996 and 1997 (unaudited)........................ F-59
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ F-60
SNIDER CORPORATION
Independent Auditors' Report................................ F-61
Balance Sheets as of December 31, 1995 and 1996............. F-62
Statements of Income for the years ended December 31, 1995
and 1996.................................................. F-63
Statements of Stockholders' Equity for the years ended
December 31, 1995 and 1996................................ F-64
Statements of Cash Flows for the years ended December 31,
1995 and 1996............................................. F-65
Notes to Financial Statements............................... F-66
</TABLE>
F-1
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<TABLE>
<CAPTION>
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<S> <C>
Schedule of Combining Operating Income, Excluding
Depreciation and Amortization for Broadcasting Units for
the year ended December 31, 1996.......................... F-69
Balance Sheet as of May 31, 1997 (unaudited)................ F-70
Statement of Income for the five months ended May 31, 1997
(unaudited)............................................... F-71
Statement of Stockholders' Equity for the five months ended
May 31, 1997 (unaudited).................................. F-72
Statement of Cash Flows for the five months ended May 31,
1997 (unaudited).......................................... F-73
Note to Financial Statements (unaudited).................... F-74
Balance Sheet as of June 30, 1996 (unaudited)............... F-75
Statement of Income for the six months ended June 30, 1996
(unaudited)............................................... F-76
Statement of Stockholders' Equity for the six months ended
June 30, 1996 (unaudited)................................. F-77
Statement of Cash Flows for the six months ended June 30,
1996 (unaudited).......................................... F-78
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY AND
CDB BROADCASTING CORPORATION
Independent Auditors' Report................................ F-79
Combined Balance Sheets as of December 31, 1995 and 1996.... F-80
Combined Statements of Operations for the years ended
December 31, 1995 and 1996................................ F-81
Combined Statements of Stockholders' Deficit for the years
ended
December 31, 1995 and 1996................................ F-82
Combined Statements of Cash Flows for the years ended
December 31, 1995 and 1996................................ F-83
Notes to Combined Financial Statements...................... F-84
Combined Balance Sheet as of May 31, 1997 (unaudited)....... F-89
Combined Statement of Operations for the five months ended
May 31, 1997 (unaudited).................................. F-90
Combined Statement of Stockholders' Deficit for the five
months ended May 31, 1997 (unaudited)..................... F-91
Combined Statement of Cash Flows for the five months ended
May 31, 1997 (unaudited).................................. F-92
Note to Combined Financial Statements (unaudited)........... F-93
Combined Balance Sheet as of June 30, 1996 (unaudited)...... F-94
Combined Statement of Operations for the six months ended
June 30, 1996 (unaudited)................................. F-95
Combined Statement of Stockholders' Deficit for the six
months ended June 30, 1996 (unaudited).................... F-96
Combined Statement of Cash Flows for the six months ended
June 30, 1996 (unaudited)................................. F-97
MARANATHA BROADCASTING COMPANY, INC.'S RADIO BROADCASTING
DIVISION
Independent Auditors' Report................................ F-98
Balance Sheet as of December 31, 1996 and September 15, 1997
(unaudited)............................................... F-99
Statement of Operations and Division Equity for the year
ended December 31, 1996 and the eight and one-half-month
period ended September 15, 1997 (unaudited)............... F-100
Statement of Cash Flows for the year ended December 31, 1996
and the eight and one-half-month period ended September
15, 1997 (unaudited)...................................... F-101
Notes to Financial Statements............................... F-102
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
Independent Auditors' Report................................ F-105
Combined Balance Sheet as of December 31, 1996.............. F-106
Combined Statement of Operations for the year ended December
31, 1996.................................................. F-107
Combined Statement of Changes in Owners' Equity for the year
ended
December 31, 1996......................................... F-108
Combined Statement of Cash Flows for the year ended December
31, 1996.................................................. F-109
Notes to Combined Financial Statements...................... F-110
</TABLE>
F-2
<PAGE> 135
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Unaudited Combined Balance Sheet as of October 31, 1997..... F-117
Unaudited Combined Statement of Operations for the ten
months ended October 31, 1997............................. F-118
Unaudited Combined Statement of Changes in Owners' Equity
for the ten months ended October 31, 1997................. F-119
Unaudited Combined Statement of Cash Flows for the ten
months ended October 31, 1997............................. F-120
Notes to Unaudited Combined Financial Statements............ F-121
WICKS RADIO GROUP (A DIVISION OF WICKS BROADCAST GROUP
LIMITED PARTNERSHIP)
Independent Auditors' Report................................ F-122
Balance Sheets as of December 31, 1997 and September 30,
1998 (unaudited).......................................... F-123
Statements of Operations and Changes in Division Equity for
the year ended December 31, 1997 and the nine months ended
September 30, 1998 (unaudited)............................ F-124
Statements of Cash Flows for the year ended December 31,
1997 and for the nine months ended September 30, 1998
(unaudited)............................................... F-125
Notes to Financial Statements............................... F-126
</TABLE>
F-3
<PAGE> 136
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
Citadel Broadcasting Company:
We have audited the accompanying consolidated balance sheets of Citadel
Broadcasting Company (a wholly-owned subsidiary of Citadel Communications
Corporation) and subsidiary as of December 31, 1996 and 1997 and the related
consolidated statements of operations, shareholder's equity and cash flows for
each of the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Citadel
Broadcasting Company and subsidiary as of December 31, 1996 and 1997 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
Phoenix, Arizona
March 26, 1998
F-4
<PAGE> 137
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,588,366 $ 7,684,991
Cash held in escrow....................................... -- 718,561
Accounts receivable, less allowance for doubtful accounts
of $621,054 in 1996, and $808,942 in 1997.............. 12,199,973 25,744,137
Notes receivable from related parties..................... 118,646 246,455
Prepaid expenses.......................................... 595,755 1,532,227
------------ ------------
Total current assets................................... 14,502,740 35,926,371
Property and equipment, net................................. 15,208,569 35,242,284
Note receivable............................................. 18,251,402 --
Intangible assets, net...................................... 51,801,835 268,689,516
Deposits for pending acquisitions........................... 300,000 650,000
Other assets................................................ 2,179,039 3,664,123
------------ ------------
$102,243,585 $344,172,294
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,286,019 $ 4,001,194
Accrued liabilities....................................... 2,301,716 9,060,129
Current maturities of notes payable....................... 2,500,000 --
Note payable to parent company............................ 12,174,416 --
Current maturities of other long-term obligations......... 435,791 271,352
------------ ------------
Total current liabilities.............................. 18,697,942 13,332,675
Notes payable, less current maturities...................... 75,084,060 90,084,059
Senior subordinated notes payable........................... -- 98,331,117
Other long-term obligations, less current maturities........ 877,600 1,012,649
Deferred tax liability...................................... 1,585,333 23,270,338
Exchangeable preferred stock................................ -- 102,009,531
Commitments and contingencies
Shareholder's equity:
Common stock, $.001 par value; authorized 136,300 shares,
issued and outstanding 40,000 shares................... 40 40
Additional paid-in capital................................ 27,472,380 42,296,316
Accumulated deficit....................................... (21,473,770) (26,164,431)
------------ ------------
Total shareholder's equity............................. 5,998,650 16,131,925
------------ ------------
$102,243,585 $344,172,294
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 138
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Gross broadcasting revenue............................ $38,047,879 $50,824,384 $ 99,469,550
Less agency commissions............................. 3,936,169 5,411,578 9,666,280
----------- ----------- ------------
Net broadcasting revenue......................... 34,111,710 45,412,806 89,803,270
----------- ----------- ------------
Operating expenses:
Station operating expenses.......................... 26,832,123 33,232,485 65,245,095
Depreciation and amortization....................... 4,890,517 5,158,206 14,635,534
Corporate general and administrative................ 2,273,744 3,247,579 3,530,067
----------- ----------- ------------
Operating expenses............................... 33,996,384 41,638,270 83,410,696
----------- ----------- ------------
Operating income...................................... 115,326 3,774,536 6,392,574
----------- ----------- ------------
Nonoperating expenses (income):
Interest expense.................................... 5,241,760 6,155,472 12,303,981
Interest income..................................... (70,503) (407,581) (439,229)
Loss (gain) on sale of property and equipment....... (707,286) 1,749 --
Other (income) expense, net......................... (3,221) (8,124) (11,944)
----------- ----------- ------------
Nonoperating expenses, net....................... 4,460,750 5,741,516 11,852,808
----------- ----------- ------------
Loss before income taxes and extraordinary item....... (4,345,424) (1,966,980) (5,460,234)
Deferred income tax (benefit)......................... -- -- (769,573)
----------- ----------- ------------
Loss before extraordinary item........................ (4,345,424) (1,966,980) (4,690,661)
Extraordinary loss on extinguishment of debt.......... -- (1,769,000) --
----------- ----------- ------------
Net loss.............................................. (4,345,424) (3,735,980) (4,690,661)
Dividend requirement for exchangeable preferred
stock............................................... -- -- 6,632,939
----------- ----------- ------------
Net loss applicable to common shares.................. $(4,345,424) $(3,735,980) $(11,323,600)
=========== =========== ============
Basic and diluted net loss per common share........... $ (109) $ (93) $ (283)
=========== =========== ============
Weighted average common shares outstanding............ 40,000 40,000 40,000
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 139
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED SHAREHOLDER'S
STOCK CAPITAL DEFICIT EQUITY
------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Balances, December 31, 1994................ $40 $ 8,569,684 $(13,392,366) $ (4,822,642)
Net loss................................... -- -- (4,345,424) (4,345,424)
Capital contribution to parent (1)......... -- (81,127) -- (81,127)
--- ----------- ------------ ------------
Balances, December 31, 1995................ 40 8,488,557 (17,737,790) (9,249,193)
Net loss................................... -- -- (3,735,980) (3,735,980)
Capital contribution from parent (2)....... -- 18,983,823 -- 18,983,823
--- ----------- ------------ ------------
Balances, December 31, 1996................ 40 27,472,380 (21,473,770) 5,998,650
Net loss................................... -- -- (4,690,661) (4,690,661)
Exchangeable preferred stock dividend
requirement.............................. -- (6,632,939) -- (6,632,939)
Capital contribution from parent (3)....... -- 21,456,875 -- 21,456,875
--- ----------- ------------ ------------
Balances, December 31, 1997................ $40 $42,296,316 $(26,164,431) $ 16,131,925
=== =========== ============ ============
</TABLE>
- ---------------
(1) Represents the payment of preferred stock dividends on behalf of the parent
company.
(2) Represents the net capital contribution from the parent company for the
issuance and redemption of preferred stock, the redemption of warrants, the
cost of the equity issuance, as well as the payment of preferred stock
dividends.
(3) Represents the net capital contribution from the parent company for the
issuance of preferred stock and the exercise of common stock options.
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 140
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1995 1996 1997
----------- ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................... $(4,345,424) $ (3,735,980) $ (4,690,661)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Extraordinary loss.............................. -- 1,769,000 --
Depreciation and amortization................... 4,890,517 5,158,206 14,635,534
Deferred tax benefit............................ -- -- (769,573)
Amortization of debt issuance costs and debt
discounts..................................... 131,752 370,652 441,334
Bad debt expense................................ 484,702 421,378 1,016,375
Loss/(gain) on sale of property and equipment... (707,286) 1,749 --
Changes in assets and liabilities, net of
acquisitions:
Increase in accounts receivable and notes
receivable from related parties............... (1,069,681) (5,257,849) (10,214,907)
(Increase) decrease in prepaid expenses......... 55,531 (175,058) (230,070)
(Increase) decrease in other assets............. 75,432 41,303 (676,946)
Increase in accounts payable.................... 651,247 94,017 707,945
Increase (decrease) in accrued liabilities...... (600,847) (81,801) 5,323,678
----------- ------------ -------------
Net cash provided by (used in) operating
activities................................. (434,057) (1,394,383) 5,542,709
Cash flows from investing activities:
Capital expenditures............................... (1,690,950) (2,037,840) (2,070,223)
Capitalized acquisition costs...................... (33,480) (1,144,699) (2,928,956)
Cash paid to acquire stations...................... -- (38,805,036) (205,973,171)
Deposits for pending acquisitions.................. (150,000) (930,000) (650,000)
Increase in note receivable........................ -- (18,251,402) --
Proceeds from sales of property and equipment...... 6,684,479 1,115 --
----------- ------------ -------------
Net cash provided by (used in) investing
activities................................. $ 4,810,049 $(61,167,862) $(211,622,350)
----------- ------------ -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 141
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1996 1997
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from financing activities:
Principal payments on notes payable................. $(6,866,198) $(50,970,385) $(39,000,000)
Proceeds from notes payable......................... 2,400,000 86,244,059 52,499,999
Proceeds from senior subordinated notes payable..... -- -- 97,250,000
Proceeds from issuance of exchangeable preferred
stock............................................ -- -- 95,376,592
Payment of debt issuance costs...................... (30,000) (2,283,124) (1,855,123)
Principal payments on other long-term obligations... (412,066) (776,107) (735,077)
Prepayment premium.................................. -- (420,000) --
Advances from (payments to) parent company.......... -- 12,367,070 (12,817,000)
Capital contribution from parent company............ -- 18,983,823 21,456,875
----------- ------------ ------------
Net cash provided by (used in) financing
activities..................................... (4,908,264) 63,145,336 212,176,266
----------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents......................................... (532,272) 583,091 6,096,625
Cash and cash equivalents, beginning of year.......... 1,537,547 1,005,275 1,588,366
----------- ------------ ------------
Cash and cash equivalents, end of year................ $ 1,005,275 $ 1,588,366 $ 7,684,991
=========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 142
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description Of Business
Citadel Broadcasting Company was formed August 21, 1991 as a Nevada
corporation and is a wholly-owned subsidiary of Citadel Communications
Corporation ("Citadel Communications"). Citadel License Inc. ("Citadel License")
is a wholly-owned subsidiary of Citadel Broadcasting Company. Citadel
Broadcasting Company and its subsidiary own and operate radio stations and hold
Federal Communications Commission ("FCC") licenses in Arkansas, California,
Colorado, Illinois, Montana, Nevada, New Mexico, Oregon, Pennsylvania, Rhode
Island, Utah and Washington.
Principles of Consolidation And Presentation
The accompanying consolidated financial statements include Citadel
Broadcasting Company and its wholly-owned subsidiary ("Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.
Derivative Financial Instruments
The Company uses an interest rate swap agreement to hedge the effects of
fluctuations in interest rates. Amounts receivable or payable under the interest
rate swap agreement are recognized as interest expense or income.
Property and Equipment
Assets acquired in business combinations accounted for using the purchase
method of accounting are recorded at their estimated fair value upon acquisition
as determined by management or by independent appraisal. Property and equipment
additions are recorded at cost. Depreciation of property and equipment is
determined using the straight-line method over the estimated useful lives of the
related assets.
Intangible Assets
Intangible assets with determinable lives have been allocated among various
categories of customer-based or market-based intangibles at their estimated fair
value upon acquisition as determined by management or by independent appraisal.
Goodwill represents the excess of cost over the fair value of tangible assets
and intangible assets with determinable lives. Amortization is provided on the
straight-line method over the estimated useful lives of the related assets (see
note 5). The Company's policy is to write-off intangible assets once they have
become fully amortized. The useful lives and recoverability of intangible assets
are evaluated at least annually. This evaluation encompasses the undiscounted
historical broadcast cash flow of each station and existing broadcast cash flow
multiples for sales of similar radio properties to estimate the potential
selling price for the station and, therefore, recoverability of the assets.
F-10
<PAGE> 143
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Barter Transactions
Barter contracts are agreements entered into under which the Company
provides commercial air time in exchange for goods and services used principally
for promotional, sales and other business activities. An asset and liability are
recorded at the fair market value of the goods or services received. Revenue is
recorded and the liability is relieved when commercials are broadcast and
expense is recorded and the asset is relieved when goods or services are used.
Income Taxes
The Company utilizes the asset and liability method of accounting for
income taxes as if it were a separate taxpayer. Under the asset and liability
method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. The Company is included in the
consolidated tax returns of its parent company, Citadel Communications.
Income (Loss) Per Share of Common Stock
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share" ("SFAS No. 128"). This statement establishes
standards for computing and presenting earnings per share ("EPS"), and
supersedes APB Opinion No. 15. The Statement replaces primary EPS with basic EPS
and requires dual presentation of basic and diluted EPS. All prior period EPS
data has been restated to conform to SFAS No. 128. The basic and diluted per
share effect of the extraordinary loss on extinguishment of debt in 1996 was
$(44) and $(44), respectively.
Revenue Recognition
Revenue is recognized as commercials are broadcast.
Local Marketing Agreements
Fees earned or incurred pursuant to various local marketing agreements
("LMA") are recognized as gross broadcasting revenue or station operating
expenses, respectively, in the period that the services performed or received
occur. The Company's consolidated financial statements include broadcasting
revenues and station operating expenses of stations marketed under LMA's.
Joint Sales Agreements
Fees earned or incurred pursuant to various joint sales agreements ("JSA")
are recognized pursuant to the terms in the various agreements under one of two
methods: (a) the JSA fee is recognized as a reduction to sales expense (included
in station operating expenses in the Company's consolidated statement of
operations), or (b) the Company is allocated a percentage of the JSA stations'
net revenue and operating expenses and these amounts are recognized as
broadcasting revenue and station operating expenses, respectively, in the period
earned or incurred.
Business and Credit Concentrations
In the opinion of management, credit risk with respect to receivables is
limited due to the large number of customers and the geographic diversification
of the Company's customer base. The Company performs credit evaluations of its
customers and believes that adequate allowances for any uncollectible
receivables are maintained. At December 31, 1996 and 1997, no receivable from
any customer exceeded five percent of gross
F-11
<PAGE> 144
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
accounts receivable nor did any customer's account exceed more than ten percent
of net broadcasting revenue for any of the periods presented.
Long-Lived Assets
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No.
121"), which requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted SFAS No. 121 in
the first quarter of the year ended December 31, 1996 and this adoption did not
have a material impact on the consolidated financial statements.
Reclassifications
Certain 1995 and 1996 balances have been reclassified to conform to the
1997 presentation.
(2) ACQUISITIONS AND DISPOSITIONS
1995 Dispositions
On February 15, 1995, the Company sold the assets of KBOZ-AM, KBOZ-FM and
KATH-FM, and KCTR-FM, KDWG-AM, and KKBR-FM in Bozeman and Billings, Montana,
respectively, for $5,400,000. A gain of approximately $800,000 was recognized on
the sale.
1996 Acquisitions
During 1996, the Company acquired the assets of five FM and one AM radio
stations from various parties as follows:
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION DATE STATION MARKET SERVED PRICE
- --------------------------------- --------------- --------------------- -----------
<S> <C> <C> <C>
June 28, 1996.................... KHFM-FM/KHFN-AM Albuquerque, NM $ 5,500,000
June 28, 1996.................... KASY-FM Albuquerque, NM 5,000,000
June 28, 1996.................... KDJK-FM Modesto, CA 5,010,000
October 1, 1996.................. KKLI-FM Colorado Springs, CO 3,450,000
October 9, 1996.................. KRST-FM Albuquerque, NM 20,000,000
</TABLE>
The acquisitions were accounted for by the purchase method of accounting
and, accordingly, the purchase price was allocated to current assets as well as
noncurrent tangible and intangible assets based on their fair values as
determined by management or by independent appraisal. The acquisitions were
funded with the proceeds from new notes payable and a securities purchase and
exchange agreement. The purchase price, including acquisition costs of $782,881,
was allocated as follows:
<TABLE>
<S> <C>
Property and equipment...................................... $ 2,446,594
Intangible assets........................................... 37,135,955
Accounts receivable......................................... 160,332
-----------
$39,742,881
===========
</TABLE>
F-12
<PAGE> 145
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1997 Acquisitions and Pending Dispositions
Acquisitions
During 1997, the Company acquired the assets of 44 FM and 17 AM radio
stations from various parties as follows:
<TABLE>
<CAPTION>
MARKET PURCHASE
ACQUISITION DATE STATION SERVED PRICE
- ------------------------------- ---------------- --------------------- ------------
<S> <C> <C> <C>
January 1, 1997................ KCTR-FM/KDWG-AM/ Billings, MT $ 26,008,357
KKBR-FM/KBBB-FM/
KMHK-FM
KUGN-AM/KUGN-FM/ Eugene, OR
KEHK-FM
KAKT-FM/KBOY-FM/ Medford, OR
KCMX-AM/KCMX-FM/
KTMT-AM/KTMT-FM
KEYW-FM/KFLD-AM/ Tri-Cities, WA
KORD-FM/KXRX-FM
February 14, 1997.............. KENZ-FM Salt Lake City, UT 5,590,119
April 10, 1997................. KBER-FM Salt Lake City, UT 7,760,000
July 3, 1997................... WPRO-AM/WPRO-FM/ Providence, RI 115,795,216
WSKO-AM/WWLI-FM
WQCY-FM/WMOS-FM/ Quincy, IL
WTAD-AM/WBRJ-FM
WQWK-FM/WIKN-FM/ State College, PA
WRSC-AM/WBLF-AM
WGLU-FM/WQKK-FM Johnstown, PA
WRKZ-FM Harrisburg, PA
WQXA-AM/WQXA-FM York, PA
WCTO-FM/WEST-AM Allentown, PA
WMGS-FM/WARM-AM/ Wilkes-Barre, PA
WZMT-FM/WAZL-AM
July 17, 1997.................. KNHK-FM Reno, NV 1,300,000
September 25, 1997............. KTHK-FM Tri-Cities, WA 600,500
September 29, 1997............. WXEX-FM, Edgenet Providence, RI 4,250,000
October 15, 1997............... KARN-AM/KARN-FM/ Little Rock, AR 9,000,000
KKRN-FM/KRNN-AM/
KAFN-FM
October 15, 1997............... KIPR-FM Little Rock, AR 5,544,506
October 15, 1997............... Land and Little Rock, AR 3,001,537
Buildings
October 15, 1997............... KOKY-FM Little Rock, AR 7,354,860
October 21, 1997............... WLEV-FM Allentown, PA 23,000,000
October 24, 1997............... KBEE-FM/KFNZ-AM Salt Lake City, UT 2,867,092
November 4, 1997............... KLAL-FM Little Rock, AR 1,500,000
November 4, 1997............... KURB-FM/KVLO-FM/ Little Rock, AR 12,000,000
KLIH-FM
November 18, 1997.............. WHKK-FM Providence, RI 3,999,310
</TABLE>
F-13
<PAGE> 146
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The acquisitions were accounted for by the purchase method of accounting
and, accordingly, the purchase price was allocated to current assets as well as
noncurrent tangible and intangible assets based on their fair values as
determined by management or by independent appraisal. The acquisitions were
funded with the proceeds from new notes payable and a securities purchase and
exchange agreement. The purchase price, including acquisition costs of
$2,928,956, was allocated as follows:
<TABLE>
<S> <C>
Cash........................................................ $ 877,693
Accounts receivable......................................... 4,473,441
Prepaid expenses............................................ 706,402
Property and equipment...................................... 21,203,071
Intangible assets........................................... 208,964,226
Other assets................................................ 10,100
Accounts payable and accrued liabilities.................... (3,084,549)
Current maturities of other long-term obligations........... (649,931)
------------
$232,500,453
============
</TABLE>
Pro Forma
The following summary, prepared on a pro forma basis, presents the results
of operations as if all the above noted radio stations had been acquired as of
January 1, 1996, after including the impact of the amortization of intangible
assets, depreciation of fixed assets and increased interest expense on the
acquisition debt since the date of acquisition.
<TABLE>
<CAPTION>
UNAUDITED
---------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Net broadcasting revenue......................... $106,683,000 $117,154,000
Operating income................................. 2,212,000 6,988,000
Net loss......................................... (17,395,000) (12,990,000)
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the radio stations had been owned for the entire periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from combined
operations.
Pending Dispositions
On September 29, 1997, the Company entered into an asset purchase agreement
to sell substantially all of the assets of radio stations WQKK-FM and WGLU-FM in
Johnstown, Pennsylvania and radio stations WRSC-AM, WQWK-FM, WBLF-AM and WIKN-FM
in State College, Pennsylvania. The disposition is pending approval by the
Federal Communications Commission.
(3) NOTE RECEIVABLE
During 1996 the Company made various advances to Deschutes, a non-related
party, to allow Deschutes to acquire various radio stations and payoff existing
debt, in conjunction with the acquisition of Deschutes by Citadel
Communications. These advances were funded through borrowings the Company made
on the Senior Credit Facility and advances from its parent company. As of
December 31, 1996, $18,251,402 was due under these advances; of this amount,
approximately $8,600,000 was included in note payable to parent company.
F-14
<PAGE> 147
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
During 1997 the Company acquired Deschutes in a stock-based acquisition.
The note receivable at December 31, 1996 was included in the purchase price
allocation during 1997, resulting in the elimination of the note receivable in
1997.
(4) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
ESTIMATED
1996 1997 USEFUL LIFE
----------- ----------- -----------
<S> <C> <C> <C>
Land.................................................. $ 569,638 $ 3,269,025 --
Buildings and improvements............................ 1,217,287 5,726,701 5-30 years
Transmitters, towers and equipment.................... 15,509,084 29,053,049 5-15 years
Office furniture and equipment........................ 3,268,426 5,615,833 3-5 years
Construction in progress.............................. 577,289 736,620 --
----------- -----------
21,141,724 44,401,228
Less accumulated depreciation and amortization........ (5,933,155) (9,158,944)
----------- -----------
$15,208,569 $35,242,284
=========== ===========
</TABLE>
(5) INTANGIBLE ASSETS
Intangible assets at December 31, 1996 and 1997 consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
1996 1997 USEFUL LIFE
------------ ------------ ----------------
<S> <C> <C> <C>
Goodwill.......................................... $ 28,925,936 $119,226,136 15 years
Broadcast licenses................................ 26,262,983 162,626,295 15 years
Noncompetition agreements......................... 5,168,854 1,858,593 3-5 years
Local marketing agreements........................ 1,909,998 -- 5 years
Presold commercials............................... 496,380 -- less than 1 year
Premium lease space............................... 161,787 161,787 1-13 years
On-air talent contracts........................... 1,383,323 -- 1-3 years
Subcarrier antenna income......................... 219,162 100,878 1-4 years
Programming contracts............................. 503,000 3,000 3 years
------------ ------------
65,031,423 283,976,689
Less accumulated amortization..................... (13,229,588) (15,287,173)
------------ ------------
$ 51,801,835 $268,689,516
============ ============
</TABLE>
(6) ACCRUED LIABILITIES
Accrued liabilities at December 31, 1996 and 1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Interest.................................................... $ -- $5,118,735
Music license fees.......................................... 245,715 209,734
Compensation and commissions................................ 1,237,392 2,082,492
Other....................................................... 818,609 1,649,168
---------- ----------
$2,301,716 $9,060,129
========== ==========
</TABLE>
F-15
<PAGE> 148
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(7) NOTES PAYABLE
Notes payable at December 31, 1996 and 1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Note payable to financial institution (Senior Credit
Facility), interest payable at the LIBOR rate (5.78% at
December 31, 1996 and 5.72% at December 31, 1997) plus
2.75%, principal due only when required by the loan
agreement, in quarterly amounts through September 30,
2003, at which time all outstanding amounts are due in
full, subject to optional prepayments.................... $77,584,060 $90,084,059
Less current maturities.................................... 2,500,000 --
----------- -----------
Long-term portion.......................................... $75,084,060 $90,084,059
=========== ===========
</TABLE>
On July 3, 1997, the Company entered into a revised financing agreement
(the "Senior Credit Facility") which allows for revolving loan borrowings up to
a maximum of $150,000,000. Per the agreement, this amount is subject to
reduction starting December 31, 1997 and continuing quarterly thereafter. The
maximum available loan commitment at December 31, 1997 was $147,500,000. The
Company must pay, on a quarterly basis, an unused commitment fee equal to the
maximum revolving loan commitment less the average of the outstanding principal
balance for the preceding quarter, multiplied by .125% or if the total leverage
ratio (as defined in the agreement) calculated as of the last day of the
preceding quarter was less than 4.5, the commitment fee is .09375%. Commitment
fees paid in 1996 and 1997 were $74,931 and $380,295, respectively. The
agreement requires that the Company enter into an interest rate swap agreement
for a period of at least two years. See note 21 for information on the interest
rate swap agreement. Principal payments are not scheduled to commence until the
outstanding principal balance exceeds the maximum loan commitment adjusted by
quarterly mandatory commitment reductions (as defined in the agreement).
The Senior Credit Facility is secured by a pledge of property and equipment
and the common stock of the Company. Various debt covenants place restrictions
on, among other things, indebtedness, acquisitions, dividends, capital
expenditures and the sale or transfer of assets and provide for certain minimum
operating cash flows for the Company. The debt covenant provisions also include
certain financial ratio covenants, the most restrictive in nature being; initial
total debt to adjusted operating cash flow < 6.75 times, initial total senior
debt to adjusted operating cash flow < 6.75 times and consolidated operating
cash flow to interest expense and cash dividends on the Exchangeable Preferred
Stock > 1.75 times. At December 31, 1997, the Company was in compliance with all
debt covenant provisions.
The required aggregate principal payments as of December 31, 1997,
excluding the consideration of any payments required based upon annual excess
cash flow (as defined), are as follows:
<TABLE>
<S> <C>
2001................................................... $23,209,059
2002................................................... 30,500,000
Thereafter............................................. 36,375,000
-----------
$90,084,059
===========
</TABLE>
(8) SENIOR SUBORDINATED NOTES PAYABLE
On July 3, 1997, the Company completed the issuance of $101 million of
10-1/4% Senior Subordinated Notes ("Notes") due 2007. Interest is payable
semi-annually. The Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after July 1, 2002. In addition, at any time
prior to July 1, 2000, subject to certain conditions, the Company may, at its
option, redeem a portion of the Notes with the
F-16
<PAGE> 149
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
net proceeds of one or more Public Equity Offerings (as defined in the indenture
governing the Notes), at a redemption price equal to 110.25% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
redemption. The Notes are shown net of unamortized discount of $2,668,883 at
December 31, 1997.
The indenture governing the Notes contains certain restrictive covenants,
including limitations which restrict the ability of the Company to incur
additional debt, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, merge or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets. At December 31, 1997, the Company was in compliance with all debt
covenants.
(9) OTHER LONG-TERM OBLIGATIONS
Other long-term obligations at December 31, 1996 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Various noncompetition and consulting agreements with the
sellers of radio stations acquired, due at various dates
through July 2003, face amount of $486,113 and $437,503 at
December 31, 1996 and 1997, respectively, non-interest
bearing with interest imputed at 8.5% to 9.0%, net of
discount of $54,540 and $29,640 in 1996 and 1997,
respectively.............................................. $ 431,573 $ 407,863
Prepayment premium on extinguishment of debt (a)............ 881,818 770,779
Capital leases.............................................. -- 105,359
---------- ----------
1,313,391 1,284,001
Less current maturities..................................... 435,791 271,352
---------- ----------
Long-term portion........................................... $ 877,600 $1,012,649
========== ==========
</TABLE>
The required aggregate principal payments as of December 31, 1997,
excluding the amortization of debt discount are as follows:
<TABLE>
<S> <C>
1998.................................................... $ 271,352
1999.................................................... 321,843
2000.................................................... 138,648
2001.................................................... 132,363
2002.................................................... 127,694
Thereafter.............................................. 292,101
----------
$1,284,001
==========
</TABLE>
- ---------------
(a) On October 9, 1996, the Company extinguished its long-term debt of
$31,310,385, payable to a financial institution, and its note payable to a
related party of $7,000,000. The early retirement of the long-term debt
resulted in a $1,769,000 extraordinary loss due to prepayment premiums and
the write-off of debt issuance costs. The prepayment premium can be reduced
on a quarterly basis depending on the outstanding balance of the Senior
Credit Facility. The balance of the prepayment premium is due upon the
repayment of the Senior Credit Facility.
F-17
<PAGE> 150
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(10) LEASE COMMITMENTS
The Company leases certain tower sites, transmitters and equipment,
automobiles, office equipment and an airplane. The following is a schedule by
year of future minimum rental payments required under operating leases that have
an initial or remaining noncancelable lease term in excess of one year as of
December 31, 1997:
<TABLE>
<S> <C>
1998................................................... $ 2,030,301
1999................................................... 1,939,314
2000................................................... 1,874,159
2001................................................... 1,859,330
2002................................................... 1,457,545
Thereafter............................................. 5,357,157
-----------
$14,517,806
===========
</TABLE>
Total rental expense was $744,395, $1,101,237 and $1,971,774 for the years
ended December 31, 1995, 1996 and 1997, respectively.
(11) INCOME TAXES
The Company is included in the consolidated tax returns of Citadel
Communications and calculates its tax provision or benefit as though it filed a
separate return. For the years ended December 31, 1995, 1996 and 1997, the
Company generated a net loss for both financial reporting and income tax
purposes; therefore, no current tax provision has been recorded. The deferred
income tax benefit in 1997 represents the reversal of deferred tax liabilities
established at the date of acquisition due to differences in the tax basis and
the financial statement carrying amounts of intangibles and fixed assets
acquired in stock-based acquisitions. At December 31, 1997, Citadel
Communications has net operating loss carryforwards for federal income tax
purposes of approximately $18,800,000 which begin to expire in 2007.
On June 28, 1996, Citadel Communications underwent an ownership change in
accordance with Section 382 of the Internal Revenue Code. Due to this change,
the net operating losses of Citadel Communications are subject to limitation in
future years. The approximate amount of the net operating loss which may be used
in any one year is $4,400,000.
The reconciliation of the expected income tax benefit calculated at the
U.S. federal statutory rate to the actual income tax benefit per the financial
statements for the years ended December 31, 1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
----------- --------- -----------
<S> <C> <C> <C>
U.S. federal statutory rate applied to the loss before
income taxes and extraordinary item.................... $(1,487,717) $(679,046) $(1,856,480)
Amortization of goodwill................................. 16,563 186,844 425,344
Nondeductible meals and entertainment.................... 19,786 31,601 51,495
Net operating losses providing no current benefit for
federal income tax purposes............................ 1,467,025 458,101 680,040
Other.................................................... (15,657) 2,500 (69,972)
----------- --------- -----------
Deferred income tax benefit.............................. $ -- $ -- $ (769,573)
=========== ========= ===========
</TABLE>
F-18
<PAGE> 151
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets, liabilities and the valuation allowance are
as follows:
<TABLE>
<CAPTION>
1996 1997
----------- ------------
<S> <C> <C>
Deferred tax assets:
Receivables, principally due to valuation allowances...... $ 248,422 $ 323,577
Net operating loss carryforwards.......................... 6,720,659 7,520,705
Accrued liabilities not deductible........................ 18,465 193,423
----------- ------------
Total deferred tax assets.............................. 6,987,546 8,037,705
Valuation allowance....................................... (4,270,206) (5,109,187)
----------- ------------
Net deferred tax assets................................ 2,717,340 2,928,518
----------- ------------
Deferred tax liabilities:
Property and equipment, principally due to accelerated
depreciation........................................... (1,883,269) (2,928,218)
Intangible assets; differences in book and tax
amortization........................................... (834,071) (300)
Differences between the tax basis and fair value of
intangibles and fixed assets acquired.................. (1,585,333) (23,270,338)
----------- ------------
Total deferred tax liabilities......................... (4,302,673) (26,198,856)
----------- ------------
Net deferred tax liability.................................. $(1,585,333) $(23,270,338)
=========== ============
</TABLE>
The valuation allowance was decreased by $2,320,699 in 1996 and increased
by $838,981 in 1997. The Company has established a valuation allowance for the
amount of the net deferred tax asset which management has determined that it is
more likely than not will not be realized.
(12) EXCHANGEABLE PREFERRED STOCK
On July 3, 1997, the Company completed the sale of 1,000,000 shares of
Series A Exchangeable Preferred Stock (Exchangeable Preferred Stock) for $100
million. The Exchangeable Preferred Stock has a liquidation preference of $100
per share, plus accumulated and unpaid dividends. Dividends on the Exchangeable
Preferred Stock accrue at the rate of 13-1/4% per annum. All dividends will be
payable semi-annually on January 1 and July 1 of each year, commencing January
1, 1998. On or prior to July 1, 2002, dividends are payable in additional shares
of Exchangeable Preferred Stock having an aggregate liquidation preference equal
to the amount of such dividends, or, at the option of the Company, in cash.
Thereafter, all dividends will be payable only in cash. The Company will be
required to redeem the Exchangeable Preferred Stock on July 1, 2009 (subject to
the legal availability of funds therefor) at a redemption price equal to the
liquidation preference thereof, plus accumulated and unpaid dividends, if any,
to the date of redemption.
The Exchangeable Preferred Stock is presented net of unamortized issuance
costs of $4,541,858, and includes accrued dividends at December 31, 1997 of
$6,551,389, which were paid in 65,513.89 additional shares of exchangeable
preferred stock on January 1, 1998.
The Certificate of Designation for the Exchangeable Preferred Stock
contains certain covenants, which, among other things, restrict the ability of
the Company with respect to: (i) the incurrence of additional debt; (ii)
restricted payments; (iii) issuances and sales of stock of certain subsidiaries;
and (iv) consolidations, mergers or sales of assets. The Company was in
compliance with these covenants at December 31, 1997.
(13) CITADEL COMMUNICATIONS FINANCIAL DATA
The operations of Citadel Communications (the parent company) include the
issuance of convertible preferred stock and obtaining a credit facility
including a revolving line of credit of $20 million, the proceeds
F-19
<PAGE> 152
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
of which were advanced to the Company. Interest was charged on these advances in
an amount equal to the interest costs of Citadel Communications. In conjunction
with the Company's refinancing of Notes, the revolving line of credit was
terminated in 1997. There are no other costs or expenses of Citadel
Communications.
Advances from Citadel Communications, other than those representing draws
on the revolving line of credit of Citadel Communications, are recorded as
capital contributions from the parent company and are presented as additional
paid-in capital in the consolidated balance sheets.
On January 1, 1997, in a non-cash transaction, the Company transferred
$9,123,310 of debt under the Senior Credit Facility to Deschutes which reduced
the corresponding note receivable. In addition, on June 20, 1997, Citadel
Communications transferred the ownership of Deschutes to the Company. Interest
paid to Citadel Communications by the Company for the year ended December 31,
1997 amounted to $568,534.
The following is summary consolidated financial data for Citadel
Communications and its subsidiaries, including the Company:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1997
------------ ------------
<S> <C> <C>
Consolidated Balance Sheets:
Current assets............................................ $ 14,502,740 $ 35,926,371
Property and equipment, net............................... 15,208,569 35,242,284
Note receivable........................................... 18,251,402 --
Intangible assets, net.................................... 51,801,835 268,689,516
Other assets.............................................. 2,550,778 4,314,123
------------ ------------
Total assets........................................... $102,315,324 $344,172,294
============ ============
Notes payable to related parties.......................... $ 11,817,000 $ --
Other current liabilities................................. 6,880,942 13,332,675
------------ ------------
Total current liabilities.............................. 18,697,942 13,332,675
Notes payable, less current maturities.................... 75,084,060 90,084,059
Senior subordinated notes payable......................... -- 98,331,117
Other liabilities......................................... 2,462,933 24,282,987
Exchangeable preferred stock.............................. -- 102,009,531
Shareholders' equity...................................... 6,070,389 16,131,925
------------ ------------
Total liabilities and shareholders' equity............. $102,315,324 $344,172,294
============ ============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
Consolidated Statements of Operations:
Net broadcasting revenue.................................. $45,412,806 $89,803,270
Operating income.......................................... $ 3,744,323 $ 6,367,016
Interest expense.......................................... 6,155,472 12,872,515
Other (income) expense, net............................... (413,955) (451,173)
----------- -----------
Loss before income taxes and extraordinary item........... (1,997,194) (6,054,326)
Deferred income tax (benefit)............................. -- (769,573)
Extraordinary loss on extinguishment of debt.............. (1,769,000) --
----------- -----------
Net loss.................................................... $(3,766,194) $(5,284,753)
=========== ===========
Dividend requirement for exchangeable preferred stock....... $ -- $ 6,632,939
=========== ===========
</TABLE>
F-20
<PAGE> 153
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(14) CITADEL LICENSE FINANCIAL DATA
The operations of Citadel License, a wholly-owned subsidiary of the
Company, include holding FCC licenses for all stations owned by the Company and
the amortization of these licenses. Citadel License has guaranteed the Senior
Subordinated Notes (see note 8). The guarantee is full, unconditional and joint
and several. The separate financial statements of Citadel License have not been
presented because management of the Company has determined they would not be
material to investors. There are no costs or expenses of Citadel License that
are borne by Citadel Broadcasting Company.
The following is summary financial data for Citadel License:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
----------- ------------
<S> <C> <C>
Balance Sheets:
Intangible assets, net (broadcast licenses)............... $24,035,920 $137,073,551
Other assets.............................................. 5,147 2,048
----------- ------------
Total assets........................................... $24,041,067 $137,075,599
=========== ============
Shareholder's equity...................................... 24,041,067 137,075,599
----------- ------------
Total liabilities and shareholder's equity............. $24,041,067 $137,075,599
=========== ============
Statements of Operations:
Amortization expense...................................... 991,901 5,267,872
----------- ------------
Net loss............................................... $ (991,901) $ (5,267,872)
=========== ============
</TABLE>
At present, Citadel License is the only subsidiary of the Company.
(15) DEFINED CONTRIBUTION PLAN
The Company has a defined contribution 401(k) plan for all employees who
are at least 21 years of age and have worked at least 1,000 hours in the year.
Under the 401(k) plan, employees can contribute up to 20% of their compensation,
subject to the maximum contribution allowed by the Internal Revenue Code.
Participants vest immediately in their contributions. The Company may make
discretionary contributions as approved by the Board of Directors. Participants'
rights to amounts contributed by the Company vest on a graded schedule over a
five-year period. During 1995, 1996, and 1997 the Company contributed $133,215,
$143,192 and $298,623, respectively, which represented a two percent matching of
employee contributions to the 401(k) plan.
(16) TRANSACTIONS WITH RELATED PARTIES
SALE--LEASEBACK
On December 29, 1995, the Company entered into a sale-leaseback transaction
with the principal shareholder of Citadel Communications. The Company sold an
airplane for its fair value of $1,275,000 to the shareholder resulting in a loss
of $74,327. The operating lease commenced on December 29, 1995 with monthly
payments of $17,250 due through December 31, 2001.
CONSULTING ARRANGEMENT
During the fiscal year ended December 31, 1996, a director of the Company
from 1996 to November 1997, provided financial consulting services to the
Company for which he was paid $83,520. On June 28, 1996, he was also granted an
option to purchase 12,000 shares of Common Stock at an exercise price of $5.72
per share. Such option is fully vested. The Company believes that such services
were provided
F-21
<PAGE> 154
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
to the Company on terms at least as favorable to the Company as could have been
obtained generally from unaffiliated parties.
LEGAL SERVICES
During each of the fiscal years ended December 31, 1995 and 1996, the
Company retained a law firm to represent the Company on various matters. A
shareholder of such firm was also a director of the Company in such years.
CITADEL COMMUNICATIONS STOCK OPTION PLAN
On June 28, 1996, Citadel Communications adopted the 1996 Equity Incentive
Plan ("Plan") pursuant to which the Board of Directors may grant stock options
to officers, employees and related parties. The Plan, which was subsequently
amended, as of March 31, 1998, authorizes grants of options to purchase up to
1,577,646 shares of authorized but unissued common stock which excludes those
options granted prior to the adoption of the Plan. Stock options are granted
with an exercise price equal to the common stock's fair market value at the date
of grant or such other exercise price as determined by the Board of Directors.
Stock options granted generally vest ratably over a five-year period, commencing
one year after the date of grant and expire on the earlier of ten years from the
date granted or termination of employment, or they will vest immediately, as
determined by the Board of Directors at the date of grant.
(17) LOCAL MARKETING AGREEMENTS
At December 31, 1997, the Company has local marketing agreements to market
stations WBHT-FM, WKQV-FM, WEMR-AM, WEMR-FM, WSGD-FM, WDLS-FM and WCDL-AM in
Wilkes-Barre/Scranton, Pennsylvania and stations KIZN-FM, KZMG-FM, KKGL-FM,
KQFC-FM and KBOI-AM in Boise, Idaho. The agreements principally provide for the
Company to supply specified programming to the brokered stations and enable the
sales staff of the Company to sell advertising time on the stations for fixed
fees to be paid by the Company. The agreements also provide the Company with the
option to purchase the stations. The Company's financial statements include the
broadcasting revenue and station operating expenses of the brokered stations.
The local marketing agreements enable the Company to extend or terminate
the agreements at the Company's option through August 1, 2002. The fees paid
under the local marketing agreements amounted to $350,000, $1,414,527 and
$1,936,139 for the years ended December 31, 1995, 1996 and 1997, respectively.
(18) JOINT SALES AGREEMENTS
On January 15, 1996, the Company entered into a joint sales agreement (JSA)
to sell advertising for radio stations KEYF-AM/FM, KUDY-AM and KKZX-FM in
Spokane, Washington and radio stations KVOR-AM, KSPZ-FM, KTWK-AM, and KVUU-FM in
Colorado Springs, Colorado. As stated in the JSA agreement, JSA revenue is
calculated as 60% of the broadcast cash flows of these radio stations and all
Company owned radio stations in these markets, with the exception of KKLI in
Colorado Springs which is not included in the JSA calculation.
On April 22, 1996, the Company entered into a JSA for radio station KENZ-FM
in Salt Lake City, Utah. The Company's financial statements include all sales
expenses for the station as well as revenue for the JSA fee calculated at 30% of
net revenue of the station. On February 14, 1997 the Company acquired KENZ-FM.
On July 3, 1997, the Company acquired all of the issued and outstanding
capital stock of Tele-Media Broadcasting Company ("Tele-Media"). As a result of
this acquisition, the Company assumed a Tele-Media
F-22
<PAGE> 155
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
JSA for radio station WKQV-AM in Wilkes-Barre/Scranton, Pennsylvania. As stated
in the JSA agreement, JSA revenue is calculated as the sum of (i) a base monthly
payment of $5,000, and (ii) an additional monthly fee ranging from 5% to 8% of
revenues (as defined in the JSA agreement) based on monthly revenues of WKQV-AM
and of its simulcast station, WARM-AM.
(19) SUPPLEMENTAL FINANCIAL INFORMATION
The Company paid cash of $5,237,240, $7,065,546 and $6,703,052 for interest
for the years ended December 31, 1995, 1996 and 1997, respectively.
Barter revenue included in gross broadcasting revenue and barter expenses
included in station operating expenses amounted to $3,087,871, $3,335,024 and
$7,388,471, and $3,214,284, $3,029,665 and $7,062,822, for the years ended
December 31, 1995, 1996 and 1997, respectively.
A summary of additions and deductions related to the allowance for doubtful
accounts receivable for the years ended December 31, 1995, 1996 and 1997
follows:
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF BALANCE AT
PERIOD ADDITIONS DEDUCTIONS END OF PERIOD
------------ --------- ---------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1995............ $380,531 484,702 (350,700) 514,533
Year ended December 31, 1996............ 514,533 421,378 (314,857) 621,054
Year ended December 31, 1997............ 621,054 1,016,375 (828,487) 808,942
</TABLE>
(20) LITIGATION
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. Management believes that such litigation and claims
will be resolved without a material effect on the Company's financial position.
The Company has received two civil investigative demands ("CIDs") from the
Antitrust Division of the U.S. Department of Justice. One CID addresses the
Company's acquisition of station KRST in Albuquerque, New Mexico and the second
CID addresses the joint sales agreement for stations in Spokane, Washington and
Colorado Springs, Colorado. The Company has provided the requested information
in response to each CID, and at present has been given no indication from the
Department of Justice regarding its intended future actions.
(21) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values for its financial instruments. The following summary
presents a description of the methodologies and assumptions used to determine
such amounts.
Limitations
Fair value estimates are made at a specific point in time and are based on
relevant market information and information about the financial instrument; they
are subjective in nature and involve uncertainties, matters of judgment and,
therefore, cannot be determined with precision. These estimates do not reflect
any premium or discount that could result from offering for sale at one time the
Company's entire holdings of a particular instrument. Changes in assumptions
could significantly affect these estimates.
Since the fair value is estimated as of December 31, 1996 and 1997, the
amounts that will actually be realized or paid at settlement or maturity of the
instruments could be significantly different.
F-23
<PAGE> 156
CITADEL BROADCASTING COMPANY
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Cash Equivalents and Cash Held in Escrow
The carrying amount is assumed to be the fair value because of the
liquidity of these instruments.
Accounts Receivable and Notes Receivable
The carrying amount is assumed to be the fair value because of the
short-term maturity of the portfolio. The carrying amount of the non-current
note receivable is assumed to be the fair value because the note receivable was
converted by Citadel Communications into a portion of the purchase price of
Deschutes on January 1, 1997 at the carrying value.
Accounts Payable and Accrued Liabilities
The carrying amount approximates fair value because of the short-term
maturity of these instruments.
Notes payable, senior subordinated notes, exchangeable preferred stock, notes
payable to parent company and other long-term obligations
The fair value of the Company's notes payable, senior subordinated notes,
exchangeable preferred stock, notes payable to parent company and other
long-term obligations approximate the terms in the marketplace at which they
could be replaced. Therefore, the fair value approximates the carrying value of
these financial instruments.
In 1996, the Company entered into an interest rate swap agreement with a
financial institution in accordance with the terms of its Senior Credit
Facility. The fair value of the interest rate swap as of December 31, 1996 and
1997 was $190,000 and $3,700, respectively, as determined by the financial
institution, and represents an unrealized gain. The fair value of the interest
rate swap is the estimated amount that the financial institution would receive
or pay to terminate the swap agreement at the reporting date, taking into
account current interest rates and the current creditworthiness of the swap
counterparties.
(22) SUBSEQUENT EVENTS
On January 2, 1998, the Company acquired radio stations WEMR-AM and WEMR-FM
in Wilkes-Barre/ Scranton, Pennsylvania for a purchase price of $815,000. The
acquisition will be accounted for by the purchase method of accounting.
On February 12, 1998, the Company acquired radio stations KQFC-FM, KKGL-FM
and KBOI-AM and a parcel of land in Boise, Idaho for an aggregate purchase price
of $14,400,000. The acquisition will be accounted for by the purchase method of
accounting. In conjunction with the acquisition, the Company borrowed an
additional $11,000,000 on its Senior Credit Facility.
