<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1997
REGISTRATION NO. 333-32259
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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EVERGREEN MEDIA CORPORATION OF LOS ANGELES
(Exact name of registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
DELAWARE 4832 75-2451687
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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<TABLE>
<S> <C>
SCOTT K. GINSBURG
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
433 EAST LAS COLINAS BOULEVARD 433 EAST LAS COLINAS BOULEVARD
IRVING, TEXAS 75039 IRVING, TEXAS 75039
(972) 869-9020 (972) 869-9020
(Address, including zip code, and telephone number, (Name, address, including zip code, telephone
including area code, of registrant's principal
executive offices) number, including area code, of agent for service)
</TABLE>
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Copies to
<TABLE>
<S> <C>
JOHN D. WATSON, JR., ESQ. JEREMY W. DICKENS, ESQ.
LATHAM & WATKINS WEIL, GOTSHAL & MANGES LLP
1001 PENNSYLVANIA AVENUE, N.W. 100 CRESCENT COURT, SUITE 1300
WASHINGTON, D.C. 20004-2505 DALLAS, TEXAS 75201
(202) 637-2200 (214) 746-7720
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and all
other conditions to the Merger (as defined herein) of Chancellor Broadcasting
Corporation with and into Evergreen Mezzanine Holdings Corporation and
Chancellor Radio Broadcasting Company with and into Evergreen Media Corporation
of Los Angeles pursuant to the Merger Agreement (as defined herein), described
in the accompanying Prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1)(2) PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
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12% Exchangeable Preferred Stock, $.01 par
value...................................... 2,117,638 $100.00 $211,763,800 $64,170.85(3)
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12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock, $.01 par
value...................................... 1,000,000 $115.90 $115,900,000 $35,121.20(3)
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12% Subordinated Exchange Debentures due
2009....................................... -- -- $211,763,800 $--(3)
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12 1/4% Subordinated Exchange Debentures due
2008....................................... -- -- $115,900,000 $--(3)
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(1) Estimated solely for purposes of computing the registration fee. The
proposed maximum offering price per share for the 12% Exchangeable Preferred
Stock, calculated in accordance with Rule 457(f)(2), is $100.00, which
represents the liquidation preference for each such share. The proposed
maximum offering price per share for the 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock, calculated in accordance with Rule 457(f)(2)
is $115.90, which represents the liquidation preference for each such share.
The proposed maximum offering price for the 12% Subordinated Exchange
Debentures due 2009 represents the maximum aggregate principal amount of the
12% Subordinated Exchange Debentures due 2009 that may, as of the date
hereof, be issued by the registrant in exchange for the 12% Exchangeable
Preferred Stock, and the proposed maximum offering price for the 12 1/4%
Subordinated Exchange Debentures due 2008 represents the maximum aggregate
principal amount of the 12 1/4% Subordinated Exchange Debentures due 2008
that may, as of the date hereof, be issued by the registrant in exchange for
the 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock.
(2) This registration statement also relates to (i) such additional shares of
12% Exchangeable Preferred Stock that may be issued from time to time at the
option of the registrant in lieu of payment of cash dividends on the 12%
Exchangeable Preferred Stock and (ii) such additional 12% Subordinated
Exchange Debentures due 2009 and 12 1/4% Subordinated Exchange Debentures
due 2008 that may be issued from time to time at the option of the
registrant in lieu of payment of cash interest on the 12% Subordinated
Exchange Debentures due 2009 or the 12 1/4% Subordinated Exchange Debentures
due 2008, as the case may be.
(3) Fees in the amount of $64,170.85 and $35,121.20 have previously been paid
for the 12% Exchangeable Preferred Stock and the 12 1/4% Series A Senior
Cumulative Exchangeable Preferred Stock, respectively. Pursuant to Rule
457(i) of the Securities Act, no registration fee is required with respect
to the 12% Subordinated Exchange Debentures due 2009 or the 12 1/4%
Subordinated Exchange Debentures due 2008 because no separate consideration
will be received in the event that the 12% Subordinated Exchange Debentures
due 2009 are issued by the registrant in exchange for the 12% Exchangeable
Preferred Stock and because no separate consideration will be received in
the event that the 12 1/4% Exchange Debentures due 2008 are issued by the
registrant in exchange for the 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock.
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<PAGE> 2
EVERGREEN MEDIA CORPORATION OF LOS ANGELES
(TO BE RENAMED CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
PURSUANT TO THE CONSUMMATION OF THE SUBSIDIARY MERGER (AS DEFINED HEREIN))
PROSPECTUS
2,117,638 SHARES OF 12% EXCHANGEABLE PREFERRED STOCK
1,000,000 SHARES OF 12 1/4% SERIES A SENIOR CUMULATIVE EXCHANGEABLE PREFERRED
STOCK
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This Prospectus relates to the proposed merger (the "Parent Merger") of
Chancellor Broadcasting Corporation, a Delaware corporation ("Chancellor"), with
and into Evergreen Mezzanine Holdings Corporation, a Delaware corporation
("EMHC") and a direct, wholly owned subsidiary of Evergreen Media Corporation, a
Delaware corporation ("Evergreen"), and the related proposed merger (the
"Subsidiary Merger" and, together with the Parent Merger, the "Merger") of
Chancellor Radio Broadcasting Company, a Delaware corporation and a direct
subsidiary of Chancellor ("CRBC"), with and into Evergreen Media Corporation of
Los Angeles, a Delaware corporation and a direct, wholly owned subsidiary of
EMHC ("EMCLA"), pursuant to the Agreement and Plan of Merger dated as of
February 19, 1997, as amended and restated (the "Merger Agreement"), among
Chancellor, CRBC, Evergreen, EMHC and EMCLA. This Prospectus is being delivered
to holders of shares of 12% Exchangeable Preferred Stock and 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock of CRBC in connection with each
such holder's decision whether to exercise appraisal rights pursuant to Section
262 of the Delaware General Corporation Law in connection with the Subsidiary
Merger. Following the Merger, Evergreen will be renamed Chancellor Media
Corporation, EMHC will be renamed Chancellor Mezzanine Holdings Corporation and
EMCLA will be renamed Chancellor Media Corporation of Los Angeles. Evergreen is
also referred to herein as the "Surviving Corporation," EMHC, as the corporation
surviving the Parent Merger, is also referred to herein as the "Surviving
Mezzanine Corporation" and EMCLA, as the corporation surviving the Subsidiary
Merger, is also referred to herein as the "Surviving Subsidiary Corporation." If
the Merger is consummated, (i) each share of Evergreen Class A Common Stock and
Evergreen Class B Common Stock (collectively, "Evergreen Common Stock")
outstanding immediately prior to the Effective Time (as defined in the Merger
Agreement) will be reclassified, changed and converted into one share of Common
Stock of the Surviving Corporation ("Surviving Corporation Common Stock"), (ii)
each share of $3.00 Convertible Exchangeable Preferred Stock of Evergreen
("Evergreen $3.00 Convertible Preferred Stock") will remain outstanding as one
share of $3.00 Convertible Exchangeable Preferred Stock of the Surviving
Corporation, (iii) each share (other than treasury shares, which will be
cancelled as a result of the Merger) of Chancellor Class A Common Stock and
Chancellor Class B Common Stock outstanding immediately prior to the Effective
Time (collectively, "Chancellor Common Stock") will be converted into the right
to receive 0.9091 shares (the "Exchange Ratio") of Surviving Corporation Common
Stock, (iv) each share of 7% Convertible Preferred Stock of Chancellor
outstanding immediately prior to the Effective Time ("Chancellor Parent
Convertible Preferred Stock"), other than shares of the Chancellor Parent
Convertible Preferred Stock for which appraisal rights have been exercised
pursuant to Section 262 ("Section 262") of the Delaware General Corporation Law
(the "DGCL"), will be converted into the right to receive one share of preferred
stock of the Surviving Corporation having substantially identical powers,
preferences and relative rights as the Chancellor Parent Convertible Preferred
Stock (the "Surviving Corporation 7% Convertible Preferred Stock"), (v) each
share of EMHC Common Stock outstanding immediately prior to the Effective Time
will remain outstanding as one share of Common Stock of the Surviving Mezzanine
Corporation, (vi) each share of EMCLA Common Stock outstanding immediately prior
to the Subsidiary Merger Effective Time (as defined in the Merger Agreement)
will remain outstanding as one share of Common Stock of the Subsidiary Surviving
Corporation, (vii) each share of CRBC Common Stock outstanding immediately prior
to the Subsidiary Merger Effective Time will be cancelled, (viii) each share of
12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock of CRBC
outstanding immediately prior to the Subsidiary Merger Effective Time (the "CRBC
Series A Preferred Stock"), other than shares of CRBC Series A Preferred Stock
for which appraisal rights have been exercised pursuant to Section 262, will be
converted into the right to receive one share of preferred stock of the
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE MERGER.
This Prospectus and the other enclosed documents are first being mailed to
preferred stockholders of CRBC on or about August 6, 1997.
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE SUBSIDIARY MERGER HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is August 5, 1997.
<PAGE> 3
Subsidiary Surviving Corporation having substantially identical powers,
preferences and relative rights as the CRBC Series A Preferred Stock (the
"Surviving Subsidiary Series A Preferred Stock") and (ix) each share of 12%
Exchangeable Preferred Stock of CRBC outstanding immediately prior to the
Subsidiary Merger Effective Time (the "CRBC Junior Preferred Stock"), other than
shares of CRBC Junior Preferred Stock for which appraisal rights have been
exercised pursuant to Section 262, will be converted into the right to receive
one share of preferred stock of the Subsidiary Surviving Corporation having
substantially identical powers, preferences and relative rights as the CRBC
Junior Preferred Stock (the "Surviving Subsidiary Junior Preferred Stock"). The
transaction is subject to various conditions, including approval by the
stockholders of Chancellor at their Special Meeting (the "Chancellor Special
Meeting") to be held on or about September 3, 1997 and approval by the
stockholders of Evergreen at their Annual Meeting (the "Evergreen Annual
Meeting") to be held on or about September 3, 1997, described herein. In
connection with the execution of the Merger Agreement, certain stockholders of
Chancellor and Evergreen entered into a stockholders agreement (the
"Stockholders Agreement") pursuant to which such stockholders agreed, among
other things, to vote all shares of capital stock of Chancellor and Evergreen
held by such parties in favor of the transactions contemplated by the Merger
Agreement. Such stockholders control approximately 90.3% of the combined voting
power of the Chancellor Common Stock and approximately 44.3% of the combined
voting power of the Evergreen Common Stock.
UNDER THE CERTIFICATES OF DESIGNATION GOVERNING THE CRBC SERIES A PREFERRED
STOCK AND CRBC JUNIOR PREFERRED STOCK, HOLDERS OF THE CRBC SERIES A PREFERRED
STOCK AND THE CRBC JUNIOR PREFERRED STOCK ARE NOT ENTITLED TO VOTE ON THE PARENT
MERGER, THE SUBSIDIARY MERGER OR ANY OTHER TRANSACTIONS CONTEMPLATED BY THE
MERGER AGREEMENT. THE SOLE INVESTMENT DECISION ARISING FROM THE MERGER FOR
HOLDERS OF CRBC SERIES A PREFERRED STOCK AND CRBC JUNIOR PREFERRED STOCK IS
WHETHER TO EXERCISE APPRAISAL RIGHTS UNDER SECTION 262 OF THE DGCL. SEE "THE
MERGER -- APPRAISAL AND DISSENTERS' RIGHTS." UNLESS A HOLDER OF SHARES OF CRBC
SERIES A PREFERRED STOCK OR CRBC JUNIOR PREFERRED STOCK TIMELY SUBMITS A WRITTEN
DEMAND FOR APPRAISAL AND OTHERWISE COMPLIES WITH SECTION 262 OF THE DGCL WITH
RESPECT TO SUCH SHARES, EACH SUCH SHARE OUTSTANDING AT THE SUBSIDIARY MERGER
EFFECTIVE TIME WILL BE CONVERTED INTO ONE SHARE OF PREFERRED STOCK OF THE
SURVIVING SUBSIDIARY CORPORATION HAVING SUBSTANTIALLY IDENTICAL POWERS,
PREFERENCE AND RELATIVE RIGHTS AS THE CRBC SERIES A PREFERRED STOCK OR CRBC
JUNIOR PREFERRED STOCK, AS THE CASE MAY BE. NEITHER THE BOARD OF DIRECTORS OF
CRBC NOR THE BOARD OF DIRECTORS OF EMCLA IS MAKING ANY RECOMMENDATION TO HOLDERS
OF CRBC SERIES A PREFERRED STOCK OR CRBC JUNIOR PREFERRED STOCK AS TO WHETHER TO
EXERCISE THEIR APPRAISAL RIGHTS.
This Prospectus constitutes a prospectus of the Surviving Subsidiary
Corporation with respect to (i) the shares of Surviving Subsidiary Series A
Preferred Stock which may be issued to holders of CRBC Series A Preferred Stock
in the Merger and (ii) the shares of Surviving Subsidiary Junior Preferred Stock
which may be issued to holders of the CRBC Junior Preferred Stock in the Merger,
together with additional shares of Surviving Subsidiary Junior Preferred Stock
which may be issued as dividends on such Surviving Subsidiary Junior Preferred
Stock in accordance with its terms. For a description of the Surviving
Subsidiary Series A Preferred Stock and the Surviving Subsidiary Junior
Preferred Stock to be issued in the Merger, see "Description of Surviving
Subsidiary Corporation Capital Stock," "Description of Surviving Subsidiary
Series A Preferred Stock and 12 1/4% Exchange Debentures" and "Description of
Surviving Subsidiary Junior Preferred Stock and 12% Exchange Debentures."
All information concerning Evergreen, EMHC and EMCLA contained in this
Prospectus has been furnished by EMCLA, and all information herein concerning
Chancellor and CRBC has been furnished by CRBC.
ii
<PAGE> 4
AVAILABLE INFORMATION
CRBC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by CRBC with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
should be available at the Commission's Regional Offices in New York (7 World
Trade Center, 13th Floor, New York, New York 10048); Los Angeles (Suite 500
East, Tishman Building, 5757 Wilshire Boulevard, Los Angeles, California 90036);
and Chicago (500 West Madison Avenue, Suite 1400, Chicago, Illinois 60661).
Copies of such material can also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission also maintains a Web Site at http://www.sec.gov
which contains reports and other information regarding registrants that file
electronically with the Commission.
EMCLA has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
shares of the Surviving Subsidiary Series A Preferred Stock and shares of
Surviving Subsidiary Junior Preferred Stock to be issued pursuant to the Merger
Agreement. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits thereto filed by EMCLA, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission and to which portions reference is hereby made for further
information with respect to EMCLA, CRBC and the securities offered hereby. Such
additional information may be obtained from the Commission's principal office in
Washington, D.C. Statements contained in this Prospectus as to the contents of
any contract or other document referred to herein are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. The Registration Statement
and the exhibits thereto may be inspected without charge at the offices of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies may be
obtained from the Commission at prescribed rates.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus in connection with
the offering of securities made hereby and, if given or made, such information
or representation must not be relied upon as having been authorized by EMCLA or
CRBC. Neither the delivery of this Prospectus nor any distribution of the
securities offered hereby shall under any circumstances create an implication
that there has not been any change in the affairs of EMCLA or CRBC since the
date hereof or that the information set forth or incorporated by reference
herein is correct as of any time subsequent to its date. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to purchase, any
securities, in any jurisdiction in which, or to any person to whom, it is
unlawful to make such offer or solicitation of an offer.
iii
<PAGE> 5
SUMMARY
The following is a summary of certain information contained in this
Prospectus. It is qualified in its entirety by reference to the more detailed
information contained elsewhere in this Prospectus or incorporated by reference
herein, in the accompanying annexes and in the documents referred to herein.
Stockholders are urged to read this Prospectus in its entirety. Certain
capitalized terms used in this Prospectus are defined under the caption
"Glossary of Certain Terms and Market and Industry Data." As used herein, unless
the context otherwise clearly requires, "EMCLA" refers to Evergreen Media
Corporation of Los Angeles and its consolidated subsidiaries, "CRBC" refers to
Chancellor Radio Broadcasting Company and its consolidated subsidiaries,
"Surviving Subsidiary Corporation" refers to the Surviving Subsidiary
Corporation and its consolidated subsidiaries, "Evergreen" refers to Evergreen
Media Corporation and "Chancellor" refers to Chancellor Broadcasting Company.
THE COMPANIES
Evergreen Media Corporation
of Los Angeles............. EMCLA, an operating subsidiary of Evergreen,
currently owns and operates radio stations across
the United States, including stations in 11 of the
nation's 12 largest radio markets (Los Angeles, New
York, Chicago, Dallas, San Francisco, Washington,
D.C., Philadelphia, Houston, Boston, Detroit and
Miami). EMCLA's strategy is to secure the leading
clusters of radio stations in each of the markets
in which it operates. At August 4, 1997, without
giving effect to the Pending Transactions (as
defined) EMCLA's portfolio of stations consisted of
41 radio stations (27 FM and 14 AM) in 11 of the 12
largest radio revenue markets, including clusters
of between three and five FM stations
("superduopolies") in six of the nation's 12
largest radio revenue markets (New York, Chicago,
San Francisco, Philadelphia, Washington, D.C. and
Detroit). EMCLA's portfolio is diversified in terms
of format, target demographics, geographic location
and phase of development. Because of the size and
geographic breadth of its portfolio, EMCLA believes
that it is not unduly reliant on the performance of
any one station or market. EMCLA also believes that
the diversity of its portfolio of radio stations
helps to insulate EMCLA from downturns in specific
markets and changes in musical tastes.
Chancellor Radio
Broadcasting Company....... CRBC, an operating subsidiary of Chancellor,
currently owns and operates radio stations in 17
large markets across the United States (Los
Angeles, New York, Chicago, San Francisco,
Washington, D.C., Atlanta, Detroit, Denver,
Minneapolis/St. Paul, Phoenix, Cincinnati,
Pittsburgh, Sacramento, Orlando, Nassau/Suffolk
(Long Island), Jacksonville and Riverside/San
Bernardino). CRBC's strategy is to focus on owning
and operating ratio stations in the top 40 United
States markets, which account for a
disproportionately large percentage of radio
advertising revenue. At August 4, 1997, without
giving effect to the Pending Transactions, CRBC's
portfolio of stations consists of 53 radio stations
(37 FM and 16 AM) in 17 large markets, including
superduopolies in five of its 17 markets (Los
Angeles, Denver, Minneapolis/ St. Paul, Phoenix and
Orlando). CRBC employs a wide variety of
programming formats, including country, oldies,
news/talk, adult contemporary, progressive album
rock, contemporary hit radio, sports and classical.
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<PAGE> 6
Pending Evergreen
Transactions............. On April 4, 1997, EMCLA entered into three separate
asset purchase agreements (the "Gannett
Agreements") with Pacific and Southern Company,
Inc., a subsidiary of Gannett Co., Inc. ("P&S"),
under which EMCLA will acquire one FM station and
one AM station in Chicago, one FM station and one
AM station in Houston, and one FM station in Dallas
(the "Gannett Stations"), for an aggregate purchase
price of $340.0 million in cash, subject to an
upward adjustment of up to $10.0 million depending
on the timing of the consummation of the
transactions (the "Gannett Acquisition"). Although
there can be no assurances, EMCLA expects that the
Gannett Acquisition will be completed subsequent to
the Merger. EMCLA has also entered into an
agreement to acquire one FM station in Philadelphia
for an aggregate purchase price of $37.8 million
and two FM stations in Dallas for an aggregate
purchase price of $83.5 million and has entered
into an agreement to sell the station to be
acquired in Philadelphia, as well as four
additional stations (in Chicago, San Francisco and
Washington, D.C.), for an aggregate sales price of
$67.3 million. EMCLA must complete certain of these
dispositions prior to the consummation of the
Merger in order for the Surviving Subsidiary
Corporation to remain in compliance with the
multiple ownership limitations established by the
Federal Communications Commission (the "FCC")
pursuant to the Telecommunications Act of 1996 (the
"1996 Act"). The foregoing transactions are
collectively referred to as the "Pending Evergreen
Transactions."
Pending Chancellor
Transactions............. CRBC has entered into an agreement to sell one FM
station in Detroit for $37.0 million in cash. CRBC
has also entered into an agreement to acquire one
FM station in Denver for $26.0 million in cash.
CRBC must complete the disposition of the Detroit
station prior to consummation of the Merger in
order for the Surviving Subsidiary Corporation to
comply with the multiple ownership limitations
established by the FCC pursuant to the 1996 Act.
The foregoing transactions are collectively
referred to as the "Pending Chancellor
Transactions."
Evergreen Financing
Transactions............. EMCLA has financed the Evergreen Viacom Acquisition
(as defined) and certain of its other recently
completed transactions, and anticipates that it
will finance the Pending Evergreen Transactions,
with the proceeds of the following transactions:
(i) the issuance and sale in June 1997 by Evergreen
(the "Evergreen Convertible Preferred Stock
Offering") of 5,990,000 shares of $3.00 Convertible
Exchangeable Preferred Stock of Evergreen (the
"Evergreen $3.00 Convertible Preferred Stock")
which generated gross proceeds of $299.5 million,
the net proceeds of which were contributed to EMCLA
as capital; (ii) the amendment and restatement of
EMCLA's senior credit facility (the "EMCLA Senior
Credit Facility") among EMCLA and a syndicate of
commercial lenders on April 25, 1997, as amended on
June 26, 1997, to, among other things, provide for
a total current commitment of $1.75 billion,
consisting of a $1.25 billion reducing revolving
credit facility and a $500.0 million term loan
facility (EMCLA expects that the revolving credit
facility and the term loan facility will be
increased to $1.60 billion and $900.0 million,
respectively, upon consummation of the Merger);
2
<PAGE> 7
(iii) the cash proceeds of EMCLA's pending
dispositions (excluding the Douglas AM Dispositions
(as defined), of $49.3 million; and (iv) deposits
previously made by EMCLA of $8.4 million related to
the Bonneville Acquisition (as defined).
Chancellor Financing
Transactions............. CRBC has financed certain of its recently financed
transactions and anticipates that it will finance
the Pending Chancellor Transactions, with the
proceeds of the following transactions: (i) the
issuance and sale on June 24, 1997 by CRBC (the
"CRBC 8 3/4% Notes Offering") of its 8 3/4%
Subordinated Notes Due 2007 (the "CRBC 8 3/4%
Notes"); (ii) the amendment and restatement of
CRBC's senior credit facility (the "CRBC Restated
Credit Facility") among CRBC and a syndicate of
commercial lenders on July 2, 1997 to, among other
things, provide for a total current commitment of
$750.0 million; (iii) borrowings under an interim
loan of $170.0 million that Chancellor closed on
July 2, 1997 (the "Chancellor Interim Financing,"
the net borrowings of which were contributed to
CRBC as capital); (iv) the cash proceeds of CRBC's
pending dispositions of $37.0 million and (v)
deposits previously made by CRBC of $1.7 million
related to the Denver Acquisition. Upon
consummation of the Merger, all borrowings under
the CRBC Restated Credit Facility and the
Chancellor Interim Financing will be repaid by
EMCLA, which is expected to borrow funds under the
EMCLA Senior Credit Facility for such purpose.
Combined Companies......... After giving effect to the Merger, the Pending
Evergreen Transactions and the Pending Chancellor
Transactions (collectively, the "Pending
Transactions"), the Surviving Subsidiary
Corporation will own and operate a radio station
portfolio consisting of 97 radio stations (69 FM
and 28 AM) in 22 large markets, including each of
the nation's 12 largest radio revenue markets. The
Surviving Subsidiary Corporation's radio station
portfolio will include the first or second ranked
station cluster in terms of revenue share in 14 of
its 22 markets, and the Surviving Subsidiary
Corporation will have assembled superduopolies of
four or more FM stations in 11 markets (Los
Angeles, New York, Chicago, San Francisco,
Philadelphia, Washington, D.C., Detroit, Denver,
Minneapolis/St. Paul, Phoenix and Orlando). See
"Business -- The Combined Companies."
THE MERGER
General.................... Pursuant to the Merger Agreement, Chancellor will
merge with and into EMHC, a direct wholly owned
subsidiary of Evergreen, and thereafter CRBC will
merge with and into EMCLA, a direct, wholly owned
subsidiary of EMHC. Upon consummation of the
Merger, Evergreen will be renamed Chancellor Media
Corporation, EMHC will be renamed Chancellor
Mezzanine Holdings Corporation, and EMCLA will be
renamed Chancellor Media Corporation of Los
Angeles.
As of the close of business on July 25, 1997,
directors and executive officers of Evergreen and
their affiliates were the beneficial owners of
818,063 shares of Evergreen Class A Common Stock
(including all currently exercisable stock options
and options exercisable within 60 days of July 25,
1997 owned by certain executive officers of
Evergreen) and 3,114,066 shares of Evergreen Class
B Common Stock (all of
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<PAGE> 8
which are owned by Scott K. Ginsburg, Evergreen's
Chairman of the Board and Chief Executive Officer).
The 3,114,066 shares of Evergreen Class B Common
Stock owned by Mr. Ginsburg represent 7.4% of all
outstanding shares of Evergreen Common Stock and
44.3% of all voting power (assuming exercise of all
currently exercisable stock options and options
exercisable within 60 days after July 25, 1997).
Mr. Ginsburg, Thomas O. Hicks, Chairman of the
Chancellor Board, and certain holders of Chancellor
Common Stock that are affiliates of Mr. Hicks
(together with Mr. Hicks, the "Hicks Stockholders")
have entered into a Stockholders Agreement (the
"Stockholders Agreement") dated as of February 19,
1997, pursuant to which (i) Mr. Ginsburg has
agreed, subject to certain conditions, to vote all
shares of Evergreen Common Stock held by him in
favor of approval of the Merger Agreement and the
transactions contemplated thereby and (ii) the
Hicks Stockholders have agreed, subject to certain
conditions, to vote all shares of Chancellor Common
Stock held by such holders in favor of approval of
the Merger Agreement and the transactions
contemplated thereby. Such stockholders control
approximately 90.3% of the combined voting power of
the Chancellor Common Stock and approximately 44.3%
of the combined voting power of the Evergreen
Common Stock.
Sole Required Stockholder
Votes.................... Under the General Corporation Law of the State of
Delaware (the "DGCL"), the sole stockholder votes
required to approve the Subsidiary Merger are
written consents approving the Subsidiary Merger
from each of the sole common stockholders of CRBC
and EMCLA, and such consents have already been
obtained. Under the certificates of designation
governing the CRBC Series A Preferred Stock and the
CRBC Junior Preferred Stock, holders of CRBC Series
A Preferred Stock and the CRBC Junior Preferred
Stock are not entitled to vote on the Parent
Merger, the Subsidiary Merger or any other
transactions contemplated by the Merger Agreement.
The sole investment decision arising from the
Merger for holders of CRBC Series A Preferred Stock
and CRBC Junior Preferred Stock is whether to
exercise appraisal rights under Section 262
("Section 262") of the DGCL. See "The Merger --
Appraisal and Dissenters' Rights." Unless a holder
of shares of CRBC Series A Preferred Stock or CRBC
Junior Preferred Stock timely submits a written
demand for appraisal and otherwise complies with
Section 262 of the DGCL with respect to such
shares, each such share outstanding at the
Subsidiary Merger Effective Time will be converted
into one share of preferred stock of the Surviving
Subsidiary Corporation having substantially
identical powers, preferences and relative rights
as the CRBC Series A Preferred Stock or CRBC Junior
Preferred Stock, as the case may be. Neither the
Board of Directors of CRBC nor the Board of
Directors of EMCLA is making any recommendation to
holders of CRBC Series A Preferred Stock or CRBC
Junior Preferred Stock as to whether to exercise
their appraisal rights.
Appraisal Rights........... Under Section 262 of the DGCL, holders of CRBC
Series A Preferred Stock or CRBC Junior Preferred
Stock who (i) hold shares of CRBC Series A
Preferred Stock or CRBC Junior Preferred Stock on
the date of making a demand for appraisal, (ii)
continuously hold such shares through the
Subsidiary Merger Effective Time, (iii) deliver a
properly executed written demand for appraisal to
CRBC (or, if such a demand is
4
<PAGE> 9
timely following the Subsidiary Merger Effective
Time, to the Surviving Subsidiary Corporation)
within 20 days of the date of the mailing date of
this Prospectus, (iv) file any necessary petition
in the Delaware Court of Chancery within 120 days
after the Subsidiary Merger Effective Time and (v)
otherwise satisfy all procedural requirements set
forth in Section 262, are entitled, if the
Subsidiary Merger is consummated, to receive
payment of the fair value of their shares of CRBC
Series A Preferred Stock or CRBC Junior Preferred
Stock, as appraised by the Delaware Court of
Chancery. See "The Merger -- Appraisal and
Dissenters' Rights."
Interests of Certain
Persons in the Merger...... Certain directors, officers and stockholders of
Evergreen have interests in the Merger that are
different from, or in addition to, the interests of
Evergreen's stockholders generally. Among other
things, (i) Mr. Ginsburg has entered the
Stockholders Agreement and (ii) Mr. Ginsburg has
entered into a memorandum of agreement with
Evergreen, Chancellor and CRBC regarding Mr.
Ginsburg's continued employment by the Surviving
Corporation and its subsidiaries following
consummation of the Merger. See "The
Merger -- Interests of Certain Persons in the
Merger -- Evergreen."
Certain directors, officers, stockholders and
affiliates of Chancellor have interests in the
Merger that are different from, or in addition to,
the interests of Chancellor's stockholders
generally. Among other things, (i) the Hicks
Stockholders have entered into the Stockholders
Agreement, (ii) Hicks, Muse & Co. Partners, L.P.
("Hicks Muse Partners"), an affiliate of Hicks Muse
that provides certain services to Chancellor, has
entered into an amendment to its Financial
Monitoring and Oversight Agreement with Chancellor
and CRBC that would increase the annual fee to be
paid to Hicks Muse Partners upon consummation of
the Merger and (iii) HM2/Management Partners, L.P.
("HM2/Management"), an affiliate of Hicks Muse that
provides financial advisory services to Chancellor
and CRBC, agreed to terminate its financial
advisory agreement with Chancellor and CRBC upon
consummation of the Merger in return for a fee of
$10.0 million to be paid upon consummation of the
Merger. See "The Merger -- Interests of Certain
Persons in the Merger -- Chancellor."
Anticipated Accounting
Treatment................ The Subsidiary Merger will be accounted for as a
purchase of CRBC by EMCLA, in accordance with
generally accepted accounting principles. After the
Subsidiary Merger Effective Time, the results of
operations of CRBC and EMCLA will be included in
the consolidated financial statements of the
Surviving Subsidiary Corporation.
Certain Federal Income Tax
Consequences to Holders
of CRBC Series A
Preferred Stock and CRBC
Junior
Preferred Stock.......... The Parent Merger and the Subsidiary Merger are
each intended to qualify as a reorganization within
the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). The
obligation of each of Evergreen, EMHC, EMCLA
Chancellor and CRBC to consummate the Merger is
subject to the condition that it shall have
5
<PAGE> 10
received an opinion of its counsel, dated the
closing date of the Merger, to the effect that the
Parent Merger and the Subsidiary Merger will each
be treated for tax purposes as a reorganization
within the meaning of Section 368(a) of the Code.
Assuming that each of the Parent Merger and the
Subsidiary Merger is so treated, for Federal income
tax purposes, neither the Parent Merger nor the
Subsidiary Merger will result in the recognition of
gain or loss to Evergreen, EMHC, EMCLA, Chancellor,
CRBC, or the holders of CRBC Series A Preferred
Stock or CRBC Junior Preferred Stock, except with
respect to cash received in respect of shares of
CRBC Series A Preferred Stock or CRBC Junior
Preferred Stock as to which appraisal rights are
perfected. See "The Merger -- Certain Federal
Income Tax Consequences."
Resale of Surviving
Subsidiary Series A
Preferred Stock and
Surviving Subsidiary
Junior Preferred Stock... The shares of Surviving Subsidiary Series A
Preferred Stock and the Surviving Subsidiary Junior
Preferred Stock issued in the Subsidiary Merger
will be registered under the Securities Act
pursuant to the Registration Statement, of which
this Prospectus is a part. All shares of Surviving
Subsidiary Series A Preferred Stock and Surviving
Subsidiary Junior Preferred Stock issued to
stockholders of CRBC in the Subsidiary Merger will
be freely transferable.
Regulatory
Considerations............. Consummation of the Merger Agreement is subject to
certain regulatory approvals, including: (i) FCC
consent to the transfer of control of the FCC
licenses and authorizations held by Evergreen and
Chancellor and their respective subsidiaries (the
"FCC Consent") and (ii) expiration or termination
of the applicable waiting period under the HSR Act.
The applicable waiting period under the HSR Act was
terminated on May 21, 1997. As of August 1, 1997,
the FCC has not yet granted its consent to the
transfer of control of the FCC licenses and
authorizations held by Evergreen and its licensee
subsidiaries and Chancellor and its licensee
subsidiaries to the public stockholders of the
Surviving Corporation as a group. Although there
can be no assurances, Evergreen and Chancellor
expect that the FCC will grant its consent to the
transfer of control prior to the Evergreen Annual
Meeting and the Chancellor Special Meeting.
Assuming that such consent is received prior to
such time, Evergreen and Chancellor expect that
they will waive the condition to consummate the
Merger that such consent be a final, nonappealable
order. See "Risk Factors -- FCC Consent for the
Merger" and "The Merger -- Regulatory Concerns."
THE MERGER AGREEMENT
General.................... Pursuant to the Merger Agreement, (i) Chancellor
will merge with and into EMHC, a direct, wholly
owned subsidiary of Evergreen, with EMHC remaining
as the Surviving Mezzanine Corporation and (ii)
thereafter, CRBC will merge with and into EMCLA,
with EMCLA remaining as the Surviving Subsidiary
Corporation. Following the Merger, Evergreen will
be renamed Chancellor Media Corporation, EMHC will
be renamed Chancellor Mezzanine Holdings
Corporation and EMCLA will be renamed Chancellor
Media Corporation of Los Angeles.
6
<PAGE> 11
Conversion of Shares....... If the Merger is consummated, (i) each share of
Evergreen Class A Common Stock and Evergreen Class
B Common Stock outstanding immediately prior to the
Effective Time will be reclassified, changed and
converted into one share of Surviving Corporation
Common Stock, (ii) each share of Evergreen $3.00
Convertible Exchangeable Preferred Stock
outstanding immediately prior to the Effective Time
will remain outstanding as one share of $3.00
Convertible Exchangeable Preferred Stock of the
Surviving Corporation, (iii) each share (other than
treasury shares, which will be cancelled as a
result of the Merger) of Chancellor Common Stock
outstanding immediately prior to the Effective Time
will be converted into the right to receive 0.9091
shares of Surviving Corporation Common Stock, (iv)
each share of Chancellor Parent Convertible
Preferred Stock, other than shares of Chancellor
Parent Convertible Preferred Stock for which
appraisal rights have been exercised pursuant to
Section 262, will be converted into the right to
receive one share of Surviving Corporation 7%
Convertible Preferred Stock, (v) each share of EMHC
Common Stock outstanding immediately prior to the
Effective Time shall remain outstanding as one
share of Common Stock of the Surviving Mezzanine
Corporation, (vi) each share of EMCLA Common Stock
outstanding immediately prior to the Subsidiary
Merger Effective Time will remain outstanding as
one share of Common Stock of the Surviving
Subsidiary Corporation, (vii) each share of CRBC
Common Stock outstanding immediately prior to the
Subsidiary Merger Effective Time will be cancelled,
(viii) each share of CRBC Series A Preferred Stock
outstanding immediately prior to the Subsidiary
Merger Effective Time, other than shares of CRBC
Series A Preferred Stock for which appraisal rights
have been exercised pursuant to Section 262, will
be converted into the right to receive one share of
Surviving Subsidiary Series A Preferred Stock and
(ix) each share of CRBC Junior Preferred Stock
outstanding immediately prior to the Subsidiary
Merger Effective Time, other than shares of CRBC
Junior Preferred Stock for which appraisal rights
have been exercised pursuant to Section 262, will
be converted into the right to receive one share of
Surviving Subsidiary Junior Preferred Stock.
Effective Time of the
Merger..................... Each of the Parent Merger and the Subsidiary Merger
will become effective upon the filing of an
appropriate certificate of merger for the Parent
Merger and the Subsidiary Merger, respectively,
with the Secretary of State of the State of
Delaware upon the satisfaction or waiver of the
conditions to the Merger (the "Effective Time" and
the "Subsidiary Merger Effective Time,"
respectively). The Parent Merger will be
consummated prior to, but on the same day, as the
Subsidiary Merger.
Representations and
Warranties............... The Merger Agreement contains various customary
representations and warranties made by each of the
parties relating to, among other things: (i) the
organization, standing and similar corporate
matters of each party; (ii) the capital structure
of each party; (iii) the authorization, execution,
delivery, performance and enforceability of the
Merger Agreement with respect to each party; (iv)
documents filed by Evergreen, Chancellor and their
respective subsidiaries with the Commission and the
accuracy of information contained therein; (v) the
absence of conflicts with the organizational and
certain other documents of the parties as a result
of the execution and delivery of the Merger
Agreement
7
<PAGE> 12
or the consummation of the transactions
contemplated by the Merger Agreement; (vi) the
absence of violation of any law, rule or regulation
or any order, writ, judgment, injunction, decree,
determination or award currently in effect
applicable to the parties as a result of the
execution and delivery of the Merger Agreement or
the consummation of the transactions contemplated
by the Merger Agreement; (vii) the absence of
material changes since the date of the most recent
audited financial statements filed with the
Commission by Evergreen, Chancellor or their
respective subsidiaries with respect to the
business of Evergreen, Chancellor or any of their
respective subsidiaries, except as otherwise
provided in the Merger Agreement; (viii) the
validity of all authorizations issued by the FCC
for the operation of radio stations ("FCC
Licenses") held by Evergreen, Chancellor and their
respective subsidiaries; (ix) the compliance in all
material respects with the terms of the FCC
Licenses issued to Evergreen, Chancellor and their
respective subsidiaries and the timely filing with
the FCC of all applications, reports and other
disclosures with the FCC required to be made by
Evergreen, Chancellor and their respective
subsidiaries; (x) overall compliance in all
material respects with all applicable laws; and
(xi) the absence of undisclosed liabilities.
Certain Covenants.......... The Merger Agreement contains various customary
covenants, including covenants of each of Evergreen
and Chancellor that, during the period from the
date of the Merger Agreement until the Effective
Time, except as permitted by or contemplated in the
Merger Agreement, each of Evergreen and Chancellor
(and each of their respective subsidiaries), will,
among other things, (i) conduct its operations in
the ordinary course of business and (ii) use its
reasonable best efforts to preserve intact its
business organizations and goodwill in all material
respects and keep available the services of its
respective officers and employees as a group.
Further, each of Evergreen and Chancellor has
agreed that, among other things and subject to
certain conditions and exceptions, it will not (and
will cause its subsidiaries not to), without the
prior consent of the other, (i) declare, set aside
or pay any dividends on or make other distributions
in respect of its or its subsidiaries outstanding
capital stock; (ii) split, combine or reclassify
any of its outstanding capital stock or issue or
authorize the issuance of any securities in lieu of
or in substitution for its outstanding capital
stock; (iii) purchase, redeem or otherwise acquire
any shares of outstanding capital stock or any
rights, warrants or options to acquire any such
shares; (iv) issue, sell, grant, pledge or
otherwise encumber any shares of its capital stock,
any other equity securities or any securities
convertible into, or any rights, warrants or
options to acquire any such shares, equity
securities or convertible securities; (v) amend its
certificate of incorporation, bylaws or other such
documents; (vi) acquire any business or any
corporation, partnership, joint venture,
association or other business organization; (vii)
sell, mortgage or otherwise encumber or subject to
any lien or encumbrance or otherwise dispose of any
of its properties or assets that are material to
Evergreen or Chancellor and their respective
subsidiaries, (viii) other than working capital
borrowing in the ordinary course of business and
consistent with past practice, incur any
indebtedness for borrowed money or guarantee any
such indebtedness of another person; and (ix) make
any tax election or settle or compromise any income
tax liability that
8
<PAGE> 13
could reasonably be expected to be material to
Chancellor or Evergreen and their respective
subsidiaries.
Conditions to the Merger... The respective obligations of Evergreen,
Chancellor, EMHC, EMCLA and CRBC to consummate the
Merger are subject to the satisfaction or waiver at
or prior to the Effective Time of a number of
conditions, including: (i) the Merger Agreement
shall have been duly approved and adopted by the
stockholders of Evergreen and Chancellor in
accordance with applicable law; (ii) any applicable
waiting periods under the HSR Act, relating to the
Merger shall have expired or been terminated; (iii)
the consent of the FCC to the transfer of control
of the FCC licenses and authorization held by
Evergreen and Chancellor and their respective
subsidiaries shall have been received and such
consent shall have become final and nonappealable;
(iv) the absence of any injunction prohibiting
consummation of the Merger; (v) the Registration
Statement and the Registration Statement containing
a Joint Proxy Statement/Prospectus of Evergreen and
Chancellor (the "Parent Registration Statement")
shall each have been declared effective by the
Commission and shall not be subject to any stop
order; and (vi) the shares of Surviving Corporation
Common Stock to be issued pursuant to the Merger
Agreement shall have been approved for quotation on
The Nasdaq Stock Market, subject to official notice
of issuance. Evergreen and Chancellor currently
expect that they will waive the condition that the
consent of the FCC to the transfer of control of
the FCC licenses and authorizations held by
Evergreen and Chancellor and their respective
subsidiaries, once received, shall have become
final and nonappealable.
Additional Agreements...... Each of Evergreen and Chancellor has also agreed
to, among other things and subject to certain
conditions and exceptions: (i) as soon as
practicable following the date of the Merger
Agreement, prepare and file with the Commission the
Prospectus, the Registration Statement and the
Parent Registration Statement and to use its best
efforts to have each of the Registration Statement
and the Parent Registration Statement declared
effective under the Securities Act of 1933, as
amended (the "Securities Act"), as promptly as
practicable after such filing; (ii) take all action
necessary to convene a meeting of its stockholders
to submit the Merger Agreement for approval and to
use its best efforts to hold such stockholders'
meeting as soon as practicable after the date of
the Merger Agreement; and (iii) make, and cause its
respective subsidiaries and its other affiliates to
make, all necessary filings as soon as practicable,
including, without limitation, those required under
the HSR Act, the Securities Act, the Exchange Act
and the Communications Act (including filing an
application with the FCC for the transfer of
control of Chancellor's FCC Licenses and
Evergreen's FCC Licenses), in order to facilitate
prompt consummation of the Merger and the other
transactions contemplated by the Merger Agreement.
Evergreen and Chancellor have also further agreed
not to, and not to permit their subsidiaries to,
permit any of their or their respective
subsidiaries' officers, directors or employees,
investment bankers, attorneys or other advisors or
representatives to, directly or indirectly, (i)
solicit, initiate or encourage the submission of
any Acquisition Proposal (as defined in the Merger
Agreement) or (ii) participate in any discussions
or negotiations regarding, or furnish to any person
any
9
<PAGE> 14
information with respect to, or take any other
action to facilitate any inquiries or the making of
any proposals that constitutes, or may be
reasonably be expected to lead to, any Acquisition
Proposal.
Termination................ The Merger Agreement may be terminated at any time
prior to the Effective Time by, among other things:
(i) the mutual written consent of Evergreen and
Chancellor; (ii) by either Evergreen or Chancellor
if, upon a vote at a duly held meeting of the
stockholders of Chancellor or Evergreen, the
required approval of the stockholders of Evergreen
or Chancellor has not been obtained; or (iii) by
either Evergreen or Chancellor if the Merger
Agreement has not been consummated on or before
February 19, 1998.
10
<PAGE> 15
SUMMARY PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial statements, a complete
set of which are included on pages P-1 through P-27 of this Prospectus, are
presented using the purchase method of accounting for all acquisitions and
reflect (i) the combination of consolidated historical financial data of EMCLA,
CRBC, each of the stations acquired in the Completed Evergreen Transactions and
the Completed Chancellor Transactions and each of the stations to be acquired by
EMCLA in the Pending Evergreen Acquisitions and by CRBC in the Pending
Chancellor Acquisitions and (ii) the elimination of the consolidated historical
data of the stations sold by EMCLA and CRBC in the Completed Evergreen
Transactions and the Completed Chancellor Transactions and stations to be sold
or swapped by EMCLA or CRBC, as the case may be, in the Pending Evergreen
Dispositions and the Pending Chancellor Dispositions.
The summary pro forma financial information set forth below under Company
Pro Forma Combined presents adjustments for (i) in the case of the Operating
Data and Other Data, the Completed Transactions, the 1996 Evergreen Equity
Offering, the 1996 Evergreen Preferred Stock Conversion, the Chancellor
Offerings, all of the Pending Transactions (including the Merger and the Pending
Chancellor Transactions) and the Financing Transactions as if such transactions
had occurred on January 1, 1996 and (ii) in the case of the Balance Sheet Data,
for the Completed Transactions consummated after March 31, 1997, the Pending
Transactions and the Financing Transactions as if such transactions had occurred
on March 31, 1997. No adjustments are presented to the unaudited pro forma
condensed combined balance sheet data or the unaudited pro forma condensed
combined statement of operations data in respect of (i) the Bonneville
Acquisition and the Denver Acquisition, because such transactions have not yet
been completed and do not constitute the acquisition of a significant business,
either individually or in the aggregate, and are unrelated for purposes of Rule
3-05 and Rule 11-01 of Regulation S-X of the Commission's rules and (ii) the
Douglas AM Dispositions, because such transaction does not constitute the
disposition of a significant business for purposes of Rule 11-01 of Regulation
S-X of the Commission's rules. In addition, certain transactions identified as
"Pending Transactions" in the pro forma financial statements have been completed
since the preparation of such pro forma financial statements. Finally, the pro
forma financial information reflects a transaction previously proposed by
Chancellor to exchange its two Jacksonville stations for four stations in
Nassau/Suffolk (Long Island) (the "SFX Exchange"); however, there is substantial
uncertainty as to whether the SFX Exchange will be consummated. See "Business --
CRBC --Recent Developments -- Pending Chancellor Transactions -- SFX Exchange."
In the opinion of EMCLA's and CRBC's management, any differences in the pro
forma financial statements that would result from the completion of such
previously pending transactions or from the non-consummation of the SFX Exchange
are not material to such presentations either individually or in the aggregate.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
---------------------- -----------------------
COMPANY COMPANY
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL COMBINED
---------- --------- ---------- ----------
(IN THOUSANDS EXCEPT MARGIN AND PER SHARE DATA)
<S> <C> <C> <C> <C>
OPERATING DATA:
Net revenues............................ $ 293,850 $ 703,373 $ 81,897 $ 170,014
Station operating expenses excluding
depreciation and amortization......... 174,344 402,284 52,984 104,550
Operating income (loss)................. 17,960 (46,782) 568 (21,148)
Interest expense........................ 37,527 159,912 8,053 39,978
Net loss................................ (16,194) (147,859) (6,011) (42,028)
Preferred stock dividends............... -- 38,400 -- 9,639
Net loss attributable to common stock... (16,194) (186,259) (6,011) (51,667)
OTHER DATA:
Broadcast cash flow(1).................. $ 119,506 $ 301,089 $ 28,913 $ 65,464
Broadcast cash flow margin.............. 41% 43% 35% 39%
EBITDA(1)............................... $ 111,709 $ 287,919 $ 26,583 $ 61,532
Ratio of earnings to combined fixed
charges and preferred stock
dividends(2).......................... -- -- -- --
BALANCE SHEET DATA (END OF PERIOD):
Working capital, excluding current
portion of long-term debt............. $ 67,921 N/A $ 68,183 $ 120,517
Intangible assets, net.................. 853,643 N/A 928,440 4,134,058
Total assets............................ 1,020,959 N/A 1,186,655 4,482,774
Long-term debt (including current
portion).............................. 358,000 N/A 535,375 2,166,600
Redeemable preferred stock.............. -- N/A -- 319,203
Stockholder's equity.................... 549,411 N/A 543,524 1,557,744
</TABLE>
11
<PAGE> 16
- ---------------
(1) Broadcast cash flow consists of station operating income excluding
depreciation and amortization, and corporate general and administrative
expense and non-cash stock option compensation expense. EBITDA consists of
operating income before depreciation, amortization and non-cash stock option
compensation expense. Although broadcast cash flow and EBITDA are not
calculated in accordance with generally accepted accounting principles,
EMCLA believes that broadcast cash flow and EBITDA are widely used in the
broadcast industry as a measure of a station group's operating performance.
Nevertheless, these measures should not be considered in isolation or as a
substitute for operating income, cash flows from operating activities or any
other measure for determining EMCLA's operating performance or liquidity
that is calculated in accordance with generally accepted accounting
principles. Broadcast cash flow and EBITDA do not take into account EMCLA's
debt service requirements and other commitments and, accordingly, broadcast
cash flow and EBITDA are not necessarily indications of amounts that may be
available for reinvestment in EMCLA's business or other discretionary uses.
(2) For purposes of this calculation, "earnings" consist of income (loss) before
income taxes and fixed charges. "Fixed charges" consist of interest,
amortization of debt issuance costs and the component of rental expense
believed by management to be representative of the interest factor thereon.
Earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $19,090 for the year ended December 31, 1996, and by
$7,320 for the three months ended March 31, 1997. On a pro forma basis after
giving effect to the Completed Transactions, the 1996 Evergreen Equity
Offering, the 1996 Evergreen Preferred Stock Conversion, the Chancellor
Offerings, the Pending Transactions (other than the Bonneville Acquisition,
the Denver Acquisition and the Douglas AM Dispositions, but including the
SFX Exchange which, as described above, may not be consummated) and the
Financing Transactions, earnings were insufficient to cover combined fixed
charges and preferred stock dividends by $265,464 and $74,215 for the year
ended December 31, 1996 and the three months ended March 31, 1997,
respectively.
12
<PAGE> 17
EVERGREEN MEDIA CORPORATION OF LOS ANGELES
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The selected consolidated historical financial data presented below as of
and for each of the five years in the period ended December 31, 1996 have been
derived from the annual audited consolidated financial statements of EMCLA,
which consolidated financial statements have been audited by KPMG Peat Marwick
LLP, independent certified public accountants. The selected consolidated
historical financial data as of March 31, 1996 and 1997 and for the three months
ended March 31, 1996 and 1997 have been derived from the unaudited historical
consolidated financial statements of EMCLA. In the opinion of management of
EMCLA, the unaudited consolidated financial data reflect all adjustments, which
are of a normal recurring nature, necessary for a fair presentation of the
financial position and results of operations for the unaudited periods. The
historical results of operations for the three months ended March 31, 1997, are
not necessarily indicative of the results to be expected for the full year. The
consolidated historical financial results of EMCLA are not comparable from
period to period because of the acquisition and disposition of various radio
stations by EMCLA during the periods covered (See "Pro Forma Financial
Statements"). The following data should be read in conjunction with the
historical consolidated financial statements of EMCLA and the related notes
thereto, the unaudited pro forma condensed consolidated financial statements of
EMCLA and the related notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
--------- -------- -------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT RATIO, MARGIN AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross Revenues.......................... $ 61,935 $106,813 $125,478 $ 186,365 $ 337,405 $ 60,782 $ 93,812
Net Revenues............................ 53,969 93,504 109,516 162,931 293,850 53,371 81,897
Station operating expenses excluding
depreciation and amortization......... 34,968 60,656 68,852 97,674 174,344 37,426 52,984
Depreciation and amortization........... 11,596 33,524 30,596 47,005 93,749 22,676 26,015
Corporate general and administrative
expenses.............................. 1,717 2,378 2,672 4,475 7,797 1,492 2,330
Other nonrecurring costs(1)............. -- 7,002 -- -- -- -- --
--------- -------- -------- --------- --------- --------- ---------
Operating income (loss)................. 5,688 (10,056) 7,396 13,777 17,960 (8,223) 568
Interest expense........................ 10,112 13,878 13,809 19,199 37,527 8,973 8,053
Other (income) expense, net(2).......... 565 (3,185) (6,452) 236 (477) -- (165)
--------- -------- -------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary income.................. (4,989) (20,749) 39 (5,658) (19,090) (17,196) (7,320)
Income tax expense (benefit)............ -- -- -- 192 (2,896) (2,923) (1,309)
--------- -------- -------- --------- --------- --------- ---------
Income (loss) before extraordinary
item.................................. (4,989) (20,749) 39 (5,850) (16,194) (14,273) (6,011)
Extraordinary loss on early
extinguishment of debt(3)............. 1,798 -- 3,585 -- -- -- --
--------- -------- -------- --------- --------- --------- ---------
Net loss attributable to common stock... $ (6,787) $(20,749) $ (3,546) $ (5,850) $ (16,194) $ (14,273) $ (6,011)
========= ======== ======== ========= ========= ========= =========
OTHER DATA:
Broadcast cash flow(4).................. $ 19,001 $ 32,848 $ 40,664 $ 65,257 $ 119,506 $ 15,945 $ 28,913
Broadcast cash flow margin.............. 35% 35% 37% 40% 41% 30% 35%
EBITDA(4)............................... $ 17,284 $ 23,468 $ 37,992 $ 60,782 $ 111,709 $ 14,453 $ 26,583
Capital expenditures.................... 867 1,735 5,227 2,642 6,543 344 672
Ratio of earnings to fixed charges(5)... -- -- 1.0x -- -- -- --
</TABLE>
13
<PAGE> 18
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
--------- -------- -------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT RATIO, MARGIN AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF PERIOD):
Working capital, excluding current
portion of long-term debt............. $ 13,456 $ 18,498 $ 19,952 $ 34,556 $ 67,921 $ 39,871 $ 68,183
Intangible assets, net.................. 181,022 212,517 233,494 458,787 853,643 762,874 928,440
Total assets............................ 234,852 283,505 297,990 552,347 1,020,959 908,900 1,186,655
Long-term debt (including current
portion).............................. 165,000 152,000 174,000 201,000 358,000 510,000 535,375
Stockholders' equity.................... 2,905 120,968 112,353 304,577 549,411 289,416 543,524
CASH FLOW DATA:
Net cash provided by operating
activities............................ $ 5,379 $ 14,959 $ 19,880 $ 40,387 $ 48,050 $ 14,860 $ 19,241
Net cash used in investing activities... (101,248) (76,163) (32,928) (192,112) (461,938) (315,506) (194,383)
Net cash provided by financing
activities............................ 97,329 62,043 11,683 153,939 413,518 304,432 177,351
</TABLE>
- ---------------
(1) Consists of a non-cash charge resulting from the grant of employee stock
options prior to Evergreen's initial public offering.
(2) Includes gain on dispositions of assets of $3,392 and $6,991 in 1993 and
1994, respectively.
(3) In connection with its debt refinancing in 1992 and 1994, EMCLA wrote off
the unamortized balance of deferred debt issuance costs of $1,798 and
$3,585, respectively, as an extraordinary charge.
(4) Broadcast cash flow consists of station operating income excluding
depreciation and amortization, and corporate general and administrative
expense and non-cash stock option compensation expense. EBITDA consists of
operating income before depreciation, amortization and non-cash stock option
compensation expense. Although broadcast cash flow and EBITDA are not
calculated in accordance with generally accepted accounting principles,
EMCLA believes that broadcast cash flow and EBITDA are widely used in the
broadcast industry as a measure of a station group's operating performance.
Nevertheless, these measures should not be considered in isolation or as a
substitute for operating income, cash flows from operating activities or any
other measure for determining EMCLA's operating performance or liquidity
that is calculated in accordance with generally accepted accounting
principles. Broadcast cash flow and EBITDA do not take into account EMCLA's
debt service requirements and other commitments and, accordingly, broadcast
cash flow and EBITDA are not necessary indications of amounts that may be
available for reinvestment in EMCLA's business or other discretionary uses.
(5) For purposes of this calculation, "earnings" consist of income (loss) before
income taxes and fixed charges. "Fixed charges" consist of interest,
amortization of debt issuance costs and the component of rental expense
believed by management to be representative of the interest factor thereon.
Earnings were insufficient to cover fixed charges by $4,989, $20,749, $5,658
and $19,090 for the years ended December 31, 1992, 1993, 1995, and 1996,
respectively and by $17,196 and $7,320 for the three months ended March 31,
1996 and 1997, respectively.
14
<PAGE> 19
CHANCELLOR RADIO BROADCASTING COMPANY
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The selected consolidated historical financial data presented below as of
and for each of the five years in the period ended December 31, 1996 have been
derived from the annual audited consolidated financial statements of CRBC, which
consolidated financial statements have been audited by Coopers & Lybrand LLP,
independent certified public accountants. The selected consolidated historical
financial data as of March 31, 1996 and 1997 and for the three months ended
March 31, 1996 and 1997 have been derived from the unaudited historical
consolidated financial statements of CRBC. The selected consolidated financial
data for CRBC in the following table reflects (i) the results of Old Chancellor
Communications for the years ended December 31, 1992 and 1993 and (ii) the
results of operations of CRBC from January 10, 1994. In the opinion of
management of CRBC, the unaudited consolidated financial data reflect all
adjustments, which are of a normal recurring nature, necessary for a fair
presentation of the financial position and results of operations for the
unaudited periods. The historical results of operations for the three months
ended March 31, 1997, are not necessarily indicative of the results to be
expected for the full year. The consolidated historical financial results of
CRBC are not comparable from period to period because of the acquisition and
disposition of various radio stations by CRBC during the periods covered (See
"Pro Forma Financial Statements"). The following data should be read in
conjunction with the historical consolidated financial statements of CRBC and
the related notes thereto, the unaudited pro forma condensed consolidated
financial statements of CRBC and the related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included elsewhere herein.