On March 26, 1998, the Company acquired radio stations WSGD-FM, WDLS-FM and
WCDL-AM in Wilkes-Barre/Scranton, Pennsylvania for a purchase price of
$6,000,000. The acquisition will be accounted for by the purchase method of
accounting. In conjunction with the acquisition, the Company borrowed an
additional $6,000,000 on its Senior Credit Facility.
F-24
<PAGE> 157
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1998
1997 (UNAUDITED)
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,684,991 $ 7,406,965
Cash held in escrow....................................... 718,561 --
Accounts receivable, less allowance for doubtful accounts
of $808,942 in 1997 and $1,280,553 in 1998............. 25,744,137 31,808,518
Notes receivable from related parties..................... 246,455 235,906
Prepaid expenses.......................................... 1,532,227 3,286,852
------------ ------------
Total current assets................................... 35,926,371 42,738,241
Property and equipment, net................................. 35,242,284 36,833,719
Intangible assets, net...................................... 268,689,516 290,405,370
Deposits for pending acquisitions........................... 650,000 --
Other assets................................................ 3,664,123 3,375,942
------------ ------------
$344,172,294 $373,353,272
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 4,001,194 $ 3,032,234
Accrued liabilities....................................... 9,060,129 8,367,647
Current maturities of other long-term obligations......... 271,352 281,617
------------ ------------
Total current liabilities.............................. 13,332,675 11,681,498
Notes payable, less current maturities...................... 90,084,059 18,726,126
Senior subordinated notes payable........................... 98,331,117 98,460,823
Other long-term obligations, less current maturities........ 1,012,649 1,011,050
Deferred tax liability...................................... 23,270,338 25,306,162
Exchangeable preferred stock................................ 102,009,531 112,964,761
Shareholder's equity:
Common stock, $.001 par value; authorized 136,300 shares,
issued and outstanding 40,000 shares................... 40 40
Additional paid-in capital................................ 42,296,316 138,243,294
Unrealized loss on hedging contract....................... -- (595,595)
Accumulated deficit....................................... (26,164,431) (32,444,887)
------------ ------------
Total shareholder's equity............................. 16,131,925 105,202,852
------------ ------------
$344,172,294 $373,353,272
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-25
<PAGE> 158
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1997 1998
----------- ------------
<S> <C> <C>
Gross broadcasting revenue.................................. $66,516,801 $109,240,243
Less agency commissions................................... (6,491,983) (10,418,869)
----------- ------------
Net broadcasting revenue............................... 60,024,818 98,821,374
Operating expenses:
Station operating expenses................................ 43,305,951 69,411,775
Depreciation and amortization............................. 9,563,084 20,005,073
Corporate general and administrative...................... 2,562,480 3,351,191
----------- ------------
Operating expenses................................ 55,431,515 92,768,039
Operating income............................................ 4,593,303 6,053,335
Nonoperating expenses (income):
Interest expense.......................................... 8,213,550 13,590,447
Other income, net......................................... (401,099) (94,149)
----------- ------------
Nonoperating expenses, net............................. 7,812,451 13,496,298
Income (loss) before income taxes........................... (3,219,148) (7,442,963)
Income tax (benefit)........................................ (105,168) (1,162,507)
----------- ------------
Net income (loss)........................................... (3,113,980) (6,280,456)
Dividend requirement for exchangeable preferred stock....... 3,275,693 10,822,375
----------- ------------
Net loss applicable to common shares........................ $(6,389,673) $(17,102,831)
=========== ============
Basic and diluted net loss per common share................. $ (159.74) $ (427.57)
=========== ============
Weighted average common shares outstanding.................. 40,000 40,000
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE> 159
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
Net income (loss)............................... $(3,113,980) $(6,280,456)
Other comprehensive income:
Unrealized loss on hedging contract............. -- (595,595)
----------- -----------
Comprehensive income (loss)..................... $(3,113,980) $(6,876,051)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE> 160
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (3,113,980) $ (6,280,456)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 9,563,084 20,005,073
Amortization of debt issuance costs and debt
discounts............................................ 138,352 479,620
Bad debt expense....................................... 603,558 886,873
Deferred tax benefit................................... (105,168) (1,341,044)
Unrealized loss on interest rate swap.................. -- (595,595)
Changes in assets and liabilities, net of acquisitions:
Increase in accounts receivable and notes receivable from
related parties........................................ (5,388,399) (6,940,705)
Increase in prepaid expenses.............................. (446,599) (1,751,373)
(Increase) decrease in other assets....................... (266,368) 1,293,436
Increase in accounts payable.............................. (215,156) (968,960)
(Decrease) increase in accrued liabilities................ 3,367,485 (841,172)
------------- -------------
Net cash provided by operating activities.............. 4,136,809 3,945,697
Cash flows from investing activities:
Capital expenditures...................................... (1,478,410) (1,746,810)
Capitalized acquisition costs............................. (2,484,066) (1,963,106)
Cash paid to acquire stations............................. (128,187,024) (36,290,411)
Deposits for pending acquisitions......................... (1,200,000) 650,000
------------- -------------
Net cash used in investing activities.................. (133,349,500) (39,350,327)
Cash flows from financing activities:
Capital contribution from parent company.................. 20,008 48,734
Advances from parent company.............................. 1,000,000 --
Proceeds from notes payable............................... 12,000,000 34,999,999
Proceeds from senior subordinated notes payable........... 97,250,000 --
Proceeds from issuance of exchangeable preferred stock.... 96,850,000 --
Proceeds from initial public offering..................... -- 116,513,904
Cash payment of initial public offering costs............. -- (9,642,586)
Principal payments on notes payable....................... (39,000,000) (106,357,932)
Principal payments on other long-term obligations......... (408,840) (346,259)
Principal payments on advances from parent company........ (12,817,000) --
Payment of debt issuance costs............................ -- (89,256)
Cost of issuance of exchangeable preferred stock.......... (569,997) --
------------- -------------
Net cash provided by financing activities.............. 154,324,171 35,126,604
Net increase (decrease) in cash and cash equivalents........ 25,111,480 (278,026)
Cash and cash equivalents, beginning of period.............. 1,588,366 7,684,991
------------- -------------
Cash and cash equivalents, end of period.................... $ 26,699,846 $ 7,406,965
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE> 161
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Citadel
Broadcasting Company (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
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, all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. For further information, refer to the consolidated financial
statements and notes thereto included in Citadel Broadcasting Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
(2) 1998 ACQUISITIONS
On January 2, 1998, the Company acquired radio stations WEMR-AM and WEMR-FM
in Wilkes-Barre/ Scranton, Pennsylvania for a purchase price of $815,000. The
acquisition was accounted for using the purchase method of accounting.
On February 12, 1998, the Company acquired radio stations KQFC-FM, KKGL-FM
and KBOI-AM and a parcel of land in Boise, Idaho for an aggregate purchase price
of approximately $14,400,000. The acquisition was accounted for using the
purchase method of accounting.
On March 26, 1998, the Company acquired radio stations WSGD-FM, WDLS-FM and
WCDL-AM in Wilkes-Barre/Scranton, Pennsylvania for a purchase price of
$6,000,000. The acquisition was accounted for using the purchase method of
accounting.
On April 21, 1998, the Company acquired radio stations KIZN-FM and KZMG-FM
in Boise, Idaho for an aggregate purchase price of $14,600,000. The acquisition
was accounted for using the purchase method of accounting.
On July 14, 1998, the Company signed an agreement to acquire KAAY-AM in
Little Rock, Arkansas for an aggregate purchase price of $5,000,000. The
acquisition will be accounted for using the purchase method of accounting.
On July 27, 1998, the Company exercised its option to purchase WBHT-FM in
Wilkes-Barre, Pennsylvania, and, on August 13, 1998, the Company entered into a
definitive purchase agreement to purchase WBHT for an approximate purchase price
of $1,200,000. The Company has operated WBHT under a local marketing agreement
since July 3, 1997. The acquisition will be accounted for using the purchase
method of accounting.
On September 18, 1998, the Company acquired the assets of an internet
service provider, Digitalplanet, L.C., in Salt Lake City, Utah for an aggregate
purchase price of $225,000. The acquisition was accounted for using the purchase
method of accounting.
On September 29, 1998, the Company acquired the assets of an internet
service provider, Internet Technology Systems, Inc., in Salt Lake City, Utah for
an aggregate purchase price of $1,535,000. The acquisition was accounted for
using the purchase method of accounting.
In September 1998, the agreement entered into by the Company to sell
substantially all of the assets of its two FM radio stations in Johnstown,
Pennsylvania and its two FM and two AM radio stations in State College,
Pennsylvania was terminated.
F-29
<PAGE> 162
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) PARENT COMPANY INITIAL PUBLIC OFFERING
On July 7, 1998, the Company's parent, Citadel Communications Corporation
("CCC"), consummated the initial public offering (the "IPO") of 6,880,796 shares
of its common stock at an initial public offering price of $16.00 per share. Of
such shares, 6,250,000 shares were sold by CCC and 630,796 shares were sold by
certain stockholders of CCC. On July 14, 1998, CCC sold an additional 1,032,119
shares of its common stock at the initial public offering price pursuant to the
exercise of the underwriters' over-allotment option. Total proceeds of the IPO,
including the shares issued under the over-allotment option, were $126,606,640,
of which total proceeds to CCC were $108,357,932, total proceeds to the selling
stockholders were $9,386,244 and total underwriting discounts and commissions
were $8,862,466.
(4) CITADEL LICENSE, INC. FINANCIAL DATA
The operations of Citadel License, Inc. ("Citadel License"), a wholly owned
subsidiary of the Company, include holding FCC licenses for all stations owned
by the Company and the amortization of these licenses. Citadel License has
guaranteed the 10 1/4% senior subordinated notes of the Company. The guarantee
is full, unconditional and joint and several. The separate financial statements
of Citadel License have not been presented because management of the Company has
determined they would not be material to investors. There are no costs or
expenses of Citadel License that are borne by Citadel Broadcasting Company.
The following is summary financial data for Citadel License:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------
(UNAUDITED)
<S> <C>
Balance Sheets:
Intangible assets, net (broadcast licenses)............... $159,727,372
------------
Total assets........................................... $159,727,372
============
Shareholder's equity...................................... 159,727,372
------------
Total liabilities and shareholder's equity............. $159,727,372
============
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1998
---------- ----------
(UNAUDITED)
<S> <C> <C>
Statements of Operations:
Amortization expense............................... $2,873,989 $8,375,335
---------- ----------
Net loss...................................... $2,873,989 $8,375,335
========== ==========
</TABLE>
At present, Citadel License is the only subsidiary of the Company.
(5) SUBSEQUENT EVENTS
On October 8, 1998, the Company sold the assets of its one AM and three FM
stations in Quincy, Illinois for $2,250,000. A gain of approximately $0.8
million was recognized on the sale.
On October 9, 1998, the Company agreed to purchase the assets of 62nd
Street Broadcasting of Saginaw, L.L.C. in Saginaw, Michigan for an approximate
purchase price of $35,000,000. The acquisition will be accounted for using the
purchase method of accounting.
On October 15, 1998, the Company acquired the assets of an internet service
provider, In Quo, in Salt Lake City, Utah for an aggregate purchase price of
approximately $550,000. The acquisition was accounted for using the purchase
method of accounting.
F-30
<PAGE> 163
CITADEL BROADCASTING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On October 26, 1998, the Company acquired the assets of an internet service
provider, The Johnson Connection, in Salt Lake City, Utah for an aggregate
purchase price of $320,000. The acquisition was accounted for using the purchase
method of accounting.
On October 29, 1998, the Company agreed to purchase WHYL-AM and WHYL-FM in
Carlisle, Pennsylvania for an approximate purchase price of $4,250,000. The
acquisition will be accounted for using the purchase method of accounting.
On November 5, 1998, the Company agreed to purchase the stock and warrants
of Citywide Communications, Inc., which owns radio stations in Baton Rouge and
Lafayette, Louisiana, for an approximate purchase price of $34,500,000. The
acquisition will be accounted for using the purchase method of accounting.
On November 17, 1998, the Company acquired radio station KAAY-AM in Little
Rock, Arkansas for a purchase price of $5,100,000. The acquisition will be
accounted for using the purchase method of accounting. In conjunction with this
acquisition, the Company sold the assets of KRNN-AM in Little Rock, Arkansas for
$200,000.
The Company sold $115,000,000 million principal amount of its 9 1/4% Senior
Subordinated Notes due 2008 on November 19, 1998 in order to finance certain
acquisitions, repay certain indebtedness and provide cash for working capital
purposes.
On November 23, 1998, the Company agreed to purchase the assets of Wicks
Radio Group, which owns radio Stations in Charleston, South Carolina,
Binghamton, New York, and Muncie and Kokomo, Indiana, for an approximate
purchase price of $77,000,000. The acquisition will be accounted for using the
purchase method of accounting.
On December 8, 1998, the Company acquired the assets of an internet service
provider, The Friendly Net, LLC, in Salt Lake City, Utah for an aggregate
purchase price of $93,000. The acquisition was accounted for using the purchase
method of accounting.
F-31
<PAGE> 164
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Deschutes River Broadcasting, Inc.:
We have audited the accompanying consolidated balance sheets of Deschutes
River Broadcasting, Inc. and subsidiaries as of December 31, 1995 and 1996, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Deschutes
River Broadcasting, Inc. and subsidiaries as of December 31, 1995 and 1996, and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Portland, Oregon
February 14, 1997
F-32
<PAGE> 165
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ -- $ 823,968
Accounts receivable, less allowance for doubtful accounts
of $49,952 and $122,714 at December 31, 1995 and 1996,
respectively........................................... 1,283,847 1,856,984
Prepaid expenses and other current assets................. 238,868 367,621
Current portion of note receivable........................ -- 156,000
----------- -----------
Total current assets................................... 1,522,715 3,204,573
Intangible assets, net (note 4)............................. 5,281,109 14,142,899
Long-term portion of note receivable........................ -- 143,000
Property and equipment, net (notes 3 and 5)................. 3,606,655 3,153,930
Deposits.................................................... 6,542 3,026
----------- -----------
$10,417,021 $20,647,428
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft............................................ $ 23,133 $ --
Line of credit (notes 7 and 13)........................... 418,168 --
Accounts payable.......................................... 185,071 467,873
Accrued compensation and commissions...................... 313,734 542,502
Other accrued expenses.................................... 128,510 147,985
Current portion of long-term debt (notes 7 and 13)........ 485,983 --
Accrued interest payable (notes 6, 12 and 13)............. 335,501 255,001
----------- -----------
Total current liabilities.............................. 1,890,100 1,413,361
Advance (note 13)........................................... -- 9,123,310
Note payable (notes 6 and 13)............................... -- 8,867,000
Long-term debt, less current portion (notes 7 and 13)....... 2,886,033 --
Subordinated notes payable (notes 7, 12 and 13)............. 3,156,998 --
Other long-term liabilities................................. 38,751 47,735
----------- -----------
Total liabilities................................. 7,971,882 19,451,406
----------- -----------
Stockholders' equity (notes 9 and 13):
Convertible preferred stock, authorized 5,000,000 shares;
issued at stated value of $1 per share:
Series A preferred, no par value, issued and
outstanding 643,000 shares............................ 643,000 643,000
Series B preferred, no par value, issued and
outstanding 1,612,000 shares.......................... 1,612,000 1,612,000
Series C preferred, no par value, issued and
outstanding 592,000 shares............................ 592,000 592,000
Series D preferred, no par value, issued and
outstanding 95,000 shares............................. 95,000 95,000
(Aggregate liquidation preference of $3,172,962 and
$3,426,798 at December 31, 1995 and 1996,
respectively)
Common stock, authorized 10,000,000 shares; no par value;
-0- and 1,096,902 shares issued and outstanding at
December 31, 1995 and 1996, respectively............... -- 136,471
Accumulated deficit....................................... (496,861) (1,882,449)
----------- -----------
Total stockholders' equity........................ 2,445,139 1,196,022
----------- -----------
Commitments and contingencies (notes 9, 10, 12 and 13)...... $10,417,021 $20,647,428
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-33
<PAGE> 166
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Revenues:
Net broadcasting revenues................................. $6,845,107 $ 8,843,074
---------- -----------
Operating expenses:
Station operating expenses:
Selling, promoting, programming and engineering........ 4,053,145 5,554,632
General and administrative............................. 1,297,835 1,780,584
Corporate general and administrative expenses............. 374,158 488,831
Management fees (note 12)................................. 171,128 215,938
Depreciation and amortization............................. 765,200 1,173,349
---------- -----------
Income (loss) from operations..................... 183,641 (370,260)
---------- -----------
Nonoperating income (expenses):
Interest expense (notes 12 and 13)........................ (656,897) (1,143,893)
Gain on sale of assets.................................... -- 97,097
Other, net................................................ 1,591 30,162
Net trade income (expense)................................ (22,934) 1,306
---------- -----------
Nonoperating expenses, net........................ (678,240) (1,015,328)
---------- -----------
Loss before income taxes.......................... (494,599) (1,385,588)
Income taxes (note 11)...................................... -- --
---------- -----------
Net loss.......................................... $ (494,599) $(1,385,588)
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-34
<PAGE> 167
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK NOTE TOTAL
---------------------- --------------------- ACCUMULATED RECEIVABLE -- STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT DEFICIT OFFICER EQUITY
--------- ---------- --------- --------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994.................... 643,000 $ 643,000 102,000 $ 102,000 $ (2,262) $(42,000) $ 700,738
Repayment of note
receivable -- officer... -- -- -- -- -- 42,000 42,000
Issuance of common
stock................ -- -- 95,000 95,000 -- -- 95,000
Conversion of common
stock to preferred
stock................ 197,000 197,000 (197,000) (197,000) -- -- --
Issuance of preferred
stock................ 2,102,000 2,102,000 -- -- -- -- 2,102,000
Net loss................ -- -- -- -- (494,599) -- (494,599)
--------- ---------- --------- --------- ----------- -------- -----------
Balance, December 31,
1995.................... 2,942,000 2,942,000 -- -- (496,861) -- 2,445,139
Issuance of common
stock................ -- -- 91,649 126,419 -- -- 126,419
Exercise of common stock
warrants............. -- -- 1,005,253 10,052 -- -- 10,052
Net loss................ -- -- -- -- (1,385,588) -- (1,385,588)
--------- ---------- --------- --------- ----------- -------- -----------
Balance, December 31,
1996.................... 2,942,000 $2,942,000 1,096,902 $ 136,471 $(1,882,449) $ -- $ 1,196,022
========= ========== ========= ========= =========== ======== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-35
<PAGE> 168
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (494,599) $(1,385,588)
----------- -----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 314,319 388,284
Amortization........................................... 450,881 785,065
Increase in allowance for doubtful accounts............ 33,500 72,762
Gain on sale of assets................................. -- (97,097)
Changes in assets and liabilities, net of effect of
acquisitions:
Increase in accounts receivable...................... (1,150,810) (645,898)
Increase in prepaid expenses and other current
assets.............................................. (86,257) (100,767)
Increase in accounts payable and accrued expenses.... 414,911 315,973
Increase (decrease) in accrued interest payable...... 314,800 (59,287)
----------- -----------
Net cash used in operating activities............. (203,255) (726,553)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of assets.............................. -- 1,150,000
Capital expenditures for property and equipment........... (171,177) (237,305)
Capital expenditures for property and equipment related to
acquisitions........................................... (2,898,359) (744,717)
Purchase of intangible assets............................. (5,072,508) (9,532,047)
Purchase of note receivable............................... -- (273,416)
Other..................................................... 11,454 2,340
----------- -----------
Net cash used in investing activities............. (8,130,590) (9,635,145)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of note payable.................... -- 8,867,000
Proceeds from advance..................................... -- 9,123,310
Increase (decrease) in bank overdraft..................... 22,992 (23,133)
Proceeds from note receivable--officer.................... 42,000 --
Proceeds from issuance of long-term debt.................. 3,306,000 --
Principal payments on long-term debt...................... (284,649) (3,372,016)
Proceeds from issuance of subordinated debt............... 2,710,998 2,600,000
Principal payments on subordinated debt................... -- (5,756,998)
Net borrowings under line of credit....................... 315,719 (418,168)
Proceeds from exercise of common stock warrants........... -- 10,052
Proceeds from issuance of preferred stock................. 2,197,000 --
Proceeds from issuance of common stock.................... -- 126,419
Increase in other long-term liabilities................... 23,785 29,200
----------- -----------
Net cash provided by financing activities......... 8,333,845 11,185,666
----------- -----------
Net increase in cash and cash equivalents......... -- 823,968
Cash and cash equivalents, beginning of year................ -- --
----------- -----------
Cash and cash equivalents, end of year...................... $ -- $ 823,968
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 321,396 $ 1,244,393
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-36
<PAGE> 169
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
(1) NATURE OF BUSINESS AND ORGANIZATION
Deschutes River Broadcasting, Inc. was formed in 1994 and is a holding
company which wholly-owns eight subsidiaries located in Oregon, Washington and
Montana. The subsidiaries own and operate radio stations and hold Federal
Communications Commission (FCC) licenses.
The subsidiary companies which own and operate radio stations are Deschutes
River Broadcasting of Oregon, Inc., Deschutes River-Tri-Cities Operating
Company, Inc., Deschutes River Broadcasting of Billings, Inc. and Deschutes
River Broadcasting of Bozeman, Inc. The subsidiary companies which hold FCC
licenses are DRB Oregon License, Inc., Deschutes River-Tri-Cities Broadcasting,
Inc., DRB Billings License, Inc. and DRB Bozeman License, Inc.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany items
and transactions have been eliminated in consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(c) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
note receivable, accounts payable and other accrued expenses, accrued interest,
advance, note payable and the line of credit approximate fair value because of
the short-term or intercompany nature of these instruments.
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
(d) Cash and Cash Equivalents
The Company considers all investments with a maturity of three months or
less at date of purchase to be a cash equivalent.
(e) Intangible Assets
Intangible assets are recorded at cost and amortized using the
straight-line method over the expected periods to be benefited, which range from
three to fifteen years. The Company assesses the recoverability of these
intangible assets by determining whether the balance can be recovered through
undiscounted future operating cash flows of the acquired asset. The amount of
asset impairment, if any, is measured based on
F-37
<PAGE> 170
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The assessment of the
recoverability of the asset will be impacted if estimated future operating cash
flows are not achieved.
(f) Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated lives of the respective assets, which
range from five to twenty years. Maintenance and repairs are charged to
operations as incurred.
(g) Revenue
Net broadcast revenue is presented net of agency commissions and is
recognized when the advertisements are broadcast.
(h) Trade Transactions
Revenue from trade transactions (advertising provided in exchange for goods
and services) is recognized as income when advertisements are broadcast and
trade expense is recognized when merchandise is consumed or services are
performed. An asset and liability are recorded at the fair market value of the
goods or services received.
(i) Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees", and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income disclosure for
employee stock option grants as if the fair-value-based method defined in SFAS
No. 123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS No. 123.
(j) Income Taxes
The Company accounts for taxes on the asset and liability method. Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Deferred income taxes are measured
using the enacted tax rates and laws that are anticipated to be in effect when
the differences are expected to reverse.
(k) Reclassifications
Certain 1995 amounts have been reclassified to conform with current year
presentation.
(3) ACQUISITIONS
During 1995, the Company acquired two stations in Medford, Oregon for
approximately $1.9 million and six stations in the Montana markets combined for
approximately $5.4 million. The acquisitions were accounted for by the purchase
method of accounting and, accordingly, the purchase price was allocated to
F-38
<PAGE> 171
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
property and equipment and intangible assets based on their fair values at the
date of acquisition. The purchase price, including acquisition costs of $564,000
was allocated as follows:
<TABLE>
<S> <C>
Property and equipment........................... $2,600,000
Intangible assets................................ 5,264,000
----------
$7,864,000
==========
</TABLE>
During 1996, the Company acquired ten new radio stations in various
markets. The acquisitions included three stations in Eugene, Oregon, four
stations in Medford, Oregon, two stations in Billings, Montana and one station
in Tri-Cities, Washington. The purchase prices were approximately $7.0 million,
$2.0 million, $1.35 million and $500,000, respectively.
The acquisitions were accounted for by the purchase method of accounting
and, accordingly, the purchase price was allocated to property and equipment,
intangible assets and payables based on their fair values at the date of
acquisition. The purchase price, including acquisition costs of $112,266 was
allocated as follows:
<TABLE>
<S> <C>
Property and equipment.......................... $ 806,000
Intangible assets............................... 10,206,028
Payables assumed................................ (49,762)
-----------
$10,962,266
===========
</TABLE>
During 1996, the Company disposed of three stations in Bozeman, Montana for
approximately $750,000. A gain of approximately $285,000 was recognized on the
sale.
The consolidated financial statements include the operating results of each
business from the date of acquisition. Pro forma unaudited consolidated
operating results of the Company and the acquired stations for the years ended
December 31, 1995 and 1996, assuming the acquisitions and dispositions had been
made as of January 1, 1995 and 1996, are summarized below:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Net broadcasting revenues......................... $11,316,910 $11,442,108
Income (loss) from operations..................... 423,053 (436,871)
Net loss.......................................... (1,188,707) (2,215,299)
</TABLE>
These pro forma results have been prepared for comparative purposes only
and include certain adjustments for operational expenses that the Company will
not incur in its operation of the stations, for interest expense that would have
been incurred to finance the purchases, additional depreciation expense based on
the fair market value of the property and equipment acquired, and the
amortization of intangibles arising from the transactions. The pro forma
financial information is not necessarily indicative of the results of operations
had the acquisitions and dispositions been consummated as of January 1, 1995 and
1996 or of future results of operations of the consolidated entities.
F-39
<PAGE> 172
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INTANGIBLE ASSETS, NET
Intangible assets, net are as follows at December 31:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ---------- -----------
<S> <C> <C> <C>
Goodwill.................................. 15 years $2,811,354 $ 5,037,425
FCC licenses.............................. 15 years 2,325,000 9,474,000
Covenants not to compete.................. 3-5 years 295,000 456,000
Organizational costs...................... 5 years 255,319 252,970
Deferred financing costs.................. Loan term 88,455 --
---------- -----------
5,775,128 15,220,395
Less accumulated amortization............. 494,019 1,077,496
---------- -----------
Intangible assets, net............... $5,281,109 $14,142,899
========== ===========
</TABLE>
(5) PROPERTY AND EQUIPMENT, NET
Property and equipment, net are as follows at December 31:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
------------- ---------- ----------
<S> <C> <C> <C>
Land................................. -- $ 312,764 $ 312,764
Buildings............................ 20 years 497,430 297,431
Leasehold improvements............... Life of lease 130,000 13,000
Tower and transmitter equipment...... 13 years 1,664,710 1,521,586
Vehicles............................. 5 years 13,260 28,724
Studio equipment..................... 7 years 1,089,163 1,153,715
Furniture and fixtures............... 5 - 7 years 236,859 352,179
---------- ----------
3,944,186 3,679,399
Less accumulated depreciation and
amortization....................... 337,531 525,469
---------- ----------
Property and equipment,
net...................... $3,606,655 $3,153,930
========== ==========
</TABLE>
(6) NOTE PAYABLE
During 1996, in contemplation of the merger discussed at note 13, the
Company obtained financing from Citadel Communications Corporation (CCC) in the
form of an $8.9 million note payable to assist in making current year
acquisitions (see note 3). The note bears interest at the higher of the Euro
dollar rate plus 300 basis points or 9% and is payable quarterly. Accrued
interest at December 31, 1996 was approximately $255,000. The note is secured by
the assets of the acquired stations and stock of the subsidiary corporations
that own the stations acquired with the note proceeds. The note payable was
required to be repaid by July 1, 1997 if the merger did not occur. On the date
of the merger, the note payable was reclassified as an intercompany liability,
therefore it is classified as a non-current liability at December 31, 1996.
F-40
<PAGE> 173
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) LINE OF CREDIT, LONG-TERM DEBT AND SUBORDINATED NOTES PAYABLE
At December 31, the Company had the following debt instruments outstanding:
<TABLE>
<CAPTION>
1995 1996
---------- ------
<S> <C> <C>
Line of credit, revolving; rate of prime plus 1.5%..... $ 418,168 $ --
Bank note payable; variable and fixed rates
of 8.5% to 10%....................................... 3,372,016 --
Subordinated notes payable; rate of 11%................ 3,156,998 --
---------- ------
Total........................................ $6,947,182 $ --
========== ======
</TABLE>
Borrowings under the line of credit and bank note payable were
collateralized by substantially all assets of the Company, excluding assets
discussed in note 6.
In contemplation of the merger discussed at note 13, all debt instruments
were paid off on December 31, 1996. As the instruments were paid off by December
31, 1996, the Company did not have to comply with any financial covenants at or
for the year then ended.
(8) LEASES
The Company and its subsidiaries are obligated under certain noncancelable
operating leases for which future minimum payments are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1997...................................................... $ 309,542
1998...................................................... 243,062
1999...................................................... 207,604
2000...................................................... 189,175
2001...................................................... 176,279
Subsequent to 2001........................................ 379,705
----------
$1,505,367
==========
</TABLE>
Rental expense, principally for office space, equipment and tower rentals,
amounted to $145,000 and $278,000 for the years ended December 31, 1995 and
1996.
(9) STOCKHOLDERS' EQUITY
Conversion of Stock at Time of Merger
As discussed in note 13, all equity instruments of the Company; preferred
stock, common stock and stock options, were converted into CCC equity
instruments on January 1, 1997, the merger date.
Convertible Preferred Stock
Each share of Deschutes River Broadcasting Series A, B, C and D preferred
stock is convertible at any time into common stock on a one-for-one basis
(subject to certain adjustments). Conversion of each series of preferred stock
is automatic upon the exchange of 51% or more of each series of preferred stock
into common stock.
Dividends are payable when and as declared by the Board of Directors and
are not cumulative. Dividends must be first paid on preferred stock before
amounts are paid on common stock. No dividends were declared or paid during 1995
or 1996.
F-41
<PAGE> 174
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Upon liquidation, dissolution, or winding up of the Company, holders of
convertible preferred stock have preference and priority over common shares for
payment out of the assets of the Company or proceeds thereof available for
distribution to stockholders of $1 per share plus a liquidation preference,
which accrues at an annual compounded rate of 8%.
Common Stock
At December 31, 1995 and 1996, the Company had reserved shares of common
stock for issuance as follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Conversion of preferred stock....................... 2,942,000 2,942,000
Issuance of warrants................................ 1,005,253 --
Issuance to employees, officers, directors and
consultants under stock incentive plan............ 708,843 708,843
--------- ---------
4,656,096 3,650,843
========= =========
</TABLE>
Stock Incentive Plan
During 1995, the Company adopted a Stock Incentive Plan (the Plan) for
selected employees, officers, directors and consultants. Under the terms of the
Plan, the option price is determined by the Board of Directors (the Board) at
the time the option is granted. The options generally expire ten years from date
of grant and are exercisable as determined by the Board. At December 31, 1995,
no shares had been granted under the Plan.
During 1996, the Company granted 246,569 options at $.60 and 332,926
options at $2.10. None of the options were exercised during the current year.
The options generally are either 100% vested at the time of grant or become 100%
vested at the time of a merger (see note 13). At December 31, 1996, 579,495
options were outstanding at a weighted average exercise price of $1.46, of which
238,095 options with an exercise price of $2.10 were exercisable.
During 1995, the Financial Accounting Standards Board issued "Accounting
for Stock-Based Compensation" (SFAS 123) which defines a fair value based method
of accounting for an employee stock option and similar equity instruments.
As permitted under SFAS 123, the Company has elected to continue to account
for its stock-based compensation plans under APB Opinion No. 25. The Company has
computed, for pro forma disclosure purposes, the value of all options granted
during 1996 using the minimum value method as prescribed by SFAS 123 using the
following assumptions for grants:
<TABLE>
<S> <C>
Risk-free interest rate..................... 6.04%
Expected dividend yield..................... 0%
Expected lives.............................. 5 years
</TABLE>
Using the minimum value methodology, the total value of options granted
during 1996 was $223,000 which would be amortized on a pro forma basis over the
vesting period of the options (one to five years). The weighted average fair
value per share of options granted during 1996 was $.38. If the Company had
F-42
<PAGE> 175
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounted for its stock-based compensation plans in accordance with SFAS 123,
the Company's net loss would approximate the pro forma disclosure below for the
year ended December 31, 1996:
<TABLE>
<CAPTION>
AS PRO
REPORTED FORMA
---------- ----------
<S> <C> <C>
Net loss.................................. $1,385,588 $1,534,861
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure is not
indicative of future amounts.
Warrants
During 1995, the Company granted 1,005,253 warrants to purchase common
stock to subordinated debt holders at a price of $.01. All warrants granted in
1995 were exercised in 1996 for 1,005,253 shares of common stock. Management
determined that the value associated with these warrants at the date of grant
was not material.
During 1996, the Company granted 290,381 warrants to purchase common stock
to subordinated debt holders at a price of $.01. The warrants were to become
exercisable on January 1, 1997 if the warrant holders' portion of the
subordinated debt was not repaid by December 31, 1996. Due to the contingent
nature of these warrants, no value was assigned at the grant date. These
warrants expired on December 31, 1996, when the subordinated debt was repaid
(see notes 7 and 13).
(10) SALARY SAVINGS AND RETIREMENT PLAN
The Company has a salary savings and retirement plan. The plan covers
primarily all officers and employees of the Company who meet prescribed age and
service requirements. Employees may contribute up to 15% of their compensation.
Matching contributions are determined at the discretion of the Board of
Directors. There were no Company contributions made to the plan during the years
ended December 31, 1995 or 1996.
(11) INCOME TAXES
No income tax benefit was recorded by the Company in 1995 and 1996. Income
tax benefit for the year ended December 31, 1996 differed from the amounts
computed by applying the U.S. Federal income tax rate of 34% to pretax income
primarily due to an increase in the valuation allowance.
F-43
<PAGE> 176
DESCHUTES RIVER BROADCASTING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1996 are presented below:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Federal and state net operating loss carryforwards........ $246,553 $912,219
Allowance for doubtful accounts........................... 19,160 48,983
Payroll accrual........................................... 21,403 2,100
-------- --------
Total gross deferred tax assets................... 287,116 963,302
Less valuation allowance.................................. 190,338 735,645
-------- --------
Net deferred tax assets........................... 96,778 227,657
-------- --------
Deferred tax liabilities:
Book versus tax basis accumulated depreciation............ 96,778 227,657
-------- --------
Total gross deferred tax liabilities.............. 96,778 227,657
-------- --------
Net deferred tax asset............................ $ -- $ --
======== ========
</TABLE>
As of December 31, 1996, the Company had a consolidated net operating loss
carryforward of approximately $2,280,000 for consolidated federal income tax
reporting purposes available to offset future taxable income through the year
2011. Based on the Company's history of operating losses, the more likely than
not criteria for recognizing the tax benefit primarily associated with the net
operating losses cannot be met and, therefore, the Company has recorded a
valuation allowance to the extent of net deferred tax assets.
(12) RELATED PARTY TRANSACTIONS
The preferred stockholders are considered related parties of the Company.
At December 31, 1995, the Company had approximately $3.2 million in notes
payable to subordinated debt holders and $308,000 in accrued interest payable.
During 1996, the Company borrowed an additional $2.6 million in subordinated
debt from the preferred stockholders. Interest expense on the subordinated debt
for fiscal 1995 and 1996 was $308,000 and $548,000, respectively.
One of the preferred stockholders provides certain management services to
the Company. Management fees accrued at December 31, 1995 and 1996 were
approximately $21,000 and $48,000 and expense for the years then ended was
approximately $171,000 and $216,000, respectively.
As part of the merger discussed in note 13, all subordinated debt and
accrued interest was repaid and management services will no longer be provided
to the Company.
(13) SUBSEQUENT EVENTS
The Company was merged with and into a wholly-owned subsidiary of CCC
effective 12:01 a.m. on January 1, 1997. Effective with the merger, the Company
(and its wholly-owned subsidiaries) ceased to exist. All of the Company's equity
instruments, preferred stock, common stock and stock options, existing at
December 31, 1996, were converted into CCC equity instruments at the conversion
multiple defined in the merger agreement, at a per share conversion rate of
.1222948. All options outstanding at December 31, 1996 became fully vested at
the time of the merger. To effectuate the merger, CCC made an advance to the
Company of approximately $9.1 million on December 31, 1996 to pay off
subordinated debt, line of credit, long-term debt and other accrued expenses of
the Company. The advance is considered a non-current liability at December 31,
1996 as the obligation was reclassified as an intercompany liability on the date
of the merger.
F-44
<PAGE> 177
LOGO
---------------------------------------------
500 One PPG Place Telephone: (412) 338-7200
Pittsburgh, Pennsylvania 15222-5401
Facsimile: (412) 338-7380
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Tele-Media Broadcasting Company:
We have audited the accompanying consolidated balance sheets of Tele-Media
Broadcasting Company and its partnership interests (collectively, the
"Companies" -- see Note 1) as of December 31, 1995 and 1996, and the related
consolidated statements of operations, deficiency in net assets and cash flows
for each of the three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Companies as of December
31, 1995 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements, at
December 31, 1996, the Companies were not in compliance with the terms of a debt
agreement.
/s/ Deloitte & Touche LLP
March 28, 1997
LOGO
F-45
<PAGE> 178
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,904,258 $ 2,343,395
Accounts receivable:
Nonbarter--less allowance for doubtful accounts of
$531,000 and $612,000................................. 4,599,032 5,262,484
Barter--net............................................... 363,394 304,244
Other current assets...................................... 157,998 739,831
----------- -----------
Total current assets................................... 7,024,682 8,649,954
----------- -----------
Property, plant and equipment:
Land...................................................... 1,372,571 1,372,571
Buildings and improvements................................ 2,357,447 2,369,520
Broadcasting equipment.................................... 10,653,182 11,169,533
----------- -----------
14,383,200 14,911,624
Less accumulated depreciation............................. 6,916,068 8,259,285
----------- -----------
Property, plant and equipment--net..................... 7,467,132 6,652,339
----------- -----------
Intangibles--Net of accumulated amortization................ 29,036,404 26,904,288
----------- -----------
Other noncurrent assets..................................... 95,641 16,331
----------- -----------
$43,623,859 $42,222,912
=========== ===========
LIABILITIES AND DEFICIENCY IN NET ASSETS
Current liabilities:
Accounts payable and other accrued expenses............... $ 1,466,387 $ 2,019,269
Accrued interest.......................................... 999,880 1,895,889
Accrued sales commissions................................. 330,561 358,513
Amounts due to affiliates--net............................ 2,057,456 2,818,179
Current portion of long-term debt......................... 3,106,208 37,528,396
----------- -----------
Total current liabilities.............................. 7,960,492 44,620,246
----------- -----------
Long-term liabilities:
Long-term debt--less current portion...................... 64,417,869 32,382,419
Other..................................................... 32,772 31,266
----------- -----------
Total long-term liabilities............................ 64,450,641 32,413,685
----------- -----------
Redeemable stock warrants................................... 750,950 1,644,000
----------- -----------
Deficiency in net assets:
Common stock, voting, $0.01 par value per share; 25,000
shares authorized, 15,000 shares outstanding........... 150 150
Common stock, nonvoting, $0.01 par value per share; 10,000
shares authorized, none outstanding.................... -- --
Additional paid-in capital................................ 6,924,445 6,924,445
Deficit................................................... (36,462,819) (43,379,614)
----------- -----------
Deficiency in net assets............................... (29,538,224) (36,455,019)
----------- -----------
$43,623,859 $42,222,912
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-46
<PAGE> 179
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Local advertising................................. $17,637,256 $18,539,201 $20,968,055
National advertising.............................. 4,867,471 4,957,359 4,618,104
Barter............................................ 3,561,009 3,646,290 3,451,849
Other............................................. 576,607 511,827 370,932
----------- ----------- -----------
26,642,343 27,654,677 29,408,940
Less agency commissions........................... 2,648,183 2,811,738 2,984,574
----------- ----------- -----------
Net revenues.............................. 23,994,160 24,842,939 26,424,366
----------- ----------- -----------
Selling, general and administrative, programming,
barter and technical expenses:
Selling........................................ 4,719,103 5,154,097 5,001,176
General and administrative..................... 3,552,604 4,088,306 4,674,883
Programming.................................... 3,882,737 4,391,676 4,858,386
Barter......................................... 3,485,969 3,520,426 3,513,231
Technical...................................... 176,459 224,975 245,524
----------- ----------- -----------
15,816,872 17,379,480 18,293,200
----------- ----------- -----------
Operating income before management fees and
depreciation and amortization..................... 8,177,288 7,463,459 8,131,166
----------- ----------- -----------
Management fees and depreciation and amortization:
Management fees -- affiliates..................... 844,579 741,876 804,410
Depreciation and amortization..................... 4,690,730 3,708,809 3,493,509
----------- ----------- -----------
5,535,309 4,450,685 4,297,919
----------- ----------- -----------
Operating income.................................... 2,641,979 3,012,774 3,833,247
Interest expense.................................... 6,093,333 9,132,133 10,750,042
----------- ----------- -----------
Loss before extraordinary item...................... (3,451,354) (6,119,359) (6,916,795)
Extraordinary item -- Loss on extinguishment of
debt.............................................. (1,341,348) -- --
----------- ----------- -----------
Net loss.................................. $(4,792,702) $(6,119,359) $(6,916,795)
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-47
<PAGE> 180
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENTS OF DEFICIENCY IN NET ASSETS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------- PAID-IN
SHARES AMOUNT CAPITAL DEFICIT
------ ------ ---------- ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994................................. 2,000 $ 20 $7,125,383 $(25,550,758)
Stock dividend......................................... 13,000 130 (130) --
Capital contributions -- cash.......................... -- -- 1,000 --
Distributions.......................................... -- -- (400,000) --
Contribution of management fees -- affiliates.......... -- -- 198,192 --
Net loss............................................... -- -- -- (4,792,702)
------ ---- ---------- ------------
Balance, December 31, 1994............................... 15,000 150 6,924,445 (30,343,460)
Net loss............................................... -- -- -- (6,119,359)
------ ---- ---------- ------------
Balance, December 31, 1995............................... 15,000 150 6,924,445 (36,462,819)
Net loss............................................... -- -- -- (6,916,795)
------ ---- ---------- ------------
Balance, December 31, 1996............................... 15,000 $150 $6,924,445 $(43,379,614)
====== ==== ========== ============
</TABLE>
See notes to consolidated financial statements.
F-48
<PAGE> 181
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(4,792,702) $(6,119,359) $(6,916,795)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 4,690,730 3,708,809 3,493,509
Interest deferral...................................... 1,343,351 5,114,170 4,932,565
Amortization of loan origination fees.................. -- 311,916 300,795
Management fees--affiliates............................ 198,192 741,876 804,410
Provision for losses on accounts receivable............ 376,732 367,522 387,291
Loss on write-off of intangible assets................. 159,431 -- --
Net barter transactions................................ (75,040) (125,864) 61,382
Increase in fair value of redeemable stock warrants.... -- -- 893,050
Other.................................................. 90,867 (36,420) (78,760)
Changes in operating assets and liabilities:
Accounts receivable--nonbarter....................... (437,520) (938,846) (1,050,743)
Other current assets................................. (249,489) 233,807 (581,833)
Accounts payable and other accrued expenses.......... (96,561) 281,957 552,882
Affiliates activity--net............................. 1,148,600 (407,409) (43,687)
Accrued interest..................................... 35,113 136,081 896,009
Accrued sales commissions............................ (38,885) (6,891) 27,952
----------- ----------- -----------
Net cash provided by operating activities......... 2,352,819 3,261,349 3,678,027
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures...................................... (428,423) (520,440) (468,631)
Purchase of radio stations................................ (1,900,000) (5,100,000) (65,000)
Other..................................................... (4,809) 6,124 6,000
----------- ----------- -----------
Net cash used in investing activities............. (2,333,232) (5,614,316) (527,631)
----------- ----------- -----------
Cash flows from financing activities:
Capital contributions..................................... 1,000 -- --
Borrowings................................................ 61,334,446 5,433,347 95,144
Payments of long-term debt................................ (57,323,706) (2,932,546) (2,640,971)
Loan origination fees and other intangible assets......... (2,668,295) (271,271) (163,764)
Sale of redeemable stock warrants......................... 750,950 -- --
Distributions to stockholders............................. (400,000) -- --
Other..................................................... (12,180) (2,178) (1,668)
----------- ----------- -----------
Net cash provided by (used in) financing
activities...................................... 1,682,215 2,227,352 (2,711,259)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........ 1,701,802 (125,615) 439,137
Cash and cash equivalents, beginning of year................ 328,071 2,029,873 1,904,258
----------- ----------- -----------
Cash and cash equivalents, end of year...................... $ 2,029,873 $ 1,904,258 $ 2,343,395
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-49
<PAGE> 182
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND BUSINESS
Tele-Media Broadcasting Company (the "Company" or "TMBC") was incorporated
in 1988 under the name TMZ Broadcasting Company ("TMZ"). In April 1994, TMZ
changed its name to Tele-Media Broadcasting Company. Robert E. Tudek and Everett
I. Mundy each own 50% of the outstanding shares of TMBC. TMBC operates radio
stations principally in midsize markets in the eastern United States and in
Illinois.
In May 1989, TMZ acquired all of the outstanding common stock of Eastern
Broadcasting Company ("Eastern") and its wholly-owned subsidiaries: Lehigh
Valley Broadcasting ("Lehigh"), Penn Broadcasting Corporation ("Hershey"),
Providence Broadcasting Corporation ("Providence"), Quincy Communications
Corporation ("Quincy") and State College Communications Corporation ("State
College"). TMZ retained the assets acquired from State College and contributed
the assets acquired from the remaining subsidiaries of Eastern to limited
partnerships with the same names which TMZ had formed to facilitate the
acquisition. TMZ owned between a 95% and 99% general partnership interest in
each of the limited partnerships. With the exception of Quincy, the limited
partnership interests were owned by the shareholders of TMZ and employees of the
Companies (hereinafter defined). The limited partnership interest in Quincy (1%)
was owned by Tele-Media Holding Corporation ("Holding"), which is owned by
Messrs. Tudek and Mundy.
In April 1993, Messrs. Tudek and Mundy formed Tele-Media Broadcasting
Company of America ("America Corporation"), which purchased substantially all of
the assets of two radio stations in Rhode Island, WPRO(AM) and WPRO-FM, for
approximately $6 million, and in May 1993 formed Tele-Media Broadcasting Company
of Johnstown/Altoona ("Johnstown/Altoona Corporation"), which purchased all of
the common stock of Cambria County Broadcasting Company ("CCBC"). CCBC operated
radio station WIYQ(FM). Simultaneous with the purchase, CCBC was merged into
Johnstown/Altoona Corporation with Johnstown/Altoona Corporation being the
surviving corporation. WIYQ(FM)'s call letters were subsequently changed to
WQKK-FM.
In April 1994, Tele-Media Broadcasting Company of Cambria County ("Cambria
County Corporation") was formed by the shareholders of TMBC. Cambria County
Corporation purchased substantially all of the assets of a radio station,
WGLU(FM), in the Johnstown, PA market for approximately $1.9 million.
In June 1994, the companies were restructured in order to facilitate a
refinancing (see Note 4). In order to accomplish the restructuring, Tele-Media
Broadcasting Operating Company Limited Partnership ("Tele-Media Operating") was
formed by TMBC. Holding distributed its 1% limited partnership interest in
Quincy to the shareholders of TMBC. TMBC contributed its general partnership
interests in Lehigh, Hershey, Providence and Quincy to Tele-Media Operating. The
shareholders of TMBC contributed all of their limited partnership interests in
Lehigh, Hershey and Quincy to TMBC. TMBC contributed all of its limited
partnership interest in Lehigh and all but 1% of its limited partnership
interest in Hershey and Quincy to Tele-Media Operating. These limited
partnership interests were, by virtue of an amendment to the respective
partnership agreements, converted into general partnership interests. Tele-Media
Broadcasting Company of America Limited Partnership ("America LP"), Tele-Media
Broadcasting Company of Johnstown/Altoona Limited Partnership
("Johnstown/Altoona LP"), Tele-Media Broadcasting Company of State College
Limited Partnership ("State College LP") and Tele-Media Broadcasting Company of
Cambria County Limited Partnership ("Cambria County LP") were formed by
Tele-Media Operating, and America Corporation, Johnstown/Altoona Corporation and
Cambria County Corporation were merged with and into TMBC and the assets were
then contributed to Tele-Media Operating which in turn conveyed them to the
limited partnerships by the same names. TMBC then transferred all of the assets
acquired in the State College acquisition to Tele-Media Operating which in turn
conveyed them to State College LP.
F-50
<PAGE> 183
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
After the restructuring, TMBC owned a 99% general partnership interest in
Tele-Media Operating, and Tele-Media Operating owned between a 95% and 99%
general partnership interest in the following limited partnerships: Lehigh,
Hershey, Providence, Quincy, State College LP, America LP, Johnstown/Altoona LP
and Cambria County LP (collectively, the "Companies").
In March 1995, Quincy purchased substantially all of the assets of WZLZ-FM
for approximately $367,000 and the call letters were subsequently changed to
WMOS-FM. This acquisition was financed primarily with unsecured seller debt.
During 1994, Tele-Media Operating formed Tele-Media Broadcasting Company of
York Limited Partnership ("York LP"), of which Tele-Media Operating is 99%
general partner and TMBC is 1% limited partner. On May 1, 1995, the Companies
entered into Local Marketing Agreements ("LMAs") to operate WQXA-AM, WQXA-FM and
WIKN-FM. In November 1995, York LP acquired substantially all the assets of
WQXA-AM and WQXA-FM for approximately $5 million. This acquisition was financed
with additional borrowings under the Amended Loan Agreement (see Note 4).
On August 1, 1996, the Companies entered into an LMA to operate WBLF-AM. In
October 1996, State College LP acquired substantially all the assets of WBLF-AM
for approximately $215,000 (including forgiveness of a note receivable from the
seller and cash paid of $65,000).
During 1996, Tele-Media Operating formed Tele-Media Broadcasting Company of
Wilkes Barre
/Scranton Limited Partnership ("Wilkes Barre LP") of which Tele-Media Operating
is 99% general partner and TMBC is 1% limited partner. On August 1, 1996 Wilkes
Barre LP entered into an asset purchase agreement to acquire WAZL-AM and WZMT-FM
and entered into an LMA to operate the stations. On December 1, 1996, TMBC
entered into an asset purchase agreement to acquire WARM-AM and WMGS-FM along
with the rights to purchase options for WBHT-FM, WKQV-FM and WKQV-AM, all of
which are located in the Wilkes-Barre market, and which were being operated
under LMAs and Joint Sales Agreements ("JSA's"). Subsequent to December 31,
1996, the Company consummated the acquisition of the assets of WAZL-AM and
WZMT-FM for approximately $3.5 million, which was financed with borrowings under
the Amended Loan Agreement. The Company expects to consummate the acquisition of
the assets of WARM-AM and WMGS-FM in 1997 for approximately $11 million to be
financed through additional borrowings under the Amended Loan Agreement. The
Company has made a nonrefundable escrow deposit of $550,000 related to this
acquisition. The escrow deposit is included in other current assets and will be
a reduction of the purchase price or, in the event the acquisition is not
consummated, paid to the seller.