<TABLE>
<CAPTION>
OLD CHANCELLOR CHANCELLOR RADIO BROADCASTING COMPANY
COMMUNICATIONS ---------------------------------------------------------
----------------- THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- -------- -------- -------- --------- -----------
(IN THOUSANDS EXCEPT MARGIN AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues................. $14,310 $17,478 $ 30,080 $ 73,279 $203,188 $ 29,089 $ 63,477
Net revenues................... 12,121 14,717 26,317 64,322 178,401 25,642 55,854
Station operating expenses
excluding depreciation and
amortization................. 8,738 9,738 15,660 37,464 111,210 16,492 38,187
Depreciation and
amortization................. 1,102 1,014 2,954 8,256 20,877 4,525 8,109
Corporate general and
administrative expenses...... 544 568 600 1,816 4,845 1,008 1,712
Merger expense(1).............. -- -- -- -- -- -- 2,056
Stock option compensation(2)... -- -- -- 6,360 3,800 950 950
------- ------- -------- -------- -------- --------- -----------
Operating income (loss)........ 1,737 3,397 7,103 10,426 37,669 2,667 4,840
Interest expense............... 724 700 5,247 18,115 35,704 7,647 11,420
Other (income) expense(3)...... 93 (2) (20) 42 68 6 (1,632)
------- ------- -------- -------- -------- --------- -----------
Income (loss) before income
taxes and extraordinary
item......................... 920 2,699 1,876 (7,731) 1,897 (4,986) (4,948)
Income tax expense (benefit)... 521 1,235 1,164 3,800 4,612 939 (400)
------- ------- -------- -------- -------- --------- -----------
Net income (loss) before
extraordinary item........... 399 1,464 712 (11,531) (2,715) (5,925) (4,548)
Extraordinary loss on early
extinguishment
of debt...................... -- -- 818 -- 4,177 4,646 2,749
------- ------- -------- -------- -------- --------- -----------
Net income (loss).............. 399 1,464 (106) (11,531) (6,892) (10,571) (7,297)
Preferred stock dividends...... -- -- -- -- 11,557 1,660 8,135
Loss on repurchase of preferred
stock........................ -- -- -- -- 16,570 16,570 --
------- ------- -------- -------- -------- --------- -----------
Net income (loss) attributable
to common stock.............. 399 1,464 (106) (11,531) (35,019) (28,801) (15,432)
======= ======= ======== ======== ======== ========= ===========
</TABLE>
15
<PAGE> 20
<TABLE>
<CAPTION>
OLD CHANCELLOR CHANCELLOR RADIO BROADCASTING COMPANY
---------------------------------------------------------
COMMUNICATIONS
--------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- ------------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- ---------- ------------
(IN THOUSANDS EXCEPT MARGIN AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
DATA:Broadcast cash flow(4)........ $ 3,383 $ 4,979 $ 10,657 $ 26,858 $ 67,191 $ 9,150 $ 17,667
Broadcast cash flow margin......... 28% 34% 41% 42% 38% 36% 32%
EBITDA(4).......................... $ 2,839 $ 4,411 $ 10,057 $ 25,042 $ 62,346 $ 8,142 $ 13,899
Capital expenditures............... 86 8 239 1,710 3,209 820 1,564
Ratio of earnings to combined fixed
charges and preferred stock
dividends(5)..................... 2.17x 4.51x 1.35x -- -- -- --
BALANCE SHEET DATA (END OF PERIOD):
Working capital, excluding current
portion of long-term debt........ $ 2,304 $ 1,739 $ 6,178 $ 5,826 $ 29,319 $ 14,169 $ 37,586
Intangibles and other, net and
deferred financing costs, net.... 13,056 12,679 189,982 208,093 568,129 573,716 992,514
Total assets....................... 20,542 19,275 219,576 241,123 690,743 673,287 1,175,723
Long-term debt (including current
portion)......................... -- -- 151,664 172,170 355,313 357,128 536,621
Redeemable preferred stock......... -- -- -- -- 107,222 97,652 307,174
Stockholders' equity............... 19,084 17,145 59,894 54,723 200,991 181,719 307,076
CASH FLOW DATA:
Net cash provided by operating
activities....................... $ 2,022 $ 3,606 $ 691 $ 5,471 $ 24,047 $ 8,785 $ 6,045
Net cash used in investing
activities....................... (86) (8) (204,748) (26,061) (442,742) (406,386) (480,632)
Net cash provided by (used in)
financing activities............. (2,018) (3,402) 205,574 20,388 421,169 398,802 475,780
</TABLE>
- ---------------
(1) Consists of costs incurred by CRBC during the three months ended March 31,
1997 in connection with the Merger.
(2) Consists of a non-cash charge resulting from the grant of employee stock
options.
(3) Includes gain on disposition of assets of $1,513 during the three months
ended March 31, 1997.
(4) Broadcast cash flow consists of station operating income excluding
depreciation and amortization, and corporate general and administrative
expense, merger expense and non-cash stock option compensation expense.
EBITDA consists of operating income before depreciation, amortization and
non-cash stock option compensation expense. Although broadcast cash flow and
EBITDA are not calculated in accordance with generally accepted accounting
principles, CRBC believes that broadcast cash flow and EBITDA are widely
used in the broadcast industry as a measure of a stations group's operating
performance. Nevertheless, these measures should not be considered in
isolation or as a substitute for operating income, cash flows from operating
activities or any other measure for determining CRBC's operating performance
or liquidity that is calculated in accordance with generally accepted
accounting principles. Broadcast cash flow and EBITDA do not take into
account CRBC's debt service requirements and other commitments and,
accordingly, broadcast cash flow and EBITDA are not necessary indications of
amounts that may be available for reinvestment in CRBC's business or other
discretionary uses.
(5) For purposes of this calculation, "earnings" consist of income (loss) before
income taxes and fixed charges. "Fixed charges" consist of interest,
amortization of debt issuance costs and the component of rental expense
believed by management to be representative of the interest factor thereon.
Earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $7,731 and $17,365 for the years ended December 31, 1995
and 1996, respectively and by $7,753 and $18,506 for the three months ended
March 31, 1996 and 1997, respectively.
16
<PAGE> 21
RISK FACTORS
In considering whether to exercise appraisal rights pursuant to Section 262
of the DGCL, holders of CRBC Series A Preferred Stock and CRBC Junior Preferred
Stock should carefully consider the following factors.
SUBSTANTIAL LEVERAGE; HISTORY OF NET LOSSES AND INSUFFICIENCY OF EARNINGS TO
COVER COMBINED FIXED CHANGES AND PREFERRED STOCK DIVIDENDS
Each of EMCLA and CRBC has, and following the Merger the Surviving
Subsidiary Corporation will continue to have, consolidated indebtedness that is
substantial in relation to its stockholder's equity. Upon consummation of the
Merger, the Surviving Subsidiary Corporation will be subject to the terms of the
EMCLA Senior Credit Facility, the indenture (the "CRBC 9 3/8% Indenture")
governing the $200.0 million principal amount of 9 3/8% Senior Subordinated
Notes due 2004 of CRBC (the "CRBC 9 3/8% Notes") being assumed by EMCLA in
connection with the Subsidiary Merger, the indenture (the "CRBC 8 3/4%
Indenture") governing the $200.0 million principal amount of 8 3/4% Senior
Subordinated Notes due 2007 of CRBC (the "CRBC 8 3/4% Notes") being assumed by
EMCLA in connection with the Subsidiary Merger and the certificates of
designation for the Surviving Subsidiary Series A Preferred Stock and the
Surviving Subsidiary Junior Preferred Stock, each of which will limit the
incurrence of additional indebtedness by the Surviving Corporation. As of March
31, 1997, EMCLA's outstanding long-term indebtedness (including current portion)
was approximately $535.4 million, and CRBC's long-term indebtedness (including
current portion) was approximately $536.6 million. Consummation of the Pending
Transactions and the Financing Transactions will cause the Surviving Subsidiary
Corporation's indebtedness to significantly exceed the amount of EMCLA's or
CRBC's individual and combined outstanding indebtedness. As of March 31, 1997,
on a pro forma basis after giving effect to those Completed Transactions
consummated after such date, the Pending Transactions (including the SFX
Exchange which, as described above, may not be consummated) and the Financing
Transactions, but without giving effect to the Bonneville Acquisition, the
Denver Acquisition or the Douglas AM Dispositions, the Surviving Subsidiary
Corporation would have had outstanding long-term indebtedness (including current
portion) of approximately $2.17 billion, redeemable preferred stock with an
aggregate liquidation preference of $319.2 million, an accumulated deficit of
$77.5 million and stockholder's equity of $1.56 billion. In addition to the
foregoing long-term indebtedness, it is expected that the Surviving Subsidiary
Corporation will finance the Bonneville Acquisition and the Denver Acquisition
through the incurrence of approximately $109.5 million in additional long-term
indebtedness. Moreover, EMCLA expects to borrow up to $144.0 million under the
EMCLA Senior Credit Facility, and CRBC expects to borrow up to $36.0 million
under the CRBC Restated Credit Facility to be distributed to Evergreen and
Chancellor, respectively, and to be used by Evergreen and Chancellor as the
equity capital required to finance their respective shares of the Katz
Acquisitions. See "-- Katz Acquisition."
The degree to which the Surviving Subsidiary Corporation will be leveraged
could have material consequences, including, but not limited to, the following:
(i) the Surviving Subsidiary Corporation's ability to obtain additional
financing in the future for acquisitions, working capital, capital expenditures,
and general corporate or other purposes may be impaired; (ii) a substantial
portion of the Surviving Subsidiary Corporation's cash flow will be required for
debt service under the EMCLA Senior Credit Facility, the CRBC 9 3/8% Senior
Notes and the CRBC 8 3/4% Senior Notes, and payment of cash dividends to the
Surviving Mezzanine Corporation, which will, in turn, distribute dividends paid
to it to the Surviving Corporation to enable the Surviving Corporation to pay
cash dividends on the Surviving Corporation 7% Convertible Preferred Stock and
the Evergreen $3.00 Convertible Preferred Stock; (iii) commencing in February
2001, the Surviving Subsidiary Corporation will have substantial cash dividend
requirements on the Surviving Subsidiary Series A Preferred Stock and,
commencing in January 2002, on the Surviving Subsidiary Junior Preferred Stock;
(iv) the Surviving Subsidiary Corporation's level of indebtedness could make it
more vulnerable to economic downturns, limit its ability to withstand
competitive pressures and reduce its flexibility in responding to changing
business and economic conditions; and (v) the agreements governing the Surviving
Subsidiary Corporation's consolidated long term debt (and, to a lesser extent,
the certificates of designation for the Surviving Subsidiary Series A Preferred
Stock and the Surviving Subsidiary Junior Preferred Stock)
17
<PAGE> 22
contain numerous restrictive operating and financial covenants with which the
Surviving Subsidiary Corporation must comply, and the failure by the Surviving
Subsidiary Corporation to comply with such covenants in such instruments could
result in an event of default, which could permit acceleration of the debt under
such instruments and in some cases acceleration of debt under other instruments
that contain cross-default or cross-acceleration provisions.
The ability of the Surviving Subsidiary Corporation to pay interest and
principal on its debt obligations and to pay cash dividends on the Surviving
Subsidiary Series A Preferred Stock and Surviving Subsidiary Junior Preferred
Stock will depend upon its future operating performance, which will be affected
by prevailing economic conditions and financial, business and other factors,
certain of which are beyond its control. The Surviving Subsidiary Corporation
anticipates that its operating cash flow, together with borrowings under the
EMCLA Senior Credit Facility, will be sufficient to meet its operating expenses,
to service its debt requirements and to pay cash dividends on the Surviving
Subsidiary Series A Preferred Stock and Surviving Subsidiary Junior Preferred
Stock as they become due. However, if the Surviving Subsidiary Corporation is
unable to meet such requirements, it will be forced to pursue one or more
alternative strategies such as selling assets, restructuring or refinancing its
indebtedness, or seeking additional equity capital. There can be no assurance
that any of these strategies could be effected on satisfactory terms, if at all,
or that the approval of the FCC could be obtained on a timely basis or at all,
for the transfer of any of the stations' licenses in connection with a proposed
sale of assets.
Each of EMCLA and CRBC has historically experienced, on a consolidated
basis, net losses, as a result of various factors, including significant
interest charges, certain non-recurring expenses and depreciation and
amortization charges relating to the acquisition of radio broadcasting stations.
EMCLA's net loss attributable to common stock for the years ended December 31,
1994, 1995 and 1996 and for the three months ended March 31, 1997 was $3.5
million, $5.9 million, $16.2 million and $6.0 million, respectively. CRBC's net
loss attributable to common stock for the years ended December 31, 1994, 1995
and 1996 and for the three months ended March 31, 1997 was $0.1 million, $11.5
million, $35.0 million and $15.4 million respectively. On a pro forma basis,
after giving effect to the Completed Transactions, the Pending Transactions
(including the SFX Exchange which, as described above, may not be consummated),
the Financing Transactions, the 1996 Evergreen Equity Offerings, the 1996
Preferred Stock Conversion and the Chancellor Offerings as though such
transactions had occurred on January 1, 1996, but without giving effect to the
Bonneville Acquisition, the Denver Acquisition or the Douglas AM Dispositions,
the Surviving Subsidiary Corporation would have had a net loss attributable to
common stock of $186.3 million and $51.7 million for the year ended December 31,
1996 and for the three months ended March 31, 1997, respectively. Consequently,
on that pro forma basis, the Surviving Subsidiary Corporation's earnings would
have been insufficient to cover combined fixed charges and preferred stock
dividends by $265.5 million and $74.2 million for the year ended December 31,
1996 and the three months ended March 31, 1997, respectively. The acquisition of
radio broadcasting stations has been and will continue to be an important part
of the Surviving Subsidiary Corporation's operating strategy and EMCLA and CRBC
expect that amortization charges and interest expenses relating to past and
possible future acquisitions of radio broadcasting stations will continue to
have a significant adverse effect on the Surviving Subsidiary Corporation's
reported results.
NECESSITY OF GOVERNMENTAL REVIEWS AND APPROVALS PRIOR TO CONSUMMATION OF THE
PENDING TRANSACTIONS; REQUIRED DISPOSITIONS
Approval of the FCC is required for the issuance, renewal or transfer of
radio broadcast station operating licenses. In addition, the consummation of
each of the Pending Transactions is conditioned upon the expiration or
termination of the applicable waiting period under the HSR Act. To date, (i) the
FCC has approved the Gannett Acquisition, the Secret/Philadelphia Acquisition,
the Greater Media Disposition, the Douglas Chicago Disposition, the Douglas AM
Dispositions and the ABC/Detroit Disposition, (ii) the waiting periods required
under the HSR Act for the Merger, the Gannett Acquisition, the
Secret/Philadelphia Acquisition, the Greater Media Disposition, the ABC/Detroit
Disposition and the Bonneville Acquisition have expired or been terminated, and
(iii) no waiting period under the HSR Act was required for the Douglas Chicago
Disposition or the Douglas AM Dispositions. EMCLA and CRBC will be required to
divest certain
18
<PAGE> 23
radio stations, including stations in the San Francisco, Washington, D.C. and
Detroit markets, in order to obtain the necessary FCC authorizations and
approvals of the Merger. In order to comply with the FCC's ownership
limitations, EMCLA or CRBC has each entered into one or more contracts to sell
stations and/or FCC authorizations in the Chicago, San Francisco, Philadelphia,
Washington, D.C. and Detroit markets. There can be no assurance that the
necessary dispositions will be consummated and, if any such dispositions are not
consummated, there can be no assurance that other buyers for the stations
required to be disposed of will be found or that any such dispositions could be
effected acceptable prices. If any of these dispositions are not consummated on
a timely basis, it is possible that the consummation of the Merger or other
Pending Transactions would be delayed. There can be no assurance that any
governmental agency will approve or take any other required action with respect
to the Pending Transactions, and, if approvals are received or actions are
taken, that such approvals or actions will not require further divestitures or
be conditioned upon matters that would cause EMCLA or CRBC to abandon one or
more of the Pending Transactions or that no action will be brought challenging
such approvals or actions, or, if such challenge is made, as to the result
thereof. See "The Merger -- Regulatory Concerns." The nonconsummation of any of
the Pending Dispositions could have a material adverse effect on EMCLA's or
CRBC's ability to consummate the Subsidiary Merger.
FCC CONSENT FOR MERGER
Consummation of the Merger is subject to the conditions that the FCC grant
its consent to the transfer of control of the FCC licenses and authorizations
held by Evergreen and Chancellor and their respective subsidiaries to the public
stockholders of the Surviving Corporation as a group (the "FCC Consent"), and
that the FCC Consent become a final and nonappealable order. See "The Merger
Agreement -- Conditions to the Merger" and "The Merger -- Regulatory Concerns."
As of August 4 , 1997, the FCC had not yet granted the FCC Consent. Evergreen
and Chancellor expect that the FCC will grant the FCC Consent prior to the
Evergreen Annual Meeting and the Chancellor Special Meeting, although it is not
possible to predict the timing, or even the outcome, of such expected actions
with certainty. No petitions to deny or similar applications against the
requests seeking the FCC Consent are pending as of August 4, 1997. Upon grant of
the FCC Consent, interested parties would have until 30 days after such consent
is released to seek review thereof by filing a petition for reconsideration, or
application for review, with the full FCC, or to file an appeal in federal
court. Moreover, within 40 days of release of such consent, the FCC could, on
its own motion, reconsider its consent. Should the FCC Consent be granted prior
to the Evergreen Annual Meeting and the Chancellor Special Meeting, Evergreen
and Chancellor expect that they will waive the condition to consummate the
Merger that such consent be a final, nonappealable order. Prior to the
expiration of such 30-or 40-day reconsideration period, there can be no
assurance that any consent granted would become a final and nonappealable order,
and if the consent were to be subsequently reversed or otherwise vacated, there
could be a material adverse effect on the Surviving Corporation.
CONDITIONS TO CONSUMMATION OF MERGER
Consummation of the Merger is subject to a number of conditions, including
approval by the stockholders of each of Evergreen and Chancellor, various
governmental approvals, the prior or simultaneous consummation of the Required
Dispositions (as defined) and the increase in the commitments under the EMCLA
Senior Credit Facility from $1.75 billion to $2.50 billion. Furthermore, under
the terms of the CRBC 9 3/8% Indenture, the CRBC 8 3/4% Indenture and the
certificates of designation for the CRBC Series A Preferred Stock and CRBC
Junior Preferred Stock, the Merger may not be consummated unless, after giving
effect thereto, leverage is less than a specified multiple of the EBITDA of CRBC
and EMCLA and their respective subsidiaries on a combined basis. There can be no
assurance that any of these conditions will be satisfied.
INTEGRATION OF ACQUISITIONS
Upon consummation of the Pending Transactions, the Surviving Subsidiary
Corporation will hold a significantly larger portfolio of radio stations than
either EMCLA or CRBC has held in the past. In addition, management of both EMCLA
and CRBC are regularly involved in discussions with third parties regarding
19
<PAGE> 24
potential acquisitions, and the Surviving Subsidiary Corporation may pursue an
active acquisition strategy that could result in significant additional
expansion in the future. Assuming the consummation of all Pending Transactions,
the Surviving Subsidiary Corporation's future operations and earnings will be
largely dependent on the Surviving Subsidiary Corporation's ability to integrate
the stations proposed to be acquired thereunder. The Surviving Subsidiary
Corporation must, among other things, integrate management and employee
personnel and combine certain administrative procedures. The integration of the
stations proposed to be acquired involve numerous other risks, including the
potential loss of key employees of acquired stations. There can be no assurance
that the Surviving Subsidiary Corporation will successfully integrate the
stations proposed to be acquired, and the failure to do so could have a material
adverse effect on its results of operations and financial condition. In
addition, the need to focus management's attention on the integration of these
stations may limit the ability of the Surviving Subsidiary Corporation to
successfully pursue other opportunities for a period of time.
The acquisition strategy of EMCLA, CRBC and, following the consummation of
the Subsidiary Merger, the Surviving Subsidiary Corporation, involves numerous
other risks, including increasing leverage and debt service requirements, the
diversion of management's attention from other business concerns and the
potential loss of key employees of acquired stations. The availability of
additional acquisition financing cannot be assured, and depending on the terms
of the proposed acquisitions and financings, could be restricted by the terms of
the EMCLA Senior Credit Facility, the CRBC 9 3/8% Indenture, the CRBC 8 3/4%
Indenture or the certificates of designation for the Surviving Corporation 7%
Convertible Preferred Stock, the Evergreen $3.00 Convertible Preferred Stock,
the Surviving Subsidiary Series A Preferred Stock and the Surviving Subsidiary
Junior Preferred Stock. There can be no assurance that or any future
acquisitions will not have a material adverse effect on the financial condition
and results of operations of the Surviving Subsidiary Corporation.
KATZ ACQUISITION
On July 14, 1997, Evergreen, Chancellor and Katz Media Group Inc. ("Katz")
entered into an agreement pursuant to which a jointly-owned affiliate of
Evergreen and Chancellor would acquire Katz, a full-service media representation
firm, in a tender offer transaction valued at approximately $373 million (the
"Katz Acquisition"). Upon consummation of the Katz Acquisition, which is
expected to occur shortly before the Merger, Evergreen and Chancellor intend, at
least in the near term, to operate Katz as a separate, stand-alone subsidiary of
Evergreen and Chancellor and not as a subsidiary of EMHC, EMCLA or CRBC.
Accordingly, neither the assets nor the results of operations of Katz will be
reflected in the consolidated financial statements of EMCLA, CRBC or the
Surviving Subsidiary Corporation. Holders of Surviving Subsidiary Series A
Preferred Stock and Surviving Subsidiary Junior Preferred Stock should not
assume that following the Subsidiary Merger the Surviving Subsidiary Corporation
will have any interest in the business or operations of Katz. Evergreen and
Chancellor are presently exploring whether, following the Subsidiary Merger and
assuming the consummation of the Katz Acquisition, Katz should be combined with
the Surviving Subsidiary Corporation. However, at this time, no definitive
decision has been made whether to pursue such a combination.
COMPETITIVE NATURE OF RADIO BROADCASTING
The radio broadcasting industry is a highly competitive business. The
success of each of the Surviving Subsidiary Corporation's stations will be
dependent, to a significant degree, upon its audience ratings and share of the
overall advertising revenue within its market. The Surviving Subsidiary
Corporation's stations will compete for listeners and advertising revenue
directly with other radio stations, as well as with other media, within their
respective markets. The Surviving Subsidiary Corporation will also compete with
other broadcasting operators for acquisition opportunities, and prices for radio
stations in major markets have increased significantly in recent periods. To the
extent the rapid pace of consolidation in the radio broadcasting industry
continues, certain competitors may emerge with larger portfolios of major market
radio stations, greater ability to deliver large audiences to advertisers and
more access to capital resources than the Surviving Subsidiary Corporation. The
Surviving Subsidiary Corporation's audience ratings and market share will be
subject to change and any adverse change in a particular market could have a
material and adverse effect on
20
<PAGE> 25
the revenue of the Surviving Subsidiary Corporation's stations located in that
market. There can be no assurance that any one of the Surviving Subsidiary
Corporation's stations will be able to maintain or increase its current audience
ratings or advertising revenue market share.
The radio broadcasting industry is also subject to competition from new
media technologies that are being developed or introduced, such as the delivery
of audio programming by cable television systems, direct broadcast satellite
("DBS") systems and other digital audio broadcasting formats to local and
national audiences. In addition, the FCC has auctioned spectrum for a new
satellite-delivered Digital Audio Radio Service ("DARS"). These actions may
result in the introduction of several new national or regional multi-channel and
multi-format satellite radio services with sound quality equivalent to compact
discs. Another possible competitor to traditional radio is In Band On Channel
("IBOC") digital radio. IBOC could provide multi-channel, multi-format digital
radio services in the same band width currently occupied by traditional AM and
FM radio services. EMCLA and CRBC cannot predict at this time the effect, if
any, that any such new technologies may have on the radio broadcasting industry.
ANTITRUST MATTERS
As a result of the recent consolidation of ownership in the radio broadcast
industry, the Antitrust Division of the United States Department of Justice
("DOJ") has been giving closer scrutiny to acquisitions in the industry,
including certain transactions involving EMCLA and CRBC. The consummation of
certain Pending Transactions is subject to notification filing requirements,
applicable waiting periods and possible review by the DOJ or the United States
Federal Trade Commission (the "FTC") under the HSR Act and to date, the waiting
periods for only certain of the Pending Transactions has expired or been
terminated. See "-- Necessity of Governmental Reviews and Approvals Prior to
Consummation of the Pending Transactions; Required Dispositions" and "The
Merger -- Regulatory Concerns." DOJ review of certain transactions has caused,
and may continue to cause, delays in anticipated consummations of certain
transactions and, in some cases, may result in attempts by DOJ to enjoin such
transactions or negotiated modifications of the proposed transactions. Such
delays, injunctions and modifications could have an adverse effect on EMCLA,
CRBC and the Surviving Subsidiary Corporation and, although unlikely, may result
in the abandonment of some of these otherwise attractive transactions.
The DOJ has stated publicly that it has established certain revenue and
audience share concentration benchmarks with respect to radio station
acquisitions, above which a transaction may receive additional antitrust
scrutiny. However, to date, the DOJ has also investigated transactions that do
not meet or exceed these benchmarks and has cleared transactions that do exceed
the benchmarks. Although each of EMCLA and CRBC do not believe that the
acquisition strategy of the Surviving Subsidiary Corporation as a whole will be
adversely affected in any material respect by antitrust review (including review
under the HSR Act) or by additional divestitures that may have to occur as a
result of the antitrust review, there can be no assurance that this will be the
case.
RADIO BROADCASTING INDUSTRY SUBJECT TO FEDERAL REGULATION
The radio broadcasting industry is subject to extensive regulation by the
FCC under the Communications Act of 1934, as amended (as amended by the
Telecommunications Act of 1996 (the "1996 Act"), the "Communications Act").
Approval of the FCC is required for the issuance, renewal or transfer of radio
broadcast station operating licenses. See "-- Necessity of Governmental Reviews
and Approvals Prior to Consummation of the Pending Transaction; Required
Dispositions." In particular, the Surviving Subsidiary Corporation's business
will be dependent upon its continuing to hold radio broadcasting licenses from
the FCC that are issued for terms of up to eight years. While in the vast
majority of cases such licenses are renewed by the FCC, there can be no
assurance that any of the stations' licenses will be renewed at their expiration
dates, or that renewals, if granted, will not include conditions or
qualifications that could adversely affect the Surviving Subsidiary
Corporation's operations. In addition, the Communications Act and the FCC rules
restrict alien ownership and voting of capital stock of, and participation in
affairs of, CRBC and EMCLA and, following the Subsidiary Merger, the Surviving
Subsidiary Corporation. Moreover, laws, regulations and policies may be changed
significantly over time and there can be no assurance that such changes will not
have
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<PAGE> 26
a material adverse affect on the Surviving Subsidiary Corporation's business,
financial condition and results of operations.
The 1996 Act, which amended the Communications Act in a number of important
respects, has created significant new opportunities for radio broadcasters, but
also has created uncertainties as to how the FCC and the courts will enforce and
interpret the 1996 Act. Although the 1996 Act eliminated the national ownership
ceiling previously applicable to radio broadcasters and also loosened
restrictions previously applicable to ownership within single markets,
significant restrictions remain on permitted levels of local ownership. In
markets with 45 or more stations, ownership is limited to eight stations, no
more than five of which can be FM or AM; in markets with 30-44 stations,
ownership is limited to seven stations, no more than four of which can be FM or
AM; in markets with 15-29 stations, ownership is limited to six stations, no
more than four of which can be FM or AM; and in markets with 14 or fewer
stations, ownership is limited to no more than 50.0% of the market's total and
no more than three AM or FM. In order to comply with these limitations, EMCLA
has sold three FM stations in the Chicago market, one FM station in the
Washington, D.C. market and two FM stations in the San Francisco market, has
additionally agreed to sell one AM radio station in the Chicago market, one AM
station in the San Francisco market, two AM stations in the Washington, D.C.
market and one FM station in the Philadelphia market, and CRBC has agreed to
sell one FM station in the Detroit market. The consummation of those
transactions are subject to the same contingencies applicable to the other
Pending Transactions. See "-- Necessity of Governmental Reviews and Approvals
Prior to Consummation of the Pending Transactions; Required Dispositions."