The accompanying consolidated financial statements include the accounts of
TMBC and its partnership interests, including the acquisition of businesses from
their respective dates of purchase. All of the aforementioned acquisitions were
accounted for under the purchase method, and as such, the purchase price is
allocated among the assets and liabilities purchased based on their relative
fair market values at the date of acquisition. All material intercompany
transactions and balances have been eliminated in the consolidated financial
statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Cash and Cash Equivalents--For purposes of the consolidated statements
of cash flows, the Companies consider highly liquid investments with original
maturities of three months or less to be cash equivalents.
b. Property, Plant and Equipment--Property, plant and equipment, carried at
cost, is depreciated over the estimated useful lives of the related assets,
principally five to ten years. Depreciation is computed on the straight-line
method for financial statement purposes and on accelerated methods for federal
income tax
F-51
<PAGE> 184
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purposes. Depreciation expense totaled $1,446,000, $1,499,000 and $1,358,000 for
the years ended December 31, 1994, 1995 and 1996, respectively.
c. Intangibles--Broadcast licenses are amortized over 20 years. Loan
origination fees and non-compete agreements are amortized over the terms of the
related agreements, and organization costs are amortized over five years. The
Companies write-off these assets and related accumulated amortization when the
assets become fully amortized.
d. Impairment of Long-Lived Assets--Management of the Companies reviews
long-lived assets (including property, plant and equipment and intangibles) for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Management considers the
undiscounted cash flow expected to be generated by the use of the asset and its
eventual disposition to determine when, and if, an impairment has occurred. Any
write-downs due to impairment are charged to operations at the time the
impairment is identified. During the year ended December 31, 1994, the Company
wrote-off loan origination fees with a net carrying value of approximately
$159,000 due to a refinancing of the debt. There were no such write-downs
required in 1995 or 1996.
e. Income Taxes--No provision for income taxes has been made for the
taxable income of the partnerships included in the consolidated financial
statements as income taxes are the responsibility of the partners. TMBC has
Subchapter S status for federal income tax purposes and, therefore, the
shareholders, rather than the Company, have the responsibility for federal
income taxes and for state income taxes in those states that recognize the
equivalent of Subchapter S status.
f. Revenue Recognition--Revenue is recognized as commercials are broadcast.
The Companies also enter into barter transactions in which advertising time is
traded for merchandise or services used principally for promotional and other
business purposes. Barter revenue is recorded as commercials are broadcast at
the estimated fair value of the air time. If merchandise or services are
received prior to the broadcast of commercials, recognition of the related
revenue is deferred and recognized as the commercials are broadcast.
g. Reclassifications--Certain reclassifications have been made to the 1994
and 1995 consolidated financial statements in order to conform to the 1996
presentation.
h. Use of Estimates in Preparation of the Consolidated Financial
Statements--The preparation of these consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of assets and
liabilities as of the date of the consolidated financial statements and the
reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
i. Local Marketing Agreements and Joint Sales Agreements--The Companies use
property, plant and equipment of the radio stations operated under LMAs and JSAs
in exchange for a fee. Under provisions of the Company's LMAs and JSAs, the
expenses of operating the stations (other than depreciation or amortization of
assets) are the obligations of the Companies, and they are entitled to the
revenues generated by the stations. Revenues and expenses related to these
agreements are reflected in the consolidated statements of operations. The
Companies have recorded fees in respect to these agreements of $63,750 for the
year ended December 31, 1996 within general and administrative expenses on the
consolidated statement of operations. No such costs were incurred in 1994 or
1995.
F-52
<PAGE> 185
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INTANGIBLES
Intangibles consist of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Broadcast licenses................................ $36,389,881 $36,440,231
Non-compete agreements............................ 1,487,500 265,000
Loan origination fees............................. 2,854,888 2,937,340
Organization costs................................ 250,387 284,633
----------- -----------
40,982,656 39,927,204
Less accumulated amortization..................... 11,946,252 13,022,916
----------- -----------
$29,036,404 $26,904,288
=========== ===========
</TABLE>
4. LONG-TERM DEBT AND REDEEMABLE STOCK WARRANTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Senior:
Borrowings under Amended Loan Agreement....... $36,383,700 $33,935,700
Discount Notes................................ 30,698,371 35,630,986
Other........................................... 442,006 344,129
----------- -----------
67,524,077 69,910,815
Less current portion............................ 3,106,208 37,528,396
----------- -----------
$64,417,869 $32,382,419
=========== ===========
</TABLE>
The significant provisions of the Amended and Restated Loan Agreement dated
February 26, 1997 (the "Amended Loan Agreement"), Senior Discount Notes (the
"Notes"), and the Redeemable Stock Warrants (the "Warrants") are discussed
below. The debt arrangements discussed in the preceding sentence were entered
into in connection with a refinancing in June 1994 of substantially all of the
debt then outstanding, resulting in an extraordinary loss on the extinguishment
thereof of approximately $1,341,000 during the year ended December 31, 1994.
AMENDED LOAN AGREEMENT
The Amended Loan Agreement permits borrowings of up to approximately $49
million. The remaining permitted borrowings under the Amended Loan Agreement
($16 million at February 26, 1997) were provided to finance the 1997 planned
acquisitions described in Note 1. The Amended Loan Agreement modified principal
and interest payments, and certain financial covenants and requires the payment
of additional fees to the Lender of $250,000 in 1997 and 1998 in the event of a
failure to meet the leverage covenant in either year. Prior to the amendment on
February 26, 1997, and at December 31, 1996, the Companies were not in
compliance with the provisions of the loan agreement then in effect.
Principal is payable in quarterly installments with any remaining principal
due April 1999. The Lender has the option to require the Companies to make an
additional principal payment of up to approximately $8.9 million in 1997 and
$21.4 million in 1998. Prior to the date of the Amended Loan Agreement, interest
was payable quarterly at the prime rate plus 2%, or at the Companies' option,
LIBOR plus 4.75%. At December 31, 1996, the interest rate was 10.25% (prime plus
2%). The Amended Loan Agreement requires interest payments quarterly. Interest
under the Amended Loan Agreement is charged at the prime rate plus
F-53
<PAGE> 186
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2%, or at the Companies' option, LIBOR plus 4.5%, on borrowings up to
approximately $44 million; interest on the next $5 million borrowed will be
charged at the prime rate plus 3.75%. The Amended Loan Agreement requires the
Companies to enter into a two year interest hedge contract on or before
September 30, 1997 in a notional amount not less than $25 million, providing
protection should the prime rate exceed the prime rate at the date the interest
hedge contract is entered into by 2.5%. A penalty of between 2% and 4% is
assessed on any principal prepayment.
Borrowings under the Amended Loan Agreement are collateralized by
substantially all of the assets and partnership interests of Tele-Media
Operating and its partnerships. The Amended Loan Agreement provides for, among
other things, limitations on distributions, indebtedness, mergers, sale and
purchase of assets, capital expenditures, payment of management fees and payment
of interest on the Notes, and requires the achievement of certain minimum cash
flow amounts.
SENIOR DISCOUNT NOTES
The Notes are due June 15, 2004 and were issued with an original issue
discount based on an interest rate of 16%. TMBC did not make interest payments
on the Notes due June 15, 1995, December 15, 1995 and June 15, 1996 and did not
consummate the Exchange Offer by the date as set forth in the original
Registration Rights Agreement (as defined below). Consequently, TMBC and the
Note holders amended the existing agreements to convert the amount of cash
interest payments then due ($2,509,000) plus penalties of approximately
$1,260,000 to notes payable and, in consideration of the conversion, the Note
holders waived TMBC's default. Under the terms of the Note Agreement, as amended
to include the notes issued in 1995 and 1996, interest of approximately $920,000
is payable semi-annually through June 15, 1999, and the remainder of the
interest is deferred and added to principal. After June 15, 1999, semi-annual
interest payments will be made at an annual rate of 16% of the accreted value of
the Notes. The accreted value of the Notes will approximate $47,811,000 at June
15, 1999.
TMBC did not make the required interest payment of $920,585 on the Notes
which was due on December 15, 1996, and consequently it is in default of the
Note Agreement. The holders of the Notes have the right to require immediate
payment of all amounts due under the Note Agreement. The total amount due under
the Note Agreement at December 31, 1996, which is classified as a current
obligation, was $35,630,986. The shareholders of TMBC have negotiated an
agreement to sell their stock in the Company. As part of the transaction, the
holders of the Notes will be paid an amount sufficient to satisfy all
outstanding claims against TMBC, including settlement of claims relating to the
redeemable stock warrants discussed below (see Note 6). In the event the sale is
not consummated, TMBC plans to enter into discussions with the Note holders to
convert the delinquent amount, plus any penalties, into a note payable. If the
Note holders refuse to agree to the conversion or another acceptable
alternative, TMBC intends to search for replacement financing.
Payment under the Notes is restricted by the Amended Loan Agreement.
Redemption of the Notes prior to their scheduled maturity is subject to
prepayment premiums. If a Qualified Public Offering is consummated by June 15,
1999, the Notes may be redeemed at TMBC's option for between 110% to 120% of the
Accreted Value of the Notes. After June 15, 1999, the Notes may be redeemed at
TMBC's option for $47,811,000 plus a premium of up to 8%, which declines ratably
through the date of maturity. In addition, if a Change of Control occurs, the
Note holders have the option to require TMBC to repurchase the Notes at 101% of
the Accreted Value.
The Notes are unsecured and restrict, among other things, the declaration
or payment of any dividends or any other distributions to shareholders, the
incurrence of additional debt, transactions with affiliates, payment of
management fees, formation of additional subsidiaries, mergers, sales of assets
and capital expenditures. Pursuant to a Registration Rights Agreement between
TMBC and the Purchasers, TMBC filed an Exchange
F-54
<PAGE> 187
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Offer Registration Statement (the "Registration Statement") with the Securities
and Exchange Commission on September 19, 1994. Under the terms of the Exchange
Offer the holders of the Notes may exchange the Old Notes for New Notes with
identical terms, except that the New Notes may be offered for resale, be resold
or otherwise transferred, under certain conditions by the holders without
compliance with the registration and prospectus delivery provisions of the
Securities Act of 1933. Pursuant to the terms of the Registration Rights
Agreement, as amended, if the Registration Statement does not become effective
by May 1, 1997, additional interest of 1% per annum will be charged from May 1,
1997 through December 1, 1997 and increase .5% each six months thereafter, not
to exceed an aggregate of 5% based on the Accreted Value of the Notes until the
Registration Statement becomes effective.
REDEEMABLE STOCK WARRANTS
The Warrants are exercisable at no additional cost to the Note holders for
between 3,750 and 5,290 shares of non-voting common stock representing 20% to
26% of the equity of TMBC, based on the achievement of certain levels of
Operating Cash Flow. The Warrant agreement provides registration rights to the
holders and restricts, among other things, the incurrence of additional debt,
payment of management fees, formation of additional subsidiaries, mergers, sale
of assets and distributions to stockholders. In addition, the Warrant holders
have put rights during the period from January 1, 2000 through March 31, 2000 or
upon a Change of Control, to require TMBC to redeem the Warrants for cash at
fair value.
The Warrants expire June 9, 2004 and are exercisable at any time on or
after January 1, 2000, or upon the occurrence of any of the following: the
conversion of TMBC to a Subchapter C corporation for federal income tax
purposes; an Initial Public Offering; a merger where TMBC is not the surviving
entity; a sale, lease, transfer or other disposition of all or substantially all
of the assets of TMBC or its subsidiaries; a liquidation or dissolution of TMBC;
or if Messrs. Tudek and Mundy own less than 50% of TMBC or a successor company.
Holders of the non-voting common stock will enter into a Registration
Rights Agreement providing them with unlimited piggy-back registration rights
and the right to participate in any Initial Public Offering. The non-voting
stock is convertible into voting common stock in connection with the sale of
shares in a public offering, in a brokers' transaction pursuant to Rule 144
under the Securities Act of 1933, and if, after conversion, the shareholder
would own 4.9% or less of the common stock. TMBC has reserved 10,000 shares of
non-voting stock and 10,000 shares of voting stock for exercise of the Warrants.
TMBC estimated the redemption price of the warrants at December 31, 1995
and 1996 as $750,950 and $7,000,000, respectively. Increases in the redemption
price are accounted for prospectively as an adjustment to periodic interest
expense from the date of the increase to January 1, 2000, the earliest date the
put can be exercised. The accreted value of the Warrants at December 31, 1995
and 1996, was $750,950 and $1,644,000, respectively, resulting in a charge to
interest expense for the year ended December 31, 1996 of $893,050. There was no
adjustment to interest expense for the years ended December 31, 1994 and 1995.
Minimum scheduled maturities of long-term debt during the next five years
considering the Amended Loan Agreement and the classification of the Notes as a
current liability resulting from the default are as follows:
<TABLE>
<S> <C>
1997........................................................ $37,528,000
1998........................................................ 2,595,000
1999........................................................ 33,744,000
2000........................................................ 19,000
2001........................................................ 3,000
</TABLE>
F-55
<PAGE> 188
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest paid on all debt in 1994, 1995 and 1996 was approximately
$4,616,000, $3,570,000 and $3,750,000, respectively.
5. OPERATING AGREEMENT WITH AFFILIATE
Under terms of an operating agreement entered into in June 1994, Tele-Media
Corporation of Delaware (an affiliate) ("Tele-Media Delaware") provides certain
management and technical services to the Companies and charges a management fee
of 3.5% of revenues. Payment of the management fee is restricted by the Notes
and the Amended Loan Agreement. The operating agreement expires on June 9, 2004
and continues from year-to-year thereafter unless either party gives written
notice to the other at least 30 days in advance of an expiration date.
Prior to the June 1994 operating agreement discussed above, Tele-Media
Delaware charged a management fee ranging from 3.5% to 7% of revenues. As
required by the provisions of the debt arrangements then outstanding as
discussed in Note 4, Messrs. Tudek and Mundy assumed responsibility for the
payment of certain management fees in 1994. The liabilities assumed by Messrs.
Tudek and Mundy are treated as additional paid-in capital in the consolidated
financial statements.
6. CONTINGENCIES AND COMMITMENTS
In 1995, TMBC and its shareholders entered into a nonbinding letter of
intent to sell the stock of TMBC. TMBC terminated the letter of intent and the
proposed buyer filed suit for damages and specific performance. A motion to
dismiss the suit was heard in early 1996 and the court ruled to dismiss a
majority of the claims, including those for specific performance, as no
definitive agreement had been reached for sale of the stock. On March 28, 1997,
the shareholders of TMBC executed an agreement to sell the stock of the Company
to the plaintiff in this suit. As part of this transaction, the suit was
dismissed with prejudice, and upon motion of the parties, the dismissal of the
suit was approved by the court. As a result of the suit's dismissal, this action
cannot again be filed by the plaintiff.
General and administrative expenses for the year ended December 31, 1995
and 1996 include approximately $274,000 and $260,000, respectively, of legal
expenses incurred relating to the defense of the lawsuit and the proposed sale.
The shareholders have agreed to pay 5.5% of the net proceeds from a sale of
their stock to two key members of management.
* * * * * *
F-56
<PAGE> 189
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,708,373
Accounts receivable:
Nonbarter--less allowance for doubtful accounts of
$800,000.............................................. 5,447,842
Barter--net............................................ 303,749
Other current assets...................................... 303,620
------------
Total current assets.............................. 9,763,584
------------
Property, plant and equipment--net.......................... 8,436,165
------------
Intangibles--net............................................ 38,326,412
------------
Other noncurrent assets..................................... 16,331
------------
$ 56,542,492
============
LIABILITIES AND DEFICIENCY IN NET ASSETS
Current liabilities:
Accounts payable and other accrued expenses............... $ 1,514,622
Accrued interest.......................................... 2,969,594
Amounts due to affiliates--net............................ 4,159,152
Current portion of long-term debt......................... 39,491,064
------------
Total current liabilities......................... 48,134,432
------------
Long-term liabilities:
Long-term debt--less current portion...................... 47,306,734
Other..................................................... 31,266
------------
Total long-term liabilities....................... 47,338,000
------------
Redeemable stock warrants................................... 7,000,000
------------
Deficiency in net assets:
Common stock, voting, $0.01 par value per share; 25,000
shares authorized, 15,000 shares outstanding........... 150
Common stock, nonvoting, $0.01 par value per share; 10,000
shares authorized, none outstanding.................... --
Additional paid-in capital................................ 6,924,445
Deficit................................................... (52,854,535)
------------
Deficiency in net assets.......................... (45,929,940)
------------
$ 56,542,492
============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-57
<PAGE> 190
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND CHANGES IN DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Revenues:
Local advertising......................................... $ 9,323,963 $ 12,557,493
National advertising...................................... 2,052,723 2,710,273
Barter.................................................... 1,697,415 2,357,519
Other..................................................... 222,507 339,431
------------ ------------
13,296,608 17,964,716
Less agency commissions................................... 1,346,551 1,723,832
------------ ------------
Net revenues...................................... 11,950,057 16,240,884
------------ ------------
Selling, general and administrative, programming, barter and
technical expenses:
Selling................................................... 2,441,926 3,287,451
General and administrative................................ 2,008,273 3,366,246
Programming............................................... 2,337,296 3,491,639
Barter.................................................... 1,697,415 2,357,519
Technical................................................. 127,977 176,110
------------ ------------
8,612,887 12,678,965
------------ ------------
Operating income before management fees and depreciation and
amortization.............................................. 3,337,170 3,561,919
------------ ------------
Management fees and depreciation and amortization:
Management fees--affiliates............................... 358,113 454,258
Depreciation and amortization............................. 2,092,858 2,207,660
------------ ------------
2,450,971 2,661,918
------------ ------------
Operating income............................................ 886,199 900,001
Interest expense............................................ 4,955,734 10,374,922
------------ ------------
Net loss.................................................... (4,069,535) (9,474,921)
Deficit, beginning of period................................ (36,462,819) (43,379,614)
------------ ------------
Deficit, end of period...................................... $(40,532,354) $(52,854,535)
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-58
<PAGE> 191
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(4,069,535) $ (9,474,921)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 2,092,858 2,207,660
Interest deferral...................................... 3,012,406 1,975,012
Management fees--affiliates............................ 358,113 454,258
Provision for losses on accounts receivable............ 158,144 305,581
Increase in fair value of redeemable stock warrants.... -- 5,356,000
----------- ------------
Other.................................................. 849 335
Changes in operating assets and liabilities:
Accounts receivable--nonbarter....................... (6,589) (490,939)
Other current assets................................. (115,852) (114,795)
Accounts payable and other accrued expenses.......... (587,980) (863,160)
Affiliates activity--net............................. (135,961) 886,715
Accrued interest..................................... 478,336 1,073,705
----------- ------------
Net cash provided by operating activities......... 1,184,789 1,315,451
----------- ------------
Cash flows from investing activities:
Capital expenditures...................................... (255,344) (227,926)
Purchase of radio stations................................ -- (14,170,000)
Other..................................................... 2,500 1,500
----------- ------------
Net cash used in investing activities............. (252,844) (14,396,426)
----------- ------------
Cash flows from financing activities:
Borrowings................................................ 79,361 16,000,000
Payments of long-term debt................................ (1,575,046) (1,408,350)
Loan origination fees and other intangible assets......... (25,000) (145,334)
Other..................................................... (1,714) (363)
----------- ------------
Net cash provided by (used in) financing
activities..................................... (1,522,399) 14,445,953
----------- ------------
Net increase (decrease) in cash and cash equivalents........ (590,454) 1,364,978
Cash and cash equivalents, beginning of period.............. 1,904,258 2,343,395
----------- ------------
Cash and cash equivalents, end of period.................... $ 1,313,804 $ 3,708,373
=========== ============
</TABLE>
See notes to consolidated financial statements.
F-59
<PAGE> 192
TELE-MEDIA BROADCASTING COMPANY
AND ITS PARTNERSHIP INTERESTS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of June 30, 1997 and the
condensed consolidated statements of operations and changes in deficit and cash
flows for the six month periods ended June 30, 1996 and 1997 are unaudited. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation for the periods presented
have been included. These interim unaudited condensed consolidated financial
statements for 1996 and 1997 should be read in conjunction with the audited
consolidated financial statements and notes thereto. The consolidated results of
operations for the six months ended June 30, 1997 are not necessarily indicative
of the results to be expected for the full year.
2. BUSINESS ACQUISITIONS
On February 27, 1997, the Company purchased substantially all of the assets
of two radio stations in the Wilkes-Barre/Scranton, Pennsylvania market for
approximately $3,400,000. The acquisition was accounted for under the purchase
method, with approximately $500,000 allocated to property, plant and equipment
and approximately $2,900,000 allocated to intangibles.
On April 18, 1997, the Company closed the acquisition of two additional
radio stations in the Wilkes-Barre/Scranton, Pennsylvania market for
approximately $11,000,000. The acquisition was financed by $12,000,000 of
additional borrowings under the Amended Loan Agreement. The acquisition was
accounted for under the purchase method, with approximately $1,722,000 allocated
to property, plant and equipment and approximately $9,278,000 allocated to
intangibles.
On May 5, 1997, the Company closed the acquisition of a radio station in
the Quincy, Illinois market for approximately $345,000. The acquisition was
financed primarily by an unsecured seller note and assumption of capital leases.
The acquisition was accounted for under the purchase method, with approximately
$148,000 allocated to property and equipment and approximately $197,000
allocated to intangibles.
3. SUBSEQUENT EVENTS
On July 3, 1997, all of the issued and outstanding stock of the Company was
acquired by Citadel Broadcasting Company, a subsidiary of Citadel Communications
Corporation for approximately $114,400,000. In connection with the acquisition
by Citadel Broadcasting Company, a Change of Control occurred. The Change of
Control has a material effect on the financial statements due to the change in
the earliest put date of the redeemable stock warrants. The Warrant holders have
put rights as of January 1, 2000 or upon a Change of Control. TMBC estimated the
redemption price of the warrants at December 31, 1996 as $7,000,000, and the
accreted value of the warrants at December 31, 1996 was $1,644,000. Previously,
increases in the redemption price were accounted for prospectively as an
adjustment to periodic interest expense from the date of the increase to January
1, 2000, the earliest date the put could be exercised. However, due to the
Change of Control on July 3, 1997, the earliest put date is July 3, 1997 and the
warrants must be accreted to their full value by this time. The accreted value
of the warrants at December 31, 1996 was $1,644,000, thus resulting in a charge
to interest expense of $5,356,000 during the six months ended June 30, 1997 to
accrete the warrants to their $7,000,000 redemption price.
F-60
<PAGE> 193
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Snider Corporation:
We have audited the accompanying consolidated balance sheet of Snider
Corporation as of December 31, 1995 and the related consolidated statements of
income, stockholders' equity, and cash flows for the year then ended. We have
also audited the accompanying balance sheet of Snider Corporation as of December
31, 1996 and the related statements of income, stockholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Snider
Corporation as of December 31, 1995 and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles. Also, in our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of Snider Corporation as of December 31, 1996 and the results
of its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
As discussed in Notes 3, 6 and 7, the Company has significant transactions
with related parties.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The combining information is
presented for purposes of additional analysis of the financial statements. The
combining information has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ ERWIN & COMPANY
Little Rock, Arkansas
April 1, 1997
F-61
<PAGE> 194
SNIDER CORPORATION
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 44,870 $ 105,788
Accounts receivable, net of allowance for doubtful
accounts of
$26,652 in 1995 and $34,461 in 1996.................... 566,180 475,065
Due from affiliates....................................... 61,352 38,146
Other..................................................... 34,495 20,867
---------- ----------
Total current assets................................... 706,897 639,866
Other assets:
Non-compete covenant...................................... -- 45,833
Land held for investment, at cost, which approximates
market value........................................... 123,396 97,553
Other..................................................... -- 18,536
---------- ----------
Total other assets..................................... 123,396 161,922
Property and equipment, at cost less accumulated
depreciation.............................................. 666,934 874,992
---------- ----------
$1,497,227 $1,676,780
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable--related party............................... $ 50,000 $ 50,000
Accounts payable--trade................................... 128,416 152,388
--other................................... 385 --
Accrued expenses.......................................... 96,593 86,481
---------- ----------
Total current liabilities.............................. 275,394 288,869
Stockholders' equity:
Common stock, no par value; 1,000 shares authorized, 100
shares issued and outstanding.......................... 143,000 143,000
Paid in capital........................................... 62,298 474,300
Retained earnings......................................... 1,016,535 770,611
---------- ----------
Total stockholders' equity............................. 1,221,833 1,387,911
---------- ----------
$1,497,227 $1,676,780
========== ==========
</TABLE>
See accompanying notes.
F-62
<PAGE> 195
SNIDER CORPORATION
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Revenue:
Announcements and programs................................ $3,510,863 $3,583,944
Barter accounts........................................... 360,616 428,129
---------- ----------
Total revenue..................................... 3,871,479 4,012,073
---------- ----------
Direct charges:
Commissions............................................... 440,461 450,944
Royalties and franchise fees.............................. 93,744 140,303
---------- ----------
Total direct charges.............................. 534,205 591,247
---------- ----------
Gross profit................................................ 3,337,274 3,420,826
---------- ----------
Operating expenses:
Technical department...................................... 57,985 95,416
Program department........................................ 608,416 509,877
News department........................................... 264,837 255,458
Sales department.......................................... 839,461 859,674
General and administrative................................ 926,945 974,815
Depreciation and amortization............................. 81,232 186,723
---------- ----------
Total operating expenses.......................... 2,778,876 2,881,963
---------- ----------
Operating income............................................ 558,398 538,863
Other income (expense):
Interest income........................................... 5,275 3,168
Interest expense.......................................... (8,548) (6,917)
Loss on sale of property and equipment.................... -- (59,024)
Minority interest......................................... (48,004) --
Operating agreement--acquired stations.................... -- (65,698)
Other..................................................... (30,540) (124,316)
---------- ----------
Total other income (expense)...................... (81,817) (252,787)
---------- ----------
Net income.................................................. $ 476,581 $ 286,076
========== ==========
</TABLE>
See accompanying notes
F-63
<PAGE> 196
SNIDER CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Balance -- December 31, 1994................. $143,000 $ 62,298 $ 868,958 $1,074,256
Net income................................. -- -- 476,581 476,581
Distributions to stockholders.............. -- -- (329,004) (329,004)
-------- -------- ---------- ----------
Balance -- December 31, 1995................. 143,000 62,298 1,016,535 1,221,833
Net income................................. -- -- 286,076 286,076
Capital contribution....................... -- 412,002 -- 412,002
Distributions to stockholders.............. -- -- (532,000) (532,000)
-------- -------- ---------- ----------
Balance -- December 31, 1996................. $143,000 $474,300 $ 770,611 $1,387,911
======== ======== ========== ==========
</TABLE>
See accompanying notes
F-64
<PAGE> 197
SNIDER CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 476,581 $ 286,076
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.......................... 81,232 186,723
Loss on disposal of assets............................. -- 59,023
Minority interest...................................... 48,004 --
Recognition of unearned income......................... (107,813) --
Bad debt provision..................................... 30,636 34,461
Net changes in operating assets and liabilities:
Accounts receivable.................................. (173,698) 56,654
Other current assets................................. 77,524 13,628
Other non-current assets............................. -- (18,536)
Accounts payable..................................... (15,065) 23,587
Accrued expenses..................................... 6,280 (10,112)
--------- ---------
Net cash provided by operating activities......... 423,681 631,504
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment........................ (192,120) (213,240)
Purchase of land held for investment...................... (22,563) --
Proceeds from sale of property and equipment.............. -- 262,800
Net advances to affiliate................................. (49,064) (38,146)
Payment under non-compete covenant........................ -- (50,000)
--------- ---------
Net cash used in investing activities............. (263,747) (38,586)
--------- ---------
Cash flows from financing activities:
Proceeds from repayments of notes receivable.............. 107,623 --
Repayment of note payable--Bank........................... (45,044) --
Distributions to minority interest........................ (48,004) --
Distributions to stockholders............................. (329,004) (532,000)
--------- ---------
Net cash used in financing activities............. (314,429) (532,000)
--------- ---------
Net increase (decrease) in cash and cash equivalents........ (154,495) 60,918
Cash and cash equivalents:
Beginning of year......................................... 199,365 44,870
--------- ---------
End of year............................................... $ 44,870 $ 105,788
========= =========
Supplemental cash flows information:
Interest paid............................................. $ 8,548 $ 6,917
Significant non-cash investing and financing activities:
Non-cash purchase of property and equipment from
affiliate............................................. -- 473,353
Non-cash contribution of capital....................... -- 412,002
</TABLE>
See accompanying notes
F-65
<PAGE> 198
SNIDER CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of consolidation
The consolidated financial statements include the accounts of Snider
Corporation (the Company) and SMN Company (SMN), a 52% owned partnership. All
significant intercompany transactions and accounts have been eliminated in
consolidation. SMN was liquidated effective December 31, 1995.
Nature of operations
The Company operates an AM radio station and two FM radio stations in the
central Arkansas market area and provides news and information to other radio
stations throughout Arkansas. The activities of SMN were not material to 1995
consolidated financial position or results of operations.
Accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation and amortization
Depreciation is calculated by the straight-line method. Estimated useful
lives are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Transmitter building, antenna system, office machines and 3-25
equipment.................................................
Furniture and fixtures...................................... 5-10
Vehicles.................................................... 2- 4
Other....................................................... 3- 5
</TABLE>
Non-compete covenant
The non-compete covenant with the former owner of certain radio
broadcasting assets acquired in 1996 is being amortized on a straight-line basis
over a period of two years. Total amortization expense was for 1996 was $4,167.
Statement of cash flows
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less when purchased
to be cash equivalents.
Concentrations of credit risk
Most of the Company's business activity is with customers located within
the state of Arkansas. The Company grants credit to its customers in the normal
course of business, ordinarily without collateral requirements.
The Company's exposure to credit risk from accounts receivable--trade and
notes receivable is represented by the carrying value of those receivables. The
Company also periodically has demand deposit balances with a local financial
institution that exceed federally insured limits. Management periodically
reviews the soundness of this financial institution and does not believe the
Company is exposed to significant financial risk.
F-66
<PAGE> 199
SNIDER CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996 -- CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Reclassifications
Certain reclassifications have been made to the 1995 financial statements
to conform to the 1996 basis of presentation.
(2) PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1995 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Land............................................... $ 301,252 $ 57,700
Transmitter building............................... 87,879 87,879
Antenna system..................................... 91,736 91,736
Satellite equipment................................ -- 473,353
Equipment.......................................... 452,326 650,906
Office machines.................................... 325,787 339,616
Furniture and fixtures............................. 149,455 150,289
Vehicles........................................... 63,623 56,272
Other.............................................. 198,714 78,831
---------- ----------
1,670,772 1,986,582
Less accumulated depreciation...................... 1,003,838 1,111,590
---------- ----------
$ 666,934 $ 874,992
========== ==========
</TABLE>
(3) NOTE PAYABLE--RELATED PARTY:
Note payable--related party at December 31, 1995 and 1996 consists of an
unsecured note payable to a stockholder. The note bears interest at 8% and is
due on demand.
(4) INCOME TAXES:
The Company has elected to be treated as an S corporation for federal
income tax purposes and is subject to similar treatment for state income tax
purposes. Under this election, income and losses of the Company are reported in
the income tax returns of the stockholders. As a result, no income taxes are
reflected in the accompanying consolidated financial statements.
(5) ACQUISITIONS:
During 1996, the Company acquired the assets, including broadcast rights
for a local FM radio. Prior to FCC approval of the acquisition, the station was
operated by the Company under a license management agreement. Expenses incurred
under this agreement totaling $65,698 are included in the accompanying 1996
statement of income under the heading "Other Income (Expenses)."
F-67
<PAGE> 200
SNIDER CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996 -- CONTINUED
(5) ACQUISITION (CONTINUED):
The acquisition cost of the broadcast assets were allocated as follows:
<TABLE>
<S> <C>
Property and equipment.................................. $132,820
Non-compete covenant.................................... 50,000
--------
Total......................................... $182,820
========
</TABLE>
(6) COMMITMENTS AND CONTINGENCIES:
The Company leases its office building and parking lot under an operating
lease from an officer and principal stockholder of the Company for $10,000 per
month. Additionally, the Company rented satellite space from an affiliate under
an informal lease agreement totaling $107,950 and $6,300 during the years ended
December 31, 1995 and 1996, respectively. Total rent expense was $245,377 and
$140,400 for the years ended December 31, 1995 and 1996, respectively. Rent
expense was offset by $54,000 in 1995 and $48,320 in 1996 by amounts received
from an affiliate under a month to month sublease agreement for office space.
Future minimum rentals under noncancelable operating leases, including
renewal options, at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997.................................................... $120,000
1998.................................................... 120,000
--------
$240,000
========
</TABLE>
(7) RELATED PARTY TRANSACTIONS:
General and administrative expense has been reduced by $23,282 and $21,000
in 1995 and 1996, respectively, for shared office and overhead expenses charged
to an affiliate. The amounts shown in the accompanying balance sheets as due
from affiliates represent amounts owed to the Company for these and certain
other operating expenses paid by the Company on behalf of affiliates.
During 1996, the Company purchased satellite communications equipment from
an affiliate for $473,353. In connection with the purchase, the Company's
stockholders transferred certain assets of another affiliate with a fair value
of $412,002 to the Company. The transfer was recorded as a capital contribution.
These contributed assets, plus accounts receivable due from the affiliate
totaling $61,351 were exchanged for the satellite communications equipment.
Information concerning the note payable--related party is contained in Note
3. Information concerning lease and other rental income and expenses with
related parties is described in Note 5.
F-68
<PAGE> 201
SNIDER CORPORATION
SCHEDULE OF COMBINING OPERATING INCOME,
EXCLUDING DEPRECIATION AND AMORTIZATION
FOR BROADCASTING UNITS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
KARN ARN COMBINED
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Local announcements.................................. $1,604,785 $1,353,472 $2,958,257
National announcements............................... 135,805 -- 135,805
Political announcements.............................. 68,318 193,539 261,857
Network.............................................. 77,236 -- 77,236
Materials and facilities............................. 71,411 79,378 150,789
Barter accounts...................................... 289,797 138,332 428,129
---------- ---------- ----------
Total revenue................................ 2,247,352 1,764,721 4,012,073
Less direct charges:
Agency commissions................................... 156,538 187,616 344,154
National representative commissions.................. 16,676 90,114 106,790
Rights fees.......................................... 78,426 61,877 140,303
---------- ---------- ----------
Totals....................................... 251,640 339,607 591,247
---------- ---------- ----------
Gross profit........................................... 1,995,712 1,425,114 3,420,826
Operating expenses:
Technical department................................. 73,611 21,805 95,416
Program department................................... 356,247 153,630 509,877
News department...................................... 115,269 140,189 255,458
Sales department..................................... 480,476 379,198 859,674
General and administrative........................... 633,288 341,527 974,815
---------- ---------- ----------
Total operating expenses, excluding
depreciation and amortization.............. 1,658,891 1,036,349 2,695,240
---------- ---------- ----------
Operating income, excluding depreciation and
amortization......................................... $ 336,821 $ 388,765 $ 725,586
========== ========== ==========
</TABLE>
F-69
<PAGE> 202
SNIDER CORPORATION
BALANCE SHEET
MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 45,972
Accounts receivable--trade, net of allowance for doubtful
accounts of $38,228.................................... 780,901
Due from affiliates....................................... 44,589
Other..................................................... 7,941
----------
Total current assets.............................. 879,403
Property and equipment, at cost less accumulated
depreciation of $1,193,204................................ 813,910
Other assets:
Non-compete agreement, less accumulated amortization of
$14,583................................................ 35,417
Land held for investment, at cost, which approximates
market value........................................... 97,553
Other..................................................... 25,692
----------
Total other assets................................ 158,662
----------
$1,851,975
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable--related party............................... $ 50,000
Accounts payable--trade................................... 190,990
Accrued expenses.......................................... 103,427
----------
Total current liabilities......................... 344,417
Stockholders' equity:
Common stock, no par value; 1,000 shares authorized, 100
shares issued and outstanding.......................... 143,000
Paid-in capital........................................... 474,300
Retained earnings......................................... 890,258
----------
Total stockholders' equity........................ 1,507,558
----------
$1,851,975
==========
</TABLE>
See accompanying notes to financial statements.
F-70
<PAGE> 203
SNIDER CORPORATION
STATEMENT OF INCOME
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Revenue:
Announcements and programs............................. $1,694,439
Barter accounts........................................ 140,783
----------
Total revenue..................................... 1,835,222
Direct charges:
Commissions............................................ 261,257
Royalties and franchise fees........................... 42,210
----------
Total direct charges.............................. 303,467
----------
Gross profit................................................ 1,531,755
----------
Operating expenses:
Technical department................................... 52,958
Program department..................................... 263,608
News department........................................ 99,351
Sales department....................................... 439,047
General and administrative............................. 437,718
Depreciation and amortization.......................... 92,030
----------
Total operating expenses.......................... 1,384,712
----------
Operating income............................................ 147,043
Other income (expense):
Interest income........................................ 733
Interest expense....................................... (1,677)
Other.................................................. (26,452)
----------
Total other income (expense)...................... (27,396)
----------
Net income.................................................. $ 119,647
==========
</TABLE>
See accompanying notes to financial statements.
F-71
<PAGE> 204
SNIDER CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Balance -- December 31, 1996.................. $143,000 $474,300 $770,611 $1,387,911
Net income.................................... -- -- 119,647 119,647
-------- -------- -------- ----------
Balance -- May 31, 1997....................... $143,000 $474,300 $890,258 $1,507,558
======== ======== ======== ==========
</TABLE>
See accompanying notes to financial statements.
F-72
<PAGE> 205
SNIDER CORPORATION
STATEMENT OF CASH FLOWS
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $119,647
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization.......................... 92,030
Bad debt provision..................................... 12,155
Net changes in operating assets and liabilities:
Accounts receivable--trade........................... (317,991)
Other current assets................................. 12,926
Other non-current assets............................. (7,156)
Accounts payable--trade.............................. 38,602
Accrued expenses..................................... 16,946
--------
Net cash used in operating activities............. (32,841)
--------
Cash flows from investing activities:
Capital expenditures...................................... (20,532)
Net advances to affiliate................................. (6,443)
--------
Net cash used in investing activities............. (26,975)
--------
Net decrease in cash and cash equivalents................... (59,816)
Cash and cash equivalents:
Beginning of period....................................... 105,788
--------
End of period............................................. $ 45,972
========
Supplemental cash flows information:
Interest paid............................................. $ 1,677
========
</TABLE>
See accompanying notes to financial statements.
F-73
<PAGE> 206
SNIDER CORPORATION
NOTE TO FINANCIAL STATEMENTS
MAY 31, 1997
(UNAUDITED)
(1) SUBSEQUENT EVENT
On June 2, 1997, Snider Corporation (the "Company") entered into a local
marketing agreement ("LMA") with Citadel Broadcasting Company ("Citadel")
whereby Citadel pays $89,000 per month to the Company in exchange for supplying
specified programming to the brokered stations and marketing all commercial
advertising time of the brokered stations, subject to the Company's right to
control the content of all programming. On the same date, the Company also
entered into a Merger Agreement with Citadel, upon the consummation of which
Citadel will acquire radio stations KARN-FM, KARN-AM, KKRN-FM, KRNN-AM and
KAFN-FM. The LMA shall terminate upon the closing of the Merger Agreement or the
termination of the Merger Agreement, unless terminated earlier pursuant to the
default provisions of the LMA. In compliance with the LMA, the broadcasting
revenue and station operating expenses of the Company for the month ended June
30, 1997 are included in the financial statements of Citadel and are summarized
as follows:
<TABLE>
<S> <C>
Net broadcasting revenues................................... $270,289
Station operating expenses.................................. 304,259
</TABLE>
F-74
<PAGE> 207
SNIDER CORPORATION
BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 191,595
Accounts receivable--trade, net of allowance for doubtful
accounts of $45,546.................................... 800,790
Due from affiliates....................................... 25,617
Other..................................................... 4,106
----------
Total current assets.............................. 1,022,108
Property and equipment, at cost less accumulated
depreciation of $1,017,541................................ 808,870
Other assets:
Land held for investment, at cost, which approximates
market value........................................... 97,553
Other..................................................... 11,240
----------
Total other assets................................ 108,793
----------
$1,939,771
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable--related party............................... $ 50,000
Accounts payable--trade................................... 153,348
Accrued expenses.......................................... 132,907
----------
Total current liabilities......................... 336,255
Stockholders' equity:
Common stock, no par value; 1,000 shares authorized, 100
shares issued and outstanding.......................... 143,000
Paid-in capital........................................... 474,300
Retained earnings......................................... 986,216
----------
Total stockholders' equity........................ 1,603,516
----------
$1,939,771
==========
</TABLE>
F-75
<PAGE> 208
SNIDER CORPORATION
STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Revenue:
Announcements and programs................................ $1,893,131
Barter accounts........................................... 214,064
----------
Total revenue..................................... 2,107,195
Direct charges:
Commissions............................................... 266,398
Royalties and franchise fees.............................. 65,599
----------
Total direct charges.............................. 331,997
----------
Gross profit................................................ 1,775,198
----------
Operating expenses:
Technical department...................................... 35,290
Program department........................................ 236,052
News department........................................... 125,103
Sales department.......................................... 414,766
General and administrative................................ 511,160
Depreciation and amortization............................. 88,507
----------
Total operating expenses.......................... 1,410,878
----------
Operating income............................................ 364,320
Other income (expense):
Loss on sale of property and equipment.................... (59,024)
Interest expense.......................................... (2,541)
Operating agreement--stations under contract.............. (36,839)
Other..................................................... (39,235)
----------
Total other income (expense)...................... (137,639)
----------
Net income.................................................. $ 226,681
==========
</TABLE>
F-76
<PAGE> 209
SNIDER CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Balance--December 31, 1995......................... $143,000 $ 62,298 $1,016,535 $1,221,833
Net income......................................... 226,681 226,681
Capital contribution............................... 412,002 412,002
Distributions to stockholders...................... (257,000) (257,000)
-------- -------- ---------- ----------
Balance--June 30, 1996............................. $143,000 $474,300 $ 986,216 $1,603,516
======== ======== ========== ==========
</TABLE>
F-77
<PAGE> 210
SNIDER CORPORATION
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $226,681
Adjustments to reconcile net income to net cash provided
by in operating activities:
Depreciation and amortization.......................... 88,507
Loss on sale of property and equipment................. 59,024
Bad debt provision..................................... 19,886
Net changes in operating assets and liabilities:
Accounts receivable--trade........................... (254,496)
Other current assets................................. 19,149
Accounts payable--trade.............................. 24,547
Accrued expenses..................................... 36,314
--------
Net cash provided by operating activities......... 219,612
--------
Cash flows from investing activities:
Capital expenditures...................................... (53,071)
Proceeds from sale of assets.............................. 262,800
Net advances to affiliate................................. (25,616)
--------
Net cash provided by investing activities......... 184,113
--------
Cash flows from financing activities:
Distributions to stockholders............................. (257,000)
--------
Net cash used in financing activities............. (257,000)
--------
Net increase in cash and cash equivalents................... 146,725
Cash and cash equivalents:
Beginning of period....................................... 44,870
--------
End of period............................................. $191,595
========
Supplemental cash flows information:
Interest paid............................................. $ 2,541
Significant non-cash investing and financing activities:
Non-cash purchase of property and equipment from
affiliate............................................. 473,353
Non-cash contribution of capital....................... 412,002
</TABLE>
F-78
<PAGE> 211
INDEPENDENT AUDITORS' REPORT
The Boards of Directors and Stockholders
Snider Broadcasting Corporation and Subsidiary
CDB Broadcasting Corporation:
We have audited the accompanying consolidated balance sheet of Snider
Broadcasting Corporation and Subsidiary, as of December 31, 1995 and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the year then ended. We have also audited the combined balance sheet of Snider
Broadcasting Corporation and Subsidiary, and CDB Broadcasting Corporation as of
December 31, 1996 and the related combined statements of operations,
stockholders' deficit and cash flows for the year then ended. These financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The combined financial statements include the financial statements of
Snider Broadcasting Corporation and Subsidiary, and CDB Broadcasting
Corporation, which are related through common ownership and management.
As described in Notes 3, 5, and 10, the Company has significant
transactions with related parties.
In our opinion, the 1995 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Snider
Broadcasting Corporation and subsidiary as of December 31, 1995 and the
consolidated results of their operations and cash flows for the year then ended
in conformity with generally accepted accounting principles. Also, in our
opinion, the 1996 financial statements referred to above present fairly, in all
material respects, the combined financial position of Snider Broadcasting
Corporation and affiliate as of December 31, 1996 and the combined results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ ERWIN & COMPANY
Little Rock, Arkansas
April 23, 1997
F-79
<PAGE> 212
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 30,813 $ 49,821
Accounts receivable, net of allowance for doubtful
accounts of $8,108 in 1995 and $7,000 in 1996.......... 305,154 376,579
Other.................................................. 2,302 15,366
----------- -----------
Total current assets................................... 338,269 441,766
Property and equipment, at cost less accumulated
depreciation (Note 2)..................................... 59,706 292,286
Other assets:
Excess of cost over carrying value of net assets acquired,
less accumulated
amortization of $117,476 in 1995 and $130,936 in
1996................................................... 309,710 796,691
Start-up costs, net of accumulated amortization of $8,797
in 1996................................................ -- 61,588
Non-compete agreement, net of accumulated amortization of
$2,083 in 1996......................................... -- 97,917
Other assets.............................................. -- 21,189
----------- -----------
Total other assets..................................... 309,710 977,385
----------- -----------
$ 707,685 $ 1,711,437
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable--stockholders (Note 3)...................... $ 52,698 $ --
Note payable--bank (Note 4)............................... -- 2,637,408
Current maturities of long-term debt (Note 5)............. 206,781 --
Accounts payable--trade................................... 109,406 218,422
Income taxes payable...................................... 2,117 7,803
Accrued expenses.......................................... 12,526 45,778
Accrued interest payable (Note 10)........................ 14,548 10,714
Deferred income taxes (Note 8)............................ -- 2,297
----------- -----------
Total current liabilities......................... 398,076 2,922,422
Long-term debt, less current maturities (Note 5)............ 1,386,490 --
----------- -----------
Total liabilities................................. 1,784,566 2,922,422
Stockholders' deficit:
Common stock (Note 6)..................................... 75,213 75,313
Retained deficit.......................................... (1,152,094) (1,286,298)
----------- -----------
Total stockholders' deficit....................... (1,076,881) (1,210,985)
----------- -----------
$ 707,685 $ 1,711,437
=========== ===========
</TABLE>
See accompanying notes.
F-80
<PAGE> 213
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Revenue:
Announcements and programs................................ $2,097,623 $2,008,315
Barter accounts........................................... 145,608 137,963
---------- ----------
Total revenue..................................... 2,243,231 2,146,278
Less direct charges--commissions............................ 286,944 264,907
---------- ----------
Gross profit................................................ 1,956,287 1,881,371
---------- ----------
Operating expenses:
Technical department...................................... 45,339 55,616
Program department........................................ 305,344 384,480
Sales department.......................................... 377,007 439,883
General and administrative................................ 465,647 679,475
Ratings enhancement....................................... -- 105,498
Time brokerage............................................ -- 60,470
Consulting and non-compete (Note 9)....................... 64,733 64,733
Goodwill amortization..................................... 10,680 13,460
Depreciation and amortization............................. 27,046 78,820
---------- ----------
Total operating expenses.......................... 1,295,796 1,882,435
---------- ----------
Operating income (loss)..................................... 660,491 (1,064)
---------- ----------
Other income (expense):
Interest expense (Note 10)................................ (189,532) (150,553)
Rent (Note 10)............................................ 12,000 30,000
Other..................................................... -- 39
---------- ----------
Total other income (expense)...................... (177,532) (120,514)
---------- ----------
Income (loss) before income taxes........................... 482,959 (121,578)
Provision for income taxes (Note 8)......................... 2,117 12,626
---------- ----------
Net income (loss)........................................... $ 480,842 $ (134,204)
========== ==========
</TABLE>
See accompanying notes.
F-81
<PAGE> 214
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK DEFICIT TOTAL
------- ----------- -----------
<S> <C> <C> <C>
Balance--December 31, 1994............................. $75,213 $(1,632,936) $(1,557,723)
Net income........................................... -- 480,842 480,842
------- ----------- -----------
Balance--December 31, 1995............................. 75,213 (1,152,094) (1,076,881)
Common stock issued.................................. 100 -- 100
Net loss............................................. -- (134,204) (134,204)
------- ----------- -----------
Balance--December 31, 1996............................. $75,313 $(1,286,298) $(1,210,985)
======= =========== ===========
</TABLE>
See accompanying notes.
F-82
<PAGE> 215
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 480,842 $ (134,204)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation........................................... 27,046 42,899
Amortization........................................... 10,680 49,381
Deferred income taxes.................................. -- 2,297
Loss on sale of property and equipment................. -- 458
Net changes in operating assets and liabilities:
Accounts receivable.................................. (56,489) (71,425)
Other assets......................................... 446 (59,294)
Accounts payable..................................... 2,896 99,824
Accrued expenses..................................... 12,707 38,938
Accrued interest payable............................. (113,269) (3,834)
--------- -----------
Net cash provided by (used in) operating
activities...................................... 364,859 (34,960)
--------- -----------
Cash flows from investing activities:
Acquisition of business assets............................ (14,921) (768,011)
Non-compete agreement..................................... -- (100,000)
Other..................................................... -- (69,560)
--------- -----------
Net cash used in investing activities............. (14,921) (937,571)
--------- -----------
Cash flows from financing activities:
Repayment of borrowings--affiliates....................... (186,825) (1,291,759)
--other......................... (169,347) (494,210)
Proceeds from borrowings.................................. -- 2,777,408
Common stock issued....................................... -- 100
--------- -----------
Net cash provided by (used in) financing
activities...................................... (356,172) 991,539
--------- -----------
Net increase (decrease) in cash............................. (6,234) 19,008
Cash:
Beginning of year......................................... 37,047 30,813
--------- -----------
End of year............................................... $ 30,813 $ 49,821
========= ===========
Supplemental information:
Interest paid............................................. $ 302,800 $ 154,387
Income taxes paid......................................... -- 4,643
Non-cash investing activities:
Equipment acquired through trade....................... 2,333 9,192
</TABLE>
See accompanying notes.