Compliance with the FCC's multiple ownership rules is expected to cause the
Surviving Subsidiary Corporation and other radio broadcasters to forego
acquisition opportunities that they might otherwise wish to pursue. Compliance
with these rules by third parties may also have a significant impact on the
Surviving Subsidiary Corporation as, for example, in precluding the consummation
of swap transactions that would cause such third parties to violate multiple
ownership rules.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Holders of CRBC Series A Preferred Stock and CRBC Junior Preferred Stock
should be aware that certain directors and executive officers of Evergreen and
Chancellor have certain interests in the Merger that are different from, or in
addition to, the interests of stockholders of Evergreen and Chancellor
generally. See "The Merger -- Interests of Certain Persons in the Merger."
DEPENDENCE ON KEY PERSONNEL
The Surviving Subsidiary Corporation's business will be dependent upon the
performance of certain key individuals, including Thomas O. Hicks, its Chairman
of the Board; Scott K. Ginsburg, its President and Chief Executive Officer;
James de Castro, its Co-Chief Operating Officer; Steven Dinetz, its Co-Chief
Operating Officer; and Matthew E. Devine, its Chief Financial Officer. The loss
of the services of Mr. Hicks, Mr. Ginsburg, Mr. de Castro, Mr. Dinetz or Mr.
Devine could have a material and adverse effect on the Surviving Subsidiary
Corporation.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS AND PREFERRED STOCK
The EMCLA Senior Credit Facility, the CRBC 9 3/8% Indenture and the CRBC
8 3/4% Indenture contain certain covenants that restrict, among other things,
the ability of EMCLA and CRBC and, upon consummation of the Merger, will
restrict the ability of the Surviving Subsidiary Corporation, to incur
additional indebtedness, incur liens, pay dividends or make certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with affiliates, impose restrictions on the ability of a subsidiary
to pay dividends or make certain payments, enter into sale and leaseback
transactions, conduct business other than the ownership and operation of radio
broadcast stations, merge or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
assets. The certificates of designation for the Surviving Subsidiary Series A
Preferred Stock and the Surviving Subsidiary Junior Preferred Stock will contain
certain similar covenants. In addition, the EMCLA Senior Credit Facility
contains other restrictive covenants and prohibits EMCLA from prepaying its
indebtedness. The EMCLA Senior Credit Facility also requires EMCLA to maintain
specified financial ratios and to satisfy certain
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<PAGE> 27
financial condition tests. EMCLA's or, following the consummation of the
Subsidiary Merger, the Surviving Subsidiary Corporation's, ability to meet those
financial ratios and financial condition tests can be affected by events beyond
its control, and there can be no assurance that EMCLA or, following the
consummation of the Subsidiary Merger, the Surviving Subsidiary Corporation,
will meet those tests. A breach of any of these covenants could result in a
default under the EMCLA Senior Credit Facility, the CRBC 9 3/8% Indenture or the
CRBC 8 3/4% Indenture. In the event of an event of default under the EMCLA
Senior Credit Facility, the CRBC 9 3/8% Indenture or the CRBC 8 3/4% Indenture,
the lenders thereunder could elect to declare all amounts outstanding
thereunder, together with accrued interest, to be immediately due and payable.
In the case of the EMCLA Senior Credit Facility, if EMCLA were unable to repay
these amounts, the lenders thereunder could, subject to compliance with the
FCC's rules, seek to foreclose on the stock of EMCLA and its subsidiaries, which
has been pledged to secure that indebtedness.
LIMITATIONS ON ABILITY TO PAY DIVIDENDS
The EMCLA Senior Credit Facility limits, and upon the consummation of the
Merger, the CRBC 9 3/8% Indenture, the CRBC 8 3/4% Indenture and the
certificates of designation governing the Surviving Subsidiary Series A
Preferred Stock and the Surviving Subsidiary Junior Preferred Stock will limit,
but do not prohibit, the payment of dividends by EMCLA or, following the
consummation of the Merger, the Surviving Subsidiary Corporation.
In addition to these restrictions, under Delaware law the Surviving
Subsidiary Corporation will be permitted to pay dividends on its capital stock,
including the Surviving Subsidiary Corporation Series A Preferred Stock and the
Surviving Subsidiary Junior Preferred Stock, only out of its surplus or, in the
event that it has no surplus, out of its net profits for the year in which a
dividend is declared or for the immediately preceding fiscal year. Surplus is
defined as the excess of a company's total assets over the sum of its total
liabilities plus the par value of its outstanding capital stock. In order to pay
dividends in cash, the Surviving Subsidiary Corporation must have surplus or net
profits equal to the full amount of the cash dividend at the time such dividend
is declared. In determining the Surviving Subsidiary Corporation's ability to
pay dividends, Delaware law permits the board of directors of the Surviving
Subsidiary Corporation to revalue the Surviving Subsidiary Corporation's assets
and liabilities from time to time to their fair market values in order to create
surplus. The Surviving Subsidiary Corporation cannot predict what the value of
its assets or the amount of its liabilities will be in the future and,
accordingly, there can be no assurance that the Surviving Subsidiary Corporation
will be able to pay dividends on the Surviving Subsidiary Series A Preferred
Stock and the Surviving Subsidiary Junior Preferred Stock.
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<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EMCLA
GENERAL
Since the acquisition in May 1995 of Broadcasting Partners, Inc. ("BPI"),
an eleven-station radio broadcasting group owning eight stations in the nation's
ten largest radio markets (the "BPI Acquisition"), EMCLA has engaged in an
acquisition strategy concentrating on expanding EMCLA's presence in the nation's
largest radio markets. Implementation of this acquisition strategy was
significantly accelerated in 1996 and to date in 1997 due to passage of the 1996
Act and the associated relaxation of national and local ownership limits. For a
discussion of the various transactions completed and agreements entered into
since January 1, 1996 as part of EMCLA's acquisition strategy, see "Pro Forma
Financial Information" and "Business -- EMCLA -- Recent Developments."
Consummation of the Pending Transactions (including the Merger and the Gannett
Acquisition) will add 19 stations (15 FM and 4 AM) in EMCLA's current markets,
and 40 stations in 10 markets not currently served by EMCLA.
EMCLA's results of operations from period to period have not historically
been comparable because of the impact of the various station acquisitions and
dispositions that EMCLA has completed. The chart below summarizes the
acquisitions and dispositions that EMCLA has completed from January 1, 1994
through March 31, 1997:
<TABLE>
<CAPTION>
DATE OF NUMBER OF COST (PROCEEDS)
TRANSACTION TRANSACTION STATIONS MARKET(S) (IN THOUSANDS)
----------- ----------- -------------- --------- ---------------
<S> <C> <C> <C> <C>
Exchange 4/94 2 FM in return Exchanged Jacksonville for San Francisco $ 25,421
for 1 FM
BPI Acquisition 5/95 7 FM/4 AM New York, Chicago, Dallas, Detroit, 258,634
Charlotte
Pyramid Acquisition 1/96 9 FM/3 AM Chicago, Philadelphia, Boston, 316,343
Charlotte, Buffalo
Acquisition 5/96 1 FM Boston 34,000
Disposition 7/96 1 FM/1 AM Buffalo (19,500)
Disposition 8/96 1 FM Buffalo (12,500)
Acquisition 8/96 1 FM San Francisco 44,000
Acquisition 10/96 1 FM Miami 65,000
Exchange 11/96 1 FM in return Exchanged Boston for Washington, D.C. N/A
for 1 FM
Acquisition 1/97 1 FM/1 AM Detroit 30,000
Acquisition 1/97 2 FM/1 AM San Francisco 115,000
</TABLE>
In the following analysis, management discusses the broadcast cash flow of
its radio station group. The performance of a radio station group is customarily
measured by its ability to generate broadcast cash flow. The two components of
broadcast cash flow are gross revenues (net of agency commissions) and operating
expenses (excluding depreciation and amortization, corporate general and
administrative expense and non-cash stock option compensation expense). The
primary source of revenues is the sale of broadcasting time for advertising.
EMCLA's most significant operating expenses for purposes of the computation of
broadcast cash flow are employee salaries and commissions, programming expenses,
and advertising and promotion expenses. EMCLA strives to control these expenses
by working closely with local station management. EMCLA's revenues vary
throughout the year. As is typical in the radio broadcasting industry, EMCLA's
first calendar quarter generally produces the lowest revenues, and the fourth
quarter generally produces the highest revenues.
Data on broadcast cash flow, although not calculated in accordance with
generally accepted accounting principles, is widely used in the broadcast
industry as a measure of a company's operating performance. Nevertheless, this
measure should not be considered in isolation or as a substitute for operating
income, cash flows from operating activities or any other measure for
determining EMCLA's operating performance or liquidity that is calculated in
accordance with generally accepted accounting principles. Broadcast cash flow
does not take into account EMCLA's debt service requirements and other
commitments and, accordingly,
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<PAGE> 29
broadcast cash flow is not necessarily indicative of amounts that may be
available for dividends, reinvestment in EMCLA's business or other discretionary
uses.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1996
EMCLA's results of operations for the three months ended March 31, 1997 are
not comparable to the results of operations for the three months ended March 31,
1996 due to the impact of the various station acquisitions and dispositions
discussed elsewhere in this Prospectus and reflected in the table above.
Net revenues for the three months ended March 31, 1997 increased 53.4% to
$81.9 million compared to $53.4 million for the three months ended March 31,
1997. Station operating expenses excluding depreciation and amortization for the
first quarter of 1997 increased 41.6% to $53.0 million compared to $37.4 million
for the same quarter in 1996. Station operating income excluding depreciation
and amortization and corporate, general and administrative expense (broadcast
cash flow) for the first quarter of 1997 increased 81.3% to $28.9 million
compared to $15.9 million for the same quarter in 1996. The increase in net
revenues, station operating expenses, and broadcast cash flow was primarily
attributable to the impact of the various station acquisitions and dispositions
described elsewhere in this Prospectus and time brokerage agreements, in
addition to the overall net operational improvements realized by EMCLA's radio
stations.
Depreciation and amortization for the first quarter of 1997 increased 14.7%
to $26.0 million compared to $22.7 million for the same period in 1996. The
increase represents additional depreciation and amortization due to the impact
of the recent acquisitions, offset by decreases due to certain intangibles which
became fully amortized in 1996 and 1997.
Corporate general and administrative expenses for the first quarter of 1997
increased 56.2% to $2.3 million compared to $1.5 million for the same period in
1996. The increase is due to the growth of EMCLA, and related increase in
properties and staff, primarily due to the recent acquisitions.
As a result of the above factors, EMCLA realized $0.6 million of operating
income for the first quarter of 1997 compared to an operating loss of $8.2
million for the first quarter of 1996.
Interest expense for the first quarter of 1997 decreased 10.3% to $8.1
million compared to $9.0 million for the same period in 1996. The net decrease
in interest expense was primarily due to the repayment of borrowings under the
revolving portion of EMCLA's, prior senior credit facility from the net proceeds
of $264.2 million from Evergreen's public offering of 9,000,000 shares of its
Class A Common Stock on October 17, 1996 that were contributed to EMCLA, and an
overall decrease in EMCLA's borrowings rates, offset by additional bank
borrowings of approximately $254.5 million which, together with the net proceeds
of $19.5 million from the sale of WHTT-FM/AM in Buffalo on July 19, 1996 and
$12.5 million from the sale of WSJZ-FM in Buffalo on August 1, 1996, were used
to finance the acquisitions of WKLB-FM, KYLD-FM, WEDR-FM, WWWW-FM, WDFN-AM,
KKSF-FM and KDFC-FM/AM during 1996 and the first quarter of 1997.
The income tax benefit for the three months ended March 31, 1997 is
comprised of current federal and state income tax expense and a deferred federal
income tax benefit.
Dividends paid to Evergreen to enable Evergreen to pay dividends on its
preferred stock were $1.2 million for the first quarter of 1996. There were no
dividends paid to Evergreen for the three months ended March 31, 1997 due to the
conversion by Evergreen of a total of 1,608,297 shares of Evergreen's formerly
outstanding convertible exchangeable preferred stock into a total of 5,025,916
shares of Evergreen's Class A Common Stock and the redemption of the remaining
1,703 shares of formerly outstanding convertible exchangeable preferred stock
during 1996.
As a result of the above factors, EMCLA incurred a $6.0 million net loss
attributable to common stock for the first quarter of 1997 compared to a $15.5
million net loss for the same period in 1996.
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<PAGE> 30
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
EMCLA's results of operations for the year ended December 31, 1996 are not
comparable to the results of operations for the year ended December 31, 1995 due
to the impact of the various station acquisitions and dispositions discussed
elsewhere in this Prospectus and reflected in the table above.
Net revenues for the year ended December 31, 1996 increased 80.4% to $293.9
million compared to $162.9 million for the year ended December 31, 1995. Station
operating expenses excluding depreciation and amortization for 1996 increased
78.5% to $174.3 million compared to $97.7 million in 1995. Station operating
income excluding depreciation and amortization and corporate general and
administrative expense (broadcast cash flow) for 1996 increased 83.1% or $54.2
million to $119.5 million compared to $65.3 million in 1995. The increase in net
revenues, station operating expenses, and broadcast cash flow was primarily
attributable to the impact of the various station acquisitions and dispositions
described elsewhere in this Prospectus, in addition to the overall net
operational improvements realized by EMCLA's radio stations.
Depreciation and amortization for 1996 increased 99.4% to $93.7 million
compared to $47.0 million in 1995. The increase represents additional
depreciation and amortization expenses due to the impact of recent acquisitions,
offset by decreases due to certain intangibles which became fully amortized in
1995 and 1996.
Corporate general and administrative expenses for 1996 increased 74.2% to
$7.8 million compared to $4.5 million in 1995. The increase is due to the growth
of EMCLA, and related increase in properties and staff, primarily due to recent
acquisitions.
As a result of the above factors, operating income for 1996 increased 30.4%
to $18.0 million compared to $13.8 million in 1995.
Interest expense for 1996 increased 95.5% to $37.5 million compared to
$19.2 million in 1995. The net increase in interest expense was primarily due to
additional bank borrowings required to finance the acquisition of Pyramid
Communications, Inc. (the "Pyramid Acquisition"), a radio broadcasting company
with nine FM and three AM radio stations in five radio markets, as well as the
other station acquisitions referred to above, offset by repayment of borrowings
under the revolving credit portion of EMCLA's prior senior credit agreement from
the net proceeds of approximately $264.2 million from Evergreen's public
offering of Class A Common Stock in October 1996, contributed to EMCLA in an
equity contribution, and an overall decrease in the EMCLA's borrowing rates.
The provision for income tax expense for the year ended December 31, 1996
is comprised of current federal and state taxes of $.5 million and $1.0 million,
respectively, and a deferred federal income tax benefit of $4.4 million. EMCLA
from time to time seeks to defer recognition of taxable gains upon the
disposition of radio properties by structuring dispositions as like-kind
exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended,
under appropriate circumstances.
Dividends paid to Evergreen to enable Evergreen to pay dividends on its
preferred stock decreased $1.0 million to $3.8 million in 1996 compared to $4.8
million in 1995. The decrease in dividends is due to the conversion by Evergreen
of a total of 1,608,297 shares of Evergreen's formerly outstanding convertible
exchangeable preferred stock into a total of 5,025,916 shares of Evergreen's
Class A Common Stock and the redemption of the remaining 1,703 shares of
Evergreen's formerly outstanding convertible exchangeable preferred stock during
1996.
As a result of the above factors, EMCLA incurred a $20.0 million net loss
attributable to common stock in 1996 compared to a $10.7 million net loss in
1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
EMCLA's results of operations for the year ended December 31, 1995 are not
comparable to the results of operations for the year ended December 31, 1994 due
to the impact of the BPI Acquisition. The BPI Acquisition resulted in the
addition of seven FM and four AM radio stations, eight of which are in the
nation's ten largest radio markets.
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<PAGE> 31
Net revenues for the year ended December 31, 1995 increased 48.8% to $162.9
million compared to $109.5 million for the year ended December 31, 1994. Station
operating expenses excluding depreciation and amortization for 1995 increased
41.9% to $97.7 million compared to $68.9 million in 1994. Station operating
income excluding depreciation and amortization (broadcast cash flow) for 1995
increased 60.5% or $24.6 million to $65.3 million compared to $40.7 million in
1994. The increase in net revenues, station operating expenses, and broadcast
cash flow was attributable to the overall net operational improvements realized
by EMCLA's radio stations, in addition to the impact of the consolidation of the
results of operations of BPI since the consummation of the BPI Acquisition on
May 12, 1995.
Depreciation and amortization for 1995 increased 53.6% to $47.0 million
compared to $30.6 million in 1994. The net increase represents additional
depreciation and amortization expenses due to the impact of the BPI Acquisition
on May 12, 1995, offset by decreases due to certain intangible assets which
became fully amortized in 1995 and 1994.
Corporate general and administrative expenses for 1995 increased 67.5% to
$4.5 million compared to $2.7 million in 1994. The increase is due to the growth
of EMCLA primarily related to the BPI Acquisition.
As a result of the above factors, operating income for 1995 increased 86.3%
to $13.8 million compared to $7.4 million in 1994.
Interest expense for 1995 increased 39.0% to $19.2 million compared to
$13.8 million in 1994. The net increase in interest expense was due to
additional bank borrowings of approximately $186.0 million required to finance
the BPI Acquisition in May 1995, offset by the application of net proceeds of
approximately $132.7 million from Evergreen's public offering of Class A Common
Stock in July 1995, contributed to EMCLA in an equity contribution, and overall
decline in EMCLA's borrowing rates. The net proceeds from the public offering
were used to repay borrowings under the revolving credit portion of EMCLA's
prior senior credit agreement, which borrowings had been incurred to finance the
BPI Acquisition.
Other income (expense) comprised of interest income, gain on disposition of
assets and other expense, net was a $.2 million charge in 1995 compared to $6.5
million in income in 1994. Other income (expense) for the year ended December
31, 1994 includes a gain of approximately $7.3 million on the disposition of
WAPE-FM and WFYV-FM in Jacksonville, Florida, which closed in April 1994.
The provision for income tax expense for the year ended December 31, 1995
is comprised of current federal and state taxes of $.3 million and $.4 million,
respectively, and a deferred federal income tax benefit of $.5 million.
In connection with the restructuring of EMCLA's senior credit agreement on
November 29, 1994, EMCLA recorded an extraordinary charge of $3.6 million,
consisting of a write-off of the unamortized balance of deferred debt issuance
costs related to the debt retirement.
Dividends paid to Evergreen to enable Evergreen to pay dividends on its
preferred stock were $4.8 million in 1995 and 1994.
As a result of the above factors, EMCLA incurred a $10.7 million net loss
attributable to common stock in 1995 compared to an $8.4 million net loss in
1994.
LIQUIDITY AND CAPITAL RESOURCES
EMCLA historically has generated sufficient cash flow from operations to
finance its existing operational requirements and debt service requirements, and
EMCLA anticipates that this will continue to be the case. EMCLA historically has
used the proceeds of bank debt and public equity offerings, supplemented by cash
flow from operations not required to fund operational requirements and debt
service, to fund implementation of EMCLA's acquisition strategy.
The total cash financing required to consummate the Pending Transactions
(other than the Merger and the Pending Chancellor Transactions) is expected to
be $461.3 million (excluding a possible upward adjustment of $10.0 million for
the Gannett Acquisition). Of this amount, approximately $8.4 million has
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<PAGE> 32
already been advanced by EMCLA in the form of escrow deposits. In addition,
EMCLA expects to receive $49.3 million in cash and $18.0 million evidenced by a
promissory note from the completion of the Pending Evergreen Dispositions.
Accordingly, EMCLA will require at least $403.6 million in additional financing
(without taking into account the $18.0 million promissory note) to consummate
the Pending Transactions (other than the Merger and the Pending Chancellor
Transactions). EMCLA anticipates that it will obtain this additional financing
through borrowings under the EMCLA Senior Credit Facility. In addition to the
foregoing long-term indebtedness, EMCLA expects to borrow up to $144.0 million
under the EMCLA Senior Credit Facility, and CRBC expects to borrow up to $36.0
million under the CRBC Restated Credit Facility to be distributed to Evergreen
and Chancellor and to be used by Evergreen and Chancellor as the equity capital
required to finance their respective shares of the Katz Acquisition. See "Risk
Factors -- Katz Acquisition." Moreover, the Surviving Subsidiary Corporation is
expected to incur $109.5 million in long-term indebtedness to finance the
Bonneville Acquisition and the Denver Acquisition.
On April 25, 1997, EMCLA entered into the EMCLA Senior Credit Facility
which amended and restated its prior senior credit facility. Under the amended
agreement, EMCLA established a $1.25 billion revolving facility (the "Revolving
Loan Facility") and a $500.0 million term loan facility (the "Term Loan
Facility"). Upon consummation of the Merger, EMCLA expects that the revolving
credit facility and the term loan facility will be increased to $1.60 billion
and $900.0 million, respectively and, as discussed below, EMCLA will borrow an
amount sufficient to repay the Chancellor Interim Financing and outstanding
borrowings of CRBC under the CRBC Restated Credit Agreement. The capital stock
of EMCLA and its subsidiaries are pledged to secure performance of EMCLA's
obligations under the EMCLA Senior Credit Facility and a guarantee by EMHC of
EMCLA's obligations thereunder. At July 28, 1997, EMCLA had drawn $500.0 million
of the Term Loan Facility and $410.0 million of the Revolving Loan Facility.
Required repayments of principal amounts outstanding under the Term Loan
Facility and commitment reductions under the Revolving Loan Facility commence on
September 30, 2000. EMCLA's ability to make additional borrowings under the
EMCLA Senior Credit Facility is subject to compliance with certain financial
ratios and other conditions set forth in the EMCLA Senior Credit Facility. EMCLA
from time to time may explore other financing alternatives to supplement the
financing available under the EMCLA Senior Credit Facility, including the public
or private issuance of debt, common equity or preferred equity securities.
Upon consummation of the Merger, Evergreen and EMCLA will be required to
assume or refinance existing debt and preferred stock of Chancellor and CRBC,
and, at or prior to the consummation of the Merger, EMCLA expects all amounts
outstanding under the Chancellor Interim Financing will be repaid. After giving
pro forma effect to those Completed Transactions consummated after March 31,
1997, the Pending Transactions (including the SFX Exchange which, as described
above, may not be consummated) and the Financing Transactions, but without
giving effect to the Bonneville Acquisition, the Denver Acquisition or the
Douglas AM Dispositions or borrowings expected to be incurred to finance the
equity capital for the Katz Acquisition, at March 31, 1997, EMCLA would have had
$2.17 billion in long term debt outstanding, of which $1.77 billion would have
consisted of EMCLA's borrowings under the EMCLA Senior Credit Facility. In
addition to debt service requirements under the EMCLA Senior Credit Facility,
EMCLA will be required to pay interest on the CRBC 9 3/8% Notes and the CRBC
8 3/4% Notes. The Surviving Subsidiary Series A Preferred Stock and the
Surviving Subsidiary Junior Preferred Stock will not require the payment of cash
dividends through February 14, 2001 and January 14, 2002, respectively, although
the Surviving Subsidiary Corporation (i.e., EMCLA) will issue additional shares
of such preferred stock, or incur accretion in lieu of cash dividends. Cash
dividend requirements on the Surviving Corporation $3.00 Convertible Preferred
Stock, and the Surviving Corporation 7% Convertible Preferred Stock will require
cash dividends by the Surviving Corporation (i.e., Evergreen) of $16.5 million
and $7.7 million, respectively, per year, which dividends are expected to be
funded at least in substantial part by dividends from the Surviving Subsidiary
Corporation. The EMCLA Senior Credit Facility limits, and following consummation
of the Merger, the CRBC 9 3/8% Indenture, the CRBC 8 3/4% Indenture and the
certificates of designation for the CRBC Junior Preferred Stock and the CRBC
Series A Preferred Stock will limit, but not prohibit, EMCLA from paying such
dividends to EMHC, which will in turn distribute such dividends to Evergreen.
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Pursuant to the EMCLA Senior Credit Facility, EMCLA is required to enter
into interest hedging agreements that result in the fixing or placing a cap on
EMCLA's floating rate debt so that not less than 50% of the principal amount of
total debt outstanding has a fixed or capped rate.
RECENTLY ISSUED ACCOUNTING PRINCIPLES
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Transfers of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 125"). SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. The provisions of SFAS No. 125 are
generally effective for transactions occurring after December 31, 1996. The
adoption of SFAS No. 125 is not expected to have a material impact on EMCLA's
financial statements.
CRBC
GENERAL
The following discussion and analysis of results of operations and
financial condition of CRBC should be read in conjunction with the Consolidated
Financial Statements of Chancellor Radio Broadcasting Company and Subsidiaries
and related notes thereto included elsewhere in this Prospectus.
CRBC has grown largely through acquisitions, as well as through internally
generated growth. Upon completion of the Pending Chancellor Transactions, CRBC
will own and operate 53 radio stations serving the following large markets: New
York, New York; Nassau/Suffolk (Long Island), New York; Los Angeles, California;
Chicago, Illinois; San Francisco, California; Washington, D.C.; Atlanta,
Georgia; Detroit, Michigan; Riverside/San Bernardino, California;
Minneapolis/St. Paul, Minnesota; Phoenix, Arizona; Pittsburgh, Pennsylvania;
Denver, Colorado; Cincinnati, Ohio; Sacramento, California; Orlando, Florida;
and Jacksonville, Florida. CRBC anticipates that it will be able to consummate
all of its pending transactions; however, the closing of each of such
transactions is subject to FCC approval and other governmental approvals which
are beyond CRBC's control, and there can be no assurance when those transactions
will be competed or that they will be completed on the terms described herein,
or at all.
In the following analysis, management discusses the "broadcast cash flow"
of its combined station group. Broadcast cash flow consists of station operating
income excluding depreciation and amortization, corporate general and
administrative, merger expense and non-cash stock option compensation expense.
Although broadcast cash flow is not a measure of performance calculated in
accordance with generally accepted accounting principles ("GAAP"), management
believes that it is useful to an investor in evaluating CRBC because it is a
measure widely used in the broadcast industry to evaluate a radio company's
operating performance. However, broadcast cash flow should not be considered in
isolation or as a substitute for net income, cash flows from operating
activities and other income or cash flow statement data prepared in accordance
with GAAP or as a measure of liquidity or profitability. The discussion of
broadcast cash flow appears as the last paragraph in the discussion of the
results of operations.
A radio broadcast company's revenues come primarily from the sale of time
to local and national advertisers. Those revenues are affected by the
advertising rates that a radio station is able to charge and the number of
advertisements that can be broadcast without jeopardizing listener levels (and
the resulting ratings). Advertising rates tend to be based upon a station's
demand for its inventory and its ability to attract audiences in targeted
demographic groups, as measured principally by Arbitron. Radio stations attempt
to maximize revenues by adjusting advertising rates based upon local market
conditions, controlling inventory and creating demand and audience ratings.
Seasonal revenue fluctuations are common in the radio broadcasting industry
and are due primarily to fluctuations in advertising expenditures by local and
national advertisers, with revenues typically being lowest in the first quarter
and highest in the second and fourth quarters of each year. A radio station's
operating results in any period also may be affected by the occurrence of
advertising and promotional expenditures that do not produce commensurate
revenues in the period in which the expenditures are made. Because Arbitron
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reports audience ratings on a quarterly basis, a radio station's ability to
realize revenues as a result of increased advertising and promotional expenses
and any resulting audience ratings improvements may be delayed for several
months.
Because CRBC incurred substantial indebtedness for its acquisitions for
which it has significant debt service requirements, and because CRBC has
significant charges for stock option compensation, dividends and accretion on
preferred stock and depreciation and amortization expense related to the fixed
assets and intangibles acquired in its acquisitions, CRBC expects that it will
report net losses attributable to common stock for the foreseeable future, which
losses may be greater than those historically experienced by CRBC.
RESULTS OF OPERATIONS
CRBC's acquisitions, including the Shamrock Acquisition in February 1996,
the Houston/Denver Exchange in July 1996, the acquisition of WKYN-AM in November
1996, the Colfax Acquisition, the Omni Acquisition in February 1997, and the
West Palm Beach Exchange in March 1997, have all been accounted for using the
purchase method of accounting. In addition, pursuant to local marketing
agreements CRBC began providing sales and programming services to stations
WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM in Nassau/Suffolk, New York and stations
WOMX-FM, WXXL-FM and WJHM-FM in Orlando, Florida effective July 1, 1996, and
station KSTE-AM in Rancho Cordova, California effective August 1, 1996. As a
result of the acquisition, disposition and exchange activity and the local
marketing agreements, CRBC's results of operations are not directly comparable
from period to period.