F-83
<PAGE> 216
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Reporting Entity
The accompanying 1995 financial statements include the accounts of Snider
Broadcasting Corporation and its wholly-owned subsidiary, Cornerstone
Broadcasting Corporation (Snider). The accompanying 1996 financial statements
include these accounts combined with those of CDB Broadcasting Corporation
(CDB), a company affiliated through common ownership and management. CDB was
incorporated and began operations May 17, 1996 . All significant intercompany
transactions and accounts have been eliminated.
Nature of Operations
Snider and CDB operate FM radio stations in the Central Arkansas market
area.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property and Equipment
Depreciation of property and equipment is calculated using the accelerated
and modified accelerated cost recovery systems. Depreciation calculated under
these methods does not differ significantly from amounts calculated under
methods and lives which conform to generally accepted accounting principles.
Estimated useful lives of property and equipment are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Tower....................................................... 5-10
Radio, office and computer equipment........................ 3- 7
Vehicle..................................................... 5
</TABLE>
Intangible Assets
The excess of cost over carrying value of assets acquired for Snider
Broadcasting Corporation is being amortized over 40 years using the
straight-line method. The excess of cost over carrying value of assets acquired
of CDB Broadcasting Corporation is being amortized over 15 years using the
straight-line method.
The non-compete agreement is being amortized over 24 months using the
straight-line method. Start-up costs are being amortized over five years using
the straight-line method.
Asset Impairment
In the event that facts and circumstances indicate that the carrying value
of long-lived assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to fair value or a value based on discounted cash
flows is required.
F-84
<PAGE> 217
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Income Taxes
Snider incurred net operating losses from the date of its incorporation on
January 1, 1985 through 1991. At December 31, 1996 there are approximately
$610,000 of net operating loss carryforwards available for federal income tax
purposes. These loss carryforwards will expire beginning in the year 2000 if not
previously used to offset future net taxable income. In addition, Snider has
approximately $3,600 in general business credit carryforwards that expire in
2000 and 2001.
Snider provides for deferred income taxes under the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
statement provides for a liability approach under which deferred income taxes
are based on enacted tax laws and rates applicable to the periods in which the
taxes become payable.
CDB has elected to be treated as an S corporation for federal income tax
purposes and is subject to similar treatment for state income tax purposes.
Under this election, income and losses of CDB are reported in the income tax
returns of the stockholders. As a result, no provision for income taxes for CDB
is reflected in the accompanying combined financial statements.
Statement of Cash Flows
For purposes of the statement of cash flows, the Companies consider cash on
hand and deposits in financial institutions with initial maturities of three
months or less as cash.
Concentrations of Credit Risk
Most of the Companies' business activity is with customers located within
the central region of Arkansas. The Companies' grant credit to their customers
in the normal course of business, ordinarily without collateral requirements.
Reclassifications
Certain reclassifications have been made to the 1995 financial statements
to conform to the 1996 basis of presentation.
(2) PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1995 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Tower................................................. $ 89,909 $104,642
Radio equipment....................................... 186,059 404,648
Office equipment...................................... 67,357 95,921
Computer equipment.................................... 37,727 52,604
Vehicle............................................... 20,113 9,859
-------- --------
401,165 667,674
Less accumulated depreciation......................... 341,459 375,388
-------- --------
$ 59,706 $292,286
======== ========
</TABLE>
F-85
<PAGE> 218
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(3) NOTES PAYABLE -- STOCKHOLDERS:
Notes payable -- stockholders at December 31, 1995 consist of unsecured
demand notes payable to stockholders of Snider bearing interest at 10.25% at
December 31, 1995.
(4) NOTE PAYABLE -- BANK:
Note payable-bank represents a short-term, $3,000,000 credit facility
shared by Snider and CDB. The note matures June 12, 1997, and is secured by
substantially all assets of the Companies and by guarantees of the Companies
stockholders.
The agreement requires the maintenance of certain ratios related to
leverage and debt service. In addition, the agreement contains certain
covenants, the most restrictive of which prohibit or restrict the Companies'
ability to incur additional debt; pledge assets; merge, consolidate or sell
assets; make certain "restricted" investments or loans and advances; dispose of
certain assets; make distributions to its stockholders; and engage in
transactions with their affiliates.
At December 31, 1996, the Companies were in technical default with respect
to a required leverage ratio and certain reporting requirements, however the
Companies had not defaulted on any required principal or interest payments and
were in compliance with all other ratios required under the agreement. These
technical defaults permit the lender to accelerate the scheduled due date of the
debt. Management anticipates the note to be extended during June 1997 with a new
maturity date of December 1997.
(5) LONG-TERM DEBT:
Long-term debt at December 31, 1995 consists of the following:
<TABLE>
<CAPTION>
1995
----------
<S> <C>
Variable rate (9.0% at December 31, 1995); note payable to
Nationsbank of Texas, N.A................................. $ 169,500
Variable rate (10.0% at December 31, 1995) unsecured,
subordinated note payable to Snider Communications
Corporation, an affiliate; payable on demand.............. 1,291,759
10.0% note payable; payable $4,067 monthly, including
interest through February 1999; secured by real estate and
personal property of Snider and guaranteed by stockholders
of Snider and by a member of the immediate family of
Snider's majority stockholder............................. 132,012
----------
1,593,271
Less current portion........................................ 206,781
----------
Long-term debt, less current portion........................ $1,386,490
==========
</TABLE>
The note payable to affiliate of $1,291,759 at December 31, 1995 was
classified as long-term due to such affiliate waiving its right to demand
payment during the immediately following year.
(6) STOCKHOLDERS EQUITY:
Snider Broadcasting Corporation has 1,000 shares of no par value common
stock authorized and 85 shares issued and outstanding.
CDB Broadcasting Corporation has 1,000 shares of no par value common stock
authorized, issued and outstanding.
F-86
<PAGE> 219
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) RETIREMENT PLAN:
During 1995, Snider adopted a 401(k) savings plan which covers
substantially all employees who have completed one year of service and attained
the age of 21. Participating employees may contribute from 1% to 15% of their
compensation. Snider matches 25% of the first 4% contributed by participating
employees. Matching contributions totaled $3,950 and $3,727 for the years ended
December 31, 1995 and 1996, respectively.
(8) INCOME TAXES:
The provision for income taxes at December 31, 1995 and 1996, consists of
the following:
<TABLE>
<CAPTION>
1995 1996
--------- --------
<S> <C> <C>
Current:
Federal............................................. $ 2,117 $ --
State............................................... -- 10,329
--------- --------
2,117 10,329
--------- --------
Deferred:
Federal............................................. 155,754 84,429
State............................................... 32,802 4,709
Decrease in valuation allowance..................... (188,556) (86,841)
--------- --------
-- 2,297
--------- --------
Provision for income taxes............................ $ 2,117 $ 12,626
========= ========
</TABLE>
The income tax provision computed at the federal statutory rate on pretax
income differs from the reported tax provision due to the decrease in the
valuation allowance, effect of graduated rates and non-deductible expenses, and
the results of operations of CDB reported to stockholders for income tax
purposes.
The components of the net deferred tax liability at December 31, 1995 and
1996 follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Federal............................................ $ 295,680 $ 213,291
State.............................................. 4,319 --
--------- ---------
Valuation allowance................................ (299,999) (213,158)
--------- ---------
-- 133
--------- ---------
Deferred tax liabilities:
Federal............................................ -- 2,040
State.............................................. -- 390
--------- ---------
-- 2,430
--------- ---------
Net deferred tax liability........................... $ -- $ (2,297)
========= =========
</TABLE>
F-87
<PAGE> 220
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(9) COMMITMENTS AND CONTINGENCIES:
The Companies lease office space, office equipment, broadcasting equipment
and tower facilities under operating leases expiring in 1993 through 1999. Total
rent expense under these agreements was $61,939 in 1995 and $61,159 in 1996.
Snider has commitments to pay the former owner of one of its radio stations
consulting fees and amounts due under a non-compete agreement. These commitments
extend through February 1999. Payments related to these commitments totaled
$64,733 for each of the years ended December 31, 1995 and 1996.
Future commitments under noncancelable operating leases, consulting and
non-compete agreements at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997...................................................... $138,557
1998...................................................... 75,607
1999...................................................... 20,569
2000...................................................... 9,780
--------
$244,513
========
</TABLE>
(10) RELATED PARTY TRANSACTIONS:
Interest expense in 1995 and 1996, respectively, includes $144,132 and
$56,846 related to the Company's note payable to an affiliate (Note 5). Included
in accrued expenses at December 31, 1995 is accrued interest payable of $708
related to the note.
The Company leases a subcarrier bandwidth of Snider to an affiliate to
transmit paging and weather information under an operating lease, cancelable
upon six months written notice, expiring in 2000 and requiring monthly lease
payments. Total rental income recognized under this lease was $12,000 in 1995
and $30,000 in 1996.
F-88
<PAGE> 221
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED BALANCE SHEET
MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 16,874
Accounts receivable--trade, net of allowance for doubtful
accounts of $13,110.................................... 539,057
Other..................................................... 16,652
-----------
Total current assets.............................. 572,583
Property and equipment, at cost less accumulated
depreciation of $421,330.................................. 284,067
Other assets:
Excess of cost over carrying value of net assets acquired,
less accumulated amortization of $149,287.............. 778,340
Start-up costs, net of accumulated amortization of
$14,663................................................ 55,723
Non-compete agreement, less accumulated amortization of
$22,917................................................ 77,083
-----------
Total other assets................................ 911,146
-----------
$ 1,767,796
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable--bank........................................ $ 2,635,000
Accounts payable--trade................................... 277,793
--affiliate............................. 27,782
Income taxes payable...................................... 2,461
Accrued expenses.......................................... 13,056
Accrued interest payable.................................. 42,216
Deferred income taxes..................................... 4,245
-----------
Total current liabilities......................... 3,002,553
Stockholders' deficit:
Common stock.............................................. 75,313
Retained deficit.......................................... (1,310,070)
-----------
Total stockholders' deficit....................... (1,234,757)
-----------
$ 1,767,796
===========
</TABLE>
See accompanying notes to financial statements.
F-89
<PAGE> 222
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF OPERATIONS
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Revenue:
Announcements and programs................................ $ 937,865
Barter accounts........................................... 65,293
----------
Total revenue..................................... 1,003,158
Less direct charges--commissions............................ 107,208
----------
Gross profit................................................ 895,950
----------
Operating expenses:
Technical department...................................... 28,843
Program department........................................ 193,887
Sales department.......................................... 222,007
General and administrative................................ 246,680
Consulting and non-compete................................ 26,972
Goodwill amortization..................................... 18,351
Depreciation and amortization............................. 91,903
----------
Total operating expenses.......................... 828,643
----------
Operating income............................................ 67,307
----------
Other income (expense):
Interest expense.......................................... (90,723)
Rent...................................................... 12,500
----------
Total other income (expense)...................... (78,223)
----------
Loss before income taxes.................................... (10,916)
Provision for income taxes.................................. 12,856
----------
Net loss.................................................... $ (23,772)
==========
</TABLE>
See accompanying notes to financial statements.
F-90
<PAGE> 223
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK DEFICIT TOTAL
------- ----------- -----------
<S> <C> <C> <C>
Balance--December 31, 1996.............................. $75,313 $(1,286,298) $(1,210,985)
Net loss................................................ -- (23,772) (23,772)
------- ----------- -----------
Balance--May 31, 1997................................... $75,313 $(1,310,070) $(1,234,757)
======= =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-91
<PAGE> 224
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF CASH FLOWS
FIVE MONTHS ENDED MAY 31, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (23,772)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation......................................... 45,942
Amortization......................................... 64,313
Deferred income taxes................................ 1,948
Net changes in operating assets and liabilities:
Accounts receivable--trade........................ (134,431)
Other assets...................................... 640
Accounts payable--trade........................... 56,906
Accrued expenses.................................. (38,064)
Accrued interest payable.......................... 31,502
---------
Net cash provided by operating activities....... 4,984
---------
Cash flows from investing activities:
Capital expenditures...................................... (35,523)
---------
Net cash used in investing activities........... (35,523)
---------
Cash flows from financing activities:
Repayment of borrowings................................... (2,408)
---------
Net cash used in financing activities........... (2,408)
---------
Net decrease in cash........................................ (32,947)
Cash:
Beginning of period....................................... 49,821
---------
End of period............................................. $ 16,874
=========
Supplemental cash flows information:
Interest paid............................................. $ 59,229
Income taxes paid......................................... 16,250
Equipment acquired by trade............................... 2,200
</TABLE>
See accompanying notes to financial statements.
F-92
<PAGE> 225
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
NOTE TO COMBINED FINANCIAL STATEMENTS
MAY 31, 1997
(UNAUDITED)
(1) SUBSEQUENT EVENT
On June 2, 1997, Snider Broadcasting Corporation and Subsidiary CDB
Broadcasting Corporation (the "Company") entered into local marketing agreements
("LMA") with Citadel Broadcasting Company ("Citadel") whereby Citadel pays
$97,335 per month to the Company in exchange for supplying specified programming
to the brokered stations and marketing all commercial advertising time of the
brokered stations, subject to the Company's right to control the content of all
programming. On the same date, the Company also entered into an Asset Purchase
Agreement and a Merger Agreement with Citadel, upon the consummation of which
Citadel will acquire radio stations KESR-FM and KIPR-FM. The LMA shall terminate
upon the closing of the Merger Agreement and the Asset Purchase Agreement or the
termination of the Merger Agreement and the Asset Purchase Agreement, unless
terminated earlier pursuant to the default provisions of the LMA. In compliance
with the LMA, the broadcasting revenue and station operating expenses of the
Company for the month ended June 30, 1997 are included in the financial
statements of Citadel and are summarized as follows:
<TABLE>
<S> <C>
Net broadcasting revenues................................... $247,783
Station operating expenses.................................. 169,569
</TABLE>
F-93
<PAGE> 226
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 74,209
Accounts receivable--trade, net of allowance for doubtful
accounts of $6,000..................................... 384,567
Other..................................................... 113,716
----------
Total current assets.............................. 572,492
Property and equipment, at cost less accumulated
depreciation of $346,745.................................. 69,855
Other assets:
Excess of cost over carrying value of net assets acquired,
less accumulated
amortization of $122,816............................... 304,370
Start-up costs, less accumulated amortization of $2,023... 78,900
----------
Total other assets................................ 383,270
----------
$1,025,617
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable--bank........................................ $1,737,408
Accounts payable--trade................................... 137,490
Income taxes payable...................................... 3,889
Accrued expenses.......................................... 16,638
Accrued interest payable.................................. 19,132
----------
Total current liabilities......................... 1,914,557
Stockholders' deficit:
Common stock.............................................. 75,313
Retained deficit.......................................... (964,253)
----------
Total stockholders' deficit....................... (888,940)
----------
$1,025,617
==========
</TABLE>
F-94
<PAGE> 227
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Revenue:
Announcements and programs................................ $ 974,107
Barter accounts........................................... 62,690
----------
Total revenue..................................... 1,036,797
Less direct charges--commissions............................ 136,184
----------
Gross profit................................................ 900,613
----------
Operating expenses:
Technical department...................................... 27,973
Program department........................................ 156,515
Sales department.......................................... 181,298
General and administrative................................ 209,999
Ratings enhancement....................................... 7,657
Consulting and non-compete................................ 32,366
Goodwill amortization..................................... 5,340
Depreciation and amortization............................. 18,925
----------
Total operating expenses.......................... 640,073
----------
Operating income............................................ 260,540
Other income (expense):
Interest expense.......................................... (82,076)
Loss on sale of property and equipment.................... (458)
Rent...................................................... 15,000
----------
Total other income (expense)...................... (67,534)
----------
Income before income taxes.................................. 193,006
Provision for income taxes.................................. 5,165
----------
Net income.................................................. $ 187,841
==========
</TABLE>
F-95
<PAGE> 228
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK DEFICIT TOTAL
------- ----------- -----------
<S> <C> <C> <C>
Balance--December 31, 1995................................. $75,213 $(1,152,094) $(1,076,881)
Common stock issued........................................ 100 100
Net income................................................. 187,841 187,841
------- ----------- -----------
Balance--June 30, 1996..................................... $75,313 $ (964,253) $ (888,940)
======= =========== ===========
</TABLE>
F-96
<PAGE> 229
SNIDER BROADCASTING CORPORATION AND SUBSIDIARY
CDB BROADCASTING CORPORATION
COMBINED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $ 187,841
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation......................................... 14,256
Amortization......................................... 8,800
Loss on sale of property and equipment............... 458
Net changes in operating assets and liabilities:
Accounts receivable--trade........................ (79,413)
Other assets...................................... (62,851)
Accounts payable--trade........................... 28,084
Accrued expenses.................................. 5,884
Accrued interest payable.......................... 4,584
-----------
Net cash provided by operating activities....... 107,643
-----------
Cash flows from investing activities:
Capital expenditures...................................... (25,688)
Proceeds from sale of assets.............................. 825
Business acquisition costs................................ (50,000)
Start-up costs............................................ (80,923)
-----------
Net cash used in investing activities.................. (155,786)
-----------
Cash flows from financing activities:
Repayment of borrowings--bank............................. (169,500)
--affiliates....................... (1,291,759)
--others........................... (184,710)
Proceeds from borrowings.................................. 1,737,408
Common stock issued....................................... 100
-----------
Net cash provided by financing activities.............. 91,539
-----------
Net increase in cash........................................ 43,396
Cash:
Beginning of period....................................... 30,813
-----------
End of period............................................. $ 74,209
===========
Supplemental cash flows information:
Interest paid............................................. $ 77,492
===========
</TABLE>
F-97
<PAGE> 230
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Maranatha Broadcasting Company, Inc.:
We have audited the accompanying balance sheet of Maranatha Broadcasting
Company, Inc.'s Radio Broadcasting Division (the "Company") as of December 31,
1996, and the related statements of operations and division equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Maranatha Broadcasting
Company, Inc.'s Radio Broadcasting Division as of December 31, 1996, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Phoenix, Arizona
September 29, 1997
F-98
<PAGE> 231
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
BALANCE SHEET
DECEMBER 31, 1996 AND SEPTEMBER 15, 1997
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Accounts receivable, net of reserves of $20,000........... $ 366,278 $ 293,143
Equipment................................................. 213,800 220,562
Accumulated depreciation.................................. (140,828) (155,828)
--------- ---------
72,972 64,734
Broadcast license......................................... 10,325 9,895
--------- ---------
Total assets........................................... $ 449,575 $ 367,772
========= =========
LIABILITIES AND DIVISION EQUITY
Current Liabilities:
Accounts payable.......................................... $ 11,944 $ 9,630
Trade payable............................................. 10,000 --
Accrued compensation and commissions...................... 18,091 12,537
Customer deposits......................................... 16,447 16,964
--------- ---------
Total current liabilities.............................. 56,482 39,131
Commitments and contingencies
Division equity........................................... 393,093 328,641
--------- ---------
Total liabilities and division equity.................. $ 449,575 $ 367,772
========= =========
</TABLE>
See accompanying notes to financial statements.
F-99
<PAGE> 232
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
STATEMENT OF OPERATIONS AND DIVISION EQUITY
YEAR ENDED DECEMBER 31, 1996 AND THE EIGHT AND ONE-HALF-MONTH PERIOD ENDED
SEPTEMBER 15, 1997
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Net broadcasting revenue.................................. $2,066,271 $1,375,243
Subcarrier rental......................................... 48,796 37,333
---------- ----------
2,115,067 1,412,576
Operating expenses:
Technical expenses........................................ 75,265 54,366
Program expenses.......................................... 191,363 135,229
Selling expenses.......................................... 893,721 656,039
General and administrative expenses....................... 279,090 213,382
Management fee and corporate overhead allocation.......... 139,379 55,966
Bad debts................................................. 62,868 51,511
Depreciation and amortization............................. 20,148 15,430
---------- ----------
Total operating expenses.......................... 1,661,834 1,181,923
---------- ----------
Net income.................................................. 453,233 230,653
Division equity, beginning of period........................ 421,384 393,093
Transfers to parent......................................... (481,524) (295,105)
---------- ----------
Division equity, end of period.............................. $ 393,093 $ 328,641
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-100
<PAGE> 233
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 AND THE EIGHT AND ONE-HALF MONTH PERIOD ENDED
SEPTEMBER 15, 1997
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 453,233 $ 230,653
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization........................ 20,148 15,430
Changes in assets and liabilities:
Decrease in accounts receivable...................... 25,809 73,135
Decrease in accounts payable and accruals............ (740) (17,351)
--------- ---------
Net cash provided by operating activities......... 498,450 301,867
--------- ---------
Cash flows from investing activities:
Purchase of radio equipment............................... (16,926) (6,762)
--------- ---------
Net cash used in investing activities............. (16,926) (6,762)
--------- ---------
Cash flows from financing activities:
Cash transfers to parent.................................. (481,524) (295,105)
--------- ---------
Net cash used in financing activities............. (481,524) (295,105)
--------- ---------
Net change in cash........................................ -- --
Cash, beginning of period................................... -- --
--------- ---------
Cash, end of period......................................... $ -- $ --
========= =========
</TABLE>
See accompanying notes to financial statements.
F-101
<PAGE> 234
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INFORMATION AS OF SEPTEMBER 15, 1997 AND FOR THE EIGHT AND ONE-HALF-MONTH
PERIOD
THEN ENDED IS UNAUDITED)
(1) NATURE OF BUSINESS AND ORGANIZATION
Radio Broadcasting (the "Company") is a division of the Maranatha
Broadcasting Company, Inc. ("Maranatha"). Maranatha is a television and radio
broadcaster with facilities located in Allentown, Pennsylvania. The Company's
operations and facilities are integrated with those of Maranatha. Maranatha
provides management, accounting and certain administrative services for the
Company and charges them for these services based upon a percentage of
utilization which management believes is reasonable. Total allocated
administrative costs were $418,469 and $296,416 for the year ended December 31,
1996 and the eight and one-half months ended September 15, 1997, respectively.
Maranatha collects and retains all cash generated by the Radio Broadcasting
Division.
The Radio Broadcasting Division provides credit to customers, substantially
all of whom are regional businesses engaged in a variety of industries and
services. The Division broadcasts in the Allentown, Bethlehem, Easton region of
Eastern Pennsylvania as WLEV (formerly WFMZ) and broadcasts, through a
translator, in Reading, Pennsylvania as WLEV.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Equipment
Equipment is carried at cost, less accumulated depreciation. Depreciation
is provided on the straight-line method over the estimated useful lives of 5 to
7 years. Maintenance and repairs are charged to operations as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue
Net broadcasting revenue is presented net of agency commissions and is
recognized when the advertisements are broadcast.
Trade Transactions
Revenue from trade transactions (advertising provided in exchange for goods
and services) is recognized when advertisements are broadcast and trade expense
is recognized when merchandise is consumed or services are performed. An asset
and liability are recorded at the fair market value of the goods or services
received.
Accounts Receivable
The division generally extends 60 day credit terms to its advertisers and
maintains an allowance for uncollectible accounts based upon past experience.
F-102
<PAGE> 235
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Broadcast License
The broadcast license and translator license were recorded at cost and
amortized over 15 years; the license has been fully amortized.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Maranatha has elected by consent of its shareholders to be taxed under the
provisions of Subchapter S for federal and state income tax purposes. Under
those provisions, Maranatha does not pay corporate income taxes on its taxable
income. Instead, the shareholders are liable for individual income taxes on the
Company's taxable income. Accordingly, these financial statements do not contain
a provision for income taxes.
Interim Financial Information
The financial statements as of September 15, 1997 and for the eight and
one-half months ended September 15, 1997 are unaudited; however, in the opinion
of management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the financial statements for the interim
period have been included. The results for the interim period are not
necessarily indicative of the results to be achieved for the full fiscal year.
Division Equity
Division equity at December 31, 1996 consists of accumulated earnings of
$5,629,473 less distributions to Maranatha of $5,216,380.
(3) CONTINGENT LIABILITIES AND COMMITMENTS
Maranatha has certain debt and a revolving line of credit, which is secured
by all the assets of Maranatha, including the assets of the Radio Broadcasting
Division, as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 15,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Total notes and debt payable..................... $ 506,886 $ 826,648
Less current portion............................. (190,286) (183,670)
--------- ---------
Total long-term debt............................. $ 316,600 $ 642,978
========= =========
Revolving line of credit......................... $ -- $ --
========= =========
</TABLE>
The notes and line of credit bear interest primarily at the lender's prime
rate which was 8.25% and 8.5% at December 31, 1996 and September 15, 1997,
respectively. One of the notes bears interest at a fixed rate of 7.90%.
Maranatha is in compliance with the debt covenants as of September 15, 1997.
Proceeds from debt issuance were used to enhance Maranatha's television
operations.
The Division leases its Reading translator site and Reading sales office
under operating leases with future minimum monthly payments of $800 through
November 1998. The Division has also entered into lease
F-103
<PAGE> 236
MARANATHA BROADCASTING COMPANY, INC.
RADIO BROADCASTING DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
agreements to provide sub-channel broadcast frequency to two lessees. The future
revenue under the lease terms is as follows:
<TABLE>
<S> <C>
1997...................................................... $ 48,796
1998...................................................... 50,516
1999...................................................... 39,121
2000...................................................... 39,817
2001...................................................... 23,891
--------
$202,141
========
</TABLE>
(4) AGREEMENT OF SALE
On July 15, 1997, Maranatha entered into an asset purchase agreement with
Citadel Broadcasting Company ("CBC") and a wholly-owned subsidiary of CBC to
sell the assets and broadcast license of the Radio Broadcasting Division to CBC
for $23,000,000 plus the broadcasting assets of a radio station (WEST-AM in
Easton, Pennsylvania) owned by CBC and a wholly-owned subsidiary of CBC.
On September 15, 1997 Maranatha entered into a local marketing agreement
(LMA) with Citadel Broadcasting Company (Citadel) whereby Citadel pays $25,000
per month to the Company in exchange for supplying specified programming to the
brokered stations and marketing all commercial advertising time of the brokered
stations, subject to the Company's right to control the content of all
programming. In compliance with the LMA, the broadcasting revenue and station
operating expenses of the Company for the 15-day period from September 16, 1997
to September 30, 1997 are included in the financial statements of Citadel.
F-104
<PAGE> 237
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Pacific Northwest Broadcasting Corporation
Boise, Idaho
We have audited the accompanying combined balance sheet of Pacific
Northwest Broadcasting Corporation and Affiliates as of December 31, 1996, and
the related combined statements of operations, changes in owners' equity, and
cash flows for the year then ended. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Pacific
Northwest Broadcasting Corporation and Affiliates as of December 31, 1996, and
the results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ BALUKOFF, LINDSTROM & CO., P.A.
Boise, Idaho
September 25, 1997
F-105
<PAGE> 238
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
COMBINED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 220,381
Trade accounts receivable, net of allowance for doubtful
accounts of $25,000.................................... 1,079,835
Other accounts receivable................................. 57,692
Prepaid expenses.......................................... 189,395
Accrued interest receivable............................... 18,169
Current portion of notes receivable....................... 488,880
-----------
Total current assets................................... 2,054,352
Other assets:
AM and FM broadcast licenses.............................. 4,497,916
Notes receivable, less current portion.................... 3,011,778
Noncompete agreements..................................... 354,441
Equipment deposits and other assets....................... 39,250
Deferred taxes............................................ 42,443
-----------
7,945,828
Property and equipment, at cost
Land and improvements..................................... 130,011
Leasehold improvements.................................... 61,744
Towers and antennas....................................... 402,710
Transmitters and transmitter buildings.................... 508,444
Studio and technical equipment............................ 915,007
Automobiles............................................... 44,930
Furniture and office equipment............................ 360,595
-----------
2,423,441
Accumulated depreciation.................................. (992,576)
-----------
1,430,865
-----------
$11,431,045
===========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 268,401
Accrued expenses.......................................... 259,479
Accrued taxes payable..................................... 12,520
Current portion of notes payable to related parties....... 106,868
Current portion of long-term debt......................... 1,195,717
-----------
Total current liabilities.............................. 1,842,985
Long-term debt:
Notes payable to related parties, less current portion.... 1,155,817
Notes payable, less current portion....................... 7,184,057
-----------
8,339,874
Deferred revenue............................................ 235,395
Owners' equity:
Convertible preferred stock, nonvoting, par value $1,000
per share, 5% non cumulative, authorized 3,500 shares,
issued and outstanding 1,396.8 shares.................. 1,396,800
Common stock, voting, no par value, authorized 10,000
shares, issued and outstanding 3,766.6 shares.......... 475,677
Members' equity........................................... 61,176
Accumulated deficit....................................... (920,862)
-----------
1,012,791
-----------
$11,431,045
===========
</TABLE>
See accompanying notes.
F-106
<PAGE> 239
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Revenues:
Revenues.................................................. $5,404,307
Less agency and representative commissions................ 772,233
----------
4,632,074
Expenses:
Transmission.............................................. 223,366
Programming and production................................ 1,476,235
Sales..................................................... 816,459
General and administrative................................ 1,599,675
Advertising............................................... 150,696
----------
4,266,431
----------
Income from operations................................. 365,643
Nonoperating income (expense)
Gain on sale of assets.................................... 198,581
Noncompete revenue........................................ 184,508
Interest income........................................... 321,759
Interest expense.......................................... (566,783)
----------
138,065
----------
Income before income taxes............................. 503,708
Income tax expense.......................................... 182,480
----------
Net income............................................. $ 321,228
==========
</TABLE>
See accompanying notes.
F-107
<PAGE> 240
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
COMBINED STATEMENT OF CHANGES IN OWNERS' EQUITY
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PREFERRED COMMON SHAREHOLDER ACCUMULATED MEMBERS'
STOCK STOCK RECEIVABLE DEFICIT EQUITY TOTAL
---------- --------- ------------ ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996... $1,396,800 $ 591,302 $(85,445) $(1,180,914) $ -- $ 721,743
Common stock redemption,
125 shares............... -- (115,625) -- -- -- (115,625)
Decrease in shareholder
receivable............... -- -- 85,445 -- -- 85,445
Net income................. -- -- -- 260,052 61,176 321,228
---------- --------- -------- ----------- ------- ----------
Balance at December 31,
1996....................... $1,396,800 $ 475,677 $ -- $ (920,862) $61,176 $1,012,791
========== ========= ======== =========== ======= ==========
</TABLE>
See accompanying notes.
F-108
<PAGE> 241
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $ 321,228
Adjustments to reconcile net income to net cash provided
by operating activities Amortization................... 55,427
Depreciation........................................... 71,926
Noncompete revenue..................................... (134,508)
Noncompete expense..................................... 89,257
Provision for bad debts................................ 14,029
Gain on sale of assets................................. (198,581)
Legal expense paid directly by bank.................... 10,200
Changes in operating assets and liabilities
Trade accounts receivable............................ (604,884)
Other accounts receivable............................ (5,319)
Prepaid expenses..................................... 21,658
Prepaid income tax................................... 7,739
Accrued interest receivable.......................... 9,794
Equipment deposits and other assets.................. (14,258)
Deferred taxes....................................... 169,936
Accounts payable..................................... 90,761
Accrued expenses..................................... 82,996
Accrued taxes payable................................ 12,520
---------
Net cash used by operating activities............. (79)
Cash flows from investing activities:
Payments on receivable from shareholders.................. 39
Loans made to shareholders................................ (491,256)
Payments on notes receivable.............................. 773,885
Payments for acquisition of stations...................... (63,360)
Proceeds from sale of assets.............................. 190,244
Additions to property and equipment....................... (152,300)
---------
Net cash provided by investing activities......... 257,252
Cash flows from financing activities:
Decrease in bank overdraft................................ (118,289)
Payments on notes payable................................. (282,906)
Borrowings on notes payable to related parties............ 400,000
Payment on notes payable to related parties............... (35,597)
---------
Net cash provided by financing activities......... (36,792)
---------
Net increase in cash.............................. 220,381
Cash at beginning of year................................... --
---------
Cash at end of year............................... $ 220,381
=========
</TABLE>
See accompanying notes.
F-109
<PAGE> 242
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
The Company operates AM and FM radio stations in southwestern Idaho.
Revenues received from local advertisers and national agencies advertising in
the southwestern Idaho market account for the majority of revenues.
Principles of Combination
The financial statements include the accounts of Pacific Northwest
Broadcasting Corporation (PNWB) and its wholly owned subsidiary, (Richardson
Broadcasting Company), and Wilson Group, LLC (Wilson), a limited liability
company which has common ownership. Wilson operates as an Idaho limited
liability company and its members have limited personal liability for the
obligations or debts of the entity. Wilson will terminate no later than December
31, 2072. Intercompany accounts and transactions have been eliminated in
combination.
Allocation of Earnings
Wilson operates two broadcast signals--KIZN and KZMG. Earnings from these
two signals are reported on the balance sheet as increases or decreases in
members' equity. The other broadcast signals--KBOI, KQFC and KKGL--are operated
by PNWB. Their earnings are reported as increases or decreases in the
accumulated deficit account.
Cash
For purposes of reporting cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.
Depreciation
Depreciation of property and equipment is provided using the straight line
method over the estimated useful lives of the assets, which range from 3 to 50
years.
Amortization
Costs related to obtaining AM and FM broadcast licenses are amortized using
the straight line method over fifteen years. Accumulated amortization relating
to these licenses was $133,852 at December 31, 1996.
Costs related to the noncompete agreements are amortized using the
straight-line method over five years, the term of the agreement. Accumulated
amortization relating to the noncompete agreements was $171,848 at December 31,
1996.
Deferred Revenue
Deferred revenue consists of a noncompete agreement and will be earned over
the life of the agreement (7 years).
Revenue Recognition and Trade Transactions
Broadcast revenue is recognized when the advertisements are broadcast.
Revenue from trade transactions (advertising provided in exchange for goods and
services) is recognized as income when advertisements are broadcast and trade
expense is recognized when merchandise is consumed or services are performed.
F-110
<PAGE> 243
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
Advertising
The Company expenses advertising costs as they are incurred.
Income Taxes
Income taxes are provided for the tax effects of PNWB transactions reported
in the financial statements and consist of taxes currently due or recoverable
and deferred taxes related primarily to differences between the bases of assets
and liabilities for financial and income tax reporting. Differences between
financial and income tax reporting relate to accumulated depreciation,
installment sales, basis in subsidiary's stock, allowance for doubtful accounts,
deferred compensation, noncompete amortization and shareholder interest payable.
No provision has been made for the tax effects of the Wilson transactions
since Wilson is taxed as a partnership and taxes are the responsibility of the
individual members.
Estimates
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
reported revenues and expenses. Actual results could differ from these
estimates.
Concentrations of Credit Risk
In the normal course of business, the Company extends unsecured credit to
customers principally national advertising agencies and companies in the
southwestern Idaho market. The Company also has demand deposits on hand in
financial institutions which exceed applicable FDIC insurance.
Acquisitions and Local Marketing Agreement
In October, 1996, the Company acquired two radio stations in Boise, Idaho
for $5,000,000. This acquisition was accounted for using the purchase method of
accounting. The purchase price has been allocated to the assets purchased based
upon fair values as agreed to with the seller.
The Company operated the two radio stations under a Local Marketing
Agreement (LMA) for six months prior to the acquisition. Under the terms of the
LMA, the expenses of operating the stations (other than depreciation or
amortization of assets) were the obligation of the Company and the Company
received the revenues generated by the stations.
NOTE B--NOTES RECEIVABLE
The Company sold radio stations in Medford, Oregon, Chico, California, and
Eugene, Oregon in prior years and financed the sale of the radio stations to the
buyers. In 1996, the Company sold two radio stations and a building in
Pocatello, Idaho, and financed the sale. Each of the sales agreements included
provisions which restrict the Company from competing in markets served by the
radio stations which were sold. The
F-111
<PAGE> 244
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
noncompete agreements extend for periods up to seven years from the dates of the
sales. The terms of the notes are as follows:
<TABLE>
<S> <C>
Note receivable from broadcasting company for Pocatello
stations at $4,003 per month through March 1997 and
$11,592 per month thereafter including interest at 8.5%,
due March 2002, secured by substantially all assets of the
Pocatello stations........................................ $ 564,993
Note receivable from broadcasting company for Pocatello
building at $2,405 per month, including interest at 8.5%,
due March 2002, secured by real estate.................... 108,884
Note receivable from broadcasting company for Chico and
Eugene stations at monthly payments ranging from $37,033
to $53,204 including interest at 7.71%, due September
2002, secured by substantially all assets of the
stations.................................................. 2,826,781
----------
3,500,658
Less current portion........................................ 488,880
----------
$3,011,778
==========
</TABLE>
NOTE C--LONG-TERM DEBT
Long-term debt is summarized as follows:
To banks:
<TABLE>
<S> <C>
Note payable to bank, monthly payments of interest only at
prime plus 1%, secured by substantially all of the
Company's assets. The interest rate at December 31, 1996
was 9.25%................................................. $8,000,000
To individuals:
Note payable to former shareholder at $1,205 per month
including interest at 8% through January 2003,
unsecured................................................. 69,440
Note payable to former shareholder at $991 per month
including interest at 10% through June 2000, unsecured.... 35,002
Note payable to former shareholder at $3,033 per month
including interest at 8% through January 2006,
unsecured................................................. 234,457
Note payable to former shareholder at $375 per month
through January 2006...................................... 40,875
Unsecured notes payable to related party, due on demand... 7,772
Unsecured notes payable to related parties at $4,446 per
month including interest at 9% through August 2018........ 208,093
Unsecured notes payable to related party, due on demand
including interest at 7.5%................................ 53,372
</TABLE>
F-112
<PAGE> 245
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
Notes payable to related parties, secured by certain notes receivable and
guaranteed by principal shareholder, payable in monthly installments, including
interest as follows:
<TABLE>
<CAPTION>
MONTHLY INTEREST
INSTALLMENTS RATES DUE DATES
------------ -------- ---------
<S> <C> <C> <C>
$5,077 8.0% January 1, 2005.................. $ 679,945
$ 470 8.0% January 1, 2005.................. 58,820
$ 470 8.0% January 1, 2005.................. 58,820
$ 470 8.0% January 1, 2005.................. 58,821
$ 440 8.0% January 1, 2005.................. 58,956
$ 381 8.0% January 1, 2005.................. 50,989
Accrued interest due to related parties............................... 27,097
----------
9,642,459
Less current portion.................................................. 1,302,585
----------
$8,339,874
==========
</TABLE>
Maturities in future years are: 1997--$1,302,585, 1998--$2,589,369;
1999--$4,454,088; 2000--$106,077; 2001--$1,018,430 and thereafter--$171,910.
The note payable to the bank limits the amount of new debt and operating
leases to not more than a total of $50,000 without lender's approval.
The bank issued a commitment letter to refinance $7,000,000 of the
$8,000,000 obligation in 1997, including a bridge loan of $2,000,000 and a term
loan of $5,000,000. The bridge loan has terms which include interest at prime
plus 1% and a maturity date of February 28, 1998. Requirements of the term loan
include interest at prime plus 1%, due August 31, 1999 and monthly payments of
approximately $77,000 (using an interest rate of 9.25%). The current portion and
scheduled maturities have been adjusted to reflect the intended refinance.
NOTE D--RELATED PARTY TRANSACTIONS
Interest expense paid to related parties amounted to $187,646 in 1996. The
Company leases land, office facilities, and equipment from certain shareholders
and officers of the Company. Rental expense paid to related parties amounted to
$99,588 in 1996.
NOTE E--LEASE COMMITMENTS
The Company leases radio transmitter sites, buildings, music and airtime
under noncancellable leases with terms in excess of one year. Future minimum
payments, by year and in the aggregate, under noncancellable operating leases
with initial or remaining terms of one year or more consisted of the following
at December 31, 1996:
<TABLE>
<S> <C>
1997........................................................ $206,120
1998........................................................ 201,980
1999........................................................ 133,202
2000........................................................ 31,300
2001........................................................ 11,150
Thereafter.................................................. 105,850
--------
Total minimum lease payments................................ $689,602
========
</TABLE>
Rental expense amounted to $245,589 in 1996.
F-113
<PAGE> 246
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
NOTE F -- INCOME TAXES
The provision for income taxes results from continuing operations and
includes the following components:
<TABLE>
<S> <C>
Federal
Current tax provision............................. $ --
Deferred tax provision............................ 147,548
--------
147,548
State
Current tax provision............................. 12,544
Deferred tax provision............................ 22,388
--------
34,932
--------
Total income tax expense.................................... $182,480
========
</TABLE>
The components of the net deferred tax asset at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
--------- -------- ---------
<S> <C> <C> <C>
Deferred tax liability from:
Taxable temporary differences............................. $(255,017) $(60,004) $(315,021)
Deferred tax asset from:
Deductible temporary differences.......................... 105,662 22,049 127,711
Operating loss carryforward............................... 205,289 -- 205,289
Tax credit carryforward................................... 83,214 2,793 86,007
Valuation allowance....................................... (61,543) -- (61,543)
--------- -------- ---------
332,622 24,842 357,464
--------- -------- ---------
Deferred tax asset (liability).............................. $ 77,605 $(35,162) $ 42,443
========= ======== =========
</TABLE>
The following reconciles the federal tax provision with the expected
provision by applying statutory rates to income before income taxes:
<TABLE>
<S> <C>
Federal tax expense at statutory rate....................... $171,261
Effect of state taxes....................................... (13,701)
Nondeductible expenses...................................... 2,861
Partnership income.......................................... (20,800)
Other....................................................... 7,927
--------
Federal income tax expense.................................. $147,548
========
</TABLE>
For income tax purposes, operating losses and tax credit carryovers used
and available are as follows at December 31, 1996:
<TABLE>
<CAPTION>
USED AVAILABLE
-------- ---------
<S> <C> <C>
Net operating loss, federal............................. $379,789 $710,617
Alternative minimum tax credit.......................... -- 21,671
General business credit................................. -- 61,543
</TABLE>
The federal net operating losses expire during 2004 through 2010. The
general business credits expire during 1998 through 2000. The alternative
minimum tax credits can be carried forward indefinitely.
F-114
<PAGE> 247
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
NOTE G -- DEFINED CONTRIBUTION PLAN
The Company maintains a 401(k) plan covering all employees over the age of
twenty-one who have completed one year of service. The Company matches 10% of an
employee's contribution. Contributions to the plan were $7,022 in 1996.
NOTE H -- CONVERTIBLE PREFERRED STOCK
The preferred stockholders have the option to convert the preferred stock
into common stock prior to December 31, 2002 on the basis of five shares of
common stock for each share of preferred stock redeemed. The holders of
preferred stock do not have voting rights. Preferred stock is redeemable at par.
Subsequent to year end, the preferred stockholders converted all of their
preferred stock to common stock at the ratio of five shares of common stock for
each share of preferred stock.
NOTE I -- CASH FLOW INFORMATION
Supplemental cash flow information for the years ended December 31, 1996 is
as follows:
<TABLE>
<S> <C>
Interest paid............................................... $ 347,933
Taxes paid (net of refunds)................................. $ (7,718)
Noncash financing and investing activities:
Purchase of shareholder's common stock and payment of
deferred compensation:
Common stock redeemed.................................. $ 115,625
New debt incurred...................................... (295,000)
Deferred compensation paid............................. 179,375
-----------
$ --
===========
Sale of assets:
Proceeds from sale of property and equipment........... $ 689,000
Increase in notes receivable........................... (689,000)
-----------
$ --
===========
Payment of shareholder receivable with reduction in
shareholder note payable:
Notes payable reduced.................................. $ 1,000,000
Note payable created................................... (7,772)
Shareholder receivable paid............................ (992,228)
-----------
$ --
===========
Refinancing company and shareholder debt and acquisition
of radio stations:
Proceeds from new debt................................. $ 8,000,000
Payments on existing debt.............................. (2,557,188)
Broadcast licenses acquired............................ (4,100,000)
Property and equipment acquired........................ (800,000)
Noncompete agreement................................... (100,000)
Debt repayment on behalf of shareholder................ (415,972)
Loan fees.............................................. (80,000)
Legal fees............................................. (10,200)
-----------
Net cash paid for acquisition $ (63,360)
===========
</TABLE>
F-115
<PAGE> 248
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 -- CONTINUED
NOTE J--SUBSEQUENT EVENTS
The Company has entered into an agreement to redirect certain of the
Company's broadcast signals in exchange for a payment of $2,000,000. The
agreement is subject to Federal Communications Commission (FCC) approval and is
secured by a letter of credit. Approval is expected in 1997 and the payment is
expected to be received subsequent to approval.
Subsequent to December 31, 1996, the shareholders of PNWB and the members
of Wilson have signed letters of intent to sell the capital stock of PNWB, the
operating assets of Wilson and a building owned by a shareholder to Citadel
Broadcasting Company (Citadel). The transactions are subject to approval of the
FCC. Under the letters of intent, the Company will enter into a LMA with Citadel
which will allow Citadel use of the property and equipment of the radio stations
in exchange for a fee. The LMA will continue until closing of the sales of the
stock of PNWB and the assets of Wilson. The sale of the stock of PNWB will not
close prior to January 1, 1998 and the sale of the assets of Wilson will not
close prior to April 18, 1998. The sale price of $28,500,000 for the stock,
assets and building is payable in cash, or, if Citadel's parent consummates an
initial public offering prior to closing, such price is payable in cash totaling
$25,650,000 and stock of $2,850,000. The agreement to purchase the stock of PNWB
requires, among other things, that certain minimum levels of net asset value be
met on the date of closing.
The Company made payments of notes payable amounting to approximately
$1,800,000 subsequent to year end in advance of the payment due dates.
Additionally, the Company received approximately $2,600,000 in full payment of
certain notes receivables subsequent to December 31, 1996.
Subsequent to year end, the preferred stockholders converted all of their
preferred stock to common stock at the ratio of five shares of common stock for
each share of preferred stock.
F-116
<PAGE> 249
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
UNAUDITED COMBINED BALANCE SHEET
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 457,658
Trade accounts receivable, net of allowance for doubtful
accounts of $25,000..................................... 1,033,958
Other accounts receivable................................. 47,171
Prepaid expenses.......................................... 92,255
Prepaid income tax........................................ 5,880
Accrued interest receivable............................... 2,119
Current portion of notes receivable....................... 132,952
-----------
Total current assets............................... 1,771,993
Other Assets:
AM and FM broadcast licenses.............................. 4,382,008
Notes receivable, less current portion.................... 525,244
Noncompete agreements..................................... 266,170
Equipment deposits and other assets....................... 43,509
Deferred taxes............................................ 5,452
-----------
5,222,383
Property and equipment, at cost:
Land and improvements..................................... 324,647
Leasehold improvements.................................... 63,063
Towers and antennas....................................... 402,710
Transmitters and transmitter buildings.................... 513,002
Studio and technical equipment............................ 951,467
Automobiles............................................... 44,930
Furniture and office equipment............................ 382,019
-----------
2,681,838
Accumulated depreciation.................................. (1,109,093)
-----------
1,572,745
-----------
$ 8,567,121
===========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 203,805
Accrued expenses.......................................... 181,856
Current portion of notes payable to related parties....... 71,720
Current portion of long-term debt......................... 6,533,928
-----------
Total current liabilities.......................... 6,991,309
Long-term debt:
Notes payable to related parties, less current portion.... 832,523
Notes payable, less current portion....................... 284,301
-----------
1,116,824
Deferred revenue............................................ 123,305
Owners' equity:
Common stock, voting, no par value, authorized 20,000
shares, issued and outstanding 10,750.6 shares.......... 1,872,477
Shareholder receivable.................................... (531,500)
Accumulated deficit....................................... (852,164)
Members' deficit.......................................... (153,130)
-----------
335,683
-----------
$ 8,567,121
===========
</TABLE>
See accompanying notes.
F-117
<PAGE> 250
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
UNAUDITED COMBINED STATEMENT OF OPERATIONS
TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
Revenues:
Revenues.................................................. $5,717,702
Less agency and representative commissions................ 796,360
----------
4,921,342
Expenses:
Transmission.............................................. 233,678
Programming and production................................ 1,640,619
Sales..................................................... 874,358
General and administrative................................ 1,622,242
Advertising............................................... 137,386
----------
4,508,283
----------
Income from operations............................ 413,059
Nonoperating income (expense):
Loss on sale of assets.................................... (65,639)
Noncompete revenue........................................ 112,090
Interest income........................................... 121,846
Interest expense.......................................... (694,674)
----------
(526,377)
----------
Loss before income taxes.......................... (113,318)
Income tax expense.......................................... 32,290
----------
Net loss.......................................... $ (145,608)
==========
</TABLE>
See accompanying notes.
F-118
<PAGE> 251
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
UNAUDITED COMBINED STATEMENT OF CHANGES IN OWNERS' EQUITY
TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
PREFERRED COMMON SHAREHOLDER ACCUMULATED MEMBERS'
STOCK STOCK RECEIVABLE DEFICIT DEFICIT TOTAL
----------- ---------- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997.... $ 1,396,800 $ 475,677 $ -- $(920,862) $ 61,176 $1,012,791
Preferred stock
conversion................ (1,396,800) 1,396,800 -- -- -- --
Increase in shareholder
receivable................ -- -- (531,500) -- -- (531,500)
Net income (loss)........... -- -- -- 68,698 (214,306) (145,608)
----------- ---------- --------- --------- --------- ----------
Balance at October 31, 1997... $ -- $1,872,477 $(531,500) $(852,164) $(153,130) $ 335,683
=========== ========== ========= ========= ========= ==========
</TABLE>
See accompanying notes.
F-119
<PAGE> 252
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
UNAUDITED COMBINED STATEMENT OF CASH FLOWS
TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (145,608)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization........................................... 115,908
Depreciation........................................... 116,517
Noncompete revenue..................................... (112,090)
Noncompete expense..................................... 88,271
Provision for bad debts................................ 20,284
Loss on sale of assets................................. 65,639
Changes in operating assets and liabilities:
Trade accounts receivable............................ 25,593
Other accounts receivable............................ 10,521
Prepaid expenses..................................... 97,140
Prepaid income tax................................... (5,880)
Accrued interest receivable.......................... 16,050
Equipment deposits and other assets.................. (4,259)
Deferred taxes....................................... 36,991
Accounts payable..................................... (64,596)
Accrued expenses..................................... (77,623)
Accrued taxes payable................................ (12,520)
-----------
Net cash provided by operating activities......... 170,338
Cash flows from investing activities:
Loans made to shareholders................................ (531,500)
Advances on notes receivable.............................. (59,836)
Payments on notes receivable.............................. 2,902,298
Proceeds from sale of assets.............................. 61,100
Additions to property and equipment....................... (385,136)
-----------
Net cash provided by investing activities......... 1,986,926
Cash flows from financing activities:
Payments on notes payable................................. (1,561,545)
Payments on notes payable to related parties.............. (358,442)
-----------
Net cash used by financing activities............. (1,919,987)
-----------
Net increase in cash.............................. 237,277
Cash at beginning of period....................... 220,381
-----------
Cash at end of period............................. $ 457,658
===========
Supplemental disclosure of cash flow information:
Interest paid............................................. $ 703,382
Taxes paid................................................ $ 13,699
</TABLE>
See accompanying notes.
F-120
<PAGE> 253
PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
OCTOBER 31, 1997
NOTE A--UNAUDITED INTERIM FINANCIAL STATEMENTS
The combined balance sheet as of October 31, 1997 and the combined
statements of operations, changes in owners' equity, and cash flows for the ten
month period ended October 31, 1997 are unaudited. In the opinion of management,
the accompanying unaudited financial statements contain all adjustments
(consisting solely of normal recurring adjustments) necessary to present fairly
the financial position of Pacific Northwest Broadcasting Corporation and
Affiliates, (the Company) and the results of operations, changes in owners'
equity, and cash flows. These interim unaudited combined financial statements
should be read in conjunction with the audited combined financial statements.
The combined results of operations for the ten months ended October 31, 1997 are
not necessarily indicative of results to be expected for the full year.
NOTE B--AGREEMENT TO REDIRECT SIGNAL
The Company has entered into an agreement to redirect certain of the
Company's broadcast signals in exchange for a payment of $2,000,000. The
agreement is subject to Federal Communications Commission approval and is
secured by a letter of credit.
NOTE C--SALES AGREEMENTS
On September 29, 1997, the shareholders of Pacific Northwest Broadcasting
Corporation (PNWB) and the members of Wilson Group, LLC (Wilson) signed various
agreements to sell the capital stock of PNWB, the operating assets of Wilson and
a building of the controlling owner to Citadel Broadcasting Company (Citadel).
In conjunction with the agreements, the Company entered into a Local Marketing
Agreement (LMA) with Citadel which allowed Citadel use of the property and
equipment of the radio stations in exchange for a fee. The LMA continued until
the closing of the sale of the assets of Wilson. The sale of the stock of PNWB
closed February 12, 1998 and the sale of the assets of Wilson closed on April
21, 1998. The sales price of $28,500,000 for the stock, assets and building was
paid in cash.
NOTE D--SUBSEQUENT EVENT
On February 12, 1998, PNWB entered into an assignment and distribution
agreement with Wilson Properties, L.P., the sole shareholder. This agreement
transferred certain obligations and assets to the shareholder and resulted in a
net dividend of $245,301. The agreement also assigned the right to collect the
proceeds from the agreement to redirect broadcast signals described in Note B.
The dividend is summarized as follows:
<TABLE>
<S> <C>
Cash........................................................ $ 655,089
Accounts receivable......................................... 1,534,460
Notes receivable............................................ 5,636,732
Real property............................................... 312,872
Other assets................................................ 30,902
Debt........................................................ (7,681,981)
Accounts payable and accrued expenses....................... (242,773)
-----------
Dividend.................................................... $ 245,301
===========
</TABLE>
F-121
<PAGE> 254
INDEPENDENT AUDITORS' REPORT
The Partners
Wicks Radio Group
(a division of Wicks Broadcast Group Limited Partnership)
We have audited the accompanying balance sheet of Wicks Radio Group (a
division of Wicks Broadcast Group Limited Partnership) as of December 31, 1997,
and the related statements of operations and changes in division equity, and
cash flows for the year then ended. These financial statements are the
responsibility of Wicks Radio Group's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Wicks Radio Group (a
division of Wicks Broadcast Group Limited Partnership) as of December 31, 1997
and the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
McLean, Virginia
December 15, 1998
F-122
<PAGE> 255
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 104,940 $ 326,168
Accounts receivable, net of allowance for doubtful accounts
of $286,811 at December 31, 1997 and $311,650 at September
30, 1998.................................................. 2,123,972 3,126,098
Prepaid expenses and other assets........................... 58,099 203,819
----------- -----------
Total current assets................................... 2,287,011 3,656,085
Property and equipment, net................................. 4,617,141 6,277,822
Intangible assets, net...................................... 25,047,120 38,242,931
----------- -----------
Total assets........................................... $31,951,272 $48,176,838
=========== ===========
LIABILITIES AND DIVISION EQUITY
Current liabilities -- accounts payable and accrued
expenses.................................................. $ 489,238 $ 513,650
Deferred income taxes....................................... 560,000 530,000
----------- -----------
Total liabilities...................................... 1,049,238 1,043,650
Division equity............................................. 30,902,034 47,133,188
----------- -----------
Total liabilities and division equity.................. $31,951,272 $48,176,838
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-123
<PAGE> 256
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS AND CHANGES IN DIVISION EQUITY
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -----------------
<S> <C> <C>
Revenues:
Broadcast revenues........................................ $12,751,347 $13,837,308
Other revenue............................................. 346,790 500,346
----------- -----------
Gross revenues.............................................. 13,098,137 14,337,654
Less -- agency commissions................................ (1,320,388) (1,387,370)
----------- -----------
Net revenue................................................. 11,777,749 12,950,284
Operating costs:
Station operating expenses................................ 8,269,884 8,668,765
Depreciation and amortization............................. 2,301,180 3,052,064
Corporate overhead........................................ 1,008,602 587,049
----------- -----------
11,579,666 12,307,878
Net income before income taxes.............................. 198,083 642,406
Income taxes (benefit)...................................... (40,000) (30,000)
----------- -----------
Net income.................................................. 238,083 672,406
Division equity, beginning of period........................ 23,281,430 30,902,034
Net corporate transfers..................................... 7,382,521 15,558,748
----------- -----------
Division equity, end of period.............................. $30,902,034 $47,133,188
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-124
<PAGE> 257
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 238,083 $ 672,406
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 2,301,180 3,052,064
Deferred tax benefit................................... (40,000) (30,000)
(Increase) decrease in receivables..................... 65,154 (1,002,126)
Increase in prepaid expenses and other current
assets............................................... (50,794) (145,720)
Increase (decrease) in accounts payable and accrued
expenses............................................. (1,515,667) 24,412
----------- ------------
Net cash provided by operating activities............ 997,956 2,571,036
----------- ------------
Cash flows used in investing activities:
Purchase of property and equipment........................ (369,460) (145,157)
Acquisition of broadcast properties....................... (8,672,770) (17,763,399)
----------- ------------
Cash flows used in investing activities..................... (9,042,230) (17,908,556)
----------- ------------
Cash flows provided by financing activities -- net corporate
transfers................................................. 7,382,521 15,558,748
----------- ------------
Net increase (decrease) in cash and cash equivalents........ (661,753) 221,228
Cash and cash equivalents, beginning of period.............. 766,693 104,940
----------- ------------
Cash and cash equivalents, end of period.................... $ 104,940 $ 326,168
=========== ============
</TABLE>
See accompanying notes to financial statements.
F-125
<PAGE> 258
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS DESCRIPTION
The Wicks Radio Group (the "Broadcast Group") is a division of Wicks
Broadcast Group Limited Partnership (the "Partnership"). The Broadcast Group
consists of the thirteen radio stations (8 FMs and 5 AMs) serving the
Charleston, SC and Binghamton, NY markets as of December 31, 1997. In January
1998, the Broadcast Group acquired an additional three stations (2 FMs and 1
AM). See note 3.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For the purposes of the statement of cash flows, cash equivalents consist
of highly liquid investments with original maturities of three months or less.
The fair market value of such investments approximates cost.
Property and Equipment
Property and equipment are stated at cost. Depreciation expense is computed
using the straight-line method over the estimated useful lives of the assets,
which range from three to twenty years.
Intangible Assets and Recovery of Long-Lived Assets
Intangible assets consist principally of network affiliation agreements,
broadcasting licenses, covenants not to compete and the excess of costs over the
fair value of net assets acquired. Amortization expense is computed on a
straight-line basis over the estimated lives of the assets which range from 2-15
years.
The Partnership's policy is to review its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. The Partnership recognizes an impairment loss when the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset. The measurement of the impairment losses to be recognized
is based upon the difference between the fair value and the carrying amount of
the assets.
Income Taxes
The Broadcast Group is generally not an entity subject to income taxes. The
Broadcast Group's income or loss is passed through to the Partnership and the
related tax attributes are deemed to be distributed to, and to be reportable by,
the partners of the Partnership on their respective income tax returns.
However, the Broadcast Group contains the Partnership's subsidiary,
Regional Group, Inc. Regional Group, Inc. and its subsidiaries are Subchapter C
corporations, and are, therefore, responsible for the income taxes attributable
to their profit and losses.
Income taxes for Regional Group, Inc. and its subsidiaries are accounted
for under the asset and liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating losses and tax credit
carryforwards. Deferred tax assets and liabilities are measured using the
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized
into income in the period that includes the enactment date. The income tax
benefit is a result of the amortization of the deferred tax liability.
Revenues
Broadcasting revenues are derived principally from the sale of program time
and spot announcements to local, regional, and national advertisers. Advertising
revenue is recognized in the period during which the program time and spot
announcements are broadcast.
F-126
<PAGE> 259
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Barter Transactions
Barter transactions are recorded at the estimated fair values of the
products and services received. Barter revenues are recognized when commercials
are broadcast. The assets or services received in exchange for broadcast time
are recorded when received or used.
Corporate Overhead
A number of overhead services are maintained centrally by the Partnership
and are allocated to its business units based on the benefits provided. These
services include most of the costs associated with the human resources function
and certain general and administrative costs of the corporate function such as
accounting and finance, treasury and legal.
In addition, the Partnership provides for the working capital needs of the
Broadcast Group. There is no borrowing arrangement between the Partnership and
the Broadcast Group. Accordingly, no interest expense is recorded in the
accompanying financial statements. However, all of the assets of the Broadcast
Group have been pledged as collateral on the Partnership's credit facility.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
A significant portion of the Broadcast's Group accounts receivable are due
from advertising agencies.
Unaudited Interim Financial Information
The unaudited balance sheet, statements of operations and changes in
division equity, and cash flows as of September 30, 1998 and for the nine months
then ended have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions of
Regulation S-X. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the interim period are not necessarily
indicative of the results that may be expected for any future period including
the year ending December 31, 1998.
(3) ACQUISITION OF BROADCAST RADIO STATIONS
In December 1997, the Partnership acquired certain broadcasting assets of
WBUB-FM (St. George, South Carolina) and WXTC-AM (Charleston, South Carolina)
and upgraded the frequency of one of its existing FM stations in the Charleston,
South Carolina, market through a swap of broadcast license rights.
In January 1998, the Partnership acquired certain broadcasting assets of
WMDH-FM and WMDH-AM (Muncie, Indiana) and WWKI-FM (Kokomo, Indiana).
F-127
<PAGE> 260
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Total consideration paid for these acquisitions including costs of
acquisitions was approximately $8,673,000 in 1997 and $17,764,000 (unaudited) in
1998. These acquisitions have been accounted for under the purchase method of
accounting and, accordingly, the assets acquired and liabilities assumed have
been recorded at their estimated fair value as of the acquisition date, as
determined by an independent appraiser. The allocation of the purchase price is
summarized as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
1997 1998
---------- -----------
<S> <C> <C>
Land........................................................ $ 68,000 $ 107,000
Property and equipment...................................... 2,260,000 2,194,000
Intangible assets........................................... 6,345,000 15,463,000
---------- -----------
Total consideration paid.................................... $8,673,000 $17,764,000
========== ===========
</TABLE>
(4) PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Land........................................................ $ 168,615 $ 275,318
Building and improvements................................... 267,370 989,413
Office equipment, furniture, and fixtures................... 430,259 581,724
Broadcast and production equipment.......................... 4,980,885 6,432,008
Vehicles.................................................... 81,137 94,660
----------- -----------
5,928,266 8,373,123
Less accumulated depreciation............................... (1,311,125) (2,095,301)
----------- -----------
$ 4,617,141 $ 6,277,822
=========== ===========
</TABLE>
(5) INTANGIBLE ASSETS AND AMORTIZATION
Intangible assets are comprised of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
USEFUL LIFE DECEMBER 31, SEPTEMBER 30,
IN YEARS 1997 1998
----------- ------------ -------------
<S> <C> <C> <C>
FCC licenses......................................... 15 $14,548,860 $23,996,860
Network affiliations................................. 15 1,372,056 2,869,114
Goodwill............................................. 15 9,721,115 14,239,756
Non-compete agreements............................... 2-5 725,000 725,000
Other intangibles.................................... 2-15 2,113,348 2,113,348
----------- -----------
28,480,379 43,944,078
Less accumulated amortization........................ (3,433,259) (5,701,147)
----------- -----------
$25,047,120 $38,242,931
=========== ===========
</TABLE>
(6) DEFERRED INCOME TAXES
The Partnership had established a deferred tax liability arising from the
acquisition of Regional Group, Inc. of $600,000. This liability was attributable
to the difference between the book basis of Regional Group, Inc. and the
carryover basis of the former shareholders at the acquisition date. As the
liability was principally
F-128
<PAGE> 261
WICKS RADIO GROUP
(A DIVISION OF WICKS BROADCAST GROUP LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
attributable to the book/tax difference in long-term tangible and intangible
assets, the deferred tax liability was classified as a long-term liability. The
Broadcast Group recognized an income tax benefit of $40,000 in 1997 and $30,000
for the nine months ended September 30, 1998 as a result of amortization of the
deferred tax liability.
(7) LEASES
The Broadcast Group leases certain property and equipment under
noncancelable operating lease agreements. Rental expense was approximately
$261,000 for the year ended December 31, 1997.
Future minimum lease payments under noncancelable operating leases are
approximately:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
------------------------
<S> <C>
1998.................................................... $ 308,000
1999.................................................... 239,000
2000.................................................... 188,000
2001.................................................... 153,000
2002.................................................... 153,000
Thereafter.............................................. 675,000
----------
$1,716,000
==========
</TABLE>
(8) SUBSEQUENT EVENT
In November 1998, the Partnership entered into an agreement with Citadel
Broadcasting Company ("Citadel") to sell the Wicks Radio Group to Citadel for
approximately $77 million, subject to approval from the Federal Communications
Commission.
F-129
<PAGE> 262
------------------------------------------------------
------------------------------------------------------
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING
AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS
NOT PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF THIS
PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 15
Use of Proceeds....................... 21
Capitalization........................ 22
Pro Forma Financial Information....... 23
Selected Historical Financial Data.... 35
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 37
Business.............................. 44
The Pending Transactions.............. 69
Management............................ 72
Certain Transactions.................. 79
Principal Stockholders................ 82
Description of Indebtedness........... 84
The Exchange Offer.................... 90
Description of the Notes.............. 99
Certain U.S. Federal Income Tax
Consequences........................ 123
Plan of Distribution.................. 127
Legal Matters......................... 127
Independent Auditors.................. 127
Available Information................. 128
</TABLE>
UNTIL (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
$115,000,000
CITADEL LOGO
CITADEL BROADCASTING COMPANY
---------------------------------------------------
OFFER TO EXCHANGE
9-1/4% Senior Subordinated Notes
Due 2008
for
9-1/4% Senior Subordinated Notes
Due 2008,
which have been registered under the Securities Act of 1933, as amended.
---------------------------
PROSPECTUS
---------------------------
, 199
------------------------------------------------------
------------------------------------------------------
<PAGE> 263
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.7502 of the Nevada General Corporation Law (the "NGCL") empowers
a corporation to indemnify any person who was or is a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation), by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
corporation, and with respect to any criminal proceeding, he had reasonable
cause to believe that his conduct was unlawful.
Section 78.7502 of the NGCL also empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including amounts paid in settlement and attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted under similar standards, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation unless, and only to the extent
that, the court in which such action or suit was brought or other court of
competent jurisdiction shall determine upon application that in view of all the
circumstances of the case, that despite the adjudication of liability such
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
Section 78.7502 of the NGCL further provides that, to the extent that a
director or officer of a corporation has been successful on the merits or
otherwise, in the defense of any action, suit or proceeding referred to above or
in the defense of any claim, issue or matter therein, he must be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith and that indemnification provided for by Section
78.751 of the NGCL shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled, except that such indemnification may not
be made to any director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action, unless a court of competent
jurisdiction orders otherwise, utilizing the standard described in the
immediately preceding paragraph.
The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of the officers and directors incurred
in defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by the officer or
director to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation; these provisions do not affect any rights to advancement of
expenses to which corporate personnel other than officers and directors may be
entitled under any contract or otherwise by law.
Any indemnification referred to above, unless ordered by a court or paid as
incurred in advance of final disposition upon receipt of a proper undertaking to
repay the same, must be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances. The determination
must be made: (i) by the stockholders; (ii) by the board of directors by
majority vote of a quorum consisting of directors who were not parties to the
act, suit or
II-1
<PAGE> 264
proceeding; (iii) if a majority vote of a quorum consisting of directors who
were not parties to the act, suit or proceeding so orders, by independent legal
counsel in a written opinion; or (iv) if a quorum consisting of directors who
were not parties to the act, suit, or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
Article VI of Citadel Broadcasting Company's Restated Articles of
Incorporation provides as follows:
To the full extent permitted by law, the Corporation shall indemnify
any person made or threatened to be made a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he or she is or was a director of the Corporation
or any predecessor of the Corporation or serves or served any other
enterprise as director at the request of the Corporation or any predecessor
of the Corporation.
Citadel Broadcasting Company's Bylaws further implement the permissive
provisions of Section 78.751 of the NGCL discussed above.
As permitted by Section 78.037 of the NGCL, Article V of Citadel
Broadcasting Company's Restated Articles of Incorporation provides as follows:
To the full extent permitted by General Corporation Law of State of
Nevada in effect from time to time and to no greater extent, no officer or
member of the Board of Directors shall be liable for monetary damages for
breach of fiduciary duty in his or her capacity as an officer or a director
in any action brought by or on behalf of the Corporation or any of its
shareholders.
Section 78.037 currently provides that any such provision of a
corporation's articles of incorporation may not eliminate or limit the liability
of a director or officer for (a) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law; or (b) the payment of dividends
in violation of the NGCL.
Citadel Broadcasting Company maintains insurance to protect persons
entitled to indemnification pursuant to its amended and Restated Articles of
Incorporation and Bylaws and the NGCL against expenses, judgments, fines and
amounts paid in settlement, to the fullest extent permitted by the NGCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
------- -------------------------
<S> <C>
2.1 Asset Purchase Agreement dated November 23, 1998 by and
among Wicks Broadcast Group Limited Partnership, WBG License
Co., L.L.C., Butternut Broadcasting Company, Inc., WBG
Binghamton License Co., Inc. and Citadel Broadcasting
Company (incorporated by reference to Exhibit 2.1 to Citadel
Broadcasting Company's Amendment No. 1 to Current Report on
Form 8-K/A filed December 16, 1998).
2.2 Stock Purchase Agreement dated September 29, 1997 among
Pacific Northwest Broadcasting Corporation, Wilson
Properties, L.P. and Citadel Broadcasting Company
(incorporated by reference to Exhibit 2.1 to Citadel
Broadcasting Company's Amendment No. 1 to Registration
Statement No. 333-36771 on Form S-4).
2.3 Asset Purchase Agreement dated September 29, 1997 among
Wilson Group LLC, Citadel Broadcasting Company and Citadel
License, Inc. (incorporated by reference to Exhibit 2.2 to
Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
2.4 Asset Purchase Agreement dated as of July 15, 1997 among
Maranatha Broadcasting Company, Inc., Citadel Broadcasting
Company and Citadel License, Inc. (relating to WFMZ-FM)
(incorporated by reference to Exhibit 2.3 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
</TABLE>
II-2
<PAGE> 265
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
2.5 Asset Purchase Agreement dated as of July 15, 1997 among
Maranatha Broadcasting Company, Inc., Citadel Broadcasting
Company and Citadel License, Inc. (relating to WEST-AM)
(incorporated by reference to Exhibit 2.4 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.6 Merger Agreement dated as of June 2, 1997 among Snider
Corporation, Ted L. Snider, Sr., Jane J. Snider, Citadel
Communications Corporation and Citadel Broadcasting Company
(incorporated by reference to Exhibit 2.5 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.7 Merger Agreement dated as of June 2, 1997 among Snider
Broadcasting Corporation, Ted L. Snider, Jr., Calvin G.
Arnold, Citadel Communications Corporation and Citadel
Broadcasting Company (incorporated by reference to Exhibit
2.6 to Citadel Broadcasting Company's Registration Statement
No. 333-36771 on Form S-4).
2.8 Asset Purchase Agreement dated as of June 2, 1997 among CDB
Broadcasting Corporation, CDB License Corporation and
Citadel Broadcasting Company (incorporated by reference to
Exhibit 2.7 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
2.9 Agreement of Purchase and Sale dated March 17, 1997 by and
among Tele-Media Broadcasting Company, Tele-Media
Broadcasting Company of Centre Region, Tele-Media
Broadcasting Holding Corporation and their respective
shareholders and Citadel Broadcasting Company and Citadel
Communications Corporation (incorporated by reference to
Exhibit 10.19 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
3(i)(a) Restated Articles of Incorporation of Citadel Broadcasting
Company (incorporated by reference to Exhibit 3(i)(a) to
Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
3(i)(b) Amendment to Certificate of the Designations, Voting Powers
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or
Restrictions of the 13-1/4% Series A Exchangeable Preferred
Stock and the 13-1/4% Series B Exchangeable Preferred Stock
of Citadel Broadcasting Company (incorporated by reference
to Exhibit 3(i)(b) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
3(i)(c) Articles of Incorporation of Citadel License, Inc.
(incorporated by reference to Exhibit 3(i)(c) to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
3(ii)(a) Bylaws of Citadel Broadcasting Company, as amended
(incorporated by reference to Exhibit 3(ii)(a) to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
3(ii)(b) Bylaws of Citadel License, Inc. (incorporated by reference
to Exhibit 3(i)(c) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
4.1 Indenture dated as of July 1, 1997 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the form of 10-1/4% Senior
Subordinated Notes due 2007 included therein (incorporated
by reference to Exhibit 4.1 to Citadel Broadcasting
Company's Registration Statement No. 333-36771 on Form S-4).
4.2 Indenture dated as of July 1, 1997 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the form of 13-1/4% Exchange
Debentures due 2009 included therein (incorporated by
reference to Exhibit 4.2 to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
4.3 Amendment to Certificate of the Designations, Voting Powers
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or
Restrictions of the 13-1/4% Series A Exchangeable Preferred
Stock and the 13-1/4% Series B Exchangeable Preferred Stock
of Citadel Broadcasting Company (incorporated by reference
to Exhibit 3(i)(b) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
</TABLE>
II-3
<PAGE> 266
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
4.4 Indenture dated as of November 19, 1998 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the form of 9-1/4% Senior
Subordinated Notes due 2008 included therein (incorporated
by reference to Exhibit 4.1 to Citadel Broadcasting
Company's Current Report on Form 8-K filed November 30,
1998).
9 Amended and Restated Voting Trust Agreement dated as of
October 15, 1997 among Citadel Communications Corporation,
ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment
Partners, L.P., Harlan Levy, as Trustee, and J. Walter
Corcoran and Christopher Hall (incorporated by reference to
Exhibit 9 to Citadel Broadcasting Company's Amendment No. 1
to Registration Statement No. 333-36771 on Form S-4).
5 Opinion of Eckert Seamans Cherin & Mellott, LLC, including
consent.*
8 Opinion of Eckert Seamans Cherin & Mellott, LLC regarding
certain Federal income tax matters, including consent.*
10.1 Employment Agreement dated as of June 28, 1996 among
Lawrence R. Wilson, Citadel Broadcasting Company and Citadel
Communications Corporation (incorporated by reference to
Exhibit 10.1 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.2 Citadel Communications Corporation 1996 Equity Incentive
Plan, as amended (incorporated by reference to Exhibit 10.2
to Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
10.3 Citadel Communications Corporation Nonqualified Stock Option
Agreement made and entered into as of June 28, 1996 between
Citadel Communications Corporation and Lawrence R. Wilson
(incorporated by reference to Exhibit 10.3 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.4 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of December 21, 1994
(incorporated by reference to Exhibit 10.4 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.5 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of February 21, 1994
(incorporated by reference to Exhibit 10.5 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.6 Joint Sales Agreement dated as of December 15, 1995 among
Pourtales Radio Partnership, Pourtales Holdings, Inc.,
Springs Radio, Inc., KVUU/KSSS, Inc. and Citadel
Broadcasting Company (incorporated by reference to Exhibit
10.6 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.7 Second Amended and Restated Stockholders Agreement dated as
of June 28, 1996, among Citadel Communications Corporation,
Baker, Fentress & Company, Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Thomas
E. Van Pelt, Jr., ABRY Broadcast Partners II, L.P., ABRY
Citadel Investment Partners, L.P., Oppenheimer & Co., Inc.,
Finova Capital Corporation, Lawrence R. Wilson, Claire
Wilson, Donna L. Heffner and Stuart Stanek (incorporated by
reference to Exhibit 10.11 to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
</TABLE>
II-4
<PAGE> 267
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.8 First Amendment to the Second Amended Stockholders Agreement
dated as of December 31, 1996 among Citadel Communications
Corporation, ABRY Broadcast Partners II, L.P., ABRY/ Citadel
Investment Partners, L.P., Baker, Fentress & Company,
Oppenheimer & Co., Inc., Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl
E. Bartol, Andrea P. Joselit, Finova Capital Corporation,
The Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust u/a/d 2-15-94, Babson
Capital Partners Limited Partnership, Tal Johnson, Edward T.
Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
(incorporated by reference to Exhibit 10.12 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.9 Second Amendment to the Second Amended and Restated
Stockholders Agreement dated as of March 17, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
Illinois, Christopher J. Perry, Robert F. Perille, M. Ann
O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W.
Clary, Sheryl E. Bartol, Andrea P. Joselit, Finova Capital
Corporation, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust, Babson
Capital Partners Limited Partnership, Tal Johnson, Edward T.
Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
(incorporated by reference to Exhibit 10.13 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.10 Third Amendment to the Second Amended and Restated
Stockholders Agreement dated as of September 26, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, Finova Capital Corporation, The Endeavour
Capital Fund Limited Partnership, Joseph P. Tennant, The
Schafbuch Family Trust, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee,
Philip J. Urso, Phillip Norton, Richard Poholek, Karen
Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark
Urso, M. Linda Urso, Juliet Rice, Lawrence R. Wilson and
Claire Wilson (incorporated by reference to Exhibit 10.14 to
Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.11 Fourth Amendment to the Second Amended and Restated
Stockholders Agreement dated as of October 15, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust, Finova
Capital Corporation, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee,
Philip J. Urso, Phillip Norton, Richard Poholek, Karen
Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark
Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr., Jane
J. Snider, Ted L. Snider, Jr., Calvin G. Arnold, Lawrence R.
Wilson and Claire Wilson (incorporated by reference to
Exhibit 10.17 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
</TABLE>
II-5
<PAGE> 268
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.12 Fourth Amended and Restated Voting Agreement dated as of
October 15, 1997 among Citadel Communications Corporation,
ABRY Broadcast Partners II, L.P., Baker Fentress & Company,
Finova Capital Corporation, Oppenheimer & Co., Inc., The
Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust, Babson Capital Partners
Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W.
McKee, Philip J. Urso, Phillip Norton, Richard Poholek,
Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen,
Mark Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr.,
Jane L. Snider, Ted L. Snider, Jr., Calvin Arnold, Lawrence
R. Wilson and Claire Wilson (incorporated by reference to
Exhibit 10.15 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
10.13 Amended and Restated Loan Agreement dated as of July 3, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
FINOVA Capital Corporation and the Lenders party thereto
(incorporated by reference to Exhibit 10.18 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.14 First Amendment to Loan Instruments dated July 15, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.28 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.15 Second Amendment to Loan Instruments dated September 25,
1997 among Citadel Broadcasting Company, Citadel License,
Inc., Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.29 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.16 Third Amendment to Loan Instruments dated October 15, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.30 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.17 Fourth Amendment to Loan Instruments dated November 4, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.31 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.18 Fifth Amendment to Loan Instruments dated December 24, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.32 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.19 Sixth Amendment to Loan Instruments dated February 12, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.33 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.20 Seventh Amendment to Loan Instruments dated March 24, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.34 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
</TABLE>
II-6
<PAGE> 269
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.21 Eighth Amendment to Loan Instruments dated April 21, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.35 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.22 Ninth Amendment to Loan Instruments dated September 15, 1998
among Citadel Communications, Citadel Broadcasting Company,
Citadel License, Inc., FINOVA Capital Corporation and the
Lenders party thereto (incorporated by reference to Exhibit
10.1 to Citadel Broadcasting Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1998).
10.23 Tenth Amendment to Loan Instruments dated November 3, 1998
among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.1 to Citadel Broadcasting Company's
Current Report on Form 8-K filed November 30, 1998).
10.24 Eleventh Amendment to Loan Instruments dated November 17,
1998 among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.2 to Citadel Broadcasting Company's
Current Report on Form 8-K filed November 30, 1998).
10.25 Twelfth Amendment to Loan Instruments dated November 19,
1998 among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.3 to Citadel Broadcasting Company's
Current Report on Form 8-K filed November 30, 1998).
10.26 Agreement Not to Compete made as of December 31, 1996
between DVS Management Inc. and Citadel Communications
Corporation (incorporated by reference to Exhibit 10.20 to
Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
10.27 Deschutes Option Exchange Agreement dated as of December 31,
1996 by and between Citadel Communications Corporation and
Edward T. Hardy (incorporated by reference to Exhibit 10.24
to Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.28 Deschutes Option Exchange Agreement dated as of December 31,
1996 by and between Citadel Communications Corporation and
Edward T. Hardy (incorporated by reference to Exhibit 10.25
to Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.29 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of January 1, 1996
(incorporated by reference to Exhibit 10.26 to Citadel
Broadcasting Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997).
10.30 Purchase Agreement dated November 12, 1998 among Citadel
Broadcasting Company, Citadel Communications Corporation,
Prudential Securities Incorporated and BT Alex. Brown
Incorporated.*
10.31 Registration Rights Agreement dated November 19, 1998 among
Citadel Broadcasting Company, Citadel License, Inc.,
Prudential Securities Incorporated and BT Alex. Brown
Incorporated.*
12 Deficiency of Earnings to Fixed Charges and Preferred Stock
Dividends.*
21 Subsidiaries of Citadel Broadcasting Company (incorporated
by reference to Exhibit 21 to Citadel Broadcasting Company's
Registration Statement No. 33336771 on Form S-4).
23.1 Consent of Eckert Seamans Cherin & Mellott, LLC (included in
its opinions filed herewith as Exhibit 5 and Exhibit 8).
23.2 Consent of KPMG Peat Marwick LLP*
</TABLE>
II-7
<PAGE> 270
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
23.3 Consent of KPMG Peat Marwick LLP*
23.4 Consent of KPMG Peat Marwick LLP*
23.5 Consent of Deloitte & Touche, LLP*
23.6 Consent of Erwin & Company*
23.7 Consent of Balukoff, Lindstrom & Co., P.A.*
23.8 Consent of KPMG Peat Marwick LLP*
24 Power of Attorney (included on signature page).*
25 Statement of Eligibility on Form T-1 of Trustee (9-1/4%
Senior Subordinated Notes due 2008).*
27 Financial Data Schedule*
99.1 Form of Letter of Transmittal to Tender for Exchange 9-1/4%
Senior Subordinated Notes due 2008.*
99.2 Form of Exchange Agent Agreement between Citadel
Broadcasting Company and The Bank of New York, as Exchange
Agent.*
</TABLE>
- ---------------
(1) In the case of incorporation by reference to documents filed by the
Registrant under the Exchange Act of 1934, as amended, the Registrant's file
number under such Act is 333-36771.
* Filed Herewith.
(b) FINANCIAL STATEMENT SCHEDULES
None
ITEM 22. UNDERTAKINGS
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission (the "Commission") pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of other securities being registered which remain unsold at the
termination of the offering.
II-8
<PAGE> 271
The Registrants undertake to respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or
13 of Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding to
the request.
The Registrants undertake to supply by means of a post-effective amendment
all information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the Registration
Statement when it became effective.
The Registrants hereby undertake as follows: that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this Registration Statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
The Registrants undertake that every prospectus (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-9
<PAGE> 272
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Lawrence
R. Wilson and Donna L. Heffner and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tempe, in the State of
Arizona, on December 16, 1998.
CITADEL BROADCASTING COMPANY
By: /s/ LAWRENCE R. WILSON
------------------------------------
Lawrence R. Wilson
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on December 16, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ LAWRENCE R. WILSON Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer (Principal Executive Officer)
Lawrence R. Wilson
/s/ DONNA L. HEFFNER Vice President and Chief Financial Officer
- ----------------------------------------------------- (Principal Financial and Accounting Officer)
Donna L. Heffner
/s/ PATRICIA DIAZ DENNIS Director
- -----------------------------------------------------
Patricia Diaz Dennis
/s/ SCOTT E. SMITH Director
- -----------------------------------------------------
Scott E. Smith
/s/ TED L. SNIDER, SR. Director
- -----------------------------------------------------
Ted L. Snider, Sr.
/s/ JOHN E. VON SCHLEGELL Director
- -----------------------------------------------------
John E. von Schlegell
</TABLE>
II-10
<PAGE> 273
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Lawrence
R. Wilson and Donna L. Heffner and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tempe, in the State of
Arizona, on December 16, 1998.
CITADEL BROADCASTING COMPANY
By: /s/ LAWRENCE R. WILSON
------------------------------------
Lawrence R. Wilson
Chairman of the Board,
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on December 16, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ LAWRENCE R. WILSON Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer and President (Principal Executive
Lawrence R. Wilson Officer)
/s/ DONNA L. HEFFNER Vice President and Chief Financial Officer
- ----------------------------------------------------- (Principal Financial and Accounting Officer)
Donna L. Heffner
/s/ PATRICIA DIAZ DENNIS Director
- -----------------------------------------------------
Patricia Diaz Dennis
/s/ SCOTT E. SMITH Director
- -----------------------------------------------------
Scott E. Smith
/s/ TED L. SNIDER, SR. Director
- -----------------------------------------------------
Ted L. Snider, Sr.
/s/ JOHN E. VON SCHLEGELL Director
- -----------------------------------------------------
John E. von Schlegell
</TABLE>
II-11
<PAGE> 274
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT(1)
------- -------------------------
<S> <C>
2.1 Asset Purchase Agreement dated November 23, 1998 by and
among Wicks Broadcast Group Limited Partnership, WBG License
Co., L.L.C., Butternut Broadcasting Company, Inc., WBG
Binghamton License Co., Inc. and Citadel Broadcasting
Company (incorporated by reference to Exhibit 2.1 to Citadel
Broadcasting Company's Amendment No. 1 to Current Report on
Form 8-K/A filed December 16, 1998).
2.2 Stock Purchase Agreement dated September 29, 1997 among
Pacific Northwest Broadcasting Corporation, Wilson
Properties, L.P. and Citadel Broadcasting Company
(incorporated by reference to Exhibit 2.1 to Citadel
Broadcasting Company's Amendment No. 1 to Registration
Statement No. 333-36771 on Form S-4).
2.3 Asset Purchase Agreement dated September 29, 1997 among
Wilson Group LLC, Citadel Broadcasting Company and Citadel
License, Inc. (incorporated by reference to Exhibit 2.2 to
Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
2.4 Asset Purchase Agreement dated as of July 15, 1997 among
Maranatha Broadcasting Company, Inc., Citadel Broadcasting
Company and Citadel License, Inc. (relating to WFMZ-FM)
(incorporated by reference to Exhibit 2.3 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.5 Asset Purchase Agreement dated as of July 15, 1997 among
Maranatha Broadcasting Company, Inc., Citadel Broadcasting
Company and Citadel License, Inc. (relating to WEST-AM)
(incorporated by reference to Exhibit 2.4 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.6 Merger Agreement dated as of June 2, 1997 among Snider
Corporation, Ted L. Snider, Sr., Jane J. Snider, Citadel
Communications Corporation and Citadel Broadcasting Company
(incorporated by reference to Exhibit 2.5 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
2.7 Merger Agreement dated as of June 2, 1997 among Snider
Broadcasting Corporation, Ted L. Snider, Jr., Calvin G.
Arnold, Citadel Communications Corporation and Citadel
Broadcasting Company (incorporated by reference to Exhibit
2.6 to Citadel Broadcasting Company's Registration Statement
No. 333-36771 on Form S-4).
2.8 Asset Purchase Agreement dated as of June 2, 1997 among CDB
Broadcasting Corporation, CDB License Corporation and
Citadel Broadcasting Company (incorporated by reference to
Exhibit 2.7 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
2.9 Agreement of Purchase and Sale dated March 17, 1997 by and
among Tele-Media Broadcasting Company, Tele-Media
Broadcasting Company of Centre Region, Tele-Media
Broadcasting Holding Corporation and their respective
shareholders and Citadel Broadcasting Company and Citadel
Communications Corporation (incorporated by reference to
Exhibit 10.19 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
3(i)(a) Restated Articles of Incorporation of Citadel Broadcasting
Company (incorporated by reference to Exhibit 3(i)(a) to
Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
3(i)(b) Amendment to Certificate of the Designations, Voting Powers
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or
Restrictions of the 13-1/4% Series A Exchangeable Preferred
Stock and the 13-1/4% Series B Exchangeable Preferred Stock
of Citadel Broadcasting Company (incorporated by reference
to Exhibit 3(i)(b) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
3(i)(c) Articles of Incorporation of Citadel License, Inc.
(incorporated by reference to Exhibit 3(i)(c) to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
</TABLE>
<PAGE> 275
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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<S> <C>
3(ii)(a) Bylaws of Citadel Broadcasting Company, as amended
(incorporated by reference to Exhibit 3(ii)(a) to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
3(ii)(b) Bylaws of Citadel License, Inc. (incorporated by reference
to Exhibit 3(i)(c) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
4.1 Indenture dated as of July 1, 1997 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the form of 10-1/4% Senior
Subordinated Notes due 2007 included therein (incorporated
by reference to Exhibit 4.1 to Citadel Broadcasting
Company's Registration Statement No. 333-36771 on Form S-4).
4.2 Indenture dated as of July 1, 1997 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the form of 13-1/4% Exchange
Debentures due 2009 included therein (incorporated by
reference to Exhibit 4.2 to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
4.3 Amendment to Certificate of the Designations, Voting Powers
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or
Restrictions of the 13-1/4% Series A Exchangeable Preferred
Stock and the 13-1/4% Series B Exchangeable Preferred Stock
of Citadel Broadcasting Company (incorporated by reference
to Exhibit 3(i)(b) to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
4.4 Indenture dated as of November 19, 1998 among Citadel
Broadcasting Company, Citadel License, Inc. and The Bank of
New York, as Trustee, with the form of 9-1/4% Senior
Subordinated Notes due 2008 included therein (incorporated
by reference to Exhibit 4.1 to Citadel Broadcasting
Company's Current Report on Form 8-K filed November 30,
1998).
9 Amended and Restated Voting Trust Agreement dated as of
October 15, 1997 among Citadel Communications Corporation,
ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment
Partners, L.P., Harlan Levy, as Trustee, and J. Walter
Corcoran and Christopher Hall (incorporated by reference to
Exhibit 9 to Citadel Broadcasting Company's Amendment No. 1
to Registration Statement No. 333-36771 on Form S-4).
5 Opinion of Eckert Seamans Cherin & Mellott, LLC, including
consent.*
8 Opinion of Eckert Seamans Cherin & Mellott, LLC regarding
certain Federal income tax matters, including consent.*
10.1 Employment Agreement dated as of June 28, 1996 among
Lawrence R. Wilson, Citadel Broadcasting Company and Citadel
Communications Corporation (incorporated by reference to
Exhibit 10.1 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.2 Citadel Communications Corporation 1996 Equity Incentive
Plan, as amended (incorporated by reference to Exhibit 10.2
to Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
10.3 Citadel Communications Corporation Nonqualified Stock Option
Agreement made and entered into as of June 28, 1996 between
Citadel Communications Corporation and Lawrence R. Wilson
(incorporated by reference to Exhibit 10.3 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.4 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of December 21, 1994
(incorporated by reference to Exhibit 10.4 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.5 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of February 21, 1994
(incorporated by reference to Exhibit 10.5 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
</TABLE>
<PAGE> 276
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.6 Joint Sales Agreement dated as of December 15, 1995 among
Pourtales Radio Partnership, Pourtales Holdings, Inc.,
Springs Radio, Inc., KVUU/KSSS, Inc. and Citadel
Broadcasting Company (incorporated by reference to Exhibit
10.6 to Citadel Broadcasting Company's Registration
Statement No. 333-36771 on Form S-4).
10.7 Second Amended and Restated Stockholders Agreement dated as
of June 28, 1996, among Citadel Communications Corporation,
Baker, Fentress & Company, Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Thomas
E. Van Pelt, Jr., ABRY Broadcast Partners II, L.P., ABRY
Citadel Investment Partners, L.P., Oppenheimer & Co., Inc.,
Finova Capital Corporation, Lawrence R. Wilson, Claire
Wilson, Donna L. Heffner and Stuart Stanek (incorporated by
reference to Exhibit 10.11 to Citadel Broadcasting Company's
Registration Statement No. 333-36771 on Form S-4).
10.8 First Amendment to the Second Amended Stockholders Agreement
dated as of December 31, 1996 among Citadel Communications
Corporation, ABRY Broadcast Partners II, L.P., ABRY/ Citadel
Investment Partners, L.P., Baker, Fentress & Company,
Oppenheimer & Co., Inc., Bank of America Illinois,
Christopher J. Perry, Robert F. Perille, M. Ann O'Brien,
Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl
E. Bartol, Andrea P. Joselit, Finova Capital Corporation,
The Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust u/a/d 2-15-94, Babson
Capital Partners Limited Partnership, Tal Johnson, Edward T.
Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
(incorporated by reference to Exhibit 10.12 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.9 Second Amendment to the Second Amended and Restated
Stockholders Agreement dated as of March 17, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
Illinois, Christopher J. Perry, Robert F. Perille, M. Ann
O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W.
Clary, Sheryl E. Bartol, Andrea P. Joselit, Finova Capital
Corporation, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust, Babson
Capital Partners Limited Partnership, Tal Johnson, Edward T.
Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
(incorporated by reference to Exhibit 10.13 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.10 Third Amendment to the Second Amended and Restated
Stockholders Agreement dated as of September 26, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker,
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, Finova Capital Corporation, The Endeavour
Capital Fund Limited Partnership, Joseph P. Tennant, The
Schafbuch Family Trust, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee,
Philip J. Urso, Phillip Norton, Richard Poholek, Karen
Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark
Urso, M. Linda Urso, Juliet Rice, Lawrence R. Wilson and
Claire Wilson (incorporated by reference to Exhibit 10.14 to
Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
</TABLE>
<PAGE> 277
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.11 Fourth Amendment to the Second Amended and Restated
Stockholders Agreement dated as of October 15, 1997 among
Citadel Communications Corporation, ABRY Broadcast Partners
II, L.P., ABRY/Citadel Investment Partners, L.P., Baker
Fentress & Company, Oppenheimer & Co., Inc., Bank of America
National Trust and Savings Association, Christopher J.
Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow,
Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea
P. Joselit, The Endeavour Capital Fund Limited Partnership,
Joseph P. Tennant, The Schafbuch Family Trust, Finova
Capital Corporation, Babson Capital Partners Limited
Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee,
Philip J. Urso, Phillip Norton, Richard Poholek, Karen
Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark
Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr., Jane
J. Snider, Ted L. Snider, Jr., Calvin G. Arnold, Lawrence R.
Wilson and Claire Wilson (incorporated by reference to
Exhibit 10.17 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
10.12 Fourth Amended and Restated Voting Agreement dated as of
October 15, 1997 among Citadel Communications Corporation,
ABRY Broadcast Partners II, L.P., Baker Fentress & Company,
Finova Capital Corporation, Oppenheimer & Co., Inc., The
Endeavour Capital Fund Limited Partnership, Joseph P.
Tennant, The Schafbuch Family Trust, Babson Capital Partners
Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W.
McKee, Philip J. Urso, Phillip Norton, Richard Poholek,
Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen,
Mark Urso, M. Linda Urso, Juliet Rice, Ted L. Snider, Sr.,
Jane L. Snider, Ted L. Snider, Jr., Calvin Arnold, Lawrence
R. Wilson and Claire Wilson (incorporated by reference to
Exhibit 10.15 to Citadel Broadcasting Company's Amendment
No. 1 to Registration Statement No. 333-36771 on Form S-4).
10.13 Amended and Restated Loan Agreement dated as of July 3, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
FINOVA Capital Corporation and the Lenders party thereto
(incorporated by reference to Exhibit 10.18 to Citadel
Broadcasting Company's Registration Statement No. 333-36771
on Form S-4).
10.14 First Amendment to Loan Instruments dated July 15, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.28 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.15 Second Amendment to Loan Instruments dated September 25,
1997 among Citadel Broadcasting Company, Citadel License,
Inc., Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.29 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.16 Third Amendment to Loan Instruments dated October 15, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.30 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.17 Fourth Amendment to Loan Instruments dated November 4, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.31 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.18 Fifth Amendment to Loan Instruments dated December 24, 1997
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.32 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
</TABLE>
<PAGE> 278
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.19 Sixth Amendment to Loan Instruments dated February 12, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.33 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.20 Seventh Amendment to Loan Instruments dated March 24, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.34 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.21 Eighth Amendment to Loan Instruments dated April 21, 1998
among Citadel Broadcasting Company, Citadel License, Inc.,
Citadel Communications Corporation, FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.35 to Citadel Communications
Corporation's Amendment No. 1 to Registration Statement No.
333-51011 on Form S-1).
10.22 Ninth Amendment to Loan Instruments dated September 15, 1998
among Citadel Communications, Citadel Broadcasting Company,
Citadel License, Inc., FINOVA Capital Corporation and the
Lenders party thereto (incorporated by reference to Exhibit
10.1 to Citadel Broadcasting Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1998).
10.23 Tenth Amendment to Loan Instruments dated November 3, 1998
among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.1 to Citadel Broadcasting Company's
Current Report on Form 8-K filed November 30, 1998).
10.24 Eleventh Amendment to Loan Instruments dated November 17,
1998 among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.2 to Citadel Broadcasting Company's
Current Report on Form 8-K filed November 30, 1998).
10.25 Twelfth Amendment to Loan Instruments dated November 19,
1998 among Citadel Communications Corporation, Citadel
Broadcasting Company, Citadel License, Inc., FINOVA Capital
Corporation and the Lenders party thereto (incorporated by
reference to Exhibit 10.3 to Citadel Broadcasting Company's
Current Report on Form 8-K filed November 30, 1998).
10.26 Agreement Not to Compete made as of December 31, 1996
between DVS Management Inc. and Citadel Communications
Corporation (incorporated by reference to Exhibit 10.20 to
Citadel Broadcasting Company's Registration Statement No.
333-36771 on Form S-4).
10.27 Deschutes Option Exchange Agreement dated as of December 31,
1996 by and between Citadel Communications Corporation and
Edward T. Hardy (incorporated by reference to Exhibit 10.24
to Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.28 Deschutes Option Exchange Agreement dated as of December 31,
1996 by and between Citadel Communications Corporation and
Edward T. Hardy (incorporated by reference to Exhibit 10.25
to Citadel Broadcasting Company's Amendment No. 1 to
Registration Statement No. 333-36771 on Form S-4).
10.29 Form of Citadel Communications Corporation Stock Option
Agreement for grants effective as of January 1, 1996
(incorporated by reference to Exhibit 10.26 to Citadel
Broadcasting Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997).
10.30 Purchase Agreement dated November 12, 1998 among Citadel
Broadcasting Company, Citadel Communications Corporation,
Prudential Securities Incorporated and BT Alex. Brown
Incorporated.*
</TABLE>
<PAGE> 279
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10.31 Registration Rights Agreement dated November 19, 1998 among
Citadel Broadcasting Company, Citadel License, Inc.,
Prudential Securities Incorporated and BT Alex. Brown
Incorporated.*
12 Deficiency of Earnings to Fixed Charges and Preferred Stock
Dividends.*
21 Subsidiaries of Citadel Broadcasting Company (incorporated
by reference to Exhibit 21 to Citadel Broadcasting Company's
Registration Statement No. 33336771 on Form S-4).
23.1 Consent of Eckert Seamans Cherin & Mellott, LLC (included in
its opinions filed herewith as Exhibit 5 and Exhibit 8).
23.2 Consent of KPMG Peat Marwick LLP*
23.3 Consent of KPMG Peat Marwick LLP*
23.4 Consent of KPMG Peat Marwick LLP*
23.5 Consent of Deloitte & Touche, LLP*
23.6 Consent of Erwin & Company*
23.7 Consent of Balukoff, Lindstrom & Co., P.A.*
23.8 Consent of KPMG Peat Marwick LLP*
24 Power of Attorney (included on signature page).*
25 Statement of Eligibility on Form T-1 of Trustee (9-1/4%
Senior Subordinated Notes due 2008).*
27 Financial Data Schedule*
99.1 Form of Letter of Transmittal to Tender for Exchange 9-1/4%
Senior Subordinated Notes due 2008.*
99.2 Form of Exchange Agent Agreement between Citadel
Broadcasting Company and The Bank of New York, as Exchange
Agent.*
</TABLE>
- ---------------
(1) In the case of incorporation by reference to documents filed by the
Registrant under the Exchange Act of 1934, as amended, the Registrant's file
number under such Act is 333-36771.
* Filed Herewith.
<PAGE> 1
Exhibit 5
[ECKERT SEAMANS CHERIN & MELLOTT, LLC LETTERHEAD]
December 16, 1998
Citadel Broadcasting Company
Citadel License, Inc.
140 South Ash Avenue
Tempe, AZ 85218
Ladies and Gentlemen:
This opinion is rendered in connection with the Registration Statement on Form
S-4 (the "Registration Statement") of Citadel Broadcasting Company, a Nevada
corporation (the "Company"), and Citadel License, Inc., a Nevada corporation and
a wholly-owned subsidiary of the Company (the "Guarantor"), relating to
$115,000,000 in aggregate principal amount of the Company's 9-1/4% Senior
Subordinated Notes due 2008 (the "Exchange Notes"), which are being offered
pursuant to an exchange offer (the "Exchange Offer") in exchange for the
Company's outstanding 9-1/4% Senior Subordinated Notes due 2008 (the "Initial
Notes"). The Registration Statement also registers the Guarantor's guarantee of
the Exchange Notes (the "Guarantee").