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996
Net revenues increased 117.8% to $55.9 million for the three months ended
March 31, 1997 from $25.6 million for the same period in 1996. Station operating
expenses (operating expenses exclusive of depreciation, amortization, corporate
and stock option compensation expenses) increased 131.5% to $38.2 million for
the three months ended March 31, 1997 from $16.5 million for the same period in
1996. The majority of these increases were due to the Shamrock Acquisition, the
Colfax Acquisition, the Omni Acquisition, the Houston/Denver Exchange, and
various operating agreements with Secret, SFX Broadcasting, Inc. ("SFX") and
American Radio Systems Corporation.
Depreciation and amortization increased 79.2% to $8.1 million for the first
quarter of 1997 from $4.5 million for the same period in 1996. Corporate
expenses increased to $1.7 million for the first quarter of 1997 from $1.0
million for the same period in 1996, as a result of additional personnel and
overhead costs associated with the Shamrock Acquisition, the Colfax Acquisition,
the Omni Acquisition, the Houston/Denver Exchange, and various operating
agreements with Secret, SFX and American Radio Systems Corporation. Interest
expense increased 49.3% to $11.4 million from $7.6 million for the same period
in 1996. These increases were primarily attributable to the acquisitions
mentioned above and the resulting change in the capital structure from their
financing.
During the second quarter of 1995, CRBC developed an estimate of the fair
value of its outstanding stock options in the amount of $19.0 million. Based
upon this estimate and the applicable vesting periods, CRBC recognized
approximately $1.0 million of non-cash stock option compensation expense during
the first quarter of both years.
Dividends and accretion on preferred stock increased substantially to $8.1
million for the first quarter of 1997 from $1.7 million for the same period in
1996. The majority of this increase is the result of the CRBC Series A Preferred
Stock being outstanding for the entire first quarter of 1997 and the issuance of
$200.0 million of the CRBC Junior Preferred Stock in January 1997. During the
first quarter of 1996, CRBC incurred a one-time loss of $16.6 million on the
repurchase of preferred stock.
As a result of the foregoing, income from operations increased 81.5% to
$4.8 million, including $2.1 million of merger expense, for the first quarter of
1997 from $2.7 million for the same period in 1996. CRBC had a net loss of $7.3
million compared with a net loss of $10.6 million for the same period in 1996.
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Broadcast cash flow increased 93.1% to $17.7 million for the three months
ended March 31, 1997 from $9.2 million for the same period in 1996. Broadcast
cash flow as a percentage of net revenue decreased to 31.6% for the 1997 period
from 35.7% for the 1996 period. These changes were primarily the result of the
acquisition and exchange activity discussed above.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net revenues increased 177.4% to $178.4 million for the year ended December
31, 1996 from $64.3 million for the year ended December 31, 1995. Station
operating expenses increased 196.8% to $111.2 million for the year ended
December 31, 1996 from $37.5 million for the year ended December 31, 1995. The
majority of these increases were due to the Shamrock Acquisition and the
Houston/Denver Exchange, and the various operating agreements with Omni, Secret,
SFX and American Radio Systems Corporation entered into in 1996.
Depreciation and amortization increased 152.9% to $20.9 million for the
year ended December 31, 1996 from $8.3 million for the same prior year period.
Interest expense increased 97.1% to $35.7 million for 1996 from $18.1 million
for the 1995 period. These increases, and the extraordinary loss on early
extinguishment of debt of $4.2 million in 1996, were primarily attributable to
the acquisition of Shamrock and the change in capital structure of CRBC related
to the financing of such acquisition. Corporate expenses increased 166.9% to
$4.8 million for the year ended December 31, 1996 from $1.8 million for the same
period in 1995, as a result of additional personnel and overhead costs
associated with the Shamrock Acquisition and the Houston/Denver Exchange, and
the various operating agreements with Omni, Secret, SFX and American Radio
Systems Corporation entered into in 1996.
During the second quarter of 1995, CRBC developed an estimate of the fair
value of its outstanding stock options in the amount of $19.0 million. Based
upon this estimate and the applicable vesting periods, CRBC recognized $4.5
million of non-cash stock option compensation expense during that quarter, with
the remaining amount being amortized over an approximate four year period.
During 1996, CRBC recognized non-cash stock option compensation expense of $3.8
million and non-cash charges for dividends and accretion on its preferred stock
of $11.6 million.
The deferred tax valuation allowance was originally established due to the
uncertainty surrounding the realizability of CRBC's deferred tax assets using
the "more likely than not" criteria. During the fourth quarter of 1996, CRBC
revised its estimate of the likelihood that it will realize the majority of its
deferred tax assets and adjusted its valuation allowance accordingly. This
revised estimate was the direct result of the Shamrock Acquisition. Reversal of
the valuation allowance related to deferred tax assets which existed on the date
of acquisition or which were acquired as a result of the Shamrock Acquisition
were credited against the original purchase accounting allocation to goodwill.
The reversal of the valuation allowance related to deferred tax assets generated
subsequent to the acquisition were credited as a reduction of income tax expense
and extraordinary losses as appropriate.
Income from operations increased 261.3% to $37.7 million for the year ended
December 31, 1996 from $10.4 million for the same 1995 period primarily as a
result of the effect of the completed acquisitions. CRBC had a net loss of $6.9
million compared with a net loss of $11.5 million for the prior year.
Broadcast cash flow increased 150.2% to $67.2 million for the year ended
December 31, 1996 from $26.9 million for 1995. Broadcast cash flow as a
percentage of net revenues decreased to 37.7% for 1996 from 41.8% for 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net revenues increased 144.4% to $64.3 million for the year ended December
31, 1995 from $26.3 million for the year ended December 31, 1994. Station
operating expenses increased 139.2% to $37.5 million for the year ended December
31, 1995 from $15.7 million for the year ended December 31, 1994. The majority
of these increases were due to the acquisition of the American Media stations in
October 1994 and the acquisition/LMA for KDWB-FM beginning February 1, 1995.
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In 1995, there was a $6.4 million non-cash stock option compensation
expense related to compensatory stock options of Chancellor granted in 1994.
Depreciation and amortization increased 179.5% to $8.3 million for the year
ended December 31, 1995 from $3.0 million for the same period in the prior year.
Interest expense increased 245.2% to $18.1 million for 1995 from $5.2 million
for the 1994 period. These increases, and the extraordinary loss on early
extinguishment of debt of $817,819 in 1994, were primarily attributable to the
acquisition of the American Media stations and the resulting change in capital
structure from its financing. Corporate expenses increased 202.8% to $1.8
million for the year ended December 31, 1995 from approximately $600,000 for the
same period in 1994, as a result of additional personnel and overhead costs
associated with the acquisition of the American Media stations and the LMA for
KDWB-FM.
As a result of the foregoing, income from operations increased 46.8% to
$10.4 million for the year ended December 31, 1995 from $7.1 million for the
same 1994 period. CRBC had a net loss of $11.5 million compared with a net loss
of $106,000 for the prior year.
Broadcast cash flow increased 152.0% to $26.9 million for the year ended
December 31, 1995 from $10.7 million for 1994. Broadcast cash flow as a
percentage of net revenues increased to 41.8% for 1995 from 40.5% for 1994.
LIQUIDITY AND CAPITAL RESOURCES
The pursuit by CRBC of its acquisition strategy has required a significant
portion of CRBC's capital resources. CRBC has financed its past acquisitions
through bank financing and subordinated notes, the sale of preferred stock and
common equity and with proceeds from asset sales.
As a result of the financing of its acquisitions, CRBC has a substantial
amount of long-term indebtedness, and for the foreseeable future, principal and
interest payments under the CRBC Restated Credit Agreement and interest payments
under the CRBC 9 3/8% Notes and CRBC 8 3/4% Notes will be CRBC's principal uses
of cash. In addition to debt service requirements under the CRBC Restated Credit
Agreement, CRBC will require $36.3 million per annum to pay interest on the CRBC
9 3/8% Notes and CRBC 8 3/4% Notes. The CRBC Series A Preferred Stock does not
require the payment of cash dividends through May 14, 2001. Similarly, the CRBC
Junior Preferred Stock does not require cash dividends through April 14, 2002,
although CRBC will issue additional shares of CRBC Junior Preferred Stock in
lieu of cash dividends. The Chancellor Parent Convertible Preferred Stock
requires cash dividends of $7.7 million per year. Because Chancellor is a
holding company with no assets other than the common stock of CRBC, Chancellor
will rely solely on dividends from CRBC to satisfy its dividend payment
obligations on the Chancellor Parent Convertible Preferred Stock. The CRBC
Restated Credit Agreement, the CRBC 9 3/8% Indenture, the CRBC 8 3/4% Indenture,
and the certificates of designations for the CRBC Series A Preferred Stock and
CRBC Junior Preferred Stock generally will limit but will not prohibit CRBC from
making funds available to Chancellor for such dividends.
In addition to debt service and dividends on the Chancellor Parent
Convertible Preferred Stock, CRBC's principal liquidity requirements will be for
working capital and general corporate purposes, including capital expenditures,
which are not expected to be material in amount. CRBC used the $74.3 million in
net cash proceeds from the Milwaukee Disposition and the West Palm Beach
Exchange to retire a portion of the indebtedness incurred under the CRBC
Restated Credit Agreement to fund the Colfax Acquisition and Omni Acquisition.
CRBC subsequently incurred new borrowings of $53.8 million to fund the deposit
for the Chancellor Viacom Acquisition. On June 6, 1997, CRBC consummated its
tender offer for all $60.0 million of its then outstanding 12 1/2% Senior
Subordinated Notes (the "Debt Tender Offer") for an aggregate purchase price of
$70.1 million. CRBC financed the Debt Tender Offer with additional borrowings
under its prior senior credit agreement.
On June 24, 1997, CRBC consummated the sale of $200 million aggregate
principal amount of its 8 3/4% Notes. The net proceeds from the sale of the
8 3/4% Notes were used to repay borrowings under its senior credit facility.
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In order to finance the Chancellor Viacom Acquisition, on July 2, 1997,
CRBC entered into an amended and restated senior credit agreement (the "CRBC
Restated Credit Agreement") with certain commercial banks and other
institutional lenders. The Restated Credit Agreement provides for total loans of
up to $750.0 million, consisting of a $400.0 million term loan facility (the
"Term Loan Facility") and a $350.0 million revolving loan facility (the
"Revolving Loan Facility", and, together with the Term Loan Facility, the
"Credit Facility"). The Term Loan Facility provides for a term loan that matures
7 years after July 2, 1997, subject to scheduled annual principal payments,
payable quarterly, along with provisions for both voluntary and mandatory
prepayments based upon the occurrence of specified events. The Revolving Loan
Facility provides for revolving credit loans that mature 7 years after July 2,
1997, with the entire outstanding amount of the Revolving Loan Facility to be
repaid on that date. As of July 31, 1997, there was approximately $22.0 million
outstanding under the Revolving Loan Facility and $400.0 million outstanding
under the Term Loan Facility.
In addition, on July 2, 1997, Chancellor contributed to the capital of CRBC
the net proceeds of the $170 million Chancellor Interim Financing, which were
used to partially fund the Chancellor Viacom Acquisition. The Chancellor Interim
Financing matures at the Effective Time of the Merger, and it is anticipated
that it will be repaid in connection with the refinancing of the Subsidiary
Surviving Corporation's senior credit facility.
Management believes that cash from operating activities and the Revolving
Loan Facility under CRBC's Restated Credit Agreement should be sufficient to
permit CRBC to meet its financial obligations and fund its operations. Changes
in interest rates affect CRBC to the extent that it has borrowings under its
term and revolving credit facilities or it makes additional borrowings under new
agreements.
Net cash provided by operating activities was $6.0 million and $8.8 million
for the three months ended March 31, 1997 and 1996, respectively. Changes in
CRBC's net cash provided by operating activities are primarily the result of
CRBC's acquisitions completed and station operating agreements entered into
during the periods.
Net cash used in investing activities was $480.6 million and $406.4 million
for the three months ended March 31, 1997 and 1996, respectively. Net cash
provided by financing activities was $475.8 million and $398.8 million for the
three months ended March 31, 1997 and 1996, respectively. These cash flows
primarily reflect the borrowings, capital contributions and expenditures for
station acquisitions, dispositions and swaps.
Net cash provided by operating activities was $24.0 million, $5.5 million
and $0.7 million for the year ended December 31, 1996, 1995 and 1994,
respectively. Changes in CRBC's net cash provided by operating activities are
primarily the result of CRBC's acquisitions completed and station operating
agreements entered into during the periods.
Net cash used in investing activities was $442.7 million, $26.1 million and
$204.7 million for the year ended December 31, 1996, 1995 and 1994,
respectively. Net cash provided by financing activities was $421.2 million,
$20.4 million and $205.6 million for the year ended December 31, 1996, 1995 and
1994, respectively. These cash flows primarily reflect the borrowings, capital
contributions and expenditures for station acquisitions, dispositions and swaps.
Subsequent to December 31, 1996, CRBC refinanced its bank indebtedness and
issued approximately $200.0 million of preferred stock in connection with the
consummation of the Colfax Acquisition and the Omni Acquisition. As a result of
this refinancing, CRBC incurred an extraordinary charge to write-off deferred
financing costs of approximately $4.5 million in January 1997.
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BUSINESS
EMCLA
GENERAL
EMCLA owns and operates radio stations across the United States, including
stations in 11 of the nation's 12 largest radio markets (Los Angeles, New York,
Chicago, Dallas, San Francisco, Washington, D.C., Philadelphia, Houston, Boston,
Detroit and Miami). EMCLA currently owns and operates 41 radio stations (27 FM
and 14 AM) including superduopolies in six of the nation's 12 largest radio
revenue markets (New York, Chicago, San Francisco, Philadelphia, Washington,
D.C. and Detroit). Consummation of the Pending Transactions (including the
Merger and the Gannett Acquisition) will add 19 stations (15 FM and 4 AM) in
EMCLA's current markets and 40 stations in 10 markets not currently served by
EMCLA.
EMCLA's portfolio is geographically diversified and employs a wide variety
of programming formats, including adult contemporary, contemporary hit radio,
urban, jazz, country, oldies, news/talk, rock and sports. Each of EMCLA's
stations targets a specific demographic audience within a market, with the
majority of the stations appealing primarily to 18 to 34 or 25 to 54 year old
men and/or women, the demographic groups most sought after by advertisers.
Management believes that, because of the size and diversity of its station
portfolio, EMCLA is not unduly reliant on the performance of any one station or
market.
Strategy
EMCLA's senior management team, led by Scott K. Ginsburg and James de
Castro, has extensive experience in acquiring and operating large market radio
station groups. EMCLA's business strategy is to assemble and operate radio
station clusters in order to maximize broadcast cash flow generated in each
market. This strategy relies on the following six key elements:
Create Large Market Superduopolies. EMCLA seeks to be the owner and
operator of the leading superduopoly in the largest markets in the United
States. Management believes that the large revenue base in these markets, in
conjunction with operating synergies achievable through the operation of
multiple stations, will enable it to appeal to a wider universe of national and
local advertisers and to achieve a greater degree of profitability than that of
operators and broadcasters in smaller markets. The stations to be acquired in
the Pending Transactions (including the Merger and the Gannett Acquisition) will
complement EMCLA's existing stations in the Los Angeles, New York, Chicago, San
Francisco, Dallas, Houston and Washington, D.C. markets and will increase the
number of EMCLA's superduopolies in the 12 largest United States markets from
six to eight. These transactions will also create new superduopolies for EMCLA
in five additional large markets. EMCLA expects to continue to selectively
pursue acquisition opportunities in the major markets in which it will compete
as well as in other markets.
Maximize Superduopoly Revenue and Expense Synergies. EMCLA seeks to
capitalize on the revenue and expense opportunities created by the recently
assembled superduopolies and those which will be created as a result of the
Merger, the Gannett Acquisition and the Bonneville Acquisition. Superduopolies
have only been permissible since the passage of the 1996 Act. Management
believes that substantial benefits can be derived from the successful
integration of the station cluster groups. Management also believes that radio
station clusters can attract increased revenues in a market by delivering larger
combined audiences to advertisers and by engaging in joint marketing and
promotional activities. In addition, management expects to realize significant
expense savings through the consolidation of facilities and through the
economies of scale created in areas such as national representation commissions,
employee benefits, insurance premiums and other operating costs.
Establish Strong Listener Loyalty. Management believe that strong listener
familiarity with a given radio station produces listener loyalty. Management
seeks to establish this familiarity through a variety of programming and
marketing techniques, including the development of high-profile on-air
personalities and creative station-sponsored promotional events, all of which
are designed to secure heightened listener awareness. EMCLA also conducts
extensive market research to help identify programming format opportunities and
attract new listeners, as has been the case with WKTU-FM in New York. After
operating
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WKTU-FM for nine months under the call letters and country music format
inherited from a prior operator, in February 1996 EMCLA began to operate WKTU-FM
as a rhythmic contemporary hits station. According to Arbitron, WKTU-FM was
ranked eleventh in its target demographic group as a country station, and was
ranked first in several key demographic groups (including its target demographic
group) in the first full ranking period after the station changed its format.
The station has continued to rank among the top five stations in its demographic
group in subsequent periods. Management believes that the institutionalization
of its radio stations through programming, marketing and research ensures steady
long-term audience share ratings.
Maintain Strict Cost Controls. Management maintains a company-wide focus on
cost controls in an effort to maximize broadcast cash flow margins. Management
reviews station spending on a monthly basis. In addition, corporate level
employees maintain weekly sales reporting systems designed to enable management
to evaluate station performance on a current basis. EMCLA's focus on maximizing
superduopoly revenues and maintaining cost controls is reflected by the fact
that, for the last two years, EMCLA has achieved broadcast cash flow margins of
40% or more. EMCLA also carefully monitors capital expenditures.
Develop Experienced, Incentivized Management Team. EMCLA believes that
management depth is critical to achieving superior operating performance in a
portfolio as large as EMCLA's. EMCLA's senior management team of Scott Ginsburg
and James de Castro are or will be supported by an experienced team of veteran
group operators and station general managers who are currently working for EMCLA
or for stations being acquired or who will be hired from Chancellor, Viacom and
Gannett. At the station level, EMCLA seeks to incentivize its individual radio
station managers and sales forces to outperform revenue and broadcast cash flow
budget expectations by granting quarterly and annual performance
measurement-based bonuses. Evergreen believes that the incentives it offers to
its employees, as well as its stature in the radio industry, will enable it to
continue to be successful in recruiting top industry employees.
Maximize Free Cash Flow. By emphasizing the revenue and expense synergies
achievable through the assembly and operation of superduopolies and by carefully
monitoring operating costs and capital expenditures, EMCLA seeks to maximize
broadcast cash flow and, ultimately, free cash flow (broadcast cash flow less
corporate general and administrative expenses, debt service, tax payments,
dividend requirements and capital expenditures). This focus on free cash flow
should facilitate reduction of leverage without undue dependence on capital
markets, and position EMCLA to pursue attractive acquisitions.
RECENT DEVELOPMENTS
Completed Evergreen Transactions
Since January 1, 1997, EMCLA has completed (i) the acquisition of 17 radio
stations for a net purchase price of approximately $1.13 billion, (ii) the
exchange of five stations for two stations and $9.5 million in cash and (iii)
the sale or other disposition of seven radio stations for $341.8 million.
On January 31, 1997, EMCLA acquired WWWW-FM and WDFN-AM in Detroit from
CRBC for $30.0 million in cash plus various other direct acquisition costs (the
"WWWW/WDFN Acquisition"). EMCLA had previously provided certain sales and
promotional functions to WWWW-FM and WDFN-AM under a joint sales agreement since
February 14, 1996 and subsequently operated the stations under a time brokerage
agreement since April 1, 1996. The acquisition of WWWW-FM created an FM
superduopoly of three FM stations for EMCLA in the Detroit market.
On January 31, 1997, EMCLA acquired KKSF-FM and KDFC-FM/AM in San Francisco
from affiliates of The Brown Organization for $115.0 million in cash plus
various other direct acquisition costs (the "KKSF/KDFC Acquisition"). EMCLA had
previously been operating KKSF-FM and KDFC-FM/AM under a time brokerage
agreement since November 1, 1996. The acquisition of KKSF-FM and KDFC-FM created
an FM superduopoly of five FM stations for EMCLA in the San Francisco market.
On April 1, 1997, EMCLA acquired WJLB-FM and WMXD-FM in Detroit from Secret
for $168.0 million in cash plus various other direct acquisition costs (the
"Secret/Detroit Acquisition"). EMCLA had previously been operating WJLB-FM and
WMXD-FM under time brokerage agreements since September 1,
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1996. The Secret/Detroit Acquisition created an FM superduopoly of five FM
stations for EMCLA in the Detroit market.
On April 3, 1997, EMCLA exchanged WQRS-FM in Detroit (which EMCLA acquired
on April 3, 1997 from Secret for $32.0 million in cash plus various other direct
acquisition costs) to affiliates of Greater Media Radio, Inc. ("Greater Media")
in return for WWRC-AM in Washington, D.C. and $9.5 million in cash (the "Greater
Media Exchange"). EMCLA had previously been operating WWRC-AM under a time
brokerage agreement since June 17, 1996.
On May 1, 1997, EMCLA acquired WDAS-FM/AM in Philadelphia from affiliates
of Beasley FM Acquisition Corp. ("Beasley") for $103.0 million in cash plus
various other direct acquisition costs (the "Beasley Acquisition"). The Beasley
Acquisition created an FM superduopoly of three FM stations for EMCLA in the
Philadelphia market.
On May 15, 1997, EMCLA exchanged its five of its six stations in Charlotte,
North Carolina (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for two FM stations
(WIOQ-FM and WUSL-FM) owned by EZ Communications, Inc. ("EZ") in Philadelphia,
(the "EZ Exchange"), and also sold EMCLA's sixth radio station in Charlotte,
WNKS-FM, to EZ for $10.0 million in cash (the "EZ Sale" and, collectively with
the EZ Exchange, the "EZ Transaction").
On May 30, 1997, EMCLA acquired WPNT-FM in Chicago from affiliates of
Century Broadcasting Company ("Century") for $73.8 million in cash plus various
other direct acquisition costs (the "Century Acquisition").
On June 3, 1997, EMCLA sold WEJM-FM in Chicago to Crawford Broadcasting
("Crawford") for $14.8 million in cash (the "Crawford Disposition").
On June 19, 1997, EMCLA sold WPNT-FM in Chicago to Bonneville International
Corporation ("Bonneville") for $75.0 million in cash (the "Bonneville/WPNT
Disposition").
On July 2, 1997, EMCLA acquired WLTW-FM and WAXQ-FM in New York and
WMZQ-FM, WJZW-FM, WZHF-AM and WBZS-AM in Washington, D.C. from Viacom
International, Inc. ("Viacom") for approximately $607.7 million plus various
other direct acquisition costs (the "EMCLA Viacom Acquisition").
On July 7, 1997, EMCLA sold WJZW-FM in Washington, D.C. to affiliates of
Capital Cities/ABC Radio ("ABC") for $68.0 million in cash (the "ABC/Washington
Disposition").
On July 7, 1997, EMCLA sold the FCC authorizations and certain transmission
equipment previously used in the operation of KYLD-FM in San Francisco to
Susquehanna Radio Corp. ("Susquehanna") for $44.0 million in cash (the "San
Francisco Frequency Disposition"). Simultaneously therewith, CRBC sold the call
letters "KSAN-FM" (which CRBC previously used in San Francisco) to Susquehanna.
On July 7, 1997, EMCLA and CRBC entered a time brokerage agreement to enable
EMCLA to operate KYLD-FM on the frequency previously assigned to KSAN-FM, which
has an improved broadcast signal in the San Francisco market, and upon
consummation of the Merger, the Surviving Subsidiary Corporation will continue
to operate KYLD-FM on that frequency.
On July 14, 1997, EMCLA completed the disposition of WLUP-FM in Chicago to
Bonneville (the "Bonneville/WLUP Disposition") and it is expected that this
transaction will result in a deferred exchange for one or more radio stations
within 180 days after July 14, 1997. In the event that such exchange does not
take place, EMCLA will receive gross proceeds from the disposition of WLUP-FM of
$80.0 million in cash.
On July 21, 1997, EMCLA sold KDFC-FM in San Francisco to Bonneville for
$50.0 million in cash (the "Bonneville/KDFC Disposition" and, together with the
Bonneville/WPNT Disposition and the Bonneville/WLUP Disposition, the "Bonneville
Dispositions").
The foregoing transactions, together with (i) the acquisition by EMCLA on
January 17, 1996 of Pyramid Communications, Inc. for approximately $316.3
million; (ii) the acquisition by EMCLA on May 3, 1996 of WKLB-FM in Boston for
$34.0 million in cash; (iii) the acquisition by EMCLA on August 14, 1996 of
36
<PAGE> 41
KYLD-FM in San Francisco for $44.0 million in cash; (iv) the acquisition by
EMCLA on October 18, 1996 of WEDR-FM in Miami for $65.0 million in cash; (v) the
exchange by EMCLA on November 26, 1996 of WKLB-FM in Boston for WGAY-FM in
Washington, D.C.; and (vi) the dispositions on July 19, 1996 and August 1, 1996
of WHTT-FM/AM and WSJZ-FM in Buffalo for $32.0 million are referred to as the
"Completed Evergreen Transactions."
Pending Evergreen Transactions
Gannett Acquisition
On April 4, 1997, EMCLA entered into the Gannett Agreements with P&S,
pursuant to which Evergreen will acquire WGCI-AM and WGCI-FM in Chicago, KKBQ-AM
and KKBQ-FM in Houston, and KHKS-FM in Dallas for an aggregate purchase price of
$340.0 million in cash (allocated $140.0 million for WGCI-AM and WGCI-FM, $110.0
million for KKBQ-AM and KKBQ-FM and $90.0 million for KHKS-FM), subject to an
upward adjustment of up to $10.0 million depending on the timing of the
closings. The Gannett Agreements are independent with respect to each market and
may be consummated at different times. Each of the Gannett Agreements contained
a condition precedent to its effectiveness that EMCLA present to P&S
satisfactory evidence of its ability to finance the acquisitions. EMCLA
satisfied these conditions, and each of the Gannett Agreements became effective
as of April 10, 1997. On April 10, 1997, EMCLA issued letters of credit for the
benefit of P&S in the aggregate amount of $34.0 million to secure EMCLA's
obligations under the Gannett Agreements.
EMCLA expects that it will ultimately borrow the funds necessary to
complete the Gannett Acquisition from the EMCLA Senior Credit Facility. However,
if EMCLA does not have sufficient borrowing capacity under the EMCLA Senior
Credit Facility or otherwise to consummate the Gannett Acquisition within the
time period specified in the Gannett Agreements, EMCLA has agreed, pursuant to
an alternative financing facility with certain lenders, to issue common equity
securities for the account of those lenders if the alternative facility is
drawn. EMCLA presently expects that it will be able to consummate the Gannett
Acquisition by drawing on the EMCLA Senior Credit Facility and that, as a
result, EMCLA will not be required to make any draw under an alternative
facility.
Although there can be no assurances, EMCLA expects that the Gannett
Acquisition will be completed in the third or fourth quarter of 1997. See "Risk
Factors -- Necessity of Governmental Reviews and Approvals Prior to Consummation
of the Pending Transactions; Required Dispositions."
Secret/Philadelphia Acquisition
On August 12, 1996, EMCLA entered into an agreement to acquire WFLN-FM in
Philadelphia from Secret Communications, L.P. ("Secret") for $37.8 million in
cash (the "Secret/Philadelphia Acquisition"). EMCLA also entered into an
agreement to operate WFLN-FM under a time brokerage agreement effective
September 1, 1996. EMCLA has also entered into an agreement to sell this station
to Greater Media for $41.8 million. See "-- Pending Evergreen
Dispositions -- Greater Media Disposition." EMCLA has received a communication
from Secret purporting to terminate the Secret/Philadelphia Acquisition. EMCLA
believes that this purported termination is without merit, and is pursuing legal
remedies in order to consummate the transaction. Any inability to consummate the
Secret/Philadelphia Acquisition is not expected to have a material adverse
effect on EMCLA or the Surviving Subsidiary Corporation. See "Risk
Factors -- Necessity of Governmental Reviews and Approvals Prior to Consummation
of the Pending Transactions; Required Dispositions."