In connection with this opinion, we, as counsel to the Company and the
Guarantor, have examined the Restated Articles of Incorporation of the Company,
the Articles of Incorporation of the Guarantor, the respective Bylaws of the
Company and the Guarantor, the Indenture dated as of November 19, 1998 (the
"Indenture") by and among the Company, the Guarantor and The Bank of New York,
as Trustee, with respect to the Initial Notes and the Exchange Notes, the
Registration Statement, the conduct of all corporate proceedings relating to the
issuance of the Exchange Notes and such other documents, records and matters of
law as we have considered necessary for the purpose of rendering this opinion.
Based upon the foregoing, we advise you that, in our opinion:
1. Each of the Company and the Guarantor is a corporation validly existing
and in good standing under the laws of the State of Nevada.
2. The Exchange Notes have been duly authorized and, when duly executed by
the proper officers of the Company, duly authenticated by the Trustee in
accordance with the terms of the Indenture and issued and delivered in
accordance with the terms of the Exchange Offer and the Indenture, will
constitute valid and binding obligations of the Company in accordance
with their terms, subject to bankruptcy, insolvency, reorganization,
receivership, fraudulent conveyance or
<PAGE> 2
[ECKERT SEAMANS CHERIN & MELLOTT, LLC LETTERHEAD]
December 16, 1998
transfer, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general equitable principles.
3. The Guarantee, when issued by the Guarantor upon authentication and
delivery of the Exchange Notes in accordance with the terms of the
Exchange Offer and the Indenture, will constitute a valid and binding
obligation of the Guarantor, subject to bankruptcy, insolvency,
reorganization, receivership, fraudulent conveyance or transfer,
moratorium and other laws of general applicability relating to or
affecting creditors' rights and to general equitable principles.
We hereby consent to being named in the Registration Statement and in the
Prospectus which constitutes a part thereof as counsel for the Company and the
Guarantor who have passed upon legal matters in connection with the securities
to which the Registration Statement and the Prospectus relate. We further
consent to the filing of this opinion as an exhibit to the Registration
Statement. In giving such consent, we do not thereby admit that we are "experts"
within the meaning of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission issued thereunder with
respect to any part of the Registration Statement, including this exhibit.
Very truly yours,
/s/ Eckert Seamans Cherin & Mellott, LLC
ECKERT SEAMANS CHERIN & MELLOTT, LLC
BDR/VMK:blk
<PAGE> 1
Exhibit 8
[ECKERT SEAMANS CHERIN & MELLOTT, LLC LETTERHEAD]
December 16, 1998
Citadel Broadcasting Company
Citadel License, Inc.
140 South Ash Avenue
Tempe, AZ 85281
Ladies and Gentlemen:
This opinion is rendered in connection with the Registration Statement on Form
S-4 (the "Registration Statement") of Citadel Broadcasting Company, a Nevada
corporation (the "Company"), and Citadel License, Inc., a Nevada corporation and
a wholly-owned subsidiary of the Company (the "Guarantor"), relating to
$115,000,000 in aggregate principal amount of the Company's 9-1/4% Senior
Subordinated Notes due 2008 (the "Exchange Notes"), which are being offered
pursuant to an exchange offer (the "Exchange Offer") in exchange for the
Company's outstanding 9-1/4% Senior Subordinated Notes due 2008 (the "Initial
Notes"). The Registration Statement also registers the Guarantor's guarantee of
the Exchange Notes.
In connection with this opinion, we, as counsel to the Company and the
Guarantor, have examined the Restated Articles of Incorporation of the Company,
the Articles of Incorporation of the Guarantor, the respective Bylaws of the
Company and the Guarantor, the Indenture dated as of November 19, 1998 by and
among the Company, the Guarantor and The Bank of New York, as Trustee, with
respect to the Initial Notes and the Exchange Notes, the Registration Statement,
the conduct of all corporate proceedings relating to the issuance of the
Exchange Notes and such other documents, records and matters of law as we have
considered necessary for the purpose of rendering this opinion.
Based on the foregoing, we are of the opinion that the information in the
Prospectus which constitutes part of the Registration Statement (the
"Prospectus") under the caption "Certain U.S. Federal Income Tax Consequences"
is a fair and accurate summary of the principal United States federal income tax
consequences of the transactions discussed therein. You should be aware,
however, that the discussions under the caption "Certain U.S. Federal Income Tax
Consequences" in the Prospectus represent conclusions as to the application of
existing law to the transactions described therein. There can be no assurance
that contrary positions may not be taken by the Internal Revenue Service or that
existing law may not change.
We hereby consent to being named in the Registration Statement and in the
Prospectus as counsel for the Company and the Guarantor who have passed upon
legal matters in
<PAGE> 2
[ECKERT SEAMANS CHERIN & MELLOTT, LLC LETTERHEAD]
December 16, 1998
connection with the securities to which the Registration Statement and the
Prospectus relate. We further consent to the filing of this opinion as an
exhibit to the Registration Statement. In giving such consent, we do not thereby
admit that we are "experts" within the meaning of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
issued thereunder with respect to any part of the Registration Statement,
including this exhibit.
Very truly yours,
/s/ Eckert Seamans Cherin & Mellott, LLC
ECKERT SEAMANS CHERIN & MELLOTT, LLC
BDR/VMK/blk
<PAGE> 1
Exhibit 10.30
CITADEL BROADCASTING COMPANY
(a Nevada corporation)
$115,000,000 9-1/4% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
------------------
November 12, 1998
PRUDENTIAL SECURITIES INCORPORATED
BT ALEX. BROWN INCORPORATED
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Dear Sirs:
Citadel Broadcasting Company, a Nevada corporation (the
"Company") and wholly-owned subsidiary of Citadel Communications Corporation
("Parent"), proposes, subject to the terms and conditions set forth herein, to
issue and sell to Prudential Securities Incorporated and BT Alex. Brown
Incorporated, acting severally and not jointly (each an "Initial Purchaser" and
collectively the "Initial Purchasers"), $115,000,000 aggregate principal amount
of the Company's 9-1/4% Senior Subordinated Notes due 2008 (the "Securities").
The Securities are to be issued pursuant to an indenture to be dated as of
November 19, 1998 (the "Indenture") among the Company, Citadel License, Inc.
(the "Subsidiary") and The Bank of New York, as trustee (the "Trustee"). The
Securities and the Indenture are more fully described in the Offering Memorandum
(as hereinafter defined). Capitalized terms used herein and not otherwise
defined herein have the respective meanings specified in the Offering
Memorandum.
The Securities will be offered and sold to the Initial
Purchasers without being registered under the Securities Act of 1933, as amended
(the "1933 Act"), in reliance on an exemption from the registration requirements
of the 1933 Act. The Company is preparing an offering memorandum, dated November
12, 1998 (such offering memorandum, in the form first furnished to the Initial
Purchasers for use in connection with the offering of the Securities, being
hereinafter referred to as the "Offering Memorandum"), setting forth information
regarding the Company and the Securities. The Company hereby confirms that it
has authorized the use of the Offering Memorandum in connection with the
offering and resale of the Securities by the Initial Purchasers in accordance
with the terms hereof.
The Company understands that the Initial Purchasers propose to
make an offering of the Securities on the terms set forth in the Offering
Memorandum, as soon as they deem advisable after this Agreement has been
executed and delivered, (i) to persons in the United States whom the Initial
Purchasers reasonably believe to be qualified institutional buyers
<PAGE> 2
("Qualified Institutional Buyers") as defined in Rule 144A under the 1933 Act,
as such rule may be amended from time to time ("Rule 144A"), in transactions
under Rule 144A and (ii) outside the United States to persons other than U.S.
persons in reliance on Regulation S ("Regulation S") under the 1933 Act.
The Initial Purchasers and other holders of Securities
(including subsequent transferees) will be entitled to the benefits of a
Registration Rights Agreement, in substantially the form attached hereto as
Exhibit A, with such changes as shall be agreed to by the parties hereto (the
"Registration Rights Agreement"). Pursuant to the Registration Rights Agreement,
the Company and the Subsidiary will agree that the Company shall file with the
Securities and Exchange Commission (the "Commission") under the circumstances
set forth therein, either (i) a registration statement under the 1933 Act
registering the New Securities (as defined in the Registration Rights Agreement)
to be offered in exchange for the Securities and use its best efforts to cause
such registration statement to be declared effective or (ii) under certain
circumstances set forth therein, a shelf registration statement pursuant to Rule
415 under the 1933 Act relating to the resale of the New Securities, and use its
best efforts to cause such shelf registration statement to be declared
effective.
Section 1. Representations and Warranties of the Company. (a)
Each of the Company and Parent jointly and severally represents and warrants to,
and agrees with, each of the Initial Purchasers that:
(1) As of their respective dates and as of the time (the
"Closing Time") of the Closing hereunder, (x) none of the
Offering Memorandum or any amendment or supplement thereto
includes or will include an untrue statement of a material fact
or omits or will omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading, (y) all reasonable
inquiries have been made to ascertain such facts and to verify
the accuracy of all such information and statements and (z) any
opinions and intentions expressed in the Offering Memorandum or
any amendment or supplement thereto with respect to the Company
are honestly held and are based on reasonable assumptions;
provided, however, that the Company makes no representation or
warranty as to statements or omissions made in reliance upon and
in conformity with information furnished in writing to the
Company by the Initial Purchasers expressly for use in the
Offering Memorandum or any amendment or supplement thereto.
(2) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Nevada with corporate power and authority under such laws to own,
lease and operate its properties and conduct its business as now
conducted and described in the Offering Memorandum and to enter
into and perform its obligations under this Agreement, the
Securities, the Indenture and the Registration Rights Agreement;
and the Company is duly qualified to transact business as a
foreign corporation and is in good standing in each other
jurisdiction in which it owns
-2-
<PAGE> 3
or leases property of a nature, or transacts business of a type,
that would make such qualification necessary, except to the
extent that the failure to so qualify or be in good standing
would not have a material adverse effect on the business, results
of operations, financial condition or properties of the Company
and the Subsidiary taken as a whole or the ability of the Company
to perform any of its obligations under this Agreement, the
Securities, the Indenture or the Registration Rights Agreement (a
"Material Adverse Effect").
(3) The Company's only subsidiary (either direct or
indirect) as of the date hereof is Citadel License, Inc. The
Subsidiary is duly incorporated and validly existing and in good
standing under the laws of the State of Nevada, with corporate
power and authority under such laws to own, lease and operate its
properties and to conduct its business as now conducted and as
described in the Offering Memorandum; and the Subsidiary is duly
qualified to do business as a foreign corporation in good
standing in each other jurisdiction in which it owns or leases
property of a nature or transacts business of a type that would
make such qualification necessary, except to the extent that the
failure to be so qualified or in good standing would not have a
Material Adverse Effect.
(4) The Company has a duly authorized capitalization as of
the date hereof of 136,300 shares of common stock, par value
$0.001 per share, 2,000,000 shares of Series A Exchangeable
Preferred Stock and 2,000,000 shares of Series B Exchangeable
Preferred Stock. As of the date hereof, the Company has 40,000
shares of common stock, 7.46375 shares of Series A Exchangeable
Preferred Stock and 1,136,096.83875 shares of Series B
Exchangeable Preferred Stock duly issued and outstanding. All of
the outstanding common stock of the Company is owned directly by
Parent, has been duly authorized and validly issued, is fully
paid and nonassessable and was not issued in violation of any
preemptive or similar rights (whether provided contractually or
pursuant to any of its articles of incorporation, by-laws or
other organizational documents) free and clear of all liens,
encumbrances, equities and claims or restrictions on
transferability or voting of such capital stock, except as set
forth in the Offering Memorandum. All of the outstanding capital
stock of the Subsidiary is owned directly by the Company, has
been duly authorized and validly issued, is fully paid and
nonassessable and was not issued in violation of any preemptive
or similar rights (whether provided contractually or pursuant to
any of its articles of incorporation, by-laws or other
organizational documents) free and clear of all liens,
encumbrances, equities and claims or restrictions on
transferability or voting of such capital stock, except as set
forth in the Offering Memorandum.
(5) The execution and delivery of this Agreement have been
duly authorized by each of the Company and Parent and this
Agreement has been duly executed and delivered by each of them,
and constitutes the valid and binding agreement of each of them,
enforceable against each of them in accordance with its terms.
-3-
<PAGE> 4
(6) The execution and delivery of the Registration Rights
Agreement have been duly authorized by each of the Company and
the Subsidiary and, on and as of the Closing Time, the
Registration Rights Agreement will have been duly executed and
delivered by the Company and the Subsidiary, and will be legal,
valid and binding obligations of the Company and the Subsidiary,
enforceable against them in accordance with their terms.
(7) The execution and delivery of the Indenture have been
duly authorized by the Company and the Subsidiary, and, on and as
of the Closing Time, the Indenture will have been duly executed
and delivered by the Company and the Subsidiary, and when duly
executed and delivered by the Company, the Subsidiary and the
Trustee, will constitute a valid and binding obligation of the
Company and the Subsidiary, enforceable against the Company and
the Subsidiary in accordance with its terms.
(8) The issuance, execution and delivery of the Securities
and the New Securities have been duly authorized by the Company.
When executed, authenticated, issued and delivered in the manner
provided for in the Indenture and sold and paid for as provided
in this Agreement, the Securities will constitute valid and
binding obligations of the Company entitled to the benefits of
the Indenture and enforceable against the Company in accordance
with their terms. The New Securities, when executed,
authenticated, issued and delivered in exchange for the
Securities, will constitute valid and binding obligations of the
Company, entitled to the benefits of the Indenture, enforceable
against the Company in accordance with the terms thereof. The
Securities conform to the description thereof in the Offering
Memorandum.
(9) The financial statements of the Company included in the
Offering Memorandum, together with the related schedules and
notes, present fairly (1) the financial position of the Company
and the Subsidiary on a consolidated basis as of the dates
indicated and (2) the results of operations and cash flows of the
Company and the Subsidiary on a consolidated basis for the
periods specified, subject, in the case of unaudited financial
statements of the Company, to normal year-end adjustments which
shall not be materially adverse to the business, results of
operations, financial condition or properties of the Company and
the Subsidiary, taken as a whole. Such financial statements have
been prepared in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the
periods involved. The financial statement schedules of the
Company, if any, included in the Offering Memorandum present
fairly in accordance with GAAP the information required to be
stated therein. The selected financial data included in the
Offering Memorandum present fairly the information shown therein
and have been compiled on a basis consistent with that of the
audited consolidated financial statements included in the
Offering Memorandum.
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<PAGE> 5
(10) KPMG Peat Marwick LLP ("KPMG"), which is reporting upon
the audited financial statements and related notes of the
Company, Deschutes (as defined below) and the Division (as
defined below) included in the Offering Memorandum, is an
independent public accountant with respect to the Company and its
subsidiaries within the meaning of the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the rules
and regulations of the Commission thereunder.
(11) The financial statements of Deschutes River
Broadcasting, Inc. and subsidiaries ("Deschutes") included in the
Offering Memorandum, together with the related schedules and
notes, present fairly (1) the financial position of Deschutes on
a consolidated basis as of the dates indicated and (2) the
results of operations, stockholders' equity and cash flows of
Deschutes on a consolidated basis for the periods specified. Such
financial statements have been prepared in conformity with GAAP
applied on a consistent basis throughout the periods involved.
The financial statement schedules of Deschutes, if any, included
in the Offering Memorandum present fairly the information
required to be stated therein.
(12) The financial statements of Tele-Media Broadcasting
Company and its partnership interests ("Tele-Media") included in
the Offering Memorandum, together with the related schedules and
notes, present fairly (1) the financial position of Tele-Media on
a consolidated basis as of the dates indicated and (2) the
results of operations, deficiency in net assets and cash flows of
Tele-Media on a consolidated basis for the periods specified,
subject, in the case of unaudited financial statements of
Tele-Media, to normal year-end adjustments which shall not be
materially adverse to the condition (financial or otherwise),
earnings, business affairs or business prospects of Tele-Media.
Such financial statements have been prepared in conformity with
GAAP applied on a consistent basis throughout the periods
involved. The financial statement schedules of Tele-Media, if
any, included in the Offering Memorandum present fairly the
information required to be stated therein.
(13) Deloitte & Touche LLP, which is reporting upon the
audited financial statements and related notes of Tele-Media
included in the Offering Memorandum, is an independent public
accountant with respect to Tele-Media within the meaning of the
1933 Act, the 1934 Act and the rules and regulations promulgated
thereunder.
(14) The financial statements of Snider Corporation
("Snider") included in the Offering Memorandum, together with the
related schedules and notes, present fairly (1) the financial
position of Snider as of the dates indicated and (2) the
statements of income, stockholders' equity and cash flows of
Snider for the periods specified, subject, in the case of
unaudited financial statements, to normal year-end adjustments
which shall not be materially adverse to the condition (financial
or otherwise), earnings,
-5-
<PAGE> 6
business affairs or business prospects of Snider. Such financial
statements have been prepared in conformity with GAAP applied on
a consistent basis throughout the periods involved. The financial
statement schedules of Snider, if any, included in the Offering
Memorandum present fairly the information required to be stated
therein.
(15) Erwin & Company, which is reporting upon the audited
financial statements and related notes of Snider and Snider
Broadcasting included in the Offering Memorandum, is an
independent public accountant with respect to Snider and Snider
Broadcasting within the meaning of the 1933 Act, the 1934 Act and
the rules and regulations of the Commission thereunder.
(16) The financial statements of Snider Broadcasting
Corporation and Subsidiary and CDB Broadcasting Corporation
(collectively "Snider Broadcasting") included in the Offering
Memorandum, together with the related schedules and notes,
present fairly (1) the financial position of Snider Broadcasting
on a combined consolidated basis as of the dates indicated and
(2) the results of operations, stockholders' deficit and cash
flows of Snider Broadcasting on a combined consolidated basis for
the periods specified, subject, in the case of unaudited
financial statements of Snider Broadcasting, to normal year-end
adjustments which shall not be materially adverse to the
condition (financial or otherwise), earnings, business affairs or
business prospects of Snider Broadcasting. Such financial
statements have been prepared in conformity with GAAP applied on
a consistent basis throughout the periods involved. The financial
statement schedules of Snider Broadcasting, if any, included in
the Offering Memorandum present fairly the information required
to be stated therein.
(17) The financial statements of Marantha Broadcasting
Company Inc.'s Radio Broadcasting Division (the "Division")
included in the Offering Memorandum, together with the related
schedules and notes, present fairly (1) the financial position of
the Division on a consolidated basis as of the dates indicated
and (2) the results of operations, deficiency in net assets and
cash flows of the Division on a consolidated basis for the
periods specified, subject, in the case of unaudited financial
statements of the Division, to normal year-end adjustments which
shall not be materially adverse to the condition (financial or
otherwise), earnings, business affairs or business prospects of
the Division. Such financial statements have been prepared in
conformity with GAAP applied on a consistent basis throughout the
period involved. The financial statement schedules of the
Division, if any, included in the Offering Memorandum present
fairly the information required to be stated therein.
(18) The financial statements of Pacific Northwest
Broadcasting Corporation and Affiliates ("Pacific Northwest")
included in the Offering Memorandum, together with the related
schedules and notes, present fairly (1) the financial position of
Pacific Northwest as of the dates indicated and (2) the
statements of income, stockholders' equity and cash flows of
Pacific Northwest for the periods specified,
-6-
<PAGE> 7
subject, in the case of unaudited financial statements, to normal
year-end adjustments which shall not be materially adverse to the
condition (financial or otherwise), earnings, business affairs or
business prospects of Pacific Northwest. Such financial
statements have been prepared in conformity with GAAP applied on
a consistent basis throughout the periods involved. The financial
statement schedules of Pacific Northwest, if any, included in the
Offering Memorandum present fairly the information required to be
stated therein.
(19) Lindstrom & Co., P.A., which is reporting upon the
audited financial statements and related notes of Pacific
Northwest included in the Offering Memorandum, is an independent
public accountant with respect to Pacific Northwest within the
meaning of the 1933 Act, the 1934 Act and the rules and
regulations of the Commission thereunder.
(20) The pro forma condensed consolidated financial
statements and other pro forma financial information (including
the notes thereto) included in the Offering Memorandum (1)
present fairly in all material respects the information shown
therein; (2) have been prepared in accordance with the applicable
requirements of Regulation S-X promulgated under the 1933 Act;
(3) have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements;
and (4) have been properly computed on the basis described
therein. The assumptions used in the preparation of the pro forma
financial statements and other pro forma condensed consolidated
financial information included in the Offering Memorandum are
reasonable and the adjustments used therein are reasonably
appropriate to give effect to the transactions or circumstances
referred to therein.
(21) Except as disclosed in the Offering Memorandum, there
is no action, suit or proceeding before or by any government,
governmental instrumentality or court, domestic or foreign, now
pending or, to the knowledge of the Company, threatened against
the Company or the Subsidiary or any of their respective
officers, in their capacity as such, that could result in a
Material Adverse Effect, or that could adversely affect the
consummation of the transactions contemplated in this Agreement
or the Offering Memorandum; the aggregate of all pending legal or
governmental proceedings that are not described in the Offering
Memorandum to which the Company or the Subsidiary is a party or
which affect any of their respective properties, including
ordinary routine litigation incidental to the business of the
Company or the Subsidiary, could not reasonably be expected to
have a Material Adverse Effect.
(22) No authorization, approval, consent or license of any
government, governmental instrumentality or court, domestic or
foreign (including, without limitation, the Federal
Communications Commission (the "FCC") (other than under the 1933
Act and the rules and regulations thereunder with respect to the
Registration Rights Agreement and the transactions contemplated
thereunder and the securities or "blue sky"
-7-
<PAGE> 8
laws of the various states) is required for the valid
authorization, issuance, sale and delivery of the Securities, for
the execution, delivery or performance by the Company, Parent or
the Subsidiary, as applicable, of this Agreement, the
Registration Rights Agreement, the Indenture and the transactions
and actions contemplated thereby.
(23) Except as disclosed in the Offering Memorandum, the
Company and the Subsidiary validly hold all material licenses,
certificates, permits, consents, authorizations and approvals for
the Existing Stations (as defined below) (collectively,
"Licenses") from governmental authorities which are necessary to
the conduct of their businesses and operations in the manner and
to the full extent now operated or proposed to be operated as
described in the Offering Memorandum; such Licenses were issued
and are in full force and effect and no complaint, action,
litigation or other proceeding has been instituted or is pending
or, to the knowledge of the Company, is threatened which in any
manner affects or questions the validity or effectiveness
thereof; such Licenses contain no materially burdensome
conditions or restrictions not customarily imposed by the FCC on
radio stations of the same class and type; the operation of the
radio stations identified in the Offering Memorandum under the
caption "Business -- Station Portfolio" (collectively, the
"Existing Stations") in the manner and to the full extent now
operated or proposed to be operated as described in the Offering
Memorandum, is in compliance with the Communications Act of 1934,
as amended (the "Communications Act"), the Telecommunications Act
of 1996, and all orders, rules, regulations, and policies of the
FCC, except for such noncompliance as would not have a Material
Adverse Effect; no event has occurred which permits (nor has an
event occurred which with notice or lapse of time or both would
permit) the revocation or termination of such Licenses or the
imposition of any material adverse restriction or condition
thereon or which might result in any other material impairment of
the rights of the Company or the Subsidiary therein; the Company
and the Subsidiary are in compliance with all statutes, orders,
rules, and policies of the FCC relating to or affecting the
broadcasting operations of any of the Existing Stations, except
for such noncompliance as would not have a Material Adverse
Effect.
(24) Neither the Company nor the Subsidiary is in default in
the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other agreement or
instrument to which it is a party or by which it may be bound or
to which any of its properties may be subject, except for such
defaults that would not have a Material Adverse Effect. Each of
(i) the execution and delivery by the Company, Parent and the
Subsidiary, as applicable, of this Agreement, the Registration
Rights Agreement and the Indenture, (ii) the issuance, sale and
delivery of the Securities by the Company, (iii) the compliance
by the Company, Parent and the Subsidiary, as applicable, with
the terms of this Agreement, the Registration Rights Agreement
and the Indenture and (iv) the transactions contemplated hereby
and thereby, (A) has been duly authorized by all necessary
corporate action on the part of the Company, Parent and the
Subsidiary, as
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<PAGE> 9
applicable, (B) does not and will not result in any violation of
the charter or by-laws of Parent, the Company and the Subsidiary,
as applicable, and (C) except as would not have a Material
Adverse Effect, does not and will not conflict with, or result in
a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the
Company, Parent and the Subsidiary, as applicable, under, (I) any
contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument to which the Company, Parent and
the Subsidiary, as applicable, are parties or by which they may
be bound or to which any of their respective properties may be
subject or (II) any existing applicable law, rule, regulation,
judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having
jurisdiction over the Company, Parent and the Subsidiary, as
applicable, or any of their respective properties, except that we
have been advised by the Company that the lenders under the
Credit Facility (as defined in the Offering Memorandum) will
consent to the issuance of the Securities provided that the
Securities have terms substantially similar to the terms of the
Company's 10-1/4% Senior Subordinated Notes due 2007 (other than
the pricing terms).
(25) Except as disclosed in the Offering Memorandum, and
other than with respect to the Licenses, each of the Company and
the Subsidiary owns, possesses or has obtained all material
governmental licenses, permits, certificates, consents, orders,
approvals and other authorizations necessary to own or lease, as
the case may be, and to operate its properties and to carry on
its business as presently conducted, and neither the Company nor
the Subsidiary has any reason to believe that any governmental
agency or body is considering limiting, suspending or revoking
any such approval, license, permit, certificate, franchise,
authorization or right.
(26) Each of the Company and the Subsidiary has good and
marketable title to all properties and assets described in the
Offering Memorandum as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as (A) are
described in the Offering Memorandum or (B) are neither material
in amount nor materially significant in relation to the business
of the Company and the Subsidiary, considered as one enterprise;
all of the leases and subleases material to the business of the
Company and the Subsidiary, considered as one enterprise, and
under which the Company or the Subsidiary holds properties
described in the Offering Memorandum, are in full force and
effect, and neither the Company nor the Subsidiary has received
any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or the
Subsidiary under any of the leases or subleases mentioned above,
or affecting or questioning the rights of such corporation to the
continued possession of the leased or subleased premises under
any such lease or sublease.
-9-
<PAGE> 10
(27) Each of the Company and the Subsidiary carries, or is
covered by, insurance in such amounts and covering such risks as
is adequate for the conduct of its respective businesses and the
value of its respective properties and is customary for companies
engaged in similar businesses in similar industries.
(28) Each of the Company and the Subsidiary owns or
possesses adequate patents, patent licenses, trademarks, service
marks and trade names necessary to carry on its business as
presently conducted, and neither the Company nor the Subsidiary
has received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, patent
licenses, trademarks, service marks or trade names that in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, could have a Material Adverse Effect.
(29) No material event of default exists under any contract,
indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which the Company or the Subsidiary is
a party or to which the Company or the Subsidiary is subject.
(30) There are no contracts or documents of a character that
would be required to be described in the Offering Memorandum, if
it were a prospectus filed as part of a registration statement on
Form S-1 under the 1933 Act, that are not described as would be
so required. All such contracts which are so described in the
Offering Memorandum to which the Company or the Subsidiary is a
party have been duly authorized, executed and delivered by the
Company or the Subsidiary, constitute valid and binding
agreements of the Company or the Subsidiary and are enforceable
against the Company or the Subsidiary in accordance with the
terms thereof.
(31) To the best knowledge of the Company, no labor problem
exists with its employees or with the employees of the Subsidiary
or is imminent that could materially adversely affect the Company
and the Subsidiary, considered as one enterprise, and the Company
is not aware of any existing or imminent labor disturbance by the
employees of any of the Subsidiary's principal suppliers,
contractors or customers that could have a Material Adverse
Effect.
(32) All United States federal income tax returns of the
Company and the Subsidiary required by law to be filed have been
filed and all United States federal income taxes which are due
and payable have been paid, except assessments against which
appeals have been or will be promptly taken and as to which
adequate reserves have been provided. The Company and the
Subsidiary each has filed all other tax returns that are required
to have been filed by it pursuant to applicable foreign, state,
local or other law except insofar as the failure to file such
returns would not have a Material Adverse Effect, and has paid
all taxes due pursuant to such returns or pursuant to any
assessment received by the Company and the Subsidiary, except for
such taxes, if any, as are being contested in good faith and as
to which adequate reserves have been provided. The charges,
accruals and reserves on the books of the Company in respect of
any income
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<PAGE> 11
and corporation tax liability for any years not finally
determined are adequate to meet any assessments or re-assessments
for additional income tax for any years not finally determined,
except to the extent of any inadequacy that would not have a
Material Adverse Effect.
(33) Each of the Company and the Subsidiary maintains a
system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization;
(B) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain
accountability for assets; (C) access to assets is permitted only
in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company and the Subsidiary have not made, and, to the knowledge
of the Company, no employee or agent of the Company or the
Subsidiary has made, any payment of the Company's funds or the
Subsidiary's funds or received or retained any funds in violation
of any applicable law, regulation or rule or that would be
required to be disclosed in the Offering Memorandum if it were a
prospectus filed as part of a registration statement on Form S-1
under the 1933 Act.
(34) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA");
no "reportable event" (as defined in ERISA) has occurred with
respect to any "pension plan" (as defined in ERISA) for which the
Company would have any liability; the Company has not incurred
and does not expect to incur liability under (A) Title IV of
ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (B) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would
cause the loss of such qualification.
(35) The Company has been advised that the Securities have
been designated PORTAL securities in accordance with the rules
and regulations of the National Association of Securities
Dealers, Inc. ("NASD").
(36) None of the Company or any affiliate of the Company (as
defined in Rule 501(b) under the 1933 Act) has directly or
through any agent, sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any security (as
defined in the 1933 Act) of the Company that is of the same or
similar class as the Securities
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<PAGE> 12
(other than with respect to the New Securities) in a manner that
would require the registration of the Securities under the 1933
Act.
(37) None of the Company or any affiliate of the Company or
any person acting on their behalf has (A) engaged, in connection
with the offering of the Securities, in any form of general
solicitation or general advertising (as those terms are used
within the meaning of Regulation D ("Regulation D") of the 1933
Act) or (B) solicited offers for, or offered or sold, such
Securities by means of any form of general solicitation or
general advertising (as those terms are used in Regulation D
under the 1933 Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the 1933 Act or (C) with
respect to the Securities sold in reliance on Rule 903 under the
1933 Act, engaged in any directed selling efforts within the
meaning of Regulation S with respect to the Securities, and each
of them has complied with the offering requirements of Regulation
S.
(38) The Company has not, directly or indirectly, (i) taken
any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities or
(ii) (A) sold (except pursuant to this Agreement), bid for,
purchased, or paid anyone any compensation for soliciting
purchases of, the Securities or (B) paid or agreed to pay to any
person any compensation for soliciting another to purchase any
other securities of the Company.
(39) Assuming (A) the accuracy of the representations and
warranties of the Initial Purchasers in Section 2 hereof and (B)
the due performance by the Initial Purchasers of the covenants
and agreements set forth in Section 2 hereof, it is not necessary
in connection with the offer, sale and delivery of the Securities
to the Initial Purchasers under, or in connection with the
initial resale of such Securities by the Initial Purchasers in
accordance with, this Agreement to register the Securities under
the 1933 Act or to qualify any indenture in respect of the
Securities under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
(40) No relationship, direct or indirect, exists between or
among the Company or the Subsidiary, on the one hand, and the
directors, officers, securityholders, customers or suppliers of
the Company or the Subsidiary, on the other hand, that is of a
character that would be required to be described in the Offering
Memorandum if it were a prospectus filed as part of a
registration statement on Form S-1 under the 1933 Act, that is
not described as would be so required.
(41) The Company is not an "investment company" or a company
controlled by an "investment company," as such terms are defined
in the Investment Company Act of 1940, as amended (the "1940
Act").
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<PAGE> 13
(42) Neither the Company nor the Subsidiary, nor any
director, officer, agent, employee or other person associated
with or acting on behalf of the Company or the Subsidiary, has
used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political
activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of
the Foreign Corrupt Practices Act of 1977; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful
payment.
(43) All offers and sales by the Company of the Company's
securities which have taken place within the past three years
were at all relevant times exempt from the registration
requirements of the 1933 Act or duly registered under the 1933
Act, and were duly registered or the subject of an available
exemption from the requirements of applicable state securities
laws.
(44) Since the respective dates as of which information is
given in the Offering Memorandum, except as otherwise stated
therein or contemplated thereby, there has not been (A) any
material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of
the Company and the Subsidiary, considered as one enterprise,
whether or not arising in the ordinary course of business, (B)
any transaction entered into by the Company or the Subsidiary,
other than in the ordinary course of business, that is material
to the Company and the Subsidiary, considered as one enterprise,
or (C) any dividend or distribution of any kind declared, paid or
made by the Company on its capital stock.
(45) Except as disclosed in the Offering Memorandum and
except as would not individually or in the aggregate have a
Material Adverse Effect, (A) the Company and the Subsidiary are
each in compliance with all applicable Environmental Laws, (B)
the Company and the Subsidiary have all permits, authorizations
and approvals required under any applicable Environmental Laws
and are each in compliance with their requirements, (C) there are
no pending or, to the knowledge of the Company, threatened
Environmental Claims against the Company or the Subsidiary, and
(D) there are no circumstances with respect to any property or
operations of the Company or the Subsidiary that could reasonably
be anticipated to form the basis of an Environmental Claim
against the Company of the Subsidiary.
(46) For purposes of this Agreement, the following terms
shall have the following meanings: "Environmental Law" means any
United States (or other applicable jurisdiction's) federal,
state, local or municipal statute, law, rule, regulation,
ordinance, code, policy or rule of common law and any judicial or
administrative interpretation thereof including any judicial or
administrative order, consent decree or judgment, relating to the
environment, health, safety or any chemical, material or
substance, exposure to which is prohibited, limited or regulated
by any governmental
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<PAGE> 14
authority. "Environmental Claims" means any and all
administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or
violation, investigations or proceedings relating in any way to
any Environmental Law.
The statistical and market-related data included in the Offering Memorandum are
based on or derived from sources which the Company believes to be reliable and
accurate in all material respects or represent the Company's good faith
estimates that are made on the basis of data derived from such sources.
(b) Any certificate signed by any officer of the Company or
the Subsidiary and delivered to the Initial Purchasers or to counsel for the
Initial Purchasers shall be deemed a representation and warranty by the Company
to the Initial Purchasers as to the matters covered thereby.
Section 2. Purchase, Sale and Resale of the Securities;
Closing; Representations and Warranties of the Initial Purchasers. (a) On the
basis of the representations and warranties herein contained, and subject to the
terms and conditions herein set forth, the Company agrees to sell to each of the
Initial Purchasers, severally and not jointly, and each of the Initial
Purchasers, severally and not jointly, agrees to purchase from the Company at a
purchase price of 97% of the principal amount thereof, plus accrued interest, if
any, from November 19, 1998 to the date of delivery of the Securities, the
principal amount of the Securities, set forth opposite its name on Schedule I.
(b) Payment of the purchase price for, and delivery of, the
Securities shall be made at the offices of Shearman & Sterling, 599 Lexington
Avenue, New York, New York 10022, or at such other place as shall be agreed upon
by the Company and you, at 10:00 A.M., New York time, on November 19, 1998, or
at such other time not more than two business days thereafter as the Initial
Purchasers and the Company shall agree (such date and time of payment and
delivery being herein called the "Closing Time"). The Securities shall be in
such denominations and registered in such names as you may request in writing at
least two business days before the Closing Time. The Securities, which may be in
temporary form, will be made available in New York City for examination and
packaging by you not later than 10:00 A.M. on the last business day prior to the
Closing Time.
(c) At the Closing Time, payment shall be made to the Company
in the aggregate amount of $111,550,000 immediately available funds payable to
the order of the Company against delivery of the Securities to you and the
Company shall promptly reimburse you for your costs in obtaining immediately
available funds.
(d) The Initial Purchasers have advised the Company that they
propose to offer the Securities for sale, upon the terms and conditions set
forth in this Agreement and in the Offering Memorandum. Each Initial Purchaser
hereby represents and warrants to the Company that it is a Qualified
Institutional Buyer as defined in Rule 144A and an "Accredited Investor" as
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<PAGE> 15
defined in Rule 501 of Regulation D. Each Initial Purchaser agrees with the
Company that it (i) has not solicited and will not solicit offers for, or offer
or sell, the Securities by means of any form of general solicitation or general
advertising or in any manner involving a public offering within the meaning of
Section 4(2) of the 1933 Act and (ii) has solicited and will solicit offers for
the Securities only from, and will offer, sell or deliver the Securities, as
part of its initial offering, only to (A) persons whom it reasonably believes to
be Qualified Institutional Buyers or, if any such person is buying for one or
more institutional accounts for which such person is acting as fiduciary or
agent, only when such person has represented to it that each such account is a
Qualified Institutional Buyer to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, and, in each case, in a
transaction under Rule 144A and (B) to non-U.S. persons outside the United
States pursuant to Regulation S of the 1933 Act.
(e) The Initial Purchasers shall notify the Company upon
completion of the distribution of the Securities.
Section 3. Certain Covenants of the Company. The Company
covenants and agrees with each of the Initial Purchasers as follows:
(a) The Company will not at any time make any amendment or
supplement to the Offering Memorandum of which the Initial Purchasers shall not
have previously been advised and furnished a copy for a reasonable period of
time prior to the proposed amendment or supplement and as to which the Initial
Purchasers or their counsel shall reasonably object.
(b) The Company will promptly deliver to the Initial
Purchasers, without charge, during the period from the date hereof to the date
of the completion of the distribution of the Securities by the Initial
Purchasers, such number of copies of the Offering Memorandum, as it may then be
amended or supplemented, as the Initial Purchasers and their counsel may
reasonably request.
(c) The Company will immediately notify the Initial
Purchasers, and confirm such notice in writing, of (x) any filing other than a
filing made under the 1934 Act made by the Company of information relating to
the offering of the Securities with any securities exchange or any other
regulatory body in the United States or any other jurisdiction, and (y) prior to
the completion of the distribution of the Securities by the Initial Purchasers,
(A) any filing made by the Company pursuant to Form 8-K of the 1934 Act and (B)
any material changes in or affecting the condition, financial or otherwise, or
the earnings, business affairs or business prospects of the Company that (i)
make any statement in the Offering Memorandum false or misleading or (ii) are
not disclosed in the Offering Memorandum. In such event or if during such time
any event shall occur as a result of which it is necessary, in the reasonable
opinion of any of the Company, its counsel, the Initial Purchasers or counsel
for the Initial Purchasers, to amend or supplement the Offering Memorandum in
order that the Offering Memorandum
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<PAGE> 16
will not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances existing at the time it is delivered to a purchaser, not
misleading or if, in the opinion of counsel for the Initial Purchasers or
counsel for the Company, it is necessary to amend or supplement the Offering
Memorandum to comply with applicable law, the Company, at its own expense, will
promptly prepare such amendment or supplement as may be necessary so that the
statements in the Offering Memorandum as so amended or supplemented will not, in
the light of the circumstances existing at the time it is delivered to a
purchaser, be misleading or so that such Offering Memorandum as so amended or
supplemented will comply with applicable law, as the case may be, and furnish
the Initial Purchasers such number of copies as they may reasonably request.
(d) The Company will endeavor, in cooperation with the Initial
Purchasers, to qualify the Securities for offering and sale under the applicable
securities laws of such states and other jurisdictions as the Initial Purchasers
may designate and to maintain such qualifications in effect for as long as may
be necessary to complete the resale of the Securities by the Initial Purchasers;
provided, however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject. The Company will file such statements and
reports as may be required by the laws of each jurisdiction in which the
Securities have been qualified as above provided. The Company will also supply
the Initial Purchasers with such information as is necessary for the
determination of the legality of the Securities for investment under the laws of
such jurisdictions as the Initial Purchasers may request.
(e) Except following the effectiveness of the Registration
Statement, neither the Company nor any of its affiliates (as such term is
defined in Rule 501 (b) of Regulation D) will solicit any offer to buy or offer
to sell the Securities by means of any form of general solicitation or general
advertising (within the meaning of Rule 502(C) of Regulation D) or in any manner
involving a public offering within the meaning of Section 4(2) of the 1933 Act
or will engage in any directed selling efforts within the meaning of Regulation
S with respect to the Securities, and each of them will comply with the offering
restrictions requirements of Regulation S.
(f) Neither the Company nor any of its affiliates (as such
term is defined in Rule 501(b) of the 1933 Act) will offer, sell or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
the 1933 Act) the offering of which security could be integrated with the sale
of the Securities in a manner that would require the registration of any of the
Securities under the 1933 Act.
(g) The Company will not be or become an open-end investment
company, unit investment trust or face-amount certificate company that is or is
required to be registered under the 1940 Act, and will not be or become a
closed-end investment company required to be registered thereunder.
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<PAGE> 17
(h) During the period from the Closing Time to the earlier of
(i) two years after the Closing Time or (ii) the date of effectiveness of the
registration statement filed pursuant to the Registration Rights Agreement, the
Company will not, and will not permit any of its affiliates (as such term is
defined in Rule 144 under the 1933 Act) to, resell any of the Securities that
have been reacquired thereby, except for Securities purchased by the Company or
any of its affiliates and resold in a transaction registered under the 1933 Act.
(i) The Company will, so long as the Securities are
outstanding and are "restricted securities" within the meaning of Rule 144(a)(3)
under the 1933 Act, either (i) file reports and other information with the
Commission under Section 13 or Section 15(d) of the 1934 Act, or (ii) in the
event the Company is not subject to Section 13 or Section 15(d) of the 1934 Act,
furnish to holders of the Securities and prospective purchasers of the
Securities designated by such holders, upon request of such holders or such
prospective purchasers, the information required to be delivered pursuant to
Rule 144A(d)(4) under the 1933 Act to permit compliance with Rule 144A in
connection with resale of the Securities. For a period of five years after the
Closing Time, the Company will make available to the Initial Purchasers upon
request copies of all such reports and information, together with such other
documents, reports and information as shall be furnished by the Company to the
holders of the Securities issued by it.
(j) If requested by the Initial Purchasers, the Company will
use its best efforts in cooperation with the Initial Purchasers to permit the
Securities sold in transactions described in Section 2(d)(ii)(A) hereof to be
eligible for clearance and settlement through The Depository Trust Company.
(k) Each Security will bear the following legend until such
legend shall no longer be necessary or advisable because such Security is no
longer subject to the restrictions on transfer described therein:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER
SUCH SECURITY, PRIOR
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<PAGE> 18
TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CITADEL
BROADCASTING COMPANY ("THE COMPANY") OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE"),
ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS
THAT OCCUR OUTSIDE THE UNITED STATES MEETING THE REQUIREMENTS
OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF
THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER
IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER
AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
(1) The Company will apply the net proceeds from the sale of
the Securities as set forth in the Offering Memorandum under the heading "Use of
Proceeds."
(m) Prior to the Closing Time, the Company will not issue any
press release or other communications directly or indirectly or hold any press
conference with respect to the Company, the condition, financial or otherwise,
or the earnings, business affairs or business prospects of the Company, without
the prior written consent of Prudential Securities Incorporated, unless in the
judgment of the Company and its counsel, and after notification to the Initial
Purchasers, such press release or communication is required by law. Prior to the
Closing Time, the Company will not at any time otherwise publicly refer to the
Initial Purchasers without their prior written consent.
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<PAGE> 19
(n) During the period beginning from the date of the Offering
Memorandum and continuing to and including the date 180 days after the date of
the Offering Memorandum, the Company will not offer, sell, contract to sell or
otherwise dispose of, without the prior written consent of the Initial
Purchasers, any securities of the Company that are substantially similar to the
New Securities, or any securities of the Company convertible or exchangeable
into securities of the Company substantially similar to the New Securities;
provided, however, the foregoing shall not apply to notes issued in the
Securities Exchange Offer (as defined in the Registration Rights Agreement).
(o) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as they have been prepared by or are available to
the Company, a copy of any unaudited interim consolidated financial statements
of the Company for any period subsequent to the period covered by the most
recent financial statements appearing in the Offering Memorandum.
Section 4. Payment of Expenses. (a) The Company will pay all
costs and expenses incident to the performance of its obligations under this
Agreement, whether or not the transactions contemplated herein are consummated
or this Agreement is terminated pursuant to Section 9 hereof, including all
costs and expenses incident to (i) the preparation and printing or other
production of documents with respect to the transactions, including any costs of
printing the Offering Memorandum and any amendments or supplements thereto, the
Indenture, this Agreement, the Registration Rights Agreement, the Securities and
any blue sky memoranda, (ii) all arrangements relating to the delivery to the
Initial Purchasers of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company, (iv) preparation, issuance and delivery to the Initial
Purchasers of any certificates evidencing the Securities, including transfer
agent's and registrar's fees, (v) the qualification of the Securities under
state securities and blue sky laws in accordance with Section 3(d) and any
filing for review of the offering with the NASD, in each case including filing
fees and reasonable fees and disbursements of counsel for the Initial Purchasers
relating thereto and in connection with the preparation of any "blue sky" or
legal investment memoranda, (vi) the fees and disbursements of the Trustees,
including the fees and disbursements of counsel for the Trustees, in connection
with the Indenture and the Securities, (vii) any meetings with prospective
investors in the Securities (other than as shall have been specifically approved
by the Initial Purchasers to be paid for by the Initial Purchasers), (viii) any
fees charged by investment rating agencies for the rating of Securities and (ix)
the fees associated with any listing of the Securities on any securities
exchange, including the cost of obtaining approval for the trading of the
Securities through PORTAL. If the sale of the Securities provided for herein is
not consummated because any condition to the obligations of the Initial
Purchasers set forth in Section 5 hereof is not satisfied, because this
Agreement is terminated pursuant to Section 9 (a)(i) hereof or because of any
failure, refusal or inability on the part of the Company to perform all
obligations and satisfy all conditions on its part to be performed or satisfied
hereunder other than by reason of a default by any of the Initial Purchasers,
the Company will reimburse the
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<PAGE> 20
Initial Purchasers severally upon demand for all out-of-pocket expenses
(including fees and disbursements of counsel) that shall have been incurred by
them in connection with the proposed purchase and sale of the Securities. The
Company shall not in any event be liable to any of the Initial Purchasers for
the loss of anticipated profits from the transactions covered by this Agreement.
(b) In addition to its obligations under Section 6(a) hereof,
the Company agrees that, as an interim measure during the pendency of any claim,
action, investigation,. inquiry or other proceeding arising out of or based upon
any loss, claim, damage or liability described in Section 6(a) hereof, it will
reimburse the Initial Purchasers, and each of them, on a monthly basis against
submission of invoices and such additional information as the Company reasonably
may request for all reasonable legal or other expenses incurred in connection
with investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the obligations of the Company to
reimburse the Initial Purchasers for such expenses and the possibility that such
payments might later be held to have been improper by a court of jurisdiction.
To the extent that any portion, or all, of any such interim reimbursement
payments are so held to have been improper, the Initial Purchasers receiving the
same shall promptly return such amounts to the party or parties who have paid
such amounts together with interest, compounded daily, determined on the basis
of the prime rate (or other commercial lending rate for borrowers of the highest
credit standing) announced from time to time by Bankers Trust Company (the
"Prime Rate"). Any such interim reimbursement payments that are not made to the
Initial Purchasers within 30 days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request until the date paid.
(c) In addition to their obligations under Section 6(a)
hereof, the Initial Purchasers agree that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any loss, claim, damage or liability described in
Section 6(b)(i) or 6(b)(ii) hereof, (in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by one or more of the Initial Purchasers
specifically for use in the Offering Memorandum and any amendments or
supplements thereto), they will reimburse the Company on a monthly basis,
against submission of invoices and such additional information as the Initial
Purchasers reasonably may request, for all reasonable legal or other expenses
incurred by the Company in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the Initial Purchasers' obligation to reimburse the Company for such expenses
and the possibility that such payments might later be held to have been improper
by a court of competent jurisdiction. To the extent that any portion, or all, of
any such interim reimbursement payments are so held to have been improper, the
Company shall promptly return such amounts to the Initial Purchasers together
with interest, compounded daily, determined on the basis of the Prime Rate. Any
such interim reimbursement payments that are not made to the Company
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<PAGE> 21
within 30 days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request until the date paid.
(d) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections 4 (b)
and 4 (c) above, including the amounts of any requested reimbursement payments,
the method of determining such amounts and the basis on which such amounts shall
be apportioned among the indemnifying parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for arbitration or
a written notice of intention to arbitrate, therein electing the arbitration
tribunal. If the party demanding arbitration does not make designation of an
arbitration tribunal in such demand or notice, then the party responding to said
demand or notice is authorized to do so. Any such arbitration will be limited to
the interpretation and obligations of the parties under the interim
reimbursement provisions contained in Sections 4(b) and 4(c) hereof and will not
resolve the ultimate propriety or enforceability of the obligation to indemnify
for expenses that is created by the provisions of Section 6 hereof.
Section 5. Conditions of Initial Purchasers' Obligations. The
obligation of each Initial Purchaser to purchase and pay for the Securities that
it has severally agreed to purchase hereunder is subject to the accuracy of the
representations and warranties of the Company contained herein and in
certificates of any officer of the Company and the Subsidiary delivered pursuant
to the provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following further conditions:
(a) At the Closing Time, each of the Initial Purchasers
shall have received a signed opinion of Eckert Seamans Cherin &
Mellott, LLC, counsel for the Company, dated as of the Closing
Time, in substantially the form attached hereto as Exhibit B-1.
Such opinion shall be to such further effect with respect to
other legal matters relating to this Agreement and the sale of
the Securities pursuant to this Agreement as counsel for the
Initial Purchasers may reasonably request.
(b) At the Closing Time, each of the Initial Purchasers
shall have received a signed opinion of Wiley, Rein & Fielding,
FCC counsel to the Company, dated as of the Closing Time, in
substantially the form attached hereto as Exhibit B-2. Such
opinion shall be to such further effect with respect to other
legal matters relating to this Agreement and the sale of the
Securities pursuant to this Agreement as counsel for the Initial
Purchasers may reasonably request.
(c) At the Closing Time, each of the Initial Purchasers
shall have received a signed opinion of Lionel Sawyer & Collins,
Nevada counsel for the Company, dated as of the Closing Time, in
substantially the form attached hereto as Exhibit B-3. Such
opinion shall be to such further effect with respect to other
legal matters relating to
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<PAGE> 22
this Agreement and the sale of the Securities pursuant to this
Agreement as counsel for the Initial Purchasers may reasonably
request.