Bonneville Acquisition
On June 24, 1997, EMCLA entered into an agreement to acquire KZPS-FM and
KDGE-FM in Dallas from Bonneville for $83.5 million in cash (the "Bonneville
Acquisition"). EMCLA also entered into an agreement to operate KZPS-FM and
KDGE-FM under a time brokerage agreement effective on August 1, 1997. Although
there can be no assurance, EMCLA expects that the Bonneville Acquisition will be
completed
37
<PAGE> 42
in the third or fourth quarter of 1997. See "Risk Factors -- Necessity of
Governmental Reviews and Approvals Prior to Consummation of the Pending
Transactions; Required Dispositions."
The Gannett Acquisition, the Secret/Philadelphia Acquisition and the
Bonneville Acquisition are referred to collectively herein as the "Pending
Evergreen Acquisitions."
Required Dispositions
The following describes the transactions contemplated by the Pending
Evergreen Dispositions (as defined) which, together with the ABC/Detroit
Disposition (as defined) to be effected by CRBC, are collectively referred to
herein as the "Required Dispositions".
Under currently applicable rules of the FCC, EMCLA, like other radio
broadcasters, may not own or control more than eight stations, of which no more
than five may be FM or AM, in a single large market. As a result of the
consummation of the Merger, the Gannett Acquisition and the Secret/Philadelphia
Acquisition, the Surviving Subsidiary Corporation would own stations in excess
of the maximum number of FM stations under common ownership permitted by the
FCC's multiple ownership rules in San Francisco/Sacramento, Washington, D.C.,
Philadelphia and Detroit. Accordingly, EMCLA has sold certain stations and/or
FCC authorizations in the Crawford Disposition, the ABC/Washington Disposition,
the San Francisco Frequency Disposition and the Bonneville Dispositions, and has
entered into agreements to divest additional stations in the markets where it
would have stations in excess of the FCC's multiple ownership limitations.
Moreover, CRBC has entered into an agreement to divest a station in Detroit.
There can be no assurance that EMCLA or CRBC will be able to consummate the
foregoing dispositions. See "Risk Factors -- Necessity of Governmental Reviews
and Approvals Prior to Consummation of Pending Transactions; Required
Divestitures."
Douglas Chicago Disposition. On March 19, 1997, EMCLA entered into an
agreement to sell WEJM-AM in Chicago to Douglas Broadcasting ("Douglas") for
$7.5 million in cash (including $0.5 million paid by Douglas in escrow) (the
"Douglas Chicago Disposition"). EMCLA expects that the Douglas Chicago
Disposition will be completed in the third quarter of 1997.
Greater Media Disposition. On April 4, 1997, EMCLA entered into an
agreement to sell WFLN-FM in Philadelphia, which EMCLA will acquire in the
Secret/Philadelphia Acquisition, to Greater Media for $41.8 million in cash (the
"Greater Media Disposition"). Consummation of the Greater Media Disposition is
subject to the prior or concurrent consummation of the Secret/Philadelphia
Acquisition, as to which no assurances can be given. See "-- Pending Evergreen
Acquisitions -- Secret/Philadelphia Acquisition" above. Any inability to
consummate the Greater Media Disposition is not expected to have a material
adverse effect on EMCLA or the Surviving Subsidiary Corporation.
Douglas AM Dispositions. On May 14, 1997, EMCLA entered into an agreement
to sell KDFC-AM in San Francisco and WBZS-AM and WZHF-AM in Washington, D.C. to
Douglas for $18.0 million in the form of a promissory note to be delivered at
closing (the "Douglas AM Dispositions"). The promissory note will bear interest
at 7 3/4%, with a balloon principal payment due four years after closing. At
closing, Douglas will be required to post a $1.0 million letter of credit for
the benefit of EMCLA that will remain outstanding until all amounts due under
the promissory note are paid. Although there can be no assurance, EMCLA expects
that the Douglas AM Dispositions will be completed during the third quarter of
1997.
The Douglas Chicago Disposition, the Greater Media Disposition and the
Douglas AM Dispositions are referred to collectively herein as the "Pending
Evergreen Dispositions." The Pending Evergreen Acquisitions and the Pending
Evergreen Dispositions are referred to collectively herein as the "Pending
Evergreen Transactions."
The Required Dispositions reflect the number of stations that must be
disposed of by EMCLA and CRBC in order to comply with the FCC's multiple
ownership limits if the Pending Evergreen Acquisitions and the Merger are to be
consummated. The Surviving Subsidiary Corporation may also be required to
dispose of one or more of its stations as a result of federal or state antitrust
laws. See "Risk Factors -- Antitrust Matters".
38
<PAGE> 43
Evergreen Financing Transactions
To finance the Pending Evergreen Acquisitions and the Evergreen Viacom
Acquisition, on April 25, 1997, EMCLA entered into the EMCLA Senior Credit
Facility with certain lenders and Toronto Dominion (Texas), Inc. as
Administrative Agent for such lenders. Pursuant to the EMCLA Senior Credit
Facility, EMCLA's credit facility was increased to a total commitment of $1.75
billion and, upon consummation of the Merger, such total commitment is expected
to be increased to at least $2.50 billion.
On June 16, 1997 Evergreen completed its private offering of 5,500,000
shares of Evergreen $3.00 Convertible Preferred Stock for aggregate gross
proceeds of $275.0 million and on June 20, 1997, the initial purchasers of the
Evergreen $3.00 Convertible Preferred Stock exercised an over-allotment option
granted by Evergreen to acquire an additional 490,000 shares of the Evergreen
$3.00 Convertible Preferred Stock for additional gross proceeds of $24.5
million, (collectively, the "Evergreen Convertible Preferred Stock Offering").
The net proceeds of the Evergreen Convertible Preferred Stock Offering were
contributed to EMCLA as capital and used to repay borrowings under the EMCLA
Senior Credit Facility and subsequently were reborrowed as part of the financing
of the Evergreen Viacom Acquisition.
CRBC
GENERAL
CRBC is one of the largest companies in the United States exclusively
devoted to radio broadcasting. CRBC focuses on owning and operating radio
stations in the top 40 U.S. markets, which account for a disproportionately
large percentage of radio advertising revenue. CRBC believes that the large
revenue base in these markets generally enables operators to achieve a greater
degree of profitability than operators in smaller markets. CRBC employs a
variety of programming formats, including country, oldies, news/talk, adult
contemporary, progressive album rock, contemporary hit radio, sports and
classical, which CRBC believes makes it less susceptible to changes in listening
preferences and reduces its dependence upon any local economy or advertiser
category.
Strategy
CRBC's senior management team, led by Steven Dinetz, its President and
Chief Executive Officer, has extensive experience in acquiring radio stations
and enhancing their broadcast cash flow. CRBC's business strategy relies upon
five key elements:
Revenue Maximization through Large Local Sales Forces and Effective
Inventory Management. CRBC seeks to maximize its share of local advertising
revenue in each of its markets by developing large, well-trained sales forces
that can be employed to efficiently target available advertising sources.
Management believes that large sales forces enable it to compete effectively
against other radio station operators and position it to obtain additional
advertising dollars that otherwise would be spent on other local media, such as
television and newspapers. In addition, CRBC aggressively manages its stations'
inventory position to ensure that revenue is maximized.
Emphasis on Margin Enhancement Through Strict Cost Controls. Management
maintains tight control of operating expenses to ensure a focus on profitability
throughout CRBC. Management requires each station to prepare daily reports that
track station-level revenues, collections and expenses. These reports enable
management to monitor station performance on a real-time basis and promote
greater accountability on the part of station management.
Targeted Programming and Marketing Efforts. Management focuses on
increasing both audience share and audience time spent listening by researching
each station's core audience and targeting its programming format to that
audience's preferences. CRBC reinforces its programming efforts through active
marketing and promotional activities that target the same core audiences.
Decentralized Management Structure. CRBC emphasizes the development of
skilled local management and staff with support from CRBC's regional managers.
CRBC seeks to decentralize decision-making so that
39
<PAGE> 44
local managers have the flexibility to develop policies that they consider to be
the most effective in improving station performance in their respective markets.
To further motivate senior management, CRBC has established incentive plans that
link compensation directly to station operating performance.
Optimize Station Portfolio. CRBC seeks to acquire radio stations or radio
station groups operating in top 40 markets that possess programming,
demographic, technical and operating attributes that management believes it can
exploit. CRBC's goal is to be a leading radio station operator in each of its
markets. However, in markets where management does not believe that it will be
able to achieve this goal, CRBC may explore the exchange of its stations for
radio stations in other markets where CRBC can increase its presence or will
consider the sale of stations to raise funds for future acquisitions.
RECENT DEVELOPMENTS
Completed Chancellor Transactions
Since January 1, 1997, CRBC has completed (i) the acquisition of 24 radio
stations for a net purchase price of approximately $1.05 billion, (ii) the
exchange of three stations for one station and $33.0 million in cash and (iii)
the sale of four stations for $71.3 million.
On January 23, 1997, CRBC acquired Colfax Communications, a radio
broadcasting company with eight FM stations and four AM stations located in four
markets (Minneapolis/St. Paul, Phoenix, Washington, D.C. and Milwaukee) (the
"Colfax Acquisition") for $383.7 million in cash (including acquisition costs).
On January 31, 1997, CRBC sold WWWW-FM and WDFN-AM in Detroit to Evergreen
for $30.0 million in cash plus various other direct transaction costs (the
"WWWW/WDFN Disposition").
On February 13, 1997, CRBC acquired three FM stations in Orlando, two FM
stations and one AM station in West Palm Beach and two FM stations in
Jacksonville from OmniAmerica Group for $166.0 million in cash (including
acquisition costs) and common stock of CRBC valued at $15.0 million (the "Omni
Acquisition"). CRBC had previously been operating the Orlando stations acquired
in the Omni Acquisition pursuant to a time brokerage agreement since July 1,
1996.
On March 24, 1997, CRBC exchanged WEAT-FM/AM and WOLL-FM in West Palm
Beach, which were acquired as part of the Omni Acquisition, for KSTE-FM in
Sacramento and $33.0 million in cash (the "West Palm Beach Exchange"). CRBC had
previously been operating KSTE-FM under a time brokerage agreement since August
1, 1996. Prior to consummating the West Palm Beach Exchange, CRBC had sold all
of the broadcast time on WEAT-FM/AM and WOLL-FM pursuant to a time brokerage
agreement since July 1, 1996.
On March 31, 1997, CRBC sold WMIL-FM and WOKY-AM in Milwaukee, which were
acquired as part of the Colfax Acquisition, for $41.3 million in cash (the
"Milwaukee Disposition").
On July 2, 1997, CRBC acquired KIBB-FM and KYSR-FM in Los Angeles, WLIT-FM
in Chicago and WDRQ-FM in Detroit from Viacom for approximately $489.8 million
plus various other direct acquisition costs (the "Chancellor Viacom
Acquisition").
In addition, on February 14, 1996, CRBC acquired Trefoil Communications,
Inc. and its wholly owned subsidiary, Shamrock Broadcasting, Inc. (collectively,
"Shamrock Broadcasting"), a radio broadcasting company with 11 FM stations and 8
AM stations in 10 markets for $408.0 million in cash (including acquisition
costs) (the "Shamrock Acquisition"), on July 31, 1996 CRBC exchanged KTBZ-FM in
Houston (which was acquired as part of the Shamrock Acquisition) and $5.6
million in cash for KIMN-FM and KALC-FM in Denver (the "Houston/Denver
Exchange") and on November 22, 1996 acquired WKYN-AM in Cincinnati for $1.4
million in cash.
The foregoing transactions are referred to as the "Completed Chancellor
Transactions." The Completed Evergreen Transactions and the Completed Chancellor
Transactions are collectively referred to as the "Completed Transactions."
40
<PAGE> 45
Pending Chancellor Transactions
The following transactions (other than the SFX Exchange) are collectively
referred to herein as the "Pending Chancellor Transactions":
ABC/Detroit Disposition. In connection with Evergreen's ABC/Washington
Disposition, on April 11, 1997, CRBC entered into an agreement to sell WDRQ-FM
in Detroit to ABC for $37.0 million in cash (including $3.7 million paid by ABC
in escrow) (the "ABC/Detroit Disposition" and, together with the ABC/Washington
Disposition, the "ABC Dispositions"). CRBC expects that the ABC/Detroit
Disposition will be completed in the third quarter of 1997.
Denver Acquisition. On July 30, 1997, CRBC entered into an agreement to
acquire KXPK-FM in Denver from Ever Green Wireless LLC (which is unrelated to
Evergreen) for $26.0 million in cash (including $1.7 million paid by CRBC in
escrow) (the "Denver Acquisition"). CRBC also entered into an agreement to
operate KXPK-FM under a time brokerage agreement to be effective upon receipt of
HSR Act approval. Although there can be no assurance, CRBC expects that the
Denver Acquisition will be completed in the first quarter of 1998, after
completion of the Merger. See "Risk Factors -- Necessity of Governmental Reviews
and Approvals Prior to Consummation of the Pending Transactions; Required
Dispositions."
SFX Exchange. On July 1, 1996, CRBC entered into an agreement with SFX
pursuant to which CRBC agreed to exchange WAPE-FM and WFYV-FM in Jacksonville
and $11.0 million in cash in return for WBAB-FM, WBLI-FM, WHFM-FM and WGBB-AM in
Nassau/Suffolk (Long Island). CRBC has been operating WBAB-FM, WBLI-FM, WHFM-FM
and WGBB-FM pursuant to a time brokerage agreement effective July 1, 1996 and
SFX has been operating WAPE-FM and WFYV-FM pursuant to time brokerage agreements
each effective July 1, 1996. CRBC is unable to predict whether or when it will
consummate the SFX Exchange, as it is pending review by the DOJ under the HSR
Act. CRBC and SFX have entered into an amendment to the agreement extending the
time for which the transactions are to be consummated to July 31, 1997, after
which either party may terminate the agreement. CRBC cannot currently predict
whether the agreement will be further extended, whether the SFX Exchange will be
consummated as previously planned or whether the terms thereof will be modified.
In light of the uncertainty as to the terms, if any, on which the SFX Exchange
may ultimately be consummated, the information set forth under "-- The Combined
Companies" and under "Summary -- The Companies -- Combined Companies" does not
give effect to the SFX Exchange, and the term "Pending Chancellor Transactions"
does not include the SFX Exchange.
The dispositions contemplated by the SFX Exchange and the ABC/Detroit
Disposition are referred to collectively herein as the "Pending Chancellor
Dispositions" The Pending Evergreen Dispositions and the Pending Chancellor
Dispositions are referred to collectively herein as the "Pending Dispositions".
For a discussion of certain factors that could affect the consummation of
the Pending Transactions, see "Risk Factors -- Necessity of Governmental Reviews
and Approvals Prior to Consummation of the Pending Transactions; Required
Divestitures."
Chancellor Financing Transactions
On June 24, 1997, CRBC completed its private offering of the CRBC 8 3/4%
Notes (the "CRBC 8 3/4% Notes Offering"). The proceeds of the CRBC Notes were
used to repay borrowings under CRBC's previous senior credit agreement.
On July 2, 1997, CRBC entered into the CRBC Restated Credit Agreement with
certain lenders and Bankers Trust Company as Managing Agent for such lenders.
Pursuant to the CRBC Restated Credit Agreement, CRBC's credit facility was
refinanced and increased to a total commitment of $750.0 million. Additionally,
on July 2, 1997 CRBC received an interim loan of $170.0 million (the "Chancellor
Interim Financing"). These financing transactions were used to finance the
Chancellor Viacom Acquisition. Upon consummation of the Merger, all borrowings
under the CRBC Restated Credit Agreement and the Chancellor Interim Financing
will be repaid by EMCLA, which is expected to borrow funds under the EMCLA
Senior Credit Facility for such purpose.
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<PAGE> 46
THE COMBINED COMPANIES
After giving effect to the Pending Transactions, the Surviving Subsidiary
Corporation will own and operate 97 radio stations (69 FM and 28 AM) in 22
markets, including 58 stations serving the 12 largest radio markets in the
United States. The Surviving Subsidiary Corporation's station portfolio will
include a total of 12 superduopolies, with eight in the 12 largest radio
markets -- Los Angeles, New York, Chicago, San Francisco, Dallas, Philadelphia,
Washington, D.C. and Detroit -- and four in other large markets -- Denver,
Minneapolis/St. Paul, Phoenix and Orlando. The following tables set forth
certain information about EMCLA's and CRBC's radio stations and their markets:
Evergreen Stations. The following table sets forth selected information
with respect to the portfolio of radio stations owned by EMCLA at August 4,
1997, without giving effect to the Pending Transactions.
<TABLE>
<CAPTION>
RANKING OF
STATION'S
MARKET BY AUDIENCE TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHIC
--------- ---------- ------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
----------------
Los Angeles, CA 1 KKBT-FM 4.5 Urban Contemporary Women 18-34
New York, NY 2 WKTU-FM 4.7 Rhythmic Contemporary Hits Persons 25-54
WLTW-FM 6.0 Soft Adult Contemporary Persons 25-54
WAXQ-FM 2.0 Classic Rock Persons 25-54
Chicago, IL 3 WMVP-AM 1.4 Personality/Sports Men 25-54
WRCX-FM 3.2 Mainstream Rock Men 18-34
WVAZ-FM 4.2 Black Adult Women 25-54
WEJM-AM+ N/M Hip Hop Persons 18-34
WNUA-FM 3.9 Contemporary Jazz Persons 25-54
San Francisco, CA 4 KIOI-FM 3.2 Adult Contemporary Women 25-54
KMEL-FM 3.9 Contemporary Hits Persons 18-34
KKSF-FM 3.6 Contemporary Jazz Persons 25-54
KDFC-AM+(5) N/M Classical Persons 35-64
Dallas, TX 5 KSKY-AM 0.1 Inspirational N/M
Philadelphia, PA 6 WYXR-FM 3.5 Adult Contemporary Women 18-49
WJJZ-FM 3.9 Contemporary Jazz Persons 35-54
WDAS-FM 4.9 Urban Contemporary Persons 25-54
WDAS-AM 1.2 Gospel N/M
WUSL-FM 5.0 Urban Contemporary Women 18-34
WIOQ-FM 3.6 Contemporary Hit Radio/Dance Women 18-34
Houston, TX 7 KTRH-AM 4.5 News/Sports Men 25-54
KLOL-FM 3.2 Album Rock Men 18-34
Washington, D.C. 8 WTOP-AM 2.9 News/Sports Men 25-54
WASH-FM 4.6 Adult Contemporary Women 25-54
WGAY-FM 3.9 Adult Contemporary Persons 35-64
WWRC-AM 0.9 News/Talk Persons 35-64
WMZQ-FM 5.0 Country Persons 25-54
WBZS-AM+ N/M Business News N/M
WZHF-AM+ N/M Health and Fitness N/M
Boston, MA 9 WJMN-FM 6.3 Contemporary Hits Women 18-24
WXKS-FM 6.2 Contemporary Hits Women 25-34
WXKS-AM 1.7 Nostalgia Women 45-54
Detroit, MI 11 WKQI-FM 4.7 Adult Contemporary Women 25-54
WNIC-FM 7.2 Adult Contemporary Women 25-54
WDOZ-AM(6) N/M Adult Contemporary Women 25-54
WWWW-FM 3.6 Country Women 25-54
WDFN-AM 1.3 Sports/Talk Men 25-49
WJLB-FM 8.1 Urban Contemporary Persons 18-34
WMXD-FM 4.3 Black Adult Persons 25-54
Miami/ Ft Lauderdale, 12 WVCG-AM 0.6 Brokered(7) N/M
FL WEDR-FM 4.9 Urban Contemporary Persons 25-54
<CAPTION>
TARGET
STATION RANKING DEMOGRAPHICS
IN TARGET AUDIENCE
MARKET(1) DEMOGRAPHIC(4) SHARE(%)(4)
--------- --------------- ------------
<S> <C> <C>
----------------
Los Angeles, CA 2 7.2
New York, NY 5 5.0
1 7.1
12 3.1
Chicago, IL 18 2.5
1 11.8
3 6.7
N/M N/M
5 4.8
San Francisco, CA 2 5.3
1 7.2
4 4.4
N/M N/M
Dallas, TX N/M N/M
Philadelphia, PA 3 7.2
4 6.4
2 6.8
N/M N/M
1 9.9
3 7.4
Houston, TX 3 5.6
2 7.6
Washington, D.C. 10 3.6
2 7.3
6 5.1
24 0.9
5 5.0
N/M N/M
N/M N/M
Boston, MA 2 19.0
1 5.1
12 0.9
Detroit, MI 4 7.0
1 14.3
N/M N/M
9 3.2
11 3.9
1 12.3
4 5.6
Miami/ Ft Lauderdale, N/M N/M
FL 6 4.7
</TABLE>
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<PAGE> 47
- ---------------
+ Indicates station to be disposed in a Pending Evergreen Disposition.
(1) Actual city of license may differ from metropolitan market served in certain
cases.
(2) Ranking of principal radio market served by the station among all U.S. radio
broadcast markets by aggregate 1996 gross radio broadcasting revenue as
reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
(3) Information derived from The Arbitron Company, Spring 1997, Local Market
Reports in the specified markets for listeners age 12+, Monday to Sunday,
6:00 a.m. to Midnight. Copyright, The Arbitron Company.
(4) Information derived from The Arbitron Company, Spring 1997. Local Market
Reports in the specified markets for the Target Demographics specified for
listening Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron
Company.
(5) EMCLA has historically brokered KDFC-AM to third parties.
(6) EMCLA has historically brokered WDOZ-AM to third parties.
(7) EMCLA sells airtime to third parties for broadcast of programming on a
variety of topics.
N/M: Not meaningful
CRBC Stations. The following table sets forth selected information with
respect to the portfolio of stations owned by CRBC at August 4, 1997, without
giving effect to the Pending Chancellor Transactions:
<TABLE>
<CAPTION>
RANKING OF
STATION'S
MARKET BY AUDIENCE TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS
--------- ---------- ------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Los Angeles, CA 1 KLAC-AM 2.2 Adult Standards/Sports Persons 35-64
KZLA-FM 2.5 Country Persons 25-54
KYSR-FM 2.8 Hot Adult Contemporary Persons 25-54
KIBB-FM 1.6 Rhythmic Adult Contemporary Persons 25-54
New York, NY 2 WHTZ-FM 3.5 Contemporary Hit Radio Persons 18-34
Chicago, IL 3 WLIT-FM 4.8 Soft Adult Contemporary Persons 25-54
San Francisco, CA 4 KNEW-AM 1.0 Country/Sports Persons 25-54
KYLD-FM 4.2 Brokered(5) Persons 25-54
KABL-AM 2.5 Adult Standards Persons 35-64
KBGG-FM 2.7 70's Oldies Persons 25-54
Washington, D.C. 8 WBIG-FM 4.7 Oldies Persons 25-54
WGMS-FM 4.1 Classical Persons 35-64
WTEM-AM 1.0 Sports/Talk Men 18-49
Atlanta, GA 10 WFOX-FM 4.3 Oldies Persons 25-54
Detroit, MI 11 WDRQ-FM+ 3.8 Rhythmic Hit Radio Persons 18-34
Denver, CO 15 KRRF-AM 0.6 Talk Men 25-54
KXKL-FM 4.2 Oldies Persons 25-54
KVOD-FM 1.8 Classical Persons 25-54
KIMN-FM 2.7 70's Oldies Persons 25-54
KALC-FM 4.8 Hot Adult Contemporary Persons 18-34
Minneapolis/
St. Paul, MN 16 KTCZ-FM 4.4 Progressive Album Rock Men 25-49
KTCJ-AM(6) 0.2 Progressive Album Rock Men 25-49
KDWB-FM 6.9 Contemporary Hit Radio Persons 18-34
KFAN-AM 1.8 Sports Men 18-49
KEEY-FM 6.9 Country Persons 25-54
KQQL-FM 5.0 Oldies Persons 25-54
WBOB-FM(7) 4.5 Young Country Persons 18-49
Phoenix, AZ 17 KMLE-FM 6.0 Country Persons 25-54
KISO-AM 0.8 Urban Adult Contemporary Persons 25-54
KOOL-FM 6.0 Oldies Persons 25-54
KOY-AM 5.1 Adult Standards Persons 35-64
KYOT-FM 3.1 Contemporary Jazz Persons 25-54
KZON-FM 3.7 Alternative Rock Persons 18-34
Cincinnati, OH 20 WUBE-FM(8) 8.6 Country Persons 25-54
WUBE-AM 0.4 Nostalgia Persons 35-64
WYGY-FM(8) 3.3 Young Country Men 18-34
WKYN-AM 0.7 Sports/Talk Men 18-49
Pittsburgh, PA 24 WWSW-AM(9) 0.3 Oldies Persons 25-54
WWSW-FM 5.6 Oldies Persons 25-54
Sacramento, CA 25 KGBY-FM 3.8 Adult Contemporary Women 25-54
KHYL-FM 4.1 Oldies Persons 25-54
KFBK-AM 10.5 News/Talk Persons 25-54
KSTE-AM 2.9 Talk Persons 25-54
<CAPTION>
TARGET
STATION RANKING DEMOGRAPHICS
IN TARGET AUDIENCE
MARKET(1) DEMOGRAPHICS(4) SHARE(%)(4)
--------- --------------- ------------
<S> <C> <C>
Los Angeles, CA 21 1.7
14 2.9
10 3.3
18 1.9
New York, NY 6 5.7
Chicago, IL 1 5.9
San Francisco, CA 34 0.7
13 2.3
13 2.2
8 3.9
Washington, D.C. 2 5.5
3 5.8
18 2.2
Atlanta, GA 10 5.2
Detroit, MI 4 6.6
Denver, CO 18 1.2
7 5.2
19 1.1
13 3.5
1 9.6
Minneapolis/
St. Paul, MN 2 7.7
20 0.2
2 9.6
11 4.1
3 7.1
4 6.8
7 5.0
Phoenix, AZ 3 6.7
25 0.7
2 7.6
10 3.8
13 3.5
4 7.1
Cincinnati, OH 1 9.5
24 0.3
8 3.5
15 1.3
Pittsburgh, PA 24 0.2
4 7.2
Sacramento, CA 2 8.4
6 5.3
2 8.1
15 2.8
</TABLE>
43
<PAGE> 48
<TABLE>
<CAPTION>
RANKING OF
STATION'S
MARKET BY AUDIENCE TARGET
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS
--------- ---------- ------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Orlando, FL 26 WOCL-FM 4.4 Oldies Persons 25-54
WOMX-FM 7.2 Adult Contemporary Persons 25-54
WJHM-FM 8.2 Urban Contemporary Persons 18-34
WXXL-FM 6.9 Contemporary Hit Radio Persons 18-34
Nassau/Suffolk (Long
Island), NY(10) 44 WALK-FM 6.2 Adult Contemporary Persons 25-54
WALK-AM 0.3 Adult Contemporary Persons 35-64
Jacksonville, FL 47 WAPE-FM 8.1 Contemporary Hit Radio Women 18-34
WFYV-FM 8.6 Album Oriented Rock Men 25-54
Riverside/San
Bernardino, CA 64 KGGI-FM 6.1 Contemporary Hit Radio Persons 18-34
KMEN-AM 0.4 Oldies Men 25-54
<CAPTION>
TARGET
STATION RANKING DEMOGRAPHICS
IN TARGET AUDIENCE
MARKET(1) DEMOGRAPHICS(4) SHARE(%)(4)
--------- --------------- ------------
<S> <C> <C>
Orlando, FL 10 5.1
1 9.9
1 11.8
2 10.2
Nassau/Suffolk (Long
Island), NY(10) 1 7.3
38 0.3
Jacksonville, FL 1 15.7
1 15.8
Riverside/San
Bernardino, CA 1 9.4
32 .6
</TABLE>
- ---------------
+ Indicates station to be disposed in the ABC/Detroit Disposition.
(1) Actual city of license may differ from metropolitan market served in
certain cases.
(2) Ranking of principal radio market served by the station among all U.S.
radio broadcast markets by aggregate 1996 gross radio broadcasting revenue
as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
(3) Information derived from The Arbitron Company, Spring 1997, Local Market
Reports in the specified markets for listeners age 12+, Monday to Sunday,
6:00 a.m. to Midnight. Copyright, The Arbitron Company.
(4) Information derived from The Arbitron Company, Spring 1997, Local Market
Reports in the specified markets for the Target Demographics specified for
listening Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron
Company.
(5) In the San Francisco Frequency Disposition, EMCLA sold the FCC
authorizations related to the frequency previously utilized in the
operation of KYLD-FM. Upon consummation of this disposition, EMCLA began
operating KYLD-FM and its Contemporary Hits format, which was ranked first
in its Target Demographics according to Arbitron for the most recent
period, on the frequency previously used by CRBC in the operation of
KSAN-FM pursuant to a time brokerage agreement. On July 8, 1997, CRBC
changed the call letters of this frequency to "KYLD-FM."
(6) Programming provided to KTCJ-AM via simulcast of programming broadcast on
KTCZ-FM. The format of KTCJ-AM was changed to Classic Country with a target
demographic of Persons 35-64 effective April 25, 1997.
(7) The format of WBOB-FM was changed to Album Rock with a target demographic
of Men 18-34 effective April 15, 1997.
(8) WUBE-FM and WYGY-FM are sold in combination.
(9) Programming provided to WWSW-AM via simulcast of programming broadcast on
WWSW-FM.
(10) Nassau/Suffolk (Long Island) may also be considered part of the greater New
York market, although it is reported separately as a matter of convention.
N/M: Not meaningful.
44
<PAGE> 49
Gannett Stations. The following table sets forth selected information with
respect to the stations to be acquired following consummation of the Gannett
Acquisition:
<TABLE>
<CAPTION>
RANKING OF STATION TARGET
STATION'S RANKING DEMOGRAPHICS
MARKET BY AUDIENCE TARGET IN TARGET AUDIENCE
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4) SHARE(%)(4)
--------- ---------- ------- ----------- -------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Persons
Chicago, IL 3 WGCI-AM 1.4 Urban/R&B 18-34 25 0.7
Persons
WGCI-FM 5.6 Urban Oldies 25-54 2 5.6
Dallas, TX 5 KHKS-FM 7.0 Contemporary Hits Women 18-34 1 14.4
Persons
Houston, TX 7 KKBQ-AM 0.2 Country 25-54 34 0.2
Persons
KKBQ-FM 4.3 Fresh Country 25-54 6 5.0
</TABLE>
- ---------------
(1) Actual city of license may differ from metropolitan market served in certain
cases.
(2) Ranking of principal radio market served by the station among all U.S. radio
broadcast markets by aggregate 1996 gross radio broadcasting revenue as
reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
(3) Information derived from The Arbitron Company, Spring 1997, Local Market
Reports in the specified markets for listeners age 12+, Monday to Sunday,
6:00 a.m. to Midnight. Copyright, The Arbitron Company.
(4) Information derived from The Arbitron Company, Spring 1997, Local Market
Reports for the Target Demographics in the specified markets specified for
listening Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron
Company.
Other Pending Evergreen and Chancellor Acquisitions. The following table
sets forth selected information with respect to the stations to be acquired by
EMCLA following consummation of the Secret/Philadelphia Acquisition and the
Bonneville Acquisition and by CRBC following consummation of the Denver
Acquisition:
<TABLE>
<CAPTION>
RANKING OF
STATION'S STATION RANKING TARGET
MARKET BY AUDIENCE TARGET IN TARGET DEMOGRAPHICS
MARKET(1) REVENUE(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4) AUDIENCE SHARE(4)
- ------------------ ---------- --------- ----------- ---------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dallas, TX 5 KZPS-FM 3.8 Classic Rock Persons 25-54 4 5.2
KDGE-FM 3.0 Alternative Rock Persons 18-34 5 5.3
Philadelphia, PA 6 WFLN-FM+ 2.6 Classical Persons 35-74 10 3.8
Denver, CO 15 KXPK-FM 3.1 Alternative Persons 18-49 11 4.1
</TABLE>
- ---------------
+ Indicates station to be disposed in a Pending Disposition.
(1) Actual city of license may differ from metropolitan market served in certain
cases.
(2) Ranking of principal radio market served by the station among all U.S. radio
broadcast markets by aggregate 1996 gross radio broadcasting revenue as
reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
(3) Information derived from The Arbitron Company, Spring 1997, Local Market
Reports in the specified markets for listeners age 12+, Monday to Sunday,
6:00 a.m. to Midnight. Copyright, The Arbitron Company.
(4) Information derived from The Arbitron Company, Spring 1997, Local Market
Reports for the Target Demographics in the specified markets specified for
listening Monday to Sunday, 6:00 a.m. to Midnight. Copyright, The Arbitron
Company.
ADVERTISING
The primary source of each of EMCLA's and CRBC's revenues is the sale of
broadcasting time for local, regional and national advertising. Approximately
69% of EMCLA's gross revenues was generated from the sale of local advertising
in 1995 and 1996; on a pro forma basis approximately 71% of the Surviving
Subsidiary Corporation's gross revenues would have been generated from the sale
of local advertising in 1996. EMCLA and CRBC each believes that radio is one of
the most efficient, cost-effective means for advertisers to reach specific
demographic groups. The advertising rates charged by EMCLA's and CRBC's radio
stations are
45
<PAGE> 50
based primarily on (i) a station's ability to attract audiences in the
demographic groups targeted by its advertisers (as measured principally by
quarterly Arbitron rating surveys that quantify the number of listeners tuned to
the station at various times) and (ii) the supply of and demand for radio
advertising time. Advertising rates generally are the highest during morning and
evening drive-time hours.
Depending on the format of a particular station, there are predetermined
numbers of advertisements that are broadcast each hour. EMCLA and CRBC each
determines the number of advertisements broadcast hourly that can 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 sales staff generates most of its local and regional
advertising sales. To generate national advertising sales, EMCLA and CRBC each
engages an advertising representative for each of its stations that specializes
in national sales and is compensated on a commission-only basis. Most
advertising contracts are short-term and generally run only for a few weeks.
COMPETITION
The radio broadcasting industry is a highly competitive business. The
success of each of EMCLA's and CRBC's stations is dependent, to a significant
degree, upon its audience ratings and share of the overall advertising revenue
within its market. EMCLA's and CRBC's radio stations compete for listeners and
advertising revenues directly with other radio stations, as well as with other
media, within their respective markets. Radio stations compete for listeners
primarily on the basis of program content and by hiring on-air talent that
appeals to a particular demographic group. By building a strong listener base
comprised of a specific demographic group in each of its markets, EMCLA and CRBC
are able to attract advertisers who seek to reach those listeners. Other media,
including broadcast television, cable television, newspapers, magazines, direct
mail coupons and billboard advertising also compete with EMCLA's and CRBC's
stations for advertising revenues. EMCLA and CRBC also compete with other
broadcasting operators for acquisition opportunities, and prices for radio
stations in major markets have increased significantly in recent periods. To the
extent that the rapid pace of consolidation in the radio broadcasting industry
continues, certain competitors may emerge with larger portfolios of major market
radio stations, greater ability to deliver large audiences to advertisers and
more access to capital resources than do EMCLA and CRBC. The audience ratings
and market share for EMCLA and CRBC are and will be subject to change and any
adverse change in a particular market could have a material and adverse effect
on the revenue of its stations located in that market. There can be no assurance
that any one of EMCLA's and CRBC's stations will be able to maintain or increase
its current audience ratings or advertising revenue market share.
The radio broadcasting industry is also subject to competition from new
media technologies that are being developed or introduced, such as the delivery
of audio programming by cable television systems, direct broadcast satellite
("DBS") systems and other digital audio broadcasting formats to local and
national audiences. In addition, the FCC has auctioned spectrum for a new
satellite-delivered Digital Audio Radio Service ("DARS"). These actions may
result in the introduction of several new national or regional satellite radio
services with sound quality equivalent to compact discs. Another possible
competitor to traditional radio is In Band On Channel ("IBOC") digital radio.
IBOC could provide multi-channel, multi-format digital radio services in the
same band width currently occupied by traditional AM and FM radio services.
EMCLA and CRBC cannot predict at this time the effect, if any, that any such new
technologies may have on the radio broadcasting industry.
FEDERAL REGULATION OF RADIO BROADCASTING INDUSTRY
Introduction. The radio broadcasting industry is subject to extensive and
changing regulation over, among other things, program content, technical
operations and business and employment practices. Unless otherwise specified
below or indicated by the context, the discussion below also applies to the
Surviving Subsidiary Corporation after the consummation of the Pending
Transactions.
46
<PAGE> 51
The ownership, operation and sale of radio broadcast stations (including
those licensed to EMCLA and CRBC) are subject to the jurisdiction of the FCC,
which acts under authority granted by the Communications Act. The Communications
Act prohibits the assignment of an FCC license, and the transfer of control of
an FCC licensee, without the prior consent of the FCC. In determining whether to
grant requests for consent to such assignments or transfers, and in determining
whether to grant or renew a radio broadcast license, the FCC considers a number
of factors pertaining to the licensee (and proposed licensee), including:
limitations on alien ownership and the common ownership of television broadcast,
radio broadcast and daily newspaper properties, the "character" of the licensee
(and proposed licensee) and those persons or entities that have "attributable"
interests, and compliance with the Anti-Drug Abuse Act of 1988. Among other
things, the FCC assigns frequency bands for radio broadcasting; determines the
particular frequencies, locations and operating power of radio broadcast
stations; issues, renews, revokes and modifies radio broadcast station licenses;
regulates equipment used by radio broadcast stations; adopts and implements
regulations and policies that directly or indirectly affect the ownership,
operation, program content and employment and business practices of radio
broadcast stations; and has the power to impose penalties for violations of its
rules and the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act and specific FCC rules and policies. Reference should be made
to the Communications Act, FCC rules, and the public notices and rulings of the
FCC for further information concerning the nature and extent of federal
regulation of radio broadcast stations.
Failure to observe these or other FCC rules and policies may result in the
imposition of various sanctions, including admonishment, monetary forfeitures,
the grant of "short" (less than the maximum eight-year term) renewal terms or,
for particularly egregious violations, the denial of a license renewal
application, the revocation of FCC licenses, or the denial of FCC consent to
acquire additional broadcast properties.
License Renewal. Radio broadcast licenses are granted for maximum terms of
up to eight years. They may be renewed through an application to the FCC, and,
in certain instances, licensees are entitled to renewal expectancies. During
certain periods when a renewal application is pending, competing applicants may
file for the radio frequency being used by the renewal applicant, although the
FCC is prohibited from considering such competing applications if the existing
license has satisfied certain obligations. Petitions to deny license renewals
can be filed by interested parties, including members of the public. The FCC is
required to hold hearings on a renewal application in certain circumstances.
The following table sets forth, for the portfolio of stations that would be
owned by the Surviving Subsidiary Corporation, (i) the frequency of each station
and (ii) the date of expiration of each station's main FCC broadcast license:
<TABLE>
<CAPTION>
EXPIRATION DATE
STATION MARKET(1) FREQUENCY OF FCC LICENSE
------- --------- ---------- ----------------
<S> <C> <C> <C>
KKBT-FM Los Angeles, CA 92.3 MHz 12/97
KYSR-FM Los Angeles, CA 98.7 MHz 12/97
KIBB-FM Los Angeles, CA 100.3 MHz 12/97
KLAC-AM Los Angeles, CA 570 kHz 12/97
KZLA-FM Los Angeles, CA 93.9 MHz 12/97
</TABLE>
WKTU-FM New York, NY 103.5 MHz 6/98
WLTW-FM New York, NY 106.7 MHz 6/98
WAXQ-FM New York, NY 104.3 MHz 6/98
WHTZ-FM New York, NY 100.3 MHz 6/98
47
<PAGE> 52
<TABLE>
<CAPTION>
EXPIRATION DATE
STATION MARKET(1) FREQUENCY OF FCC LICENSE
------- --------- ---------- ----------------
<S> <C> <C> <C>
WMVP-AM Chicago, IL 1000 kHz 12/03
WRCX-FM Chicago, IL 103.5 MHz 12/96*
WVAZ-FM Chicago, IL 102.7 MHz 12/03
WNUA-FM Chicago, IL 95.5 MHz 12/03
WLIT-FM Chicago, IL 93.9 MHz 12/03
WGCI-FM Chicago, IL 107.5 MHz 12/03
WGCI-AM Chicago, IL 1390 kHz 12/03
KIOI-FM San Francisco, CA 101.3 MHz 12/97
KMEL-FM San Francisco, CA 106.1 MHz 12/97
KKSF-FM San Francisco, CA 103.7 MHz 12/97
KNEW-AM San Francisco, CA 910 kHz 12/97
KYLD-FM San Francisco, CA 94.9 MHz 12/97
KABL-AM San Francisco, CA 960 kHz 12/97
KBGG-FM San Francisco, CA 98.1 MHz 12/97
KSKY-AM Dallas, TX 660 kHz 8/05
KHKS-FM Dallas, TX 106.1 MHz 8/05
KZPS-FM Dallas, TX 92.5 MHz 8/97*
KDGE-FM Dallas, TX 94.5 MHz 8/05
WYXR-FM Philadelphia, PA 104.5 MHz 8/98
WJJZ-FM Philadelphia, PA 106.1 MHz 8/98
WDAS-AM Philadelphia, PA 1480 kHz 8/98
WDAS-FM Philadelphia, PA 105.3 MHz 8/98
WIOQ-FM Philadelphia, PA 102.1 MHz 8/98
WUSL-FM Philadelphia, PA 98.9 MHz 8/98
KTRH-AM Houston, TX 740 kHz 8/05
KLOL-FM Houston, TX 101.1 MHz 8/97*
KKBQ-FM Houston, TX 92.9 MHz 8/05
KKBQ-AM Houston, TX 790 kHz 8/05
WTOP-AM Washington, D.C. 1500 kHz 10/02
WASH-FM Washington, D.C. 97.1 MHz 10/02
WGAY-FM Washington, D.C. 99.5 MHz 10/02
WWRC-AM Washington, D.C. 980 kHz 10/02
WMZQ-FM Washington, D.C. 98.7 MHz 10/02
WBIG-FM Washington, D.C. 100.3 MHz 10/03
WGMS-FM Washington, D.C. 103.5 MHz 10/03
WTEM-AM Washington, D.C. 570 kHz 10/03
WJMN-FM Boston, MA 94.5 MHz 4/98
WXKS-FM Boston, MA 107.9 MHz 4/98
WXKS-AM Boston, MA 1430 kHz 4/98
WFOX-FM Atlanta, GA 97.1 MHz 4/03
WKQI-FM Detroit, MI 95.5 MHz 10/03
WNIC-FM Detroit, MI 100.3 MHz 10/03
WDOZ-AM Detroit, MI 1310 kHz 10/03
WWWW-FM Detroit, MI 106.7 MHz 10/03
WDFN-AM Detroit, MI 1130 kHz 10/03
WJLB-FM Detroit, MI 97.9 MHz 10/03
WMXD-FM Detroit, MI 92.3 MHz 10/03
WVCG-AM Miami/Ft. Lauderdale, FL 1080 kHz 2/03
WEDR-FM Miami/Ft. Lauderdale, FL 99.1 MHz 2/03
</TABLE>
48
<PAGE> 53
<TABLE>
<CAPTION>
EXPIRATION DATE
STATION MARKET(1) FREQUENCY OF FCC LICENSE
------- --------- ---------- ----------------
<S> <C> <C> <C>
KRRF-AM Denver, CO 1280 kHz 4/05
KXKL-FM Denver, CO 105.1 MHz 4/05
KVOD-FM Denver, CO 92.5 MHz 4/05
KIMN-FM Denver, CO 100.3 MHz 4/05
KALC-FM Denver, CO 105.9 MHz 4/97*
KXPK-FM Denver, CO 96.5 MHz 4/05
KTCZ-FM Minneapolis/St. Paul, MN 97.1 MHz 4/05
KTCJ-AM Minneapolis/St. Paul, MN 690 kHz 4/05
KDWB-FM Minneapolis/St. Paul, MN 101.3 MHz 4/05
KFAN-AM Minneapolis/St. Paul, MN 1130 kHz 4/97*
KEEY-FM Minneapolis/St. Paul, MN 102.1 MHz 4/97*
KQQL-FM Minneapolis/St. Paul, MN 107.9 MHz 4/05
WBOB-FM Minneapolis/St. Paul, MN 100.3 MHz 4/05
KMLE-FM Phoenix, AZ 107.9 MHz 10/97
KISO-AM Phoenix, AZ 1230 kHz 10/97
KOOL-FM Phoenix, AZ 94.5 MHz 10/97
KOY-AM Phoenix, AZ 550 kHz 10/97
KYOT-FM Phoenix, AZ 95.5 MHz 10/97
KZON-FM Phoenix, AZ 101.5 MHz 10/97
WUBE-FM Cincinnati, OH 105.1 MHz 10/03
WUBE-AM Cincinnati, OH 1230 kHz 10/03
WYGY-FM Cincinnati, OH 96.5 MHz 10/03
WKYN-AM Cincinnati, OH 1160 kHz 10/03
WWSW-AM Pittsburgh, PA 970 kHz 8/98
WWSW-FM Pittsburgh, PA 94.5 MHz 8/98
KGBY-FM Sacramento, CA 92.5 MHz 12/97
KHYL-FM Sacramento, CA 101.1 MHz 12/97
KFBK-AM Sacramento, CA 1530 kHz 12/97
KSTE-AM Sacramento, CA 650 kHz 12/97
WOCL-FM Orlando, FL 105.9 MHz 2/03
WOMX-FM Orlando, FL 105.1 MHz 2/03
WJHM-FM Orlando, FL 101.9 MHz 2/03
WXXL-FM Orlando, FL 106.7 MHz 2/03
WALK-FM Nassau/Suffolk
(Long Island), NY 97.5 MHz 6/98
WALK-AM Nassau/Suffolk
(Long Island), NY 1370 kHz 6/98
WAPE-FM Jacksonville, FL 95.1 MHz 2/03
WFYV-FM Jacksonville, FL 104.5 MHz 2/03
KGGI-FM Riverside/San Bernardino, CA 99.1 MHz 12/97
KMEN-AM Riverside/San-Bernardino, CA 1290 kHz 12/97
</TABLE>
- ---------------
* Indicates pending renewal application.
(1) Actual city of license may differ from metropolitan market served in certain
cases.
49
<PAGE> 54
The following table sets forth, for the stations that will be disposed by
EMCLA or CRBC pursuant to a Pending Disposition, (i) the frequency of each
station and (ii) the date of expiration of each station's main FCC broadcast
license:
<TABLE>
<CAPTION>
EXPIRATION DATE
STATION MARKET(1) FREQUENCY OF FCC LICENSE
------- --------- --------- ----------------
<S> <C> <C> <C>
WEJM-AM Chicago, IL 950 kHz 12/03
KDFC-AM San Francisco, CA 1220 kHz 12/97
WFLN-FM Philadelphia, PA 95.7 MHz 8/98
WBZS-AM Washington, D.C. 730 kHz 10/02
WZHF-AM Washington, D.C. 1390 kHz 10/02
WDRQ-FM Detroit, MI 93.1 MHz 10/03
</TABLE>
- ---------------
(1) Actual city of license may differ from metropolitan market served in certain
cases.
Ownership Matters. Under the Communications Act, a broadcast license may
not be granted to or held by any 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, if the FCC finds that the public
interest will be served by the refusal or revocation of such license. EMCLA has
been advised that the FCC staff has interpreted this provision of the
Communications Act to require an affirmative public interest finding before a
broadcast license may be granted to or held by any such corporation and that the
FCC has made such an affirmative finding only in limited circumstances. These
restrictions apply in modified form to other forms of business organizations,
including partnerships. Evergreen and Chancellor, each of which serves as a
holding company for its direct and indirect radio station subsidiaries,
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 Evergreen and Chancellor each contains, and the
Certificate of Incorporation of each of the Surviving Corporation, the Surviving
Mezzanine Corporation and the Surviving Subsidiary Corporation will contain,
prohibitions on alien ownership and control that are intended to facilitate
compliance with the provisions of the Communications Act applicable to alien
ownership. EMCLA and CRBC believe that in light of current levels of alien
ownership of Evergreen's, Chancellor's and CRBC's capital stock, the foregoing
restrictions are not likely to have a material impact on Evergreen, EMCLA, EMHC,
Chancellor, CRBC, the Surviving Corporation, the Surviving Mezzanine Corporation
and the Surviving Subsidiary Corporation.
The Communications Act and FCC rules also generally prohibit the common
ownership, operation or control 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, the Surviving Corporation and its
subsidiaries would not 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. In October 1996, the Commission issued a
Notice of Inquiry to explore possible changes in the newspaper/broadcast
cross-ownership waiver policy with respect to newspaper/radio combinations,
including the possibility of adopting a waiver policy based on market size or on
the number of independently owned media in a market.
The 1996 Act eliminated national ownership caps on ownership of AM and FM
radio stations. Prior to the 1996 Act, radio groups were limited to ownership of
20 FM stations and 20 AM stations on a national basis. Additionally, the 1996
Act increased local ownership limits. Prior to the 1996 Act, a single owner was
limited to owning two FMs and two AMs in a single large radio market with common
ownership of three stations, including two in the same service, permitted in
smaller markets. After the 1996 Act, local ownership limits were increased as
follows: in markets with 45 or more stations, ownership is limited to eight
stations, no
50
<PAGE> 55
more than five of which can be FMs or AMs; in markets with 30-44 stations,
ownership is limited to seven stations, no more than four of which can be FMs or
AMs; in markets with 15-29 stations, ownership is limited to six stations, no
more than four of which can be FMs or AMs; and in markets with 14 or fewer
stations, ownership is limited to no more than 50% of the market's total and no
more than three AMs or FMs.
Because of these multiple ownership rules and the cross-interest policy
described below, a purchaser of EMCLA's or CRBC's common stock who acquires an
attributable interest in EMCLA or CRBC may violate the FCC's rules if it also
has an "attributable" interest in other television or radio 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 those investments
give rise to an attributable interest. If an attributable stockholder of EMCLA
or CRBC violates any of these ownership rules, EMCLA or CRBC 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 stockholder 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.
In the case of corporations, the interest of officers, directors and
persons or entities that directly or indirectly have the right to vote 5% or
more of the corporation's voting stock (or 10% or more of such stock in the case
of insurance companies, investment companies, bank trust departments and certain
other "passive investors" that hold such stock for investment purposes only) are
generally attributed with ownership of whatever radio stations, television
stations, and daily newspapers the corporation owns. Likewise, the interest of
an officer or a director of a corporate parent (as well as the corporate parent)
is generally attributed with ownership of whatever the subsidiary owns.
In the case of 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,
non-voting 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 voting stock interests in corporations where there is a single holder
of more than 50% of the outstanding voting stock, generally do not subject their
holders to attribution.
The FCC has issued a Notice of Proposed Rulemaking (the "NPRM") that
contemplates tightening attribution standards where parties have multiple
nonattributable interests in and relationships with stations that would be
prohibited by the FCC's cross-interest rules, if the interests/relationships
were attributable. The NPRM contemplates that this change in attribution will
apply only to persons holding debt or equity interests that exceed certain
benchmarks.
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 that an equity investor in EMCLA, CRBC or
the Surviving Subsidiary Corporation may make or hold. If the FCC determines
that a stockholder of EMCLA, CRBC or the Surviving Subsidiary Corporation has
violated this cross-interest policy, EMCLA, CRBC or the Surviving Subsidiary
Corporation 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.
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Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." The FCC has gradually relaxed or eliminated many of
the more formalized procedures it had developed in the past to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. A licensee continues to be required, however, to present
programming that is responsive to community problems, needs and interests and to
maintain certain records demonstrating such responsiveness. Complaints from
listeners concerning a station's programming often will be considered by the FCC
when it evaluates the licensee's renewal application, but such complaints may be
filed and considered at any time. Stations also must follow various FCC rules
that regulate, among other things, political advertising, sponsorship
identification, and technical operations (including limits on radio frequency
radiation). In addition, licensees must develop and implement programs designed
to promote equal employment opportunities. The broadcast of obscene and indecent
material and the advertisement of contests and lotteries are regulated by FCC
rules, as well as by state and other federal laws.
Time Brokerage Agreements. Over the past three years, a number of radio
stations, including certain of EMCLA's and CRBC's stations, have entered into
what commonly are referred to as "Time Brokerage Agreements," or "TBAs" (certain
types of these agreements also are known as "Local Marketing Agreements," or
"LMAs"). These agreements may take various forms. Separately-owned and licensed
stations may agree to function cooperatively in terms of programming,
advertising sales, and other matters, subject to the licensee of each station
maintaining independent control over the programming and other operations of its
own station and compliance with the requirements of antitrust laws. One typical
type of TBA is a programming agreement between two separately-owned radio
stations that serve a common service area, whereby the licensee of one station
programs substantial portions of the broadcast day on the other licensee's
station (subject to ultimate editorial and other controls being exercised by the
latter licensee), and sells advertising time during those program segments. The
FCC staff 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 station and otherwise ensures compliance with
applicable FCC rules and policies.
A station that brokers more than 15% of the broadcast time, on a weekly
basis, on another 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 a TBA 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 a broadcast
licensee from simulcasting more than 25% of its programming on another station
in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations
serve substantially the same geographic area, whether the licensee owns the
stations or owns and programs the other through a TBA arrangement.
Proposed Changes. The FCC is considering various proposals to modify its
broadcast "attribution" rules. Among the proposals are (i) raising the basic
benchmark for attributing ownership from 5% to 10% of the licensee's voting
stock, (ii) raising the attribution benchmark for certain institutional
investors from 10% to 20%, (iii) limiting the applicability of the single
majority shareholder rule (discussed above) to treat as attributable large stock
interests coupled with other debt or securities and (iv) treating non-voting
stock as attributable in certain circumstances. The FCC is also considering
changes to its multiple ownership rules to encourage minority ownership of radio
and television broadcast stations.
The FCC has 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 financial
performance of EMCLA's or CRBC's radio broadcast stations, result in the loss of
audience share and advertising revenues for EMCLA's or CRBC's radio broadcast
stations, and affect the ability of EMCLA or CRBC to acquire additional radio
broadcast stations or finance such acquisitions. Such matters include: changes
to the license renewal process; the FCC's equal employment opportunity rules and
other matters relating to minority and female involvement in the broadcasting
industry; proposals to change rules relating to political broadcasting;
technical and frequency allocation matters; AM stereo broadcasting; proposals to
permit expanded use of FM translator stations; 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
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cross-ownership policies; changes to broadcast technical requirements; proposals
to allow telephone companies to deliver audio and video programming to the home
through existing phone lines; proposals to limit the tax deductibility of
advertising expenses by advertisers; proposals to auction to the highest bidder
the right to use the radio broadcast spectrum, instead of granting FCC licenses
and subsequent license renewals; and proposals to reinstate the "Fairness
Doctrine" which requires a station to present coverage of opposing views in
certain circumstances. It is also possible that Congress may enact additional
legislation that could have a material impact on the operation, ownership and
financial performance of EMCLA's or CRBC's radio stations over and above the
already substantial impact of the 1996 Act.
The FCC has taken initial steps to authorize the use of a new technology,
DARS, to deliver audio programming by satellite. The FCC is also considering
various proposals for terrestrial DARS. DARS may provide a medium for the
delivery of multiple new audio programming formats to local and national
audiences. It is not known at this time whether this technology also may be used
in the future by existing radio broadcast stations either on existing or
alternate broadcasting frequencies.
EMCLA and CRBC cannot predict 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.
Federal Antitrust Laws. The FTC and the DOJ evaluate transactions
requiring a pre-acquisition filing under the HSR Act to determine whether those
transactions should be challenged under the federal antitrust laws. These
agencies (particularly the DOJ) recently have been increasingly active in their
review of radio station acquisitions where an operator proposes to acquire new
stations in its existing markets.
As part of its increased scrutiny of radio station acquisitions, the DOJ
has stated publicly that it believes that TBAs 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.
Since then, the DOJ has stated publicly that it will apply its new policy
prohibiting TBAs in connection with purchase agreements until the expiration or
termination of the HSR waiting period on a prospective basis.
The DOJ has stated publicly that it has established certain revenue and
audience share concentration benchmarks with respect to radio station
acquisitions, above which a transaction may receive additional antitrust
scrutiny. However, to date, the DOJ has also investigated transactions that do
not meet or exceed these benchmarks and has cleared transactions that do exceed
the benchmarks. Given this uncertainty, EMCLA and CRBC cannot predict whether it
will be required by the DOJ or the FTC to dispose of certain stations to be
acquired as a result of the Pending Evergreen Acquisitions, the Merger or the
Pending Chancellor Transactions in addition to the Required Dispositions that
will be effected in order to comply with the FCC's multiple ownership limits.
Although EMCLA and CRBC do not believe that their acquisition strategy as a
whole will be adversely affected in any material respect by antitrust review
(including review under the HSR Act) or by additional divestitures that EMCLA or
CRBC may have to make as a result of antitrust review, there can be no assurance
that this will be the case.
EMPLOYEES
As of May 1, 1997, EMCLA had approximately 1,800 employees and CRBC had
approximately 1,500 employees. The Surviving Corporation will have approximately
3,900 employees. Certain employees at EMCLA's stations in Los Angeles, Chicago,
Washington, D.C. and Philadelphia (approximately 180 employees), and certain
employees of CRBC's stations in San Francisco, Cincinnati, Los Angeles, Detroit
and New York (approximately 120 employees) are represented by unions. EMCLA and
CRBC each believes that its relations with its employees and these unions are
generally good.