(d) At the Closing Time, each of the Initial Purchasers
shall have received the favorable opinion of Shearman & Sterling,
counsel for the Initial Purchasers, dated as of the Closing Time,
to the effect that the opinions delivered pursuant to Sections
5(a), 5(b) and 5(c) appear on their face to be appropriately
responsive to the requirements of this Agreement except,
specifying the same, to the extent waived by the Initial
Purchasers, and with respect to the incorporation and legal
existence of the Company, the Securities, this Agreement, the
Indenture, the Registration Rights Agreement, the Offering
Memorandum and such other related matters as the Initial
Purchasers may require.
(e) At the time that this Agreement is executed by the
Company and at the Closing Date, each of the Initial Purchasers
shall have received from KPMG, independent auditors for the
Company, a letter, dated respectively as of the date of this
Agreement and as of the Closing Time, in form and substance
satisfactory to the Initial Purchasers, confirming that they are
independent public accountants with respect to the Company within
the meaning of the 1933 Act and the applicable published rules
and regulations thereunder, and setting forth certain matters
customarily included in accountants' "comfort letters," in form
and substance satisfactory to the Initial Purchasers and counsel
to the Initial Purchasers.
(f) The Company shall have furnished to the Initial
Purchasers a certificate, signed by the Chief Executive Officer
and the principal financial officer of the Company, dated as of
the Closing Time, to the effect that the signers of such
certificate have examined the Offering Memorandum, any amendment
or supplement to the Offering Memorandum, and this Agreement and
that:
(i) the representations and warranties of the Company
in this Agreement are true and correct in all material
respects on and as of the Closing Time with the same effect
as if made at the Closing Time, the Offering Memorandum, as
it may then be amended or supplemented, does not contain an
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company
has complied with all the agreements and satisfied all the
conditions under this Agreement on its part to be performed
or satisfied at or prior to the Closing Time; and
(ii) since the respective dates as of which information
is given in the Offering Memorandum (exclusive of any
amendments or supplements thereto), neither the Company nor
the Subsidiary has sustained any material loss or
interference with its respective business or properties from
fire, flood, hurricane, accident or other calamity, whether
or not covered by insurance, or from any labor
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<PAGE> 23
dispute or any legal or governmental proceeding, and there
has not been any material adverse change, or any development
involving a prospective material adverse change, in the
business, results of operations, financial condition or
properties of the Company and the Subsidiary, taken as a
whole, except in each case as described in or contemplated
by the Offering Memorandum (exclusive of any amendment or
supplement thereto). As used in this subparagraph, the term
"Offering Memorandum" means the Offering Memorandum in the
form first used to confirm sales of the Securities.
(g) The Company shall have furnished to the Initial
Purchasers an amendment to the Credit Facility, the effect of
which is to allow for the issuance of the Securities.
(h) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Time, there shall not have
been any downgrading, nor any notice given of any intended or
potential downgrading or of a possible change that does not
indicate the direction of the possible change, in the rating
accorded the Securities, by any "nationally recognized
statistical rating organization," as such term is defined for
purposes of Rule 436(g)(2) under the 1933 Act.
(i) Subsequent to the date hereof or, if earlier, the dates
as of which information is given in the Offering Memorandum
(exclusive of any amendment or supplement thereto), there shall
not have been any change, or any development involving a
prospective change, in or affecting the business or properties of
the Company the effect of which is, in the sole judgment of the
Initial Purchasers, so material and adverse as to make it
impractical or inadvisable to proceed with the purchase and the
delivery of the Securities as contemplated by the Offering
Memorandum (exclusive of any amendment or supplement thereto).
(j) On or before the Closing Time, the Securities shall have
been designated for trading on PORTAL.
(k) At the Closing Time, the Indenture shall have been fully
executed and shall be in full force and effect.
(l) At the Closing Time, the Registration Rights Agreement
shall have been fully executed and be in full force and effect.
(m) The issuance and sale of the Securities pursuant to this
Agreement shall not be enjoined (temporarily or permanently) and
no restraining order or other injunctive order shall have been
issued or any action, suit or proceeding shall have been
commenced with respect to this Agreement before any Court or
governmental authority (including, without limitation, the FCC).
-23-
<PAGE> 24
(n) On or before the Closing Time, counsel for the Initial
Purchasers shall have been furnished with all such documents,
certificates and opinions as they may have reasonably requested
from the Company.
If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement, this Agreement may
be terminated by the Initial Purchasers on notice to the Company at any time at
or prior to the Closing Time, and such termination shall be without liability of
any party to any other party, except as provided in Section 4. Notwithstanding
any such termination, the provisions of Sections 4, 6, 7 and 14 shall remain in
effect.
Section 6. Indemnification and Contribution. (a) Each of the
Company and Parent jointly and severally agrees to indemnify and hold harmless
each Initial Purchaser and each person, if any, who controls any Initial
Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act against any losses, claims, damages or liabilities, joint or several,
to which such Initial Purchaser or such controlling person may become subject
under the 1933 Act, the 1934 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon:
(i) any untrue statement or alleged untrue statement
made by the Company in Section 1 of this Agreement,
(ii) any untrue statement or alleged untrue statement
of any material fact contained in (A) the Offering
Memorandum or any amendments or supplements thereto or (B)
any application or other document, or any amendments or
supplements thereto, executed by the Company or based upon
written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify the Securities
under the securities or blue sky laws thereof or filed with
the Commission or any securities association or securities
exchange (each an "Application"), or
(iii) the omission or alleged omission to state in the
Offering Memorandum or any amendment or supplement thereto,
or any Application a material fact required to be stated
therein or necessary to make the statements therein not
misleading,
and will reimburse, as incurred, each Initial Purchaser and each such
controlling person for any legal or other expenses reasonably incurred by such
Initial Purchaser or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in the Offering
Memorandum or any amendment or supplement thereto or any Application in reliance
upon and in conformity with written
-24-
<PAGE> 25
information furnished to the Company by any Initial Purchaser specifically for
use therein. This indemnity agreement will be in addition to any liability which
the Company may otherwise have. The Company will not, without the prior written
consent of the Initial Purchaser or Initial Purchasers purchasing, in the
aggregate, more than fifty percent (50%) of the Securities, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not any such Initial Purchaser or any person who controls
any such Initial Purchaser within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of all of the Initial Purchasers and such controlling
persons from all liability arising out of such claim, action, suit or
proceeding.
(b) Each Initial Purchaser, severally and not jointly, will
indemnify and hold harmless the Company, each of its directors, each of its
executive officers and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any
losses, claims, damages or liabilities to which the Company, any such director,
officer or controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in the Offering Memorandum or
any amendment or supplement thereto or any Application or (ii) the omission or
alleged omission to state therein a material fact required to be stated in the
Offering Memorandum or any amendment or supplement thereto, or any Application
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by any Initial
Purchaser specifically for use therein; and, subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred, any legal or
other expenses reasonably incurred by the Company or any such director, officer
or controlling person in connection with investigating or defending any such
loss, claim, damage, liability or any action in respect thereof. This indemnity
agreement will be in addition to any liability which any Initial Purchaser may
otherwise have. The Initial Purchasers will not, without the prior written
consent of Parent or the Company, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought hereunder (whether or not
Parent, the Company or any person who controls Parent or the Company within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act is a party
to such claim, action, suit or proceeding), unless such settlement, compromise
or consent includes an unconditional release of all of Parent, the Company and
such controlling persons from all liability arising out of such claim, action,
suit or proceeding.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party
-25-
<PAGE> 26
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Section 6. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel approved
by such indemnified party (which approval will not be unreasonably withheld);
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action (which approval
will not be unreasonably withheld), the indemnifying party will not be liable to
such indemnified party under this Section 6 for any legal or other expenses,
other than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to local counsel, if
any) in any one action or separate but substantially similar actions arising out
of the same general allegations or circumstances, designated by the Initial
Purchasers in the case of paragraph (a) of this Section 6, representing the
indemnified parties under such paragraph (a) who are parties to such action or
actions) or (ii) the indemnifying party does not promptly retain counsel
approved by the indemnified party (which approval will not be unreasonably
withheld), or (iii) the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the written consent of the indemnifying party.
(d) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this Section 6 is unavailable or
insufficient, for any reason, to hold harmless an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof),
each indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect (i) the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party on the other from the offering of the Securities or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or
-26-
<PAGE> 27
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Initial Purchasers on the other shall be deemed to be in the
same proportion as the total proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Initial Purchasers. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Initial Purchasers, the parties' relative intents, knowledge, access to
information and opportunity to correct or prevent such statement or omission,
and any other equitable considerations appropriate in the circumstances. The
Company and the Initial Purchasers agree that it would not be equitable if the
amount of such contribution were determined by pro rata or per capita allocation
(even if the Initial Purchasers were treated as one entity for such purpose) or
by any other method of allocation that does not take into account the equitable
considerations referred to above in this paragraph (d). Notwithstanding any
other provision of this paragraph (d), no Initial Purchaser shall be obligated
to make contributions hereunder that in the aggregate exceed the total offering
price of the Securities purchased by such Initial Purchaser under this
Agreement, less the aggregate amount of any damages that such Initial Purchaser
has otherwise been required to pay in respect of the same or any substantially
similar claim, and no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Initial
Purchasers' obligations to contribute hereunder are several in proportion to
their respective underwriting obligations and not joint, and contributions among
Initial Purchasers shall be governed by the provisions of the Prudential
Securities Incorporated Master Agreement Among Underwriters. For purposes of
this paragraph (d), each person, if any, who controls an Initial Purchaser
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
shall have the same rights to contribution as such Initial Purchaser, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, shall have the same rights to
contribution as the Company.
(e) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions of this Agreement, including, without
limitation, the provisions of Sections 4(b), 4(c) and 4(d) hereof and this
Section 6, and are fully informed regarding said provisions. They further
acknowledge that the provisions of Sections 4(b), 4(c) and 4(d) hereof and this
Section 6 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Offering Memorandum as required by the 1933 Act.
Section 7. Survival. The respective representations,
warranties, agreements, covenants, indemnities and other statements of the
Company, its officers, and the several Initial Purchasers set forth in or made
pursuant to this Agreement, respectively, shall remain operative
-27-
<PAGE> 28
and in full force and effect regardless of (i) any investigation made by or on
behalf of the Company, any of its officers or directors, any Initial Purchaser
or any person who controls the Company or the Initial Purchasers within the
meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act and (ii)
delivery of and payment for the Securities. The respective agreements,
covenants, indemnities and other statements set forth in Sections 4, 6 and 14
hereof shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
Section 8. Default of Underwriters. If one of the Initial
Purchasers defaults in its obligation to purchase Securities hereunder and the
aggregate principal amount of such Securities that such defaulting Initial
Purchaser agreed but failed to purchase is ten percent or less of the aggregate
principal amount of Securities to be purchased by all of the Initial Purchasers
at such time hereunder, the other Initial Purchasers may make arrangements
satisfactory to the Initial Purchaser for the purchase of such Securities by
other persons, but if no such arrangements are made by the Closing Time, the
other Initial Purchasers shall be obligated to purchase the Securities that such
defaulting Initial Purchaser agreed but failed to purchase. If one of the
Initial Purchasers so defaults with respect to an aggregate principal amount of
Securities that is more than ten percent of the aggregate principal amount of
Securities to be purchased by all of the Initial Purchasers at such time
hereunder, and if arrangements satisfactory to the Initial Purchaser are not
made within 36 hours after such default for the purchase by other persons, of
the Securities with respect to which such default occurs, this Agreement will
terminate without liability on the part of any non-defaulting Initial Purchaser
or the Company other than as provided in Section 7 hereof. In the event of any
default by one of the Initial Purchasers as described in this Section 8, the
Initial Purchasers shall have the right to postpone the Closing Time established
as provided in Section 2 hereof for not more than seven business days in order
that any necessary changes may be made in the arrangements or documents for the
purchase and delivery of the Securities. As used in this Agreement, the term
"Initial Purchaser" includes any person substituted for a Initial Purchaser
under this Section 8. Nothing herein shall relieve any defaulting Initial
Purchaser from liability for its default.
Section 9. Termination of Agreement. (a) This agreement may be
terminated with respect to the Securities in the sole discretion of the Initial
Purchasers by notice to the Company given prior to the Closing Time, in the
event that the Company shall have failed, refused or been unable to perform all
obligations and satisfy all conditions on its part to be performed or satisfied
hereunder at or prior thereto or, if at or prior to the Closing Time,
(i) the Company or the Subsidiary shall have, in the sole
judgment of the Initial Purchasers, sustained any material loss
or interference with its respective business or properties from
fire, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any labor dispute or any legal
or governmental proceeding or there shall have been any material
adverse change, or any development involving a prospective
material adverse change (including without limitation a change in
management or control of the Company), in the business, results
of operations, financial condition or properties of the Company
and the Subsidiary, taken as a whole, except in each case as
described in or contemplated by the Offering Memorandum
(exclusive of any amendment or supplement thereto);
-28-
<PAGE> 29
(ii) a banking moratorium shall have been declared by New
York or United States authorities; or
(iii) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B)
an outbreak or escalation of any other insurrection or armed
conflict involving the United States or (C) any other calamity or
crisis or material adverse change in general economic, political
or financial conditions having an effect on the financial markets
or the market for the Securities that, in the sole judgment of
the Initial Purchasers, makes it impractical or inadvisable to
proceed with the public offering or the delivery of the
Securities as contemplated by the Offering Memorandum, as amended
as of the date hereof.
(b) If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party,
except to the extent provided in Section 4. Notwithstanding any such
termination, the provisions of Sections 6 and 7 shall remain in effect.
Section 10. Information Supplied by the Initial Purchasers.
The statements set forth in the seventh paragraph under the heading "Plan of
Distribution" in the Offering Memorandum (to the extent such statements relate
to the Initial Purchasers) constitute the only information furnished by the
Initial Purchasers to the Company for the purposes of Sections 1(a)(i) and 6
hereof. The Initial Purchasers confirm that such statements (to such extent) are
correct.
Section 11. Notices. All notices and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered, mailed or transmitted by any standard form of
telecommunication to the applicable party at the addresses indicated below:
If to the Initial Purchasers:
c/o Prudential Securities Incorporated
One New York Plaza - 18th Floor,
New York, NY 10292-2018,
attention: Peter Horan
with copies to:
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<PAGE> 30
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
attention: Danielle Carbone
If to the Company or Parent:
Citadel Broadcasting Company
140 South Ash Street
Tempe, AZ 85281
attention: Donna Heffner
with copies to:
Eckert Seamans Cherin & Mellott, LLC
600 Grant Street - 42nd Floor
Pittsburgh, PA 15219
attention: Bryan D. Rosenberger
Section 12. Parties. This Agreement is made solely for the
benefit of the Initial Purchasers, the Company and, to the extent expressed, any
person who controls the Company or any Initial Purchaser within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, and the directors of
the Company, its officers and their respective executors, administrators,
successors and assigns and no other person shall acquire or have any right under
or by virtue of this Agreement. The term "successors and assigns" shall not
include any purchaser, as such purchaser, from the Initial Purchasers of the
Securities. No Purchaser of Securities from any Initial Purchaser shall be
deemed to be a successor by reason merely of such purchase.
Section 13. Governing Law and Time. This Agreement shall be
governed by the laws of the State of New York. Specified times of the day refer
to New York City time.
Section 14. Counterparts. This Agreement may be executed in
one or more counterparts and when a counterpart has been executed by each party,
all such counterparts taken together shall constitute one and the same
agreement.
Section 15. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
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<PAGE> 31
Section 16. Headings. The Section headings used or contained
in this Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
If the foregoing correctly sets forth our understanding,
please sign and return to us a counterpart hereof, whereupon this instrument
will become a binding agreement between the Company and the Initial Purchasers
in accordance with its terms.
Very truly yours,
CITADEL BROADCASTING COMPANY
By /s/ Lawrence R. Wilson
--------------------------
Name: Lawrence R. Wilson
Title:
CITADEL COMMUNICATIONS
CORPORATION
By /s/ Lawrence R. Wilson
--------------------------
Name: Lawrence R. Wilson
Title:
Confirmed and accepted as of
the date first above written:
PRUDENTIAL SECURITIES INCORPORATED
By /s/ Peter Horan
----------------------------------
Name: Peter Horan
Title: Managing Director
BT ALEX. BROWN INCORPORATED
By /s/ David Jacobs
----------------------------------
Name: David Jacobs
Title:
<PAGE> 32
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Securities
Initial Purchaser to be Purchased
- ----------------- ---------------
<S> <C>
Prudential Securities
Incorporated $ 74,750,000
BT Alex. Brown
Incorporated $ 40,250,000
------------
Total $115,000,000
============
</TABLE>
<PAGE> 1
Exhibit 10.31
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of November 19, 1998, among Citadel Broadcasting Company, a
Nevada corporation (the "Company"), Citadel License, Inc. (the "Subsidiary") and
Prudential Securities Incorporated and BT Alex. Brown Incorporated
(collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement
dated November 12, 1998 among the Company, Parent and the Initial Purchasers
(the "Purchase Agreement"), which provides for, in relevant part, the sale by
the Company to the Initial Purchasers of $115,000,000 aggregate principal amount
of the Company's 9-1/4% Senior Subordinated Notes due 2008 (the "Notes"). In
order to induce the Initial Purchasers to enter into the Purchase Agreement,
each of the Company and the Subsidiary has agreed to provide to the Initial
Purchasers and their direct and indirect transferees and assigns the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time, and the rules and regulations of the SEC promulgated
thereunder.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC promulgated
thereunder.
"Closing Time" shall mean the Closing Time as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble of
this Agreement and also includes the Company's successors.
"Depositary" shall mean The Depository Trust Company, or any
other depositary appointed by the Company, provided, however, that any such
depositary must have an address in the Borough of Manhattan, in the City of New
York.
"Exchange Offer" shall mean the exchange offer by the Company
of Registrable Notes for New Notes pursuant to Section 2(a) hereof.
<PAGE> 2
"Exchange Offer Registration" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"Holders" shall mean the Initial Purchasers, for so long as
they own any Registrable Notes, and each of their successors, assigns and direct
and indirect transferees who become registered owners of Registrable Notes under
the Indenture.
"Indenture" shall mean the Indenture relating to the Notes
dated as of November 19, 1998 among the Company and The Bank of New York, a New
York banking corporation and trust company, trustee, as the same may be amended
from time to time in accordance with the terms thereof.
"Initial Purchasers" shall have the meaning set forth in the
preamble of this Agreement.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Notes; provided that
whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Company
or any of its affiliates (as such term is defined in Rule 405 under the 1933
Act) (other than the Initial Purchasers or subsequent holders of Registrable
Notes if such subsequent holders are deemed to be such affiliates solely by
reason of their holding of such Registrable Notes) shall be disregarded in
determining whether such consent or approval was given by the Holders of such
required percentage or amount.
"New Notes" shall mean 9-1/4% Senior Subordinated Notes due
2008 issued by the Company under the Indenture containing terms identical in all
respects to the Notes (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Notes or, if no such interest has
been paid, from November 19, 1998, (ii) the transfer restrictions thereon shall
be eliminated and (iii) certain provisions relating to an increase in the stated
rate of interest thereon shall be eliminated) to be offered to Holders of Notes
in exchange for New Notes pursuant to the Exchange Offer.
"Notes Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of Section 2(b)
of this Agreement which covers all of the then Registrable Notes on an
appropriate form under Rule 415 under the 1933 Act, or any similar rule that may
be adopted by the SEC, and all amendments and supplements to such
2
<PAGE> 3
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Person" shall mean an individual, partnership, limited
liability company, corporation, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any such
prospectus as amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Notes covered by a Notes Shelf Registration Statement, and by
all other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble of this Agreement.
"Registrable Notes" shall mean the Notes; provided, however,
that the Notes shall cease to be Registrable Notes when (i) a Registration
Statement with respect to such Notes shall have been declared effective under
the 1933 Act and such Notes shall have been disposed of pursuant to such
Registration Statement, (ii) such Notes shall have been sold to the public
pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A)
under the 1933 Act, (iii) such Notes shall have ceased to be outstanding or (iv)
such Notes have been exchanged for New Notes upon consummation of the Exchange
Offer.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company and the Subsidiary with
this Agreement, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. ("NASD") registration and
filing fees, (ii) all fees and expenses incurred in connection with compliance
with state or other securities or blue sky laws and compliance with the rules of
the NASD (including reasonable fees and disbursements of counsel for any
underwriters or Holders in connection with state or other securities or blue sky
qualification of any of the New Notes or Registrable Notes), (iii) all expenses
of any Persons in preparing or assisting in preparing, word processing, printing
and distributing any Registration Statement, any Prospectus, any amendments or
supplements thereto, certificates representing the New Notes and other documents
relating to the performance of and compliance with this Agreement, (iv) all
rating agency fees, (v) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Notes on any securities exchange or
exchanges, (vi) all fees and disbursements relating to the qualification of the
Indenture under applicable securities laws, (vii) the reasonable fees and
disbursements of counsel for the Company and, in the case of a Notes Shelf
Registration Statement, the reasonable fees and disbursements (including the
expenses of preparing and distributing any underwriting or securities sales
agreement) of one counsel (in addition to
3
<PAGE> 4
appropriate local counsel, if any) for the Holders (which counsel shall be
selected in writing by the Majority Holders), (viii) the fees and expenses of
the independent public accountants of the Company, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, (ix) the fees and expenses of a "qualified
independent underwriter" as defined by Conduct Rule 2720 of the NASD (if
required by the NASD rules) in connection with the offering of the Registrable
Notes, (x) the fees and expenses of the trustee, including its counsel, and any
escrow agent or custodian and (xi) any reasonable fees and disbursements of the
underwriters customarily required to be paid by issuers or sellers of securities
and the reasonable fees and expenses of any special experts retained by the
Company in connection with any Registration Statement, but excluding
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of Registrable Notes by a Holder.
"Registration Statement" shall mean any registration statement
of the Company which covers any of the New Notes or Registrable Notes pursuant
to the provisions of this Agreement, and all amendments and supplements to any
such Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Subsidiary" shall have the meaning set forth in the preamble
of this Agreement and also includes the Subsidiary's successors.
"Trustee" shall mean the trustee with respect to the Notes
under the Indenture.
2. Registration Under the 1933 Act. (a) Exchange Offer
Registration. To the extent not prohibited by any applicable law or applicable
interpretation of the Staff of the SEC, the Company shall (A) file on or prior
to the 90th calendar day following the date hereof an Exchange Offer
Registration Statement covering the offer by the Company to the Holders to
exchange all of the Registrable Notes for New Notes, (B) use its best efforts to
cause such Exchange Offer Registration Statement to be declared effective by the
SEC on or prior to the 180th calendar day following the date hereof, (C) use its
best efforts to cause such Exchange Offer Registration Statement to remain
effective until the closing of the Exchange Offer and (D) use its best efforts
to consummate the Exchange Offer on or prior to the 210th calendar day following
the date hereof. The New Notes will be issued under the Indenture. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company shall
promptly commence the Exchange Offer, it being the objective of such Exchange
Offer to enable each Holder (other than Notes Participating Brokers (as defined
in Section 3(f)(A) hereof)), eligible and electing to exchange Registrable Notes
for New Notes (assuming that such Holder is not an
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<PAGE> 5
affiliate of the Company within the meaning of Rule 405 under the 1933 Act,
acquires the New Notes in the ordinary course of such Holder's business and has
no arrangements or understandings with any Person to participate in the Exchange
Offer for the purpose of distributing the New Notes) to trade such New Notes
from and after their receipt without any limitations or restrictions under the
1933 Act and without material restrictions under the securities laws of a
substantial proportion of the several states of the United States.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 30 days
and not more than 45 days after the date notice thereof is mailed to
the Holders (or longer if required by applicable law);
(iii) use the services of the Depositary for the Exchange
Offer with respect to Notes evidenced by global certificates;
(iv) permit Holders to withdraw tendered Registrable Notes at
any time prior to the close of business, New York City time, on the
last business day on which the Exchange Offer shall remain open, by
sending to the institution specified in the notice, a telegram, telex,
facsimile transmission or letter setting forth the name of such Holder,
the principal amount of Registrable Notes delivered for exchange, and a
statement that such Holder is withdrawing his election to have such
Notes exchanged; and
(v) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange Registrable Notes duly tendered and
not validly withdrawn pursuant to the Exchange Offer in accordance with
the terms of the Exchange Offer Registration Statement and the letter
of transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes so accepted for exchange by the
Company; and
(iii) cause the Trustee promptly to authenticate and deliver
New Notes to each Holder of Registrable Notes equal in amount to the
Registrable Notes of such Holder so accepted for exchange.
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<PAGE> 6
Interest on each New Note will accrue from the last date on
which interest was paid on the Registrable Notes surrendered in exchange
therefor or, if no interest has been paid on the Registrable Notes, from
November 19, 1998. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer, or the making of any exchange by a Holder,
does not violate applicable law or any applicable interpretation of the Staff of
the SEC. Each Holder of Registrable Notes (other than Notes Participating
Brokers as defined in Section 3(f)(A) hereof) who wishes to exchange such
Registrable Notes for New Notes in the Exchange Offer shall have represented
that (i) any New Notes to be received by it were acquired in the ordinary course
of business, (ii) at the time of the commencement of the Exchange Offer it has
no arrangement with any Person to participate in the distribution (within the
meaning of the 1933 Act) of the New Notes, (iii) it is not an affiliate (as
defined in Rule 405 under the 1933 Act) of the Company, or if it is an affiliate
it will comply with the registration and prospectus delivery requirements of the
1933 Act to the extent applicable and (iv) it is not acting on behalf of any
Person who could not make the representations in clauses (i) through (iii)
above. The Company shall inform the Initial Purchasers of the names and
addresses of the Holders to whom the Exchange Offer is made, and the Initial
Purchasers shall have the right to contact such Holders and otherwise facilitate
the tender of Registrable Notes in the Exchange Offer.
(b) Shelf Registration. (i) If, because of any change in law
or applicable interpretations thereof by the Staff of the SEC, the Company is
not permitted to effect the Exchange Offer as contemplated by Section 2(a)
hereof, or (ii) if for any other reason the Exchange Offer cannot be consummated
within 210 days following the date hereof, or (iii) if any Holder (other than an
Initial Purchaser) is not eligible to participate in the Exchange Offer or (iv)
upon the request of any Initial Purchaser (with respect to any Registrable Notes
which it acquired directly from the Company) following the consummation of the
Exchange Offer if any such Initial Purchaser shall hold Registrable Notes which
it acquired directly from the Company and if such Initial Purchaser is not
permitted, in the reasonable opinion of counsel to such Initial Purchaser,
pursuant to applicable law or applicable interpretation of the Staff of the SEC
to participate in the Exchange Offer, the Company shall, at its cost:
(A) as promptly as practicable, and in any event within 90
days after the date on which such filing obligation arises, file with
the SEC a Notes Shelf Registration Statement relating to the offer and
sale of the then outstanding Registrable Notes by the Holders from time
to time in accordance with the methods of distribution elected by the
Majority Holders of such Registrable Notes and set forth in such Notes
Shelf Registration Statement, and use its best efforts to cause such
Notes Shelf Registration Statement to be declared effective by the SEC
on or prior to 45 days after the date on which such filing occurs (or
promptly in the event of a request by any Initial Purchaser pursuant to
clause (iv) above). In the event that the Company is required to file a
Notes Shelf Registration Statement upon the request of any Holder
(other than an Initial Purchaser) not eligible to participate in the
Exchange Offer pursuant to clause (iii) above or upon the request of
any Initial Purchaser pursuant to clause (iv) above, the Company shall
file and have declared effective by the SEC both an Exchange Offer
Registration Statement pursuant to Section
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<PAGE> 7
2(a) with respect to all Registrable Notes and a Notes Shelf
Registration Statement (which may be a combined Registration
Statement with the Exchange Offer Registration Statement) with respect
to offers and sales of Registrable Notes held by such Holder or such
Initial Purchaser after completion of the Exchange Offer;
(B) use its best efforts to keep the Notes Shelf Registration
Statement continuously effective in order to permit the Prospectus
forming part thereof to be usable by Holders for a period of two years
after its effective date (or one year from the date the Notes Shelf
Registration Statement is declared effective if such Notes Shelf
Registration Statement is filed upon the request of any Initial
Purchaser pursuant to clause (iv) above) or such shorter period which
will terminate when all of the Registrable Notes covered by the Notes
Shelf Registration Statement have been sold pursuant to the Notes Shelf
Registration Statement or all of the Registrable Notes become eligible
for resale pursuant to Rule 144 under the 1933 Act without volume
restrictions; and
(C) notwithstanding any other provisions hereof, use its best
efforts to ensure that (i) any Notes Shelf Registration Statement and
any amendment thereto and any Prospectus forming a part thereof and any
supplement thereto complies in all material respects with the 1933 Act
and the rules and regulations thereunder, (ii) any Notes Shelf
Registration Statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
Prospectus forming part of any Notes Shelf Registration Statement, and
any supplement to such Prospectus (as amended or supplemented from time
to time), does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements, in light of the circumstances under which they were made,
not misleading.
The Company further agrees, if necessary, to supplement or
amend the Notes Shelf Registration Statement if reasonably requested by the
Majority Holders with respect to information relating to the Holders and
otherwise as required by Section 3(b) below, to use all reasonable efforts to
cause any such amendment to become effective and such Shelf Registration to
become usable as soon as practicable thereafter and to furnish to the Holders of
Registrable Notes copies of any such supplement or amendment promptly after its
being used or filed with the SEC.
(c) Expenses. The Company shall pay all Registration Expenses
in connection with the registration pursuant to Sections 2(a) and 2(b). Each
Holder shall pay all expenses of its counsel other than as set forth in the
preceding sentence, underwriting discounts and commissions (prior to the
reduction thereof with respect to selling concessions, if any) and transfer
taxes, if any, relating to the sale or disposition of such Holder's Registrable
Notes pursuant to the Notes Shelf Registration Statement.
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<PAGE> 8
(d) Effective Registration Statement. (i) The Company will be
deemed not to have used its best efforts to cause a Registration Statement to
become, or to remain, effective during the requisite period if the Company
voluntarily takes any action that would result in any such Registration
Statement not being declared effective or in the Holders of Registrable Notes
covered thereby not being able to exchange or offer and sell such Registrable
Notes during that period unless (A) such action is required by applicable law or
(B) such action is taken by the Company in good faith and for valid business
reasons (but not including avoidance of the Company's obligations hereunder),
including a material corporate transaction, so long as the Company promptly
complies with the requirements of Section 3(k) hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Notes Shelf Registration Statement pursuant to Section
2(b) hereof will not be deemed to have become effective unless it has been
declared effective by the SEC; provided, however, that if, after it has been
declared effective, the offering of Registrable Notes pursuant to a Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have been effective during the
period of such interference, until the offering of Registrable Notes pursuant to
such Registration Statement may legally resume.
(e) Increase in Interest Rate. In the event that either (i)
the Exchange Offer Registration Statement is not filed with the SEC on or prior
to the 90th day following the date hereof, (ii) the Exchange Offer is not
consummated within 210 days following the date hereof or a Notes Shelf
Registration Statement with respect to the Registrable Notes is not declared
effective on or prior to the 210th day following the date hereof, or (iii)
either (A) the Exchange Offer Registration Statement ceases to be effective at
any time prior to the time that the Exchange Offer is consummated or (B) if
applicable, the Notes Shelf Registration Statement has been declared effective
and such Notes Shelf Registration Statement ceases to be effective at any time
prior to the second anniversary of its effective date, the interest rate borne
by the Notes shall be increased by one-quarter of one percent per annum
following such 90-day period in the case of clause (i) above, following such
210-day period in the case of clause (ii) above, or immediately in the case of
clause (iii) above, which rate will be increased by an additional one-quarter of
one percent per annum for each 30-day period that any such additional interest
continues to accrue in the case of clause (i) above or for each 90-day period
that any such additional interest continues to accrue in the case of clauses
(ii) and (iii) above; provided that the aggregate increase in such interest rate
will in no event exceed one and one-half percent. Upon (w) the filing of the
Exchange Offer Registration Statement after the 90-day period described in
clause (i) above, (x) consummation of the Exchange Offer or the effectiveness of
a Notes Shelf Registration Statement, as the case may be, after the 210-day
period described in clause (ii) above, or (y) the effectiveness of the Exchange
Offer Registration Statement or the Notes Shelf Registration Statement following
an event described in clause (iii) above, the interest rate borne by the Notes
from the date of such filing, effectiveness or consummation, as the case may be,
will be reduced to the original interest rate if the Company is otherwise in
compliance with this paragraph; provided, however, that, if after any such
reduction in interest rate, a different event
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<PAGE> 9
specified in clause (i), (ii) or (iii) above occurs, the interest rate will
again be increased and thereafter reduced pursuant to the foregoing conditions.
If the Company issues a notice that the Notes Shelf Registration Statement is
unusable pending the announcement of a material corporate transaction or
otherwise pursuant to Section 3(k) hereof, or such a notice is required under
applicable securities laws to be issued by the Company, and the aggregate number
of days in any consecutive twelve-month period for which all such notices are
issued or required to be issued exceeds 30 days in the aggregate, then the
interest rate borne by the Notes will be increased by one-quarter of one percent
per annum following the date that such Notes Shelf Registration Statement ceases
to be usable beyond the 30-day period permitted above, which rate shall be
increased by an additional one-quarter of one percent per annum for each 90-day
period that such additional interest continues to accrue; provided that the
aggregate increase in such annual interest rate may in no event exceed one and
one-half percent. Upon the Company declaring that the Notes Shelf Registration
Statement is usable after the interest rate has been increased pursuant to the
preceding sentence, the interest rate borne by the Notes will be reduced to the
original interest rate if the Company is otherwise in compliance with this
paragraph; provided, however, that if after any such reduction in interest rate
the Notes Shelf Registration Statement again ceases to be usable beyond the
period permitted above, the interest rate will again be increased and thereafter
reduced pursuant to the foregoing provisions.
(f) Specific Enforcement. Without limiting the remedies
available to the Initial Purchasers and the Holders, each of the Company and the
Subsidiary acknowledges that any failure by each of the Company and the
Subsidiary to comply with its respective obligations under Sections 2(a) and
2(b) hereof may result in material irreparable injury to the Initial Purchasers
or the Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Sections 2(a) and 2(b) hereof.
3. Registration Procedures. In connection with the obligations
of the Company and the Subsidiary with respect to the Registration Statements
pursuant to Sections 2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement,
within the time period specified in Section 2, on the appropriate form
under the 1933 Act, which form (i) shall be selected by the Company,
(ii) shall, in the case of a Shelf Registration, be available for the
sale of the Registrable Notes by the selling Holders thereof and (iii)
shall comply as to form in all material respects with the requirements
of the applicable form and include or incorporate by reference all
financial statements required by the SEC to be filed therewith, and use
its best efforts to cause such Registration Statement to become
effective and remain effective in accordance with Section 2 hereof;
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<PAGE> 10
(b) prepare and file with the SEC such amendments and
post-effective amendments to (i) the Exchange Offer Registration
Statement as may be necessary under applicable law to keep such
Exchange Offer Registration Statement effective for the period required
to comply with Section 2(a) (except to the extent the Company is unable
to consummate the Exchange Offer and the Company complies with Section
2(b), subject in all respects to Section 3(f) hereof), and (ii) the
Notes Shelf Registration Statement as may be necessary under applicable
law to keep such Notes Shelf Registration Statement effective for the
period required pursuant to Section 2(b) hereof; cause each Prospectus
to be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the 1933 Act; and
comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by each Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the selling Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Notes, at least ten days prior to filing, that a
Notes Shelf Registration Statement with respect to the Registrable
Notes is being filed and advising such Holders that the distribution of
Registrable Notes will be made in accordance with the method elected by
the Majority Holders; and (ii) furnish to each Holder of Registrable
Notes, counsel for the Initial Purchasers, counsel for the Holders and
each underwriter of an underwritten offering of Registrable Notes, if
any, without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and
such other documents as such Holder or underwriter may reasonably
request, including financial statements and schedules and, if the
Holder so requests, all exhibits (including those incorporated by
reference) in order to facilitate the public sale or other disposition
of the Registrable Notes; and (iii) subject to the last paragraph of
Section 3, hereby consent to the use of the Prospectus, including each
preliminary Prospectus, or any amendment or supplement thereto by each
of the selling Holders of Registrable Notes in connection with the
offering and sale of the Registrable Notes covered by the Prospectus or
any amendment or supplement thereto;
(d) use its best efforts to register or qualify the
Registrable Notes under all applicable state securities or "blue sky"
laws of such jurisdictions as any Holder of Registrable Notes covered
by a Registration Statement and each underwriter of an underwritten
offering of Registrable Notes shall reasonably request by the time the
applicable Registration Statement is declared effective by the SEC, to
cooperate with the Holders in connection with any filings required to
be made with the NASD, keep each such registration or qualification
effective during the period such Registration Statement is required to
be effective and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in each such jurisdiction of such Registrable Notes
owned by such Holder; provided, however, that the Company shall not be
required to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required
to qualify but for this Section 3(d) or (ii) take any action which
would subject it to general service of process or taxation in any such
jurisdiction if it is not then so subject;
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<PAGE> 11
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes and counsel for such Holders promptly and, if
requested by such Holder or counsel, confirm such advice in writing
promptly (i) when a Registration Statement has become effective and
when any post-effective amendments and supplements thereto become
effective, (ii) of any request by the SEC or any state securities
authority for post-effective amendments and supplements to a
Registration Statement and Prospectus or for additional information
after the Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) if, between the
effective date of a Registration Statement and the closing of any sale
of Registrable Notes covered thereby, the representations and
warranties of the Company contained in any underwriting agreement,
securities sales agreement or other similar agreement, if any, relating
to such offering cease to be true and correct in all material respects,
(v) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Registrable Notes for sale
in any jurisdiction or the initiation or threatening of any proceeding
for such purpose, (vi) of the happening of any event or the discovery
of any facts during the period a Notes Shelf Registration Statement is
effective which makes any statement made in such Notes Shelf
Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such Notes Shelf
Registration Statement or Prospectus in order to make the statements
therein not misleading and (vii) of any determination by the Company
that a post-effective amendment to a Registration Statement would be
appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Exchange Offer
Registration Statement by broker-dealers who have exchanged their
Registrable Notes for New Notes for the resale of such New Notes, (ii)
furnish to each broker-dealer who desires to participate in the
Exchange Offer, without charge, as many copies of each Prospectus
included in the Exchange Offer Registration Statement, including any
preliminary prospectus, and any amendment or supplement thereto, as
such broker-dealer may reasonably request, (iii) include in the
Exchange Offer Registration Statement a statement that any
broker-dealer who holds Registrable Notes acquired for its own account
as a result of market-making activities or other trading activities (a
"Notes Participating Broker"), and who receives New Notes for
Registrable Notes pursuant to the Exchange Offer, may be a statutory
underwriter and must deliver a prospectus meeting the requirements of
the 1933 Act in connection with any resale of such New Notes, (iv)
subject to the last paragraph of Section 3, hereby consent to the use
of the Prospectus forming part of the Exchange Offer Registration
Statement or any amendment or supplement thereto, by any broker-dealer
in connection with the sale or transfer of the New Notes covered by the
Prospectus or any amendment or supplement thereto, and (v) include in
the transmittal letter or similar documentation to be executed by an
exchange offeree in order to participate in the Exchange Offer (x) the
following provision:
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<PAGE> 12
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of New Notes. If the undersigned is
a broker-dealer that will receive New Notes for its own
account in exchange for Registrable Notes, it represents that
the Registrable Notes to be exchanged for New Notes were
acquired by it as a result of market-making activities or
other trading activities and acknowledges that it will deliver
a prospectus meeting the requirements of the 1933 Act in
connection with any resale of such New Notes pursuant to the
Exchange Offer; however, by so acknowledging and by delivering
a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the 1933 Act";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in subclause (x) and by delivering a
Prospectus in connection with the exchange of Registrable Notes, the
broker-dealer will not be deemed to admit that it is an underwriter
within the meaning of the 1933 Act; and
(B) to the extent any Notes Participating Broker participates
in the Exchange Offer, the Company shall use its best efforts to cause
to be delivered at the request of an entity representing the Notes
Participating Brokers (which entity shall be one of the Initial
Purchasers, unless it elects not to act as such representative) only
one, if any, "cold comfort" letter with respect to the Prospectus in
the form existing on the last date for which exchanges are accepted
pursuant to the Exchange Offer and with respect to each subsequent
amendment or supplement, if any, effected during the period specified
in clause (C) below; and
(C) to the extent any Notes Participating Broker participates
in the Exchange Offer, the Company shall use its best efforts to
maintain the effectiveness of the Exchange Offer Registration Statement
for a period of 120 days following the closing of the Exchange Offer;
and
(D) the Company shall not be required to amend or supplement
the Prospectus contained in the Exchange Offer Registration Statement
as would otherwise be contemplated by Section 3(b), or take any other
action as a result of this Section 3(f), for a period exceeding 120
days after the last date for which exchanges are accepted pursuant to
the Exchange Offer (as such period may be extended by the Company) and
Notes Participating Brokers shall not be authorized by the Company to,
and shall not, deliver such Prospectus after such period in connection
with resales contemplated by this Section 3;
(g) (A) in the case of an Exchange Offer, furnish counsel for
the Initial Purchasers and (B) in the case of a Shelf Registration, furnish
counsel for the Holders of Registrable Notes copies of any request by the SEC or
any state securities authority for amendments or supplements to a Registration
Statement and Prospectus or for additional information;
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<PAGE> 13
(h) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement as soon as
practicable and provide immediate notice to each Holder of the withdrawal of any
such order;
(i) in the case of a Shelf Registration, furnish to each
Holder of Registrable Notes, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(j) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Notes to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold and not
bearing any restrictive legends; and cause such Registrable Notes to be in such
denominations (consistent with the provisions of the Indenture) and registered
in such names as the selling Holders or the underwriters, if any, may reasonably
request at least one business day prior to the closing of any sale of
Registrable Notes;
(k) in the case of a Shelf Registration, upon the occurrence
of any event or the discovery of any facts, each as contemplated by Section
3(e)(vi) hereof, use its best efforts to prepare a supplement or post-effective
amendment to a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Notes, such
Prospectus will not contain at the time of such delivery any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company agrees to notify each Holder to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an event, and
each Holder hereby agrees to suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such misstatement or omission.
At such time as such public disclosure is otherwise made or the Company
determines that such disclosure is not necessary, in each case to correct any
misstatement of a material fact or to include any omitted material fact, the
Company agrees promptly to notify each Holder of such determination and to
furnish each Holder such numbers of copies of the Prospectus, as amended or
supplemented, as such Holder may reasonably request;
(l) obtain a CUSIP number for all New Notes, or Registrable
Notes, as the case may be, not later than the effective date of a Registration
Statement, and provide the Trustee with printed certificates for the New Notes
or the Registrable Notes, as the case may be, in a form eligible for deposit
with the Depositary;
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(m) (i) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the New Notes, or Registrable Notes, as the case may be, (ii)
cooperate with the Trustee and the Holders to effect such changes to the
Indenture as may be required for the Indenture to be so qualified in accordance
with the terms of the TIA and (iii) execute, and use its best efforts to cause
the Trustee to execute, all documents as may be required to effect such changes
and all other forms and documents required to be filed with the SEC to enable
the Indenture to be so qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and appropriate
actions (including those reasonably requested by the Majority Holders) in order
to expedite or facilitate the disposition of such Registrable Notes and in such
connection whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration:
(i) make such representations and warranties to the Holders of
such Registrable Notes and the underwriters, if any, in form, substance
and scope as are customarily made by issuers to underwriters in similar
underwritten offerings as may be reasonably requested by them;
(ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if any,
and the holders of a majority in principal amount of the Registrable
Notes being sold) addressed to each selling Holder and the
underwriters, if any, covering the matters customarily covered in
opinions requested in sales of securities or underwritten offerings;
(iii) obtain "cold comfort" letters and updates thereof from
the Company's independent certified public accountants addressed to the
underwriters, if any, and will use best efforts to have such letters
addressed to the selling Holders of Registrable Notes, such letters to
be in customary form and covering matters of the type customarily
covered in "cold comfort" letters to underwriters in connection with
similar underwritten offerings;
(iv) enter into a securities sales agreement with the Holders
and an agent of the Holders providing for, among other things, the
appointment of such agent for the selling Holders for the purpose of
soliciting purchases of Registrable Notes, which agreement shall be in
form, substance and scope customary for similar offerings; and
(v) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in similar
offerings.
The above shall be done at (i) the effectiveness of such Notes Shelf
Registration Statement (and, if appropriate, each post-effective amendment
thereto) and (ii) each closing under any underwriting or similar agreement as
and to the extent required thereunder. In the case of any
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<PAGE> 15
underwritten offering, the Company shall provide written notice to the Holders
of all Registrable Notes of such underwritten offering at least 30 days prior to
the filing of a prospectus supplement for such underwritten offering. Such
notice shall (x) offer each such Holder the right to participate in such
underwritten offering, (y) specify a date, which shall be no earlier than 10
days following the date of such notice, by which such Holder must inform the
Company of its intent to participate in such underwritten offering and (z)
include the instructions such Holder must follow in order to participate in such
underwritten offering;
(o) in the case of a Shelf Registration, make available for
inspection by representatives of the Holders of the Registrable Notes and any
underwriters participating in any disposition pursuant to a Notes Shelf
Registration Statement and any counsel or accountant retained by such Holders or
underwriters, at reasonable times and in a reasonable manner, all financial and
other records, pertinent corporate documents and properties of the Company
reasonably requested by any such Persons, and cause the respective officers,
directors, employees, and any other agents of the Company to supply all
information reasonably requested by any such representative, underwriter,
special counsel or accountant in connection with such Notes Shelf Registration
Statement; provided, however, that such Persons shall first agree in writing
with the Company that any information that is reasonably and in good faith
designated by the Company in writing as confidential at the time of delivery of
such information shall be kept confidential by such Persons, unless (i)
disclosure of such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities, (ii) disclosure
of such information is required by law (including any disclosure requirements
pursuant to Federal securities laws in connection with the filing of such Notes
Shelf Registration Statement or the use of any Prospectus), (iii) such
information becomes generally available to the public other than as a result of
a disclosure or failure to safeguard such information by such Person or (iv)
such information becomes available to such Person from a source other than the
Company and its subsidiaries and such source is not bound by a confidentiality
agreement; provided further that the foregoing investigation shall be
coordinated on behalf of the Holders by one representative designated by and on
behalf of such Holders and any such confidential information shall be available
from such representative to such Holders so long as any Holder agrees to be
bound by such confidentiality agreement;
(p) (i) a reasonable time prior to the filing of any Exchange
Offer Registration Statement, any Prospectus forming a part thereof, any
amendment to a Exchange Offer Registration Statement or amendment or supplement
to a Prospectus, provide copies of such document to the Initial Purchasers, and
make such changes in any such document prior to the filing thereof as any of the
Initial Purchasers or their counsel may reasonably request; (ii) in the case of
a Shelf Registration, a reasonable time prior to filing any Notes Shelf
Registration Statement, any Prospectus forming a part thereof, any amendment to
such Notes Shelf Registration Statement or amendment or supplement to such
Prospectus, provide copies of such document to the Holders of Registrable Notes,
to the Initial Purchasers, to counsel on behalf of the Holders and to the
underwriter or underwriters of an underwritten offering of Registrable Notes, if
any, and make such changes in any such document prior to the filing thereof as
the
15
<PAGE> 16
Holders of Registrable Notes, the Initial Purchasers on behalf of such Holders,
their counsel and any underwriter may reasonably request; and (iii) cause the
representatives of the Company to be available for discussion of such document
as shall be reasonably requested by the Holders of Registrable Notes, the
Initial Purchasers on behalf of such Holders or any underwriter and shall not at
any time make any filing of any such document of which such Holders, the Initial
Purchasers on behalf of such Holders, their counsel or any underwriter shall not
have previously been advised and furnished a copy or to which such Holders, the
Initial Purchasers on behalf of such Holders, their counsel or any underwriter
shall reasonably object, each of which actions in this clause (iii) by the
Holders shall be coordinated by one representative for all the Holders at
reasonable times and in a reasonable manner;
(q) in the case of a Shelf Registration, use its best efforts
to cause all Registrable Notes to be listed on any securities exchange on which
similar debt securities issued by the Company are then listed if requested by
the Majority Holders or by the underwriter or underwriters of an underwritten
offering of Registrable Notes, if any;
(r) in the case of a Shelf Registration, unless the rating in
effect for the Notes applies to the New Notes and the Notes to be sold pursuant
to a Shelf Registration, use its best efforts to cause the Registrable Notes to
be rated with the appropriate rating agencies, if so requested by the Majority
Holders or by the underwriter or underwriters of an underwritten offering of
Registrable Notes, if any, unless the Registrable Notes are already so rated;
(s) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering at
least 12 months which shall satisfy the provisions of Section 11(a) of the 1933
Act and Rule 158 thereunder; and
(t) cooperate and assist in any filings required to be made
with the NASD.
In the case of a Notes Shelf Registration Statement, the
Company may (as a condition to such Holder's participation in the Shelf
Registration) require each Holder of Registrable Notes to furnish to the Company
such information regarding such Holder and the proposed distribution by such
Holder of such Registrable Notes and make such representations, in each case, as
the Company may from time to time reasonably request in writing.
In the case of a Notes Shelf Registration Statement, each
Holder agrees that, upon receipt of any notice from the Company of the happening
of any event or the discovery of any facts, each of the kind described in
Section 3(e)(ii)-(vi) hereof, such Holder will forthwith discontinue disposition
of Registrable Notes pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(k) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at its expense) all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Notes current at the time
16
<PAGE> 17
of receipt of such notice. If the Company shall give any such notice to suspend
the disposition of Registrable Notes pursuant to a Notes Shelf Registration
Statement as a result of the happening of any event or the discovery of any
facts, each of the kind described in Section 3(e)(vi) hereof. the Company shall
be deemed to have used its best efforts to keep the Notes Shelf Registration
Statement effective during such period of suspension provided that the Company
shall use its best efforts to file and have declared effective (if an amendment)
as soon as practicable an amendment or supplement to the Notes Shelf
Registration Statement and shall extend the period during which the Registration
Statement shall be maintained effective pursuant to this Agreement by the number
of days during the period from and including the date of the giving of such
notice to and including the date when the Holders shall have received copies of
the supplemented or amended Prospectus necessary to resume such dispositions.
4. Underwritten Registrations. If any of the Registrable Notes
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Majority Holders of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
5. Indemnification and Contribution. (a) Each of the Company
and the Subsidiary agrees to indemnify and hold harmless each Holder and each
Person, if any, who controls any Holder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any losses, claims, damages or
liabilities, joint or several, to which such Holder or such controlling Person
may become subject under the 1933 Act, the 1934 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in (A) any Registration Statement or Prospectus
or any amendments or supplements thereto or (B) any application or
other document, or any amendments or supplements thereto, executed by
the Company or the Subsidiary or based upon written information
furnished by or on behalf of the Company or the Subsidiary filed in any
jurisdiction in order to qualify the Securities under the securities or
blue sky laws thereof or filed with the SEC or any securities
association or securities exchange (each an "Application") or
17
<PAGE> 18
(ii) the omission or alleged omission to state in any
Registration Statement or Prospectus or any amendment or supplement
thereto, or any Application a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and will reimburse, as incurred, each Holder and each such controlling Person
for any legal or other expenses reasonably incurred by such Holder or such
controlling Person in connection with investigating, defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company and the
Subsidiary will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in any
Registration Statement or Prospectus or any amendment or supplement thereto or
any Application in reliance upon and in conformity with written information
relating to any Holder furnished to the Company by any Holder specifically for
use therein. This indemnity agreement will be in addition to any liability which
the Company and the Subsidiary may otherwise have. The Company will not, without
the prior written consent of each Holder, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not any Holder or any Person who controls any such Holder within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of all of such Holder and such
controlling Persons from all liability arising out of such claim, action, suit
or proceeding.
(b) Each Holder, severally and not jointly, agrees to
indemnify and hold harmless each of the Company and the Subsidiary, each of
their respective directors, each of their respective executive officers and each
Person, if any, who controls the Company or the Subsidiary within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act against any losses,
claims, damages or liabilities to which the Company, the Subsidiary or any such
director, officer or controlling Person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement or Prospectus or any amendment or supplement thereto or any
Application or (ii) the omission or alleged omission to state therein a material
fact required to be stated in any Registration Statement or Prospectus or any
amendment or supplement thereto, or any Application or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information relating to any Holder furnished to the Company by such Holder
specifically for use therein; and, subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred, any legal or
other expenses reasonably incurred by the Company, the Subsidiary or any such
director, officer or controlling Person in connection with investigating or
defending any such loss, claim, damage, liability or any action in respect
thereof. This indemnity agreement will be in addition to any liability which
such Holder may otherwise have. The Holders will not,
18
<PAGE> 19
without the prior written consent of the Company or the Subsidiary, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceedings in respect of which indemnification may be
sought hereunder (whether or not the Company, the Subsidiary or any person who
controls the Company or the Subsidiary within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of all of the Company, the Subsidiary and such controlling
persons from all liability arising out of such claim, action, suit or
proceeding.
(c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 5, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 5. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel approved by such indemnified party
(which approval will not be unreasonably withheld); provided, however, that if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such indemnified party or parties
and such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof and approval by such indemnified party of
counsel appointed to defend such action (which approval will not be unreasonably
withheld), the indemnifying party will not be liable to such indemnified party
under this Section 5 for any legal or other expenses, other than reasonable
costs of investigation, subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel, if any) in any one action or
separate but substantially similar actions in the same jurisdiction arising out
of the same general allegations or circumstances, designated by such Holder in
the case of paragraph (a) of this Section 5, representing the indemnified
parties under such paragraph (a) who are parties to such action or actions) or
(ii) the indemnifying party does not promptly retain counsel approved by the
indemnified party (which approval will not be unreasonably withheld) or (iii)
the indemnifying party has authorized in writing the employment of counsel for
the indemnified party at the expense of the indemnifying party. After such
notice from the indemnifying party to such indemnified party, the indemnifying
party will not be liable for the costs and expenses of any settlement of such
action effected by such indemnified party without the written consent of the
indemnifying party.
19
<PAGE> 20
(d) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this Section 5 is unavailable or
insufficient, for any reason, to hold harmless an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof),
each indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect (i) the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party on the other from the offering of the Securities or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Subsidiary
on the one hand and such Holder on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (before deducting expenses)
received by the Company and the Subsidiary bear to the total underwriting
discounts and commissions received by such Holder. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or such Holder, the parties' relative intents, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances. The Company and the
Subsidiary, on the one hand, and each Holder agree that it would not be
equitable, if the amount of such contribution were determined by pro rata or per
capita allocation or by any other method of allocation that does not take into
account the equitable considerations referred to above in this paragraph (d).
Notwithstanding any other provision of this paragraph (d), no Holder shall be
obligated to make contributions hereunder that in the aggregate exceed the total
offering price of the Securities purchased by such Holder, less the aggregate
amount of any damages that such Holder has otherwise been required to pay in
respect of the same or any substantially similar claim, and no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933)
Act) shall be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation. For purposes of this paragraph (d), each
Person, if any, who controls a Holder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as such Holder, and each director of the Company or the Subsidiary,
each officer of the Company or the Subsidiary who signed the Registration
Statement and each Person, if any, who controls the Company or the Subsidiary
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act,
shall have the same rights to contribution as the Company and the Subsidiary.
20
<PAGE> 21
(e) The parties to this Agreement hereby acknowledge that they
are sophisticated business Persons who were represented by counsel during the
negotiations regarding the provisions of this Agreement, including, without
limitation, the provisions of this Section 5, and are fully informed regarding
said provisions. They further acknowledge that the provisions of this Section 5
fairly allocate the risks in light of the ability of the parties to investigate
each of the Company and the Subsidiary and its business in order to assure that
adequate disclosure is made in the Offering Memorandum as required by the 1933
Act.
6. Miscellaneous. (a) Rule 144 and Rule 144A. For so long as
the Company is subject to the reporting requirements of Section 13 or 15 of the
1934 Act, the Company covenants that it will file the reports required to be
filed by it under Section 13(a) or 15(d) of the 1934 Act and the rules and
regulations adopted by the SEC thereunder, that if it ceases to be so required
to file such reports, it will upon the request of any Holder of Registrable
Notes (i) make publicly available such information as is necessary to permit
sales pursuant to Rule 144 under the 1933 Act, (ii) deliver such information to
a prospective purchaser as is necessary to permit sales pursuant to Rule 144A
under the 1933 Act and it will take such further action as any Holder of
Registrable Notes may reasonably request, and (iii) take such further action
that is reasonable in the circumstances, in each case, to the extent required
from time to time to enable such Holder to sell its Registrable Notes without
registration under the 1933 Act within the limitation of the exemptions provided
by (x) Rule 144 under the 1933 Act, as such Rule may be amended from time to
time, (y) Rule 144A under the 1933 Act, as such Rule may be amended from time to
time, or (z) any similar rules or regulations hereafter adopted by the SEC. Upon
the request of any Holder of Registrable Notes, the Company will deliver to such
Holder a written statement as to whether it has complied with such requirements.
(b) No Inconsistent Agreements. Neither the Company nor the
Subsidiary has entered into nor will the Company or the Subsidiary on or after
the date of this Agreement enter into any agreement which is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements.
(c) Amendments and Waiver. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Notes affected by such amendment, modification, supplement, waiver
or departure; provided, however, that no amendment, modification, supplement or
waiver or consent to any departure from the provisions of Section 5 hereof shall
be effective as against any Holder of Registrable Notes unless consented to in
writing by such Holder.
21
<PAGE> 22
(d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telecopier, or any courier guaranteeing overnight delivery (i)
if to a Holder (other than an Initial Purchaser), at the most current address
set forth on the records of the Registrar under the Indenture, (ii) if to an
Initial Purchaser, at the most current address given by such Initial Purchaser
to the Company by means of a notice given in accordance with the provisions of
this Section 6(d), which address initially is the address set forth in the
Purchase Agreement; and (iii) if to the Company or the Subsidiary, initially at
the Company's address set forth in the Purchase Agreement and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 6(d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged, if telecopied; and on the next business day if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the Person giving the same to the Trustee, at
the address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Notes in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Registrable Notes, in
any manner, whether by operation of law or otherwise, such Registrable Notes
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Notes, such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Subsidiary, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent it deems
such enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
22
<PAGE> 23
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
23
<PAGE> 24
IN WITNESS WHEREOF, the parties have executed this agreement
as of the date first written above.
CITADEL BROADCASTING COMPANY
By /s/ Lawrence R. Wilson
-------------------------
Name: Lawrence R. Wilson
Title:
CITADEL LICENSE, INC.
By /s/ Lawrence R. Wilson
-------------------------
Name: Lawrence R. Wilson
Title:
PRUDENTIAL SECURITIES INCORPORATED
By /s/ Peter Horan
------------------------
Name: Peter Horan
Title: Managing Director
BT ALEX. BROWN INCORPORATED
By /s/ David Jacobs
----------------------
Name: David Jacobs
Title:
<PAGE> 1
Exhibit 12
CITADEL BROADCASTING COMPANY
DEFICIENCY OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
--------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (1,444) (119) 1,274 4,923 7,935 5,657 7,284
Fixed charges:
Interest expense 2,637 4,866 5,242 6,155 12,304 8,214 13,590
Amortization of debt issuance
costs and debt discounts 139 287 132 371 441 138 480
33% of rent expense 179 209 246 363 651 524 657
Dividend requirement - - - - 6,633 3,276 10,822
----- ----- ----- ----- ------ ----- ------
Deficiency of earnings to fixed
charges (4,399) (5,481) (4,346) (1,966) (12,094) (6,495) (18,265)
</TABLE>
<PAGE> 1
Exhibit 23.2
KPMG PEAT MARWICK LLP
The Board of Directors
Citadel Broadcasting Company:
We consent to the use of our report dated March 26, 1998 on the consolidated
balance sheets of Citadel Broadcasting Company and subsidiary as of December
31, 1996 and 1997 and the related consolidated statements of operations,
shareholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1997 included herein and to the reference to our firm
under the heading "Independent Auditors" in the registration statement.
/s/ KPMG Peat Marwick LLP
Phoenix, Arizona
December 15, 1998
<PAGE> 1
Exhibit 23.3
KPMG PEAT MARWICK LLP
The Board of Directors
Citadel Broadcasting Company:
We consent to the use of our report dated February 14, 1997 on the consolidated
balance sheets of Deschutes River Broadcasting, Inc. and subsidiaries as of
December 31, 1996 and 1995 and the related consolidated statements of
operations, stockholder's equity and cash flows for the years then ended
included herein and to the reference to our firm under the heading "Independent
Auditors" in the registration statement.
/s/ KPMG Peat Marwick LLP
Portland, Oregon
December 15, 1998
<PAGE> 1
Exhibit 23.4
KPMG PEAT MARWICK LLP
The Board of Directors
Citadel Broadcasting Company:
We consent to the use of our report dated September 29, 1997 on the balance
sheet of Maranatha Broadcasting Company, Inc.'s Radio Broadcasting Division as
of December 31, 1996 and the related statements of operations and division
equity and cash flows for the year then ended included herein and to the
reference to our firm under the heading "Independent Auditors" in the
registration statement.
/s/ KPMG Peat Marwick LLP
Phoenix, Arizona
December 15, 1998
<PAGE> 1
Exhibit 23.5
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in the Registration Statement of Citadel Broadcasting
Company on Form S-4 of our report dated March 28, 1997 relating to the
consolidated financial statements of Tele-Media Broadcasting Company and its
partnership interests, appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the heading "Independent Auditors"
in such Prospectus.
/s/ Deloitte & Touche LLP
Pittsburgh, PA
December 14, 1998
<PAGE> 1
Exhibit 23.6
ERWIN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
900 South Shackleford
Suite 515
Three Financial Centre
Little Rock, AR 72211
(501) 225-5441
(501) 225-6763 (FAX)
The Board of Directors
Citadel Broadcasting Company
We consent to the use in the registration statement on Form S-4 of Citadel
Broadcasting Company of our reports dated April 1, 1997 on the balance sheet of
Snider Corporation as of December 31, 1996 and the related statements of income,
stockholders' equity and cash flows for the year then ended and April 23, 1997
on the combined balance sheet of Snider Broadcasting Corporation and subsidiary
and CDB Broadcasting Corporation as of December 31, 1996 and the related
combined statements of operations, stockholders' deficit and cash flows for the
year then ended included herein and to the reference to our firm under the
heading "Independent Auditors" in the registration statement.
/s/ Erwin & Company
Little Rock, Arkansas
December 15, 1998
<PAGE> 1
Exhibit 23.7
BALUKOFF LINDSTROM & CO., P.A.
Certified Public Accountants
877 West Main Street, Suite 805
Boise, Idaho 83702
(208)344-7150
FAX: (208)344-7435
The Board of Directors
Citadel Broadcasting Company
We consent to the use of our independent auditors' report on the combined
financial statements of Pacific Northwest Broadcasting Corporation and
Affiliates as of and for the year ended December 31, 1996, and to the reference
to our firm under the heading "Independent Auditors" in the registration
statement.
/s/ Balukoff, Lindstrom & Co., P.A.
December 15, 1998
<PAGE> 1
Exhibit 23.8
Consent of Independent Auditors
The Partners
Wicks Broadcast Group Limited Partnership:
We consent to the use of our report dated December 15, 1998 on the balance
sheet of Wicks Radio Group (a division of Wicks Broadcast Group Limited
Partnership) as of December 31, 1997 and the related statements of operations
and changes in division equity, and cash flows for the year then ended included
herein and to the reference to our firm under the heading "Independent
Auditors" in the registration statement.
/s/ KPMG Peat Marwick LLP
McLean, Virginia
December 15, 1998
<PAGE> 1
Exhibit 25
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
---------------------
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
---------------------
CITADEL BROADCASTING COMPANY
(Exact name of obligor as specified in its charter)
Nevada 86-0703641
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
---------------------
CITADEL LICENSE, INC.
(Exact name of obligor as specified in its charter)
Nevada 86-0837753
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
140 South Ash Avenue
Tempe, Arizona 85281
(Address of principal executive offices) (Zip code)
---------------------
9-1/4% Senior Subordinated Notes due 2008
(Title of the indenture securities)
===============================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-2-
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 8th day of December, 1998.
THE BANK OF NEW YORK
By: /s/ THOMAS C. KNIGHT
-----------------------------------
Name: THOMAS C. KNIGHT
Title: ASSISTANT VICE PRESIDENT
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 8th day of December, 1998.
THE BANK OF NEW YORK
By: /s/ THOMAS C. KNIGHT
-----------------------------------
Name: THOMAS C. KNIGHT
Title: ASSISTANT VICE PRESIDENT
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business June 30, 1998, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 7,301,241
Interest-bearing balances .......... 1,385,944
Securities:
Held-to-maturity securities ........ 1,000,737
Available-for-sale securities ...... 4,240,655
Federal funds sold and Securities pur-
chased under agreements to resell... 971,453
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................38,788,269
LESS: Allowance for loan and
lease losses ..............632,875
LESS: Allocated transfer risk
reserve..........................0
Loans and leases, net of unearned
income, allowance, and reserve 38,155,394
Assets held in trading accounts ...... 1,307,562
Premises and fixed assets (including
capitalized leases) ................ 670,445
Other real estate owned .............. 13,598
Investments in unconsolidated
subsidiaries and associated
companies .......................... 215,024
Customers' liability to this bank on
acceptances outstanding ............ 974,237
Intangible assets .................... 1,102,625
Other assets ......................... 1,944,777
-----------
Total assets ......................... $59,283,692
===========
LIABILITIES
Deposits:
In domestic offices ................ $26,930,258
Noninterest-bearing ......11,579,390
Interest-bearing .........15,350,868
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 16,117,854
Noninterest-bearing .........187,464
Interest-bearing .........15,930,390
Federal funds purchased and Securities
sold under agreements to repurchase. 2,170,238
Demand notes issued to the U.S.
Treasury ........................... 300,000
Trading liabilities .................. 1,310,867
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,549,479
With remaining maturity of more than
one year through three years...... 0
With remaining maturity of more than
three years ...................... 46,654
Bank's liability on acceptances exe-
cuted and outstanding .............. 983,398
Subordinated notes and debentures .... 1,314,000
Other liabilities .................... 2,295,520
-----------
Total liabilities .................... 54,018,268
-----------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 3,385,227
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 51,233
Cumulative foreign currency transla-
tion adjustments ................... (37,639)
-----------
Total equity capital ................. 5,265,424
-----------
Total liabilities and equity
capital ............................ $59,283,692
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot
Thomas A. Renyi --- Directors
Alan R. Griffith
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001044404
<NAME> CITADEL LICENSE, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 SEP-30-1998
<EXCHANGE-RATE> 1 1
<CASH> 7,684,991 7,406,965
<SECURITIES> 0 0
<RECEIVABLES> 26,553,079 33,324,977
<ALLOWANCES> (808,942) (1,280,553)
<INVENTORY> 0 0
<CURRENT-ASSETS> 35,926,371 42,738,241
<PP&E> 44,401,228 49,138,534
<DEPRECIATION> (9,158,944) (12,304,815)
<TOTAL-ASSETS> 344,172,294 373,353,272
<CURRENT-LIABILITIES> 13,332,675 11,681,498
<BONDS> 189,427,825 118,197,999
102,009,531 112,964,761
0 0
<COMMON> 40 40
<OTHER-SE> 16,131,925 105,202,852
<TOTAL-LIABILITY-AND-EQUITY> 344,172,294 373,353,272
<SALES> 89,803,270 98,821,374
<TOTAL-REVENUES> 89,803,270 98,821,374
<CGS> 0 0
<TOTAL-COSTS> 68,775,162 72,762,966
<OTHER-EXPENSES> 14,184,361 19,910,924
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12,303,981 13,590,447
<INCOME-PRETAX> (5,460,234) (7,442,963)
<INCOME-TAX> (769,573) (1,162,507)
<INCOME-CONTINUING> (4,690,661) (6,280,456)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,690,661) (6,280,456)
<EPS-PRIMARY> (283) (430)
<EPS-DILUTED> (283) (430)
</TABLE>
<PAGE> 1
Exhibit 99.1
Form of
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
9-1/4% SENIOR SUBORDINATED NOTES DUE 2008
OF
CITADEL BROADCASTING COMPANY
PURSUANT TO THE PROSPECTUS DATED __________, 199_
================================================================================
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON _________, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
================================================================================
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should be
completed, signed and submitted as follows:
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
(THE "EXCHANGE AGENT")
For Information by Telephone:
(212) ___-____
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery Service:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
(7 East) Corporate Trust Services Window
New York, New York 10286 Ground Level
Attention: Reorganization Section New York, New York 10286
Attention: Reorganization Section, 7 East
</TABLE>
By Facsimile Transmission:
(212)
(Facsimile Confirmation)
(212)
(ORIGINALS OF ALL DOCUMENTS SENT BY FACSIMILE SHOULD BE SENT PROMPTLY BY
REGISTERED OR CERTIFIED MAIL, BY HAND, OR BY OVERNIGHT DELIVERY SERVICE.)
<PAGE> 2
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
The undersigned hereby acknowledges receipt of the Prospectus dated
__________, 199_ (the "Prospectus") of Citadel Broadcasting Company, a Nevada
corporation (the "Issuer"), and this Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Issuer's offer (the "Exchange
Offer") to exchange its 9-1/4% Senior Subordinated Notes due 2008 (the "Exchange
Notes"), which have been registered under the Securities Act (as hereinafter
defined) pursuant to a Registration Statement, for an equal principal amount of
its outstanding 9-1/4% Senior Subordinated Notes due 2008 (the "Notes"), of
which $115,000,000 aggregate principal amount is outstanding.
The undersigned hereby tenders the Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes ("Beneficial Owners")
a duly completed and executed form of "Instruction to Registered Holder and/or
Book-Entry Transfer Facility Participant from Beneficial Owner" accompanying
this Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon the
order of, the Issuer, all rights, title and interest in, to and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as appropriate)
to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney-in-fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Issuer or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Issuer, on the books of
the registrar for the Notes and deliver all accompanying evidences of transfer
and authenticity to, or upon the order of, the Issuer upon receipt by the
Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon acceptance by the Issuer of the Tendered Notes
pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Tendered Notes, all in
accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Notes pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Issuer upon the
-2-
<PAGE> 3
terms and subject to the conditions of the Exchange Offer, subject only to
withdrawal of such tenders on the terms set forth in the Prospectus under the
caption "The Exchange Offer -- Withdrawal of Tenders." All authority herein
conferred or agreed to be conferred shall survive the death or incapacity of the
undersigned and any Beneficial Owner(s), and every obligation of the undersigned
or any Beneficial Owner(s) hereunder shall be binding upon the heirs,
representatives, successors and assigns of the undersigned and such Beneficial
Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Tendered
Notes and that the Issuer will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges, encumbrances and adverse claims
when the Tendered Notes are acquired by the Issuer as contemplated herein. The
undersigned and each Beneficial Owner will, upon request, execute and deliver
any additional documents reasonably requested by the Issuer or the Exchange
Agent as necessary or desirable to complete and give effect to the transactions
contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
acknowledges, for itself and each Beneficial Owner, that (i) the Exchange Notes
to be acquired by the undersigned and any Beneficial Owner(s) in connection with
the Exchange Offer are being acquired by the undersigned and any Beneficial
Owner(s) in the ordinary course of business of the undersigned and any
Beneficial Owner(s), (ii) neither the undersigned nor any Beneficial Owner is an
"affiliate" as defined in Rule 405 under the Securities Act, of the Issuer or
any of its subsidiaries and (iii) the undersigned and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange Offer with
the intention or for the purpose of distributing the Exchange Notes (including
any broker-dealer that acquired the Notes directly from the Issuer, but not as a
result of market-making activities or other trading activities) must comply with
the registration and prospectus delivery requirements of the Securities Act of
1933, as amended (together with the rules and regulations promulgated
thereunder, the "Securities Act"), in connection with a secondary resale of the
Exchange Notes acquired by such person and cannot rely on the position of the
staff of the Securities and Exchange Commission (the "Commission") set forth in
the no- action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer."
If the undersigned is not a broker-dealer, the undersigned represents that
the undersigned and each Beneficial Owner, if any, are not participating in, do
not intent to participate and have no arrangement or understanding with any
person to participate in any distribution of Exchange Notes received in exchange
for Tendered Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Notes, it represents that the
Notes to be exchanged for the Exchange Notes were acquired by it as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes pursuant to the Exchange
Offer; however, by so
-3-
<PAGE> 4
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
By making the foregoing representation and by delivering a prospectus in
connection with the exchange of Notes, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO
THE EXCHANGE AGENT AND COMPLETE "Use of Guaranteed Delivery"
BELOW (Box 4).
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE "Use of Book-Entry Transfer"
BELOW (Box 5).
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE UP
TO TEN ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
-------------------------------------------
Address:
----------------------------------------
Number of Copies Requested:
---------------------
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<CAPTION>
BOX 1
- -----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF NOTES TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NAME(S) AND ADDRESS(ES) OF REGISTERED AGGREGATE
NOTE HOLDER(S), EXACTLY AS NAME(S) CERTIFICATE PRINCIPAL AMOUNT AGGREGATE
APPEAR(S) ON NOTE CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) NOTES* CERTIFICATE(S) TENDERED**
- -----------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE> 5
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Notes. All other tenders must be in
integral multiples of $1,000 of principal amount. Unless otherwise indicated in this column, the
principal amount of all Note certificates identified in this Box 1 or delivered to the Exchange Agent
herewith shall be deemed tendered. See Instruction 4.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BOX 2
- ------------------------------------------------------------------------------------------------------------------------
BENEFICIAL OWNER(S)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
BOX 3
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED NOTES
ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT
AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Notes to:
Name(s):
- -----------------------------------------------------------------------------
(PLEASE PRINT)
Address:
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Tax Identification or Social Security No.:
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-5-
<PAGE> 6
BOX 4
- --------------------------------------------------------------------------------
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
- -----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------
Name of Institution which Guaranteed Delivery:
-------------------------------
- --------------------------------------------------------------------------------
BOX 5
- --------------------------------------------------------------------------------
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering Institution:
-----------------------------------------------
Account Number:
--------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------
- --------------------------------------------------------------------------------
-6-
<PAGE> 7
BOX 6
- --------------------------------------------------------------------------------
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
X
------------------------------------------------------------------------------
X
------------------------------------------------------------------------------
(SIGNATURE OF REGISTERED HOLDER(s)
OR AUTHORIZED SIGNATORY)
Note: The above lines must be signed by the registered holder(s) of Notes as
their name(s) appear(s) on the Notes or by person(s) authorized to become
registered holder(s) (evidence of which authorization must be transmitted with
this Letter of Transmittal). If Signature is by trustee, executor,
administrator, guardian, attorney-in-fact, officer, or other person acting in a
fiduciary or representative capacity, such person must set forth his or her full
title below. See instruction 5.
Name(s):
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------
----------------------------------------------------------------------
Street Address:
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Tax Identification or Social Security Number:
- --------------------------------------------------------------------------------
Signature Guarantee
(IF REQUIRED BY INSTRUCTION 5)
Authorized Signature
X
------------------------------------------------------------------------------
Name:
---------------------------------------------------------------------------
(PLEASE PRINT)
Title:
--------------------------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
(MUST BE AN ELIGIBLE INSTITUTION
AS DEFINED IN INSTRUCTION 2)
Address:
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Dated:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-7-
<PAGE> 8
<TABLE>
<CAPTION>
SUBSTITUTE FORM W-9
- -----------------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: CITADEL BROADCASTING COMPANY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN ------------------------------------
THE BOX AT RIGHT AND CERTIFY BY Social security number
SIGNING AND DATING BELOW
OR
FORM W-9
------------------------------------
EMPLOYER IDENTIFICATION NUMBER
PLEASE FILL IN YOUR NAME -----------------------------------------------------------------------------------------------------
AND ADDRESS BELOW. Part 2--Certification--Under Penalties of Perjury, I certify that:
- -------------------------- (1) The number shown on this form is my correct Taxpayer
NAME Identification Number (or I am waiting for a number to be PART 3 --
issued to me) and
Awaiting TIN [ ]
- -------------------------- (2) I am not subject to back-up withholding
ADDRESS (NUMBER AND either because (a) I am exempt from back-up
STREET) withholding or (b) I have not been notified
by the Internal Revenue Service ("IRS") --------------------------
that I am subject to back-up withholding as
a result of failure to report all interest PART 4 --
- -------------------------- or dividends or (c) the IRS has notified me
CITY, STATE AND ZIP that I am no longer subject to back-up Exempt [ ]
CODE withholding.
-----------------------------------------------------------------------------------------------------
Certification Instructions--you must cross out item (2) in Part 2 above if you have been notified by
DEPARTMENT OF THE the IRS that you are subject to back-up withholding because of underreporting interest or dividends
TREASURY INTERNAL on your tax return. However, if after being notified by the IRS that you were subject to back-up
REVENUE SERVICE withholding, you received another notification from the IRS stating that you are no longer subject
to back-up withholding, do not cross out item (2). If you are exempt from backup withholding, check
the box in Part 4 above.
PAYOR'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER (TIN)
SIGNATURE DATE , 1999
------------------------------------------------------------- --------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT
HERETO. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
- ------------------------------------------- ---------------------- , 1999
Signature Date
- --------------------------------------------------------------------------------
-8-
<PAGE> 9
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. A properly completed
and duly executed copy of this Letter of Transmittal, including Substitute Form
W-9, and any other documents required by this Letter of Transmittal must be
received by the Exchange Agent at its address set forth herein, and either
certificates for Tendered Notes must be received by the Exchange Agent at its
address set forth herein or such Tendered Notes must be transferred pursuant to
the procedures for book-entry transfer described in the Prospectus under the
caption "The Exchange Offer -- Procedures for Tendering" (and a confirmation of
such transfer received by the Exchange Agent), in each case prior to 5:00 p.m.,
New York City time, on the Expiration Date. The method of delivery of
certificates for Tendered Notes, this Letter of Transmittal and all other
required documents to the Exchange Agent is at the election and risk of the
tendering holder and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return- receipt requested, properly insured, is recommended. Instead of delivery
by mail, it is recommended that the holder use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. No Letter of Transmittal or Notes should be sent to the Issuer.
Neither the Issuer nor the registrar is under any obligation to notify any
tendering holder of the Issuer's acceptance of Tendered Notes prior to the
closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available, and who cannot deliver their
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date must tender their Notes according to
the guaranteed delivery procedures set forth below, including completion of Box
4. Pursuant to such procedures: (i) such tender must be made by or through a
firm which is a member of a recognized Medallion Program approved by the
Securities Transfer Association Inc. (an "Eligible Institution") and the Notice
of Guaranteed Delivery must be signed by the holder; (ii) prior to the
Expiration Date, the Exchange Agent must have received from the holder and the
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by mail or hand delivery) setting forth the name and address of the
holder, the certificate number(s) of the Tendered Notes and the principal amount
of Tendered Notes, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
Expiration Date, this Letter of Transmittal together with the certificate(s)
representing the Tendered Notes and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed Letter of Transmittal, as well as all other
documents required by this Letter of Transmittal and the certificate(s)
representing all Tendered Notes in proper form for transfer, must be received by
the Exchange Agent within five New York Stock Exchange trading days after the
Expiration Date. Any holder who wishes to tender Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery relating to such Notes prior to
5:00 p.m., New York City time, on the Expiration Date. Failure to complete the
guaranteed delivery procedures outlined above will not, of itself, affect the
validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by an eligible holder who attempted to use the guaranteed
delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may execute
and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Notes
who is not the registered holder must arrange promptly with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf
through the execution and
-9-
<PAGE> 10
delivery to the registered holder of the Instructions to Registered Holder
and/or Book-Entry Transfer Facility Participant from Beneficial Owner form
accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes held by the holder is tendered, the tendering holder should fill
in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of the box entitled "Description of Notes Tendered" (Box 1)
above. The entire principal amount of Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Notes held by the holder is not tendered, then Notes for
the principal amount of Notes delivered to the Exchange Agent, but not tendered,
and Exchange Notes issued in exchange for any Notes tendered and accepted will
be sent to the holder at his or her registered address, unless a different
address is provided in the appropriate box on this Letter of Transmittal, as
soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any principal amount of Notes delivered to the Exchange Agent, but
untendered, is to be reissued) in the name of the registered holder(s), then
such registered holder(s) need not and should not endorse any Tendered Notes,
nor provide a separate bond power. In any other case, such registered holder(s)
must either properly endorse the Tendered Notes or transmit a properly completed
bond power with this Letter of Transmittal, with the signature(s) on the
endorsement or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Issuer, evidence satisfactory to the Issuer of their authority to so act must be
submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a registered holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the
applicable box (Box 3), the name and address to which the Exchange Notes and/or
substitute Notes for principal amounts
-10-
<PAGE> 11
delivered to the Exchange Agent, but not tendered, or not accepted for exchange
are to be sent, if different from the name and address of the person signing
this Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated.
7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer and
exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide the
Issuer (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is her or her social
security number. If the Issuer is not provided with the correct TIN, the holder
may be subject to backup withholding and a $50 penalty imposed by the Internal
Revenue Service. (If withholding results in an over-payment of taxes, a refund
may be obtained.) Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding.
The Issuer reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Issuer's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of Tendered Notes will be
determined by the Issuer in its sole discretion, which determination will be
final and binding. The Issuer reserves the right to reject any and all Notes not
validly tendered or any Notes the Issuer's acceptance of which would, in the
opinion of the Issuer or its counsel, be unlawful. The Issuer also reserves the
right to waive any conditions of the Exchange Offer or defects or irregularities
in tenders of Notes as to any ineligibility of any holder who seeks to tender
Notes in the Exchange Offer. The interpretation of the terms and conditions of
the Exchange Offer (including this Letter of Transmittal and the instructions
hereto) by the Issuer shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Notes must be cured
within such time as the Issuer shall determine. Neither the Issuer, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Notes, nor shall any of
them incur any liability for failure to give such notification. Tenders of Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the Exchange Agent to the tendering holders, unless otherwise provided in this
Letter of Transmittal, as soon as practicable following the Expiration Date.
-11-
<PAGE> 12
10. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or
contingent tender of Notes or transmittal of this Letter of Transmittal will be
accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering holder whose
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Issuer
will accept for exchange all validly tendered Notes as soon as practicable after
the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Issuer shall be
deemed to have accepted tendered Notes when, as and if the Issuer has given
written or oral notice (immediately followed in writing) thereof to the Exchange
Agent. If any Tendered Notes are not exchanged pursuant to the Exchange Offer
for any reason, such unexchanged Notes will be returned, without expense, to the
undersigned at the address shown in Box 1 or at a different address as may be
indicated herein under "Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal
of Tenders."
-12-
<PAGE> 13
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
9-1/4% SENIOR SUBORDINATED NOTES DUE 2008
OF
CITADEL BROADCASTING COMPANY
PURSUANT TO THE PROSPECTUS DATED __________, 199_
This form must be used by a holder of 9-1/4% Senior Subordinated Notes due
2008 (the "Notes") of Citadel Broadcasting Company, a Nevada corporation (the
"Company"), who wishes to tender Notes to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed
Delivery Procedures" of the Company's Prospectus dated __________, 199_ (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date of the Exchange Offer.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
================================================================================
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON _________, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
================================================================================
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
(THE "EXCHANGE AGENT")
For Information by Telephone:
(212) ___-____
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery Service:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
(7 East) Corporate Trust Services Window
New York, New York 10286 Ground Level
Attention: Reorganization Section New York, New York 10286
Attention: Reorganization Section, 7 East
</TABLE>
By Facsimile Transmission:
(212) ___-____
(Facsimile Confirmation)
(212)
-13-
<PAGE> 14
(ORIGINALS OF ALL DOCUMENTS SENT BY FACSIMILE SHOULD BE SENT PROMPTLY BY
REGISTERED OR CERTIFIED MAIL, BY HAND, OR BY OVERNIGHT DELIVERY SERVICE.)
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus, and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Signatures of Registered Holder(s) or
Authorized Signatory: Date: , 1999
------------------------------------ ---------------------------
- --------------------------------------------------------- Address:
- --------------------------------------------------------- -------------------------------------
---------------------------------------------
Name(s) of Registered Holder(s): Area Code and Telephone No.
------------------------- ------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-14
<PAGE> 15
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s):
---------------------------------------------------------------------
- -----------------------------------------------------------------------------
Capacity:
--------------------------------------------------------------------
Address(es):
-----------------------------------------------------------------
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility described in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures" and in the Letter of Transmittal) and any other required documents,
all by 5:00 p.m., New York City time, on the fifth New York Stock Exchange
trading day following the Expiration Date.
Name of firm -----------------------------
-------------------------- (Authorized Signature)
Address Name
------------------------------- -----------------------------
(Please Print)
- ----------------------------- Title
(Include Zip Code) --------------------------------
Area Code and Tel. No. Dated , 1999
---------------- -------------
- --------------------------------------------------------------------------------
-15-
<PAGE> 16
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return- receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes referred
to herein, the signature must correspond with the name(s) written on the face of
the Notes without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of the Notes, the signature must correspond with the name shown on the security
position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant is shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Request for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus or the Letter of
Transmittal may be directed to the Exchange Agent at the address specified in
the Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
-16-
<PAGE> 17
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
CITADEL BROADCASTING COMPANY
9-1/4% SENIOR SUBORDINATED NOTES DUE 2008
To Registered Holder and/or Participant of the Book-Entry Transfer
Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
__________, 199_ (the "Prospectus") of Citadel Broadcasting Company, a Nevada
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus or the Letter of Transmittal.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 9 1/4% Senior Subordinated Notes due 2008 (the
"Notes") held by you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$__________ of the 9-1/4% Senior Subordinated Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY):
$__________.
[ ] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (FILL IN STATE)
________________________, (ii) the undersigned is acquiring the Exchange Notes
in the ordinary course of business of the undersigned, (iii) the undersigned is
not participating, does not participate, and has no arrangement or understanding
with any person to participate, in the distribution of the Exchange Notes, (iv)
the undersigned acknowledges that any person participating in the Exchange Offer
for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the "Securities Act"), in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on the
position of the staff of the Securities and Exchange Commission set forth in
no-action letters that are discussed in
-17-
<PAGE> 18
the section of the Prospectus entitled "The Exchange Offer -- Resale of the New
Notes," and (v) the undersigned is not an "affiliate," as defined in Rule 405
under the Securities Act, of the Company or any of its subsidiaries; (b) to
agree on behalf of the undersigned, as set forth in the Letter of Transmittal,
and (c) to take such other action as necessary under the Prospectus or the
Letter of Transmittal to effect the valid tender of such Notes.
- --------------------------------------------------------------------------------
SIGN HERE
Name of beneficial owner(s):
-------------------------------------------------
Signature(s):
----------------------------------------------------------------
Name (please print):
---------------------------------------------------------
Address:
---------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Telephone number:
------------------------------------------------------------
Taxpayer Identification or Social Security Number:
---------------------------
Date:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-18-
<PAGE> 1
Exhibit 99.2
__________, 199_
Form of
EXCHANGE AGENT AGREEMENT
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street - 21st Floor
New York, New York 10286
Ladies and Gentlemen:
Citadel Broadcasting Company (the "Company") proposes to make
an offer (the "Exchange Offer") to exchange its outstanding 9-1/4% Senior
Subordinated Notes due 2008 (the "Old Securities") for its 9-1/4% Senior
Subordinated Notes due 2008 which have been registered under the Securities Act
of 1933, as amended (the "New Securities"). The terms and conditions of the
Exchange Offer as currently contemplated are set forth in a prospectus, dated
__________, 199_ (the "Prospectus"), proposed to be distributed to all record
holders of the Old Securities. The Old Securities and the New Securities are
collectively referred to herein as the "Securities."
The Company hereby appoints The Bank of New York to act as
exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer to The Bank of New York.
The Exchange Offer is expected to be commenced by the Company
on or about __________, 199_. The Letter of Transmittal accompanying the
Prospectus (or in the case of book entry securities, the ATOP system) is to be
used by the holders of the Old Securities to accept the Exchange Offer and
contains instructions with respect to the delivery of certificates for Old
Securities tendered in connection therewith.
The Exchange Offer shall expire at 5:00 P.M., New York City
time, on __________, 1999 or on such later date or time to which the Company may
extend the Exchange Offer (the "Expiration Date"). Subject to the terms and
conditions set forth in the Prospectus, the Company expressly reserves the right
to extend the Exchange Offer from time to time and may extend the Exchange Offer
by giving oral (confirmed in writing) or written notice to you before 9:00 A.M.,
New York City time, on the business day following the previously scheduled
Expiration Date.
The Company expressly reserves the right to amend or terminate
the Exchange Offer, and not to accept for exchange any Old Securities not
theretofore accepted for exchange, upon the occurrence of any of the conditions
of the Exchange Offer specified in the Prospectus under the caption "The
Exchange Offer -- Conditions." The Company will
<PAGE> 2
give oral (confirmed in writing) or written notice of any amendment, termination
or nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act
in accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer" or as specifically set forth herein; provided, however, that in no way
will your general duty to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Old
Securities at The Depository Trust Company (the "Book-Entry Transfer Facility")
for purposes of the Exchange Offer within two business days after the date of
the Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of the Old
Securities by causing the Book-Entry Transfer Facility to transfer such Old
Securities into your account in accordance with the Book-Entry Transfer
Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Old Securities (or confirmation of book-entry transfer into
your account at the Book- Entry Transfer Facility) and any other documents
delivered or mailed to you by or for holders of the Old Securities to ascertain
whether: (i) the Letters of Transmittal and any such other documents are duly
executed and properly completed in accordance with instructions set forth
therein and (ii) the Old Securities have otherwise been properly tendered. In
each case where the Letter of Transmittal or any other document has been
improperly completed or executed or any of the certificates for Old Securities
are not in proper form for transfer or some other irregularity in connection
with the acceptance of the Exchange Offer exists, you will endeavor to inform
the presenters of the need for fulfillment of all requirements and to take any
other action as may be necessary or advisable to cause such irregularity to be
corrected.
4. With the approval of the Chairman, President or any Vice
President of the Company (such approval, if given orally, to be confirmed in
writing) or any other party designated by such an officer in writing, you are
authorized to waive any irregularities in connection with any tender of Old
Securities pursuant to the Exchange Offer.
5. Tenders of Old Securities may be made only as set forth in
the Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer -- Procedures for Tendering," and Old Securities shall be
considered properly tendered to you only when tendered in accordance with the
procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Old
Securities which the Chairman, President or any Vice President of the Company
shall approve as having been
-2-
<PAGE> 3
properly tendered shall be considered to be properly tendered (such approval, if
given orally, shall be confirmed in writing).
6. You shall advise the Company with respect to any Old
Securities received subsequent to the Expiration Date and accept its
instructions with respect to disposition of such Old Securities.
7. You shall accept tenders:
(a) in cases where the Old Securities are registered in two or
more names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Old
Securities provided that customary transfer requirements, including any
applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Old Securities where so
indicated and as permitted in the Letter of Transmittal and deliver certificates
for Old Securities to the transfer agent for split-up and return any untendered
Old Securities to the holder (or such other person as may be designated in the
Letter of Transmittal) as promptly as practicable after expiration or
termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to
the Exchange Offer, the Company will notify you (such notice if given orally, to
be confirmed in writing) of its acceptance, promptly after the Expiration Date,
of all Old Securities properly tendered and you, on behalf of the Company, will
exchange such Old Securities for New Securities and cause such Old Securities to
be cancelled. Delivery of New Securities will be made on behalf of the Company
by you for the corresponding series of Old Securities tendered promptly after
notice (such notice if given orally, to be confirmed in writing) of acceptance
of said Old Securities by the Company; provided, however, that in all cases, Old
Securities tendered pursuant to the Exchange Offer will be exchanged only after
timely receipt by you of certificates for such Old Securities (or confirmation
of book-entry transfer into your account at the Book-Entry Transfer Facility), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees and any other required
documents. You shall issue New Securities only in denominations of $1,000 or any
integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable,
except that, subject to the terms and upon the conditions set forth in the
Prospectus and the Letter of Transmittal, Old Securities tendered pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date.
-3-
<PAGE> 4
10. The Company shall not be required to exchange any Old
Securities tendered if any of the conditions set forth in the Exchange Offer are
not met. Notice of any decision by the Company not to exchange any Old
Securities tendered shall be given (and confirmed in writing) by the Company to
you.
11. If, pursuant to the Exchange Offer, the Company does
not accept for exchange all or part of the Old Securities tendered because of an
invalid tender, the occurrence of certain other events set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions" or otherwise,
you shall as soon as practicable after the expiration or termination of the
Exchange Offer return those certificates for unaccepted Old Securities (or
effect appropriate book-entry transfer), together with any related required
documents and the Letters of Transmittal relating thereto that are in your
possession, to the persons who deposited them.
12. All certificates for reissued Old Securities,
unaccepted Old Securities or for New Securities shall be forwarded by
first-class mail.
13. You are not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker, dealer, bank or
other persons or to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other
than those specifically set forth herein or as may be subsequently agreed to in
writing by you and the Company;
(b) will be regarded as making no
representations and having no responsibilities as to the validity, sufficiency,
value or genuineness of any of the certificates or the Old Securities
represented thereby deposited with you pursuant to the Exchange Offer, and will
not be required to and will make no representation as to the validity, value or
genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal
action hereunder which might in your reasonable judgment involve any expense or
liability, unless you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be
protected in acting in reliance upon any certificate, instrument, opinion,
notice, letter, telegram or other document or security delivered to you and
reasonably believed by you to be genuine and to have been signed by the proper
party or parties;
(e) may reasonably act upon any tender,
statement, request, comment, agreement or other instrument whatsoever not only
as to its due execution and validity and effectiveness of its provisions, but
also as to the truth and accuracy of any
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<PAGE> 5
information contained therein, which you shall in good faith believe to be
genuine or to have been signed or represented by a proper person or persons;
(f) may rely on and shall be protected in acting
upon written or oral instructions from any officer of the Company;
(g) may consult with your counsel with respect
to any questions relating to your duties and responsibilities and the advice or
opinion of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted to be taken by you hereunder
in good faith and in accordance with the advice or opinion of such counsel; and
(h) shall not advise any person tendering Old
Securities pursuant to the Exchange Offer as to the wisdom of making such tender
or as to the market value or decline or appreciation in market value of any Old
Securities.
15. You shall take such action as may from time to time
be requested by the Company or its counsel (and such other action as you may
reasonably deem appropriate) to furnish copies of the Prospectus, Letter of
Transmittal and the Notice of Guaranteed Delivery (as defined in the Prospectus)
or such other forms as may be approved from time to time by the Company, to all
persons requesting such documents and to accept and comply with telephone
requests for information relating to the Exchange Offer, provided that such
information shall relate only to the procedures for accepting (or withdrawing
from) the Exchange Offer. The Company will furnish you with copies of such
documents at your request. All other requests for information relating to the
Exchange Offer shall be directed to the Company, Attention: Donna L. Heffner.
16. You shall advise by facsimile transmission or
telephone, and promptly thereafter confirm in writing to Donna L. Heffner of the
Company and such other person or persons as it may request, daily (and more
frequently during the week immediately preceding the Expiration Date and if
otherwise requested) up to and including the Expiration Date, as to the number
of Old Securities which have been tendered pursuant to the Exchange Offer and
the items received by you pursuant to this Agreement, separately reporting and
giving cumulative totals as to items properly received and items improperly
received. In addition, you will also inform, and cooperate in making available
to, the Company or any such other person or persons upon oral request made from
time to time prior to the Expiration Date of such other information as it or he
or she reasonably requests. Such cooperation shall include, without limitation,
the granting by you to the Company and such person as the Company may request of
access to those persons on your staff who are responsible for receiving tenders,
in order to ensure that immediately prior to the Expiration Date the Company
shall have received information in sufficient detail to enable it to decide
whether to extend the Exchange Offer. You shall prepare a final list of all
persons whose tenders were accepted, the aggregate principal amount of Old
Securities tendered, the aggregate principal amount of Old Securities accepted
and deliver said list to the Company.
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<PAGE> 6
17. Letters of Transmittal and Notices of Guaranteed Delivery
shall be stamped by you as to the date and the time of receipt thereof and shall
be preserved by you for a period of time at least equal to the period of time
you preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company.
18. You hereby expressly waive any lien, encumbrance or right
of set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you
shall be entitled to such compensation as set forth on Schedule I attached
hereto.
20. You hereby acknowledge receipt of the Prospectus and the
Letter of Transmittal and further acknowledge that you have examined each of
them. Any inconsistency between this Agreement, on the one hand, and the
Prospectus and the Letter of Transmittal (as they may be amended from time to
time), on the other hand, shall be resolved in favor of the latter two
documents, except with respect to the duties, liabilities and indemnification of
you as Exchange Agent, which shall be controlled by this Agreement.
21. The Company covenants and agrees to indemnify and hold you
harmless in your capacity as Exchange Agent hereunder against any loss,
liability, cost or expense, including attorneys' fees and expenses, arising out
of or in connection with any act, omission, delay or refusal made by you in
reliance upon any signature, endorsement, assignment, certificate, order,
request, notice, instruction or other instrument or document reasonably believed
by you to be valid, genuine and sufficient and in accepting any tender or
effecting any transfer of Old Securities reasonably believed by you in good
faith to be authorized, and in delaying or refusing in good faith to accept any
tenders or effect any transfer of Old Securities; provided, however, that the
Company shall not be liable for indemnification or otherwise for any loss,
liability, cost or expense to the extent arising out of your gross negligence or
willful misconduct. In no case shall the Company be liable under this indemnity
with respect to any claim against you unless the Company shall be notified by
you, by letter or by facsimile confirmed by letter, of the written assertion of
a claim against you or of any other action commenced against you, promptly after
you shall have received any such written assertion or notice of commencement of
action. The Company shall be entitled to participate at its own expense in the
defense of any such claim or other action, and, if the Company so elects, the
Company shall assume the defense of any suit brought to enforce any such claim.
In the event that the Company shall assume the defense of any such suit, the
Company shall not be liable for the fees and expenses of any additional counsel
thereafter retained by you so long as the Company shall retain counsel
satisfactory to you to defend such suit, and so long as you have not determined,
in your reasonable judgment, that a conflict of interest exists between you and
the Company.
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<PAGE> 7
22. You shall arrange to comply with all requirements under
the tax laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required to deduct 31% on
payments to holders who have not supplied their correct Taxpayer Identification
Number or required certification. Such funds will be turned over to the Internal
Revenue Service in accordance with applicable regulations.
23. You shall deliver or cause to be delivered, in a timely
manner to each governmental authority to which any transfer taxes are payable in
respect of the exchange of Old Securities, your check in the amount of all
transfer taxes so payable, and the Company shall reimburse you for the amount of
any and all transfer taxes payable in respect of the exchange of Old Securities;
provided, however, that you shall reimburse the Company for amounts refunded to
you in respect of your payment of any such transfer taxes, at such time as such
refund is received by you.
24. This Agreement and your appointment as Exchange Agent
hereunder shall be construed and enforced in accordance with the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state, and without regard to conflicts of law principles, and shall
inure to the benefit of, and the obligations created hereby shall be binding
upon, the successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
26. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
27. This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part, except
by a written instrument signed by a duly authorized representative of the party
to be charged. This Agreement may not be modified orally.
28. Unless otherwise provided herein, all notices, requests
and other communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given to such party, addressed to it,
at its address or telecopy number set forth below:
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<PAGE> 8
If to the Company:
Citadel Broadcasting Company
140 South Ash Avenue
Tempe, Arizona 85281
Facsimile: (602) 731-5229
Attention: Donna L. Heffner
With a copy to:
Eckert Seamans Cherin & Mellott, LLC
600 Grant Street
42nd Floor
Pittsburgh, PA 15219
Facsimile: (412) 566-6099
Attention: Bryan D. Rosenberger
If to the Exchange Agent:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Trustee
Administration
29. Unless terminated earlier by the parties hereto, this
Agreement shall terminate 90 days following the Expiration Date. Notwithstanding
the foregoing, Paragraphs 19, 21 and 23 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
the Company any certificates for Securities, funds or property then held by you
as Exchange Agent under this Agreement.
30. This Agreement shall be binding and effective as of the
date hereof.
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<PAGE> 9
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
CITADEL BROADCASTING COMPANY
By:
---------------------------------
Name:
Title:
Accepted as of the date
first above written:
THE BANK OF NEW YORK, as Exchange Agent
By:
---------------------------
Name:
Title:
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<PAGE> 10
SCHEDULE I
FEES
Exchange Agent for exchange of notes (including acceptance fees): $5,000
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