EMCLA and CRBC each employs several high-profile on-air personalities who
have large, loyal audiences in their respective markets. EMCLA and CRBC each
believes that its relationships with its on-air talent are valuable, and each
generally enters into employment agreements with these individuals.
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PROPERTIES AND FACILITIES
EMCLA's corporate headquarters is in Irving, Texas, and CRBC's corporate
headquarters is in Dallas, Texas. The types of properties required to support
each of EMCLA's and CRBC's existing or to be acquired radio stations include
offices, studios, transmitter sites and antenna sites. A station's studio is
generally housed with its office in a downtown or business district. A station's
transmitter sites and antenna sites generally are located in a manner that
provides maximum market coverage.
The studios and offices of EMCLA's and CRBC's stations and its corporate
headquarters are located in leased or owned facilities. The terms of these
leases expire in one to ten years. EMCLA or CRBC either owns or leases its
transmitter and antenna sites. These leases have expiration dates that range
from one to eight years.
Each of EMCLA and CRBC does not anticipate any difficulties in renewing
those leases that expire within the next several years or in leasing other
space, if required.
No one property is material to EMCLA's or CRBC's overall operations. Each
of EMCLA and CRBC believes that its properties are in good condition and
suitable for its operations. Each of EMCLA and CRBC owns substantially all of
the equipment used in its radio broadcasting business.
The principal executive offices of EMCLA are located at 433 East Las
Colinas Boulevard, Suite 1130, Irving, Texas 75039. The telephone number of
EMCLA at that address is (972) 869-9020. The principal executive offices of CRBC
are located at 12655 N. Central Expressway, Suite 405, Dallas, Texas 75243. The
telephone number of CRBC at that address is (972) 239-6220.
LEGAL PROCEEDINGS
In August 1993, Evergreen terminated an agreement with Sagittarius
Broadcasting Company (an affiliate of Infinity Broadcasting Corporation) and One
Twelve, Inc. (collectively, the "Claimants") pursuant to which programming
featuring radio personality Howard Stern was broadcast on radio station WLUP-AM
(now WMVP-AM) in Chicago. The Claimants allege that termination of the agreement
was wrongful and have sued Evergreen in the Supreme Court of the State of New
York, County of New York (the "Court"). The agreement required payments to the
Claimants in the amount of $2.6 million plus five percent of advertising
revenues generated by the programming over the three-year term of the agreement.
A total of approximately $680,000 was paid to the Claimants pursuant to the
agreement prior to termination. Claimants' complaint alleged claims for breach
of contract, indemnification, breach of fiduciary duty and fraud. Claimants'
aggregate prayer for relief totaled $45.0 million. On July 12, 1994, the Court
granted Evergreen's motion to dismiss Claimants' claims for fraud and breach of
fiduciary duty. On June 6, 1995, the Court denied the Claimants' motion for
summary judgment on their contract and indemnification claims and this order has
been affirmed on appeal. On May 17, 1996, after the close of discovery,
Evergreen filed a motion for summary judgment, seeking the dismissal of the
remaining claims in the original complaint. On July 1, 1996, Claimants moved for
leave to amend their complaint in order to add claims for breach of the covenant
of good faith and fair dealing, tortious interference with business advantage
and prima facie tort. In the proposed amended complaint, Claimants seek
compensatory and punitive damages in excess of $25.0 million. On March 13, 1997,
the Court denied Evergreen's motion for summary judgment, allowed Claimants'
request to amend the complaint to add a claim for breach of the covenant of good
faith and fair dealing and denied Claimants' request to amend the complaint to
add claims for tortious interference with business advantage and prima facia
tort. On April 25, 1997, Evergreen filed a notice of appeal of the denial of
Evergreen's motion for summary judgment. Evergreen believes that it acted within
its rights in terminating the agreement.
Each of Evergreen, EMCLA, Chancellor and CRBC is also involved in various
other claims and lawsuits which are generally incidental to its business. Each
of Evergreen, EMCLA, Chancellor and CRBC believes that the litigation in which
it is currently involved, individually or in the aggregate, will not have a
material adverse effect on its consolidated financial position or results of
operations.
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THE MERGER
BACKGROUND AND REASONS FOR THE MERGER: EVERGREEN
Evergreen was incorporated in 1988. It initially owned and operated six
radio stations. From its formation through 1994, Evergreen expanded principally
through internal growth and through the acquisition of individual radio stations
or pairs of stations.
In 1994, the Evergreen Board conducted a broad-ranging review of
Evergreen's strategic alternatives in light of the ongoing consolidation in the
radio broadcasting industry. As a result of Evergreen's review of its strategic
alternatives, the Evergreen Board determined to pursue a strategy of substantial
expansion of Evergreen's ownership of major market radio stations through
acquisitions of, or mergers with, other radio station groups and, to a lesser
extent, through opportunistic acquisitions of individual major market stations
where appropriate. In 1995 and 1996, Evergreen aggressively pursued this
acquisition strategy, acquiring, on a net basis, 11 radio stations in 1995
(seven FM and four AM) and 12 radio stations in 1996 (ten FM and two AM),
including the acquisition of seven FM and four AM stations through Evergreen's
May 1995 acquisition of Broadcasting Partners Inc. and the acquisition of nine
FM and three AM radio stations through Evergreen's January 1996 acquisition of
Pyramid Communications, Inc.
Following the enactment of the 1996 Act, which eliminated the aggregate
limit on the total number of stations that any broadcaster could own and relaxed
restrictions previously applicable to the ownership of stations within a single
market, Evergreen determined to accelerate implementation of its acquisition
strategy, focusing particularly on major markets where Evergreen had the
opportunity to develop superduopolies, or clusters of between three and five FM
radio stations.
In furtherance of Evergreen's expansion strategy, Evergreen's management
routinely analyzes the potential acquisition of broadcast properties and holds
discussions with other broadcasters concerning potential business combinations
or the potential acquisition of individual stations or groups of stations, and
in this connection, has consummated, on a net basis, the acquisition of 17 radio
stations (eleven FM and six AM) to date in 1997. See "Business -- EMCLA." In
1996 and early 1997, Evergreen's senior management and advisors held preliminary
discussions with a number of major market radio operators, including Chancellor
and Viacom, concerning possible acquisitions of radio groups by Evergreen and
other potential transactions. During the fourth quarter of 1996, Evergreen was
informed that Chancellor's management and principal stockholder were considering
a potential sale of Chancellor, and Evergreen held preliminary discussions with
Chancellor concerning the possible acquisition of Chancellor by Evergreen for
cash. After brief preliminary discussions, however, the parties determined that
it was unlikely that they would be able to reach an agreement concerning the
fundamental economic terms of such a transaction in light of numerous factors,
including the then current market valuations of Evergreen and Chancellor.
In December 1996 and early January 1997, Evergreen's management engaged in
preliminary discussions with Viacom concerning a possible acquisition of the
Viacom Stations. Although Evergreen's management considered the Viacom Stations
to be attractive acquisition candidates given such stations' presence in key
major markets, the preliminary discussions between Evergreen and Viacom
concerning such a potential transaction were terminated in early January 1997
due to the inability of Evergreen and Viacom to reach an agreement concerning
the purchase price to be paid by Evergreen for the entire Viacom radio
portfolio. Early in January 1997, subsequent to the termination of these
discussions with Viacom, Evergreen was informed that Viacom had retained Credit
Suisse First Boston Corporation ("Credit Suisse First Boston") to solicit offers
to purchase the Viacom Stations and to conduct an auction for the sale of such
properties.
Also in January 1997, Evergreen's management contacted Chancellor's
representative, William Steding of Star Media Group, Inc., to inquire whether
Mr. Steding believed that it was an appropriate time to pursue possible merger
discussions with Chancellor. Mr. Steding agreed to contact Thomas O. Hicks,
Chairman of the Chancellor Board and Chairman of the Board and Chief Executive
Officer of Hicks, Muse, Tate & Furst Incorporated, an affiliate of Chancellor's
principal stockholders ("Hicks Muse"), to initiate discussions. On January 15,
1997 and January 21, 1997, Scott Ginsburg, Chairman of the Evergreen Board and
Chief Executive Officer of Evergreen, Mr. Hicks and Mr. Steding held preliminary
discussions to determine whether
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the parties would be interested in pursuing a potential business combination.
After a detailed discussion concerning the possibility of such a transaction,
Messrs. Ginsburg and Hicks determined that they should arrange further meetings
of members of the senior management of Chancellor and Evergreen to discuss the
matter in more detail.
During the next several weeks, Evergreen consulted with its legal counsel
concerning matters relating to such a potential transaction and held several
discussions with members of Chancellor's senior management. Mr. Ginsburg met
with Steven Dinetz, President and Chief Executive Officer of Chancellor, on
January 24, 1997 to discuss the potential for such a transaction, and on January
30, 1997, Messrs. Ginsburg, Hicks and Steding, as well as Eric C. Neuman, Senior
Vice President of Hicks Muse, met and discussed the potential terms of such a
transaction in more detail. On February 3, 1997, Messrs. Ginsburg, Steding,
Neuman, Dinetz, Jacques Kerrest, Chief Financial Officer of Chancellor, Matthew
Devine, Chief Financial Officer of Evergreen, and Eric W. Neumann, Senior Vice
President-Finance of Chancellor, met to discuss the historical and prospective
financial performance of Evergreen and Chancellor, certain recent and pending
acquisitions and dispositions of broadcast properties by Evergreen and
Chancellor and certain potential synergies that could result from a business
combination involving Evergreen and Chancellor. At that meeting, Evergreen and
Chancellor exchanged certain non-public financial information and other
information concerning recent acquisitions and future financial performance.
During the weeks of February 2 and February 9 representatives of Evergreen
also held discussions with Viacom and Credit Suisse First Boston, financial
advisor to Viacom, concerning the auction of the Viacom Stations being conducted
by Viacom and Credit Suisse First Boston. During this period, Evergreen learned
that Viacom intended to solicit offers to purchase the individual Viacom
Stations, as well as offers to purchase all of the Viacom Stations as a group.
As a result of Evergreen's discussions with Credit Suisse First Boston,
Evergreen's management determined that, notwithstanding the failure of Evergreen
and Viacom to come to terms concerning a possible acquisition of the Viacom
Stations during the discussions that had taken place directly between the
parties in December of 1996 and early January of 1997, Evergreen remained
interested in acquiring all of the Viacom Stations or certain individual Viacom
Stations and was willing to submit an acquisition proposal in connection with
Viacom's auction process. Accordingly, during this period, Evergreen conducted
confirmatory due diligence and financial analysis concerning the Viacom Stations
and, in consultation with its legal advisors, prepared to submit a proposal to
acquire the Viacom Stations.
On February 12, 1997, Scott Ginsburg, Steven Dinetz and James de Castro,
Evergreen's President and Chief Operating Officer, met to further discuss the
terms of the possible transaction involving Chancellor and Evergreen, the
financial performance of Chancellor and Evergreen broadcast properties and
certain other matters concerning the operations of Evergreen's and Chancellor's
respective stations. At that time, management of Evergreen and Chancellor
determined that it would be appropriate for Chancellor's and Evergreen's legal
advisors to commence discussions concerning the terms of a written merger
agreement, so that the parties would be in a position to proceed quickly in the
event that they reached an understanding concerning the basic terms of such a
transaction. On February 15, 1997, Chancellor's legal advisors provided to
Evergreen and its outside legal counsel an initial draft of a form of agreement
and plan of merger.
On February 13, 1997, the Evergreen Board met to discuss and consider the
submission of a proposal to acquire the Viacom Stations and the status of the
discussions between Evergreen and Chancellor concerning a potential business
combination. At that meeting, the Evergreen Board discussed in detail the timing
of the sale process being conducted by Viacom and Credit Suisse First Boston and
the terms on which Evergreen would be willing to acquire some or all of the
Viacom Stations. After further discussion, the Evergreen Board determined that
Evergreen should submit a proposal to purchase all of the Viacom Stations, as
well as an alternative proposal to acquire the Viacom Stations located in the
Los Angeles, New York and Washington, D.C. markets. Mr. Ginsburg then reported
to the Evergreen Board concerning the status of discussions with Chancellor.
After a detailed discussion of the possible terms of such a transaction, the
Evergreen Board authorized Mr. Ginsburg and the other members of Evergreen's
senior management to continue discussions with Chancellor concerning the terms
of a potential merger.
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On February 14, Evergreen submitted to Viacom a written proposal to acquire
all of the Viacom Stations, as well as an alternative proposal to acquire the
Viacom Stations located in the Los Angeles, New York and Washington, D.C.
markets, and from February 14 to February 16 Evergreen and its legal advisors
held discussions with representatives of Viacom concerning the terms of a stock
purchase agreement that would govern the terms of such a transaction if
Evergreen's acquisition proposal were accepted by Viacom.
Messrs. Ginsburg and Hicks met on February 14, 1997 to continue discussions
concerning the terms of the proposed Evergreen/Chancellor transaction and met
again on February 15 in the company of Mr. Steding. At these meetings, Mr.
Ginsburg and Mr. Hicks continued negotiations concerning the principal terms of
the proposed business combination involving Chancellor and Evergreen and also
discussed the fact that each of Chancellor and Evergreen was separately pursuing
an acquisition of Viacom Stations and the fact that Viacom had informed the
participants in Viacom's auction process that it desired to conclude the process
on February 16, 1997. In the course of these discussion, Mr. Ginsburg and Mr.
Hicks considered the possibility that a public announcement that either
Chancellor or Evergreen had signed a definitive agreement to acquire the Viacom
Stations could significantly complicate their discussions concerning a merger of
Chancellor and Evergreen due to the potential impact of such an announcement on
the market price of the common stock of Chancellor or Evergreen, as relevant.
Accordingly, the parties determined that, if possible, it would be desirable to
reach an understanding concerning the principle economic terms of the proposed
Evergreen/ Chancellor transaction prior to any public announcement regarding the
sale of the Viacom Stations.
Following the meeting on February 15, Mr. Ginsburg consulted with
Evergreen's legal advisors concerning matters relating to discussions with
Chancellor and the status of negotiations with Viacom concerning Evergreen's
proposal to acquire the Viacom Stations.
Messrs. Ginsburg and Hicks met again on February 16, and, following further
discussions, Mr. Ginsburg and Mr. Hicks reached a tentative understanding as to
the principal terms of a merger between Chancellor and Evergreen that they would
be willing to present and recommend to their respective boards of directors.
This preliminary understanding contemplated (i) the merger of Chancellor and
CRBC with and into Evergreen, with Evergreen continuing as the surviving
corporation following the merger, (ii) the conversion of each share of
Chancellor Class A Common Stock and Chancellor Class B Common Stock into 0.9091
shares of the Surviving Corporation Common Stock, (iii) the conversion of each
share of Evergreen Class A Common Stock and Class B Common Stock into one share
of Surviving Corporation Common Stock, (iv) that each share of the Surviving
Corporation Common Stock would entitle the holder thereof to one vote, (v) that
following the merger, Mr. Hicks would serve as Chairman of the Board of
Directors of the Surviving Corporation and Mr. Ginsburg would serve as the Chief
Executive Officer of the Surviving Corporation and (vi) that the board of
directors of the Surviving Corporation would consist of eleven directors, three
of whom (including Mr. Hicks) would be designated by Chancellor's principal
stockholders, three of whom (including Mr. Ginsburg) would be members of the
Surviving Corporation's senior management team and five of whom would be
independent directors. Evergreen and Chancellor also concluded that Chancellor
should withdraw its proposal to acquire the Viacom Stations and that Evergreen
would submit a revised proposal to acquire the entire Viacom radio portfolio.
The parties determined that, if the Evergreen proposal to acquire the Viacom
Stations were accepted by Viacom, the parties would reach an agreement to
provide for (i) the acquisition of certain of the Viacom Stations by Chancellor
and certain of the Viacom Stations by Evergreen, such that the Viacom
Acquisition could be consummated jointly by Evergreen and Chancellor prior to a
merger of Chancellor and Evergreen and (ii) the allocation, as between
Chancellor and Evergreen, of the benefits and liabilities under the purchase
agreement entered into in connection with the proposal to purchase the Viacom
Stations in the event that the parties failed to reach an agreement concerning
the proposed merger of Chancellor and Evergreen or in the event that any such
agreement failed to be consummated.
Following these discussions and communication to Viacom of Evergreen's
revised acquisition proposal, Viacom indicated that it was willing to accept
Evergreen's acquisition proposal, subject to immediate completion of
negotiations concerning the definitive stock purchase agreement that had been
negotiated by the parties. Accordingly, on the evening of February 16, the
Evergreen Board met to consider the revised proposal for the acquisition of the
Viacom Stations and the terms of the stock purchase agreement providing for the
acquisition of the Viacom Stations. At that meeting, Mr. Ginsburg also reported
to the Evergreen Board
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concerning the proposed terms of a merger with Chancellor that had been
discussed with Chancellor's management. Following a detailed discussion by the
Evergreen Board concerning the terms of the Viacom Transaction, the Evergreen
Board approved the Viacom Acquisition and authorized management to complete and
enter into a definitive stock purchase agreement on the terms considered by the
Evergreen Board. The Evergreen Board then discussed at length the proposed terms
of the merger with Chancellor and determined that Evergreen should continue
negotiations with Chancellor concerning such a transaction, with the goal of
completing such negotiations promptly. The Evergreen Board also determined to
reconvene on Monday, February 17 to discuss the status of negotiations with
Chancellor and the proposed terms of the transaction in more detail.
Following the February 16 meeting of the Evergreen Board, EMCLA and Viacom
entered into the Viacom Stock Purchase Agreement, and Evergreen and Chancellor
and their respective legal advisors continued negotiations concerning the terms
of an agreement and plan of merger and certain related agreements providing for
the merger of Chancellor and Evergreen.
Following further negotiations between the parties and their respective
legal advisors concerning the terms of the draft agreement and plan of merger,
the Evergreen Board reconvened on the evening of February 17 to discuss the
progress of negotiations with Chancellor concerning the potential transaction.
Evergreen's management reported on the status of the negotiations, and
Evergreen's legal advisors described the terms of the draft agreement and plan
of merger which had been distributed to the members of the Evergreen Board.
Evergreen's legal advisors also described the terms of the draft stockholders
agreement proposed to be entered into by Mr. Ginsburg and the Hicks
Stockholders, pursuant to which the parties would agree to vote their shares of
Evergreen Class B Common Stock and Chancellor Common Stock, respectively, in
favor of the merger, and the terms of the joint purchase agreement providing for
(i) the acquisition of certain of the Viacom Stations by Chancellor and certain
of the Viacom Stations by Evergreen, such that the Viacom Acquisition could be
consummated jointly by Evergreen and Chancellor prior to the consummation of a
merger of Chancellor and Evergreen and (ii) the allocation between Chancellor
and Evergreen of the benefits and liabilities under the Viacom Stock Purchase
Agreement in the event that Chancellor and Evergreen failed to reach agreement
concerning the proposed merger or in the event that any such agreement failed to
be consummated. At that meeting, the Evergreen Board also discussed the
anticipated continued participation of current management of Evergreen in the
management of the Surviving Corporation in the event that the proposed
transaction were consummated, as well as the potential terms of an employment
agreement that would be entered into with Mr. Ginsburg if the transaction were
to proceed in order to provide for Mr. Ginsburg's continued participation in the
management of the Surviving Corporation following the Merger. After detailed
discussion, the Evergreen Board determined that, although the parties had not
completed negotiation of all of the terms of a definitive agreement and plan of
merger and the related documents, the parties had reached tentative agreement on
the fundamental economic and legal terms of the transaction and would likely be
in a position to complete negotiations concerning a definitive agreement and
plan of merger within the next several days. Following further deliberation, the
Evergreen Board determined that, based on the progress of negotiations, it would
be appropriate for Evergreen and Chancellor to enter into a non-binding
memorandum of understanding (the "Memorandum of Understanding") providing for
the merger of Chancellor with Evergreen, subject to, among other things,
completion of negotiations concerning a definitive agreement and plan of merger
and approval of the transaction by the Evergreen Board, and to publicly announce
the terms of the Memorandum of Understanding.
On the morning of February 18, the parties entered into the Memorandum of
Understanding and publicly announced the terms of the proposed
Evergreen/Chancellor transaction simultaneously with the public announcement of
the Viacom Transaction by Evergreen and Viacom. Following that public
announcement, Chancellor, Evergreen and their respective legal advisors
continued negotiations concerning the form of agreement and plan of merger and
the related agreements.
The Evergreen Board met again on the evening of February 18. At that
meeting, Evergreen's management reported that the parties had completed
negotiation of all material terms of the agreement and plan of merger and
related agreements, and legal counsel reviewed the terms of the agreement and
plan of merger and the related agreements in detail for the Evergreen Board. The
Evergreen Board also discussed the
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terms of a memorandum of understanding that would be entered into by Evergreen
and Mr. Ginsburg which would set forth the general terms of an employment
agreement relating to Mr. Ginsburg's employment by the Surviving Corporation
following the Merger that would be entered into by Evergreen and Mr. Ginsburg
contingent upon consummation of the proposed transaction. The meeting of the
Evergreen Board was adjourned at this time so that the members of the
Compensation Committee of the Evergreen Board, Perry Lewis, Thomas Hodson and
Joseph Sitrick, together with Eric Bernthal, the remaining outside director on
the Evergreen Board, could discuss the terms of the memorandum of agreement for
the employment of Mr. Ginsburg following consummation of the Merger. After the
meeting of the Compensation Committee, the meeting of the Evergreen Board was
reconvened, and the Compensation Committee reported that it had reached an
agreement concerning the basic terms of a new employment agreement for Mr.
Ginsburg following consummation of the Merger, to be embodied in a memorandum of
agreement between Evergreen, Chancellor, CRBC and Mr. Ginsburg. The Compensation
Committee recommended that the Evergreen Board approve the terms of the
memorandum of agreement, and the Evergreen Board voted unanimously (other than
Mr. Ginsburg, who abstained from such vote) to approve the memorandum of
agreement.
Following further deliberation, the Evergreen Board, by unanimous vote of
all directors, determined that the Merger was in the best interests of Evergreen
and its stockholders, authorized the execution of the Merger Agreement, the
Stockholders Agreement and the Viacom Joint Purchase Agreement and determined to
recommend that the stockholders of Evergreen approve and adopt the Merger
Agreement and the Merger. Following that meeting, the Merger Agreement and
related documents were finalized, and the parties entered into the Merger
Agreement and the related documents on February 19, 1997.
On July 31, 1997, the Merger Agreement was amended and restated for the
purpose of modifying the legal structure of the transaction in order to, among
other things, enhance flexibility in connection with future debt or equity
financings by the Surviving Corporation. The amended and restated merger
agreement provides for the merger of Chancellor with and into EMHC and the
merger of CRBC with and into EMCLA, as opposed to the merger of Chancellor and
CRBC with and into Evergreen, but did not otherwise modify the material terms of
the Merger, as approved by the Evergreen Board on February 18, 1997.
BACKGROUND AND REASONS FOR THE MERGER: CHANCELLOR
Chancellor was incorporated in late 1994 to acquire 11 radio stations from
affiliates of American Media, Inc. and to acquire Chancellor Communications
Corporation, which owned and operated two radio stations in Sacramento,
California. Since its formation, Chancellor has grown largely through
acquisitions of radio station groups. The pace of Chancellor's acquisitions
accelerated in 1996 after the passage of the 1996 Act.
As part of its growth strategy, Chancellor routinely analyzes acquisition
opportunities. In addition, in late 1996, the Chancellor Board of Directors
briefly considered the possible sale of Chancellor in light of the intensifying
consolidation among large radio station groups. Chancellor's management met with
Evergreen during that process to discuss a possible sale of Chancellor to
Evergreen, but the parties concluded after brief preliminary discussions that
they would be unlikely to reach an agreement on mutually acceptable valuations.
After further preliminary conversations with other radio station operators, the
Chancellor Board determined that it would be in the best interests of
Chancellor's stockholders for Chancellor to continue to pursue its strategy of
growth through strategic acquisitions.
In late 1996 and early 1997, Chancellor's management engaged in preliminary
discussions with Viacom concerning a possible acquisition of the Viacom Stations
and engaged in a preliminary due diligence review of the performance of the
Viacom Stations. Although Chancellor's management considered the Viacom Stations
to be attractive properties, Chancellor and Viacom were unable to reach
agreement on a mutually acceptable purchase price for the Viacom Stations.
Subsequently, Credit Suisse First Boston advised Chancellor that it had been
engaged to conduct an auction for the Viacom Stations and invited Chancellor to
participate in that process.
In January 1997, William Steding of Star Media contacted Thomas O. Hicks,
the Chairman of Chancellor's Board of Directors, to inform him of Evergreen's
interest in discussing a possible stock-for-stock business combination between
Chancellor and Evergreen. Messrs. Hicks, Ginsburg and Steding held
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preliminary discussions on January 15, 1997 and January 21, 1997 to gauge the
interest of the parties in pursuing a possible transaction. After these
meetings, Messrs. Hicks and Ginsburg agreed that they should arrange meetings
between the respective members of their senior management teams. Subsequent
meetings were held on January 24, 1997 between Mr. Ginsburg and Steven Dinetz,
Chancellor's President and Chief Executive Officer, and on January 30, 1997
among Messrs. Hicks, Ginsburg, Steding and Eric C. Neuman, a director of
Chancellor and a Senior Vice President of Hicks Muse.
On January 31, 1997 Mr. Hicks advised the Chancellor Board of Directors
that he had held preliminary meetings with Mr. Ginsburg to discuss a potential
business combination including Chancellor and Evergreen. Mr. Dinetz also
reported to the directors about his initial meeting with Mr. Ginsburg. The
Chancellor directors encouraged Mr. Hicks to continue the dialogue with
Evergreen. Mr. Hicks advised the Chancellor Board that he expected further
discussions between Chancellor's and Evergreen's respective senior management
groups to take place during the following week. At the same meeting of the
Chancellor Board, Messrs. Dinetz and Neuman reported to the directors that
Chancellor had been invited to participate in the auction for the Viacom
Stations. The directors discussed the various markets in which the Viacom
Stations are located and reviewed with Mr. Dinetz and Jacques Kerrest,
Chancellor's Chief Financial Officer, management's analyses of these stations.
After discussion, the directors authorized management to prepare a bid for all
or a part of the Viacom Stations.
During the next two weeks, Chancellor's management conducted further due
diligence relating to the Viacom Stations and worked with Hicks Muse and
Chancellor's legal advisors to formulate a bid for those properties. In
addition, on February 6, 1997, Messrs. Dinetz, Kerrest, Neuman, Steding and
Matthew Devine, Evergreen's Chief Financial Officer, met to discuss the
respective companies' 1997 budgets and related matters and, on February 12,
1997, Messrs. Ginsburg, Dinetz and James E. de Castro, Evergreen's President and
Chief Operating Officer, met to continue their discussions about a possible
transaction between the two companies. Subsequent to that meeting, Chancellor
authorized its legal counsel to prepare a draft merger agreement to facilitate
further discussions and negotiations, if the parties elected to proceed with a
transaction.
At a special meeting of the Chancellor Board held on February 14, 1997, the
Chancellor directors authorized management to submit a bid for all the Viacom
Stations as a whole, and an alternative bid for the Viacom Stations serving Los
Angeles, New York, Chicago and Washington, D.C., after having discussed in
detail the structure and timing of the auction process being conducted by Credit
Suisse First Boston and reviewing with Chancellor its analysis of the financial
implications of, and the anticipated sources of financing for, the proposed
acquisition. In addition, Mr. Hicks informed the Chancellor directors that he
expected to meet with Mr. Ginsburg that afternoon to resume their discussions
about a possible Chancellor/Evergreen combination.
Chancellor submitted its initial bid for the Viacom Stations during the
early afternoon of February 14, 1997. Shortly thereafter, Credit Suisse First
Boston contacted Chancellor to advise it that several other bids had been
submitted that were comparable or better than the bid initially submitted by
Chancellor. Chancellor and Credit Suisse First Boston exchanged several
telephone calls, during the course of which Chancellor increased its offer for
the Viacom Stations. That evening, Viacom's negotiating team contacted
Chancellor to begin discussing Chancellor's initial comments to the form of
stock purchase agreement circulated by Credit Suisse First Boston to prospective
bidders in the auction process. Chancellor submitted revised comments to the
purchase agreement to Viacom during the morning of February 15, 1997 and
continued negotiations with Viacom later that day and into the evening of
February 15.
On February 14, 1997, Messrs. Hicks and Ginsburg met to continue their
discussions about the possible merger. Because of the progress made between
Messrs. Hicks and Ginsburg in defining the outlines of a possible transaction,
Chancellor instructed its legal counsel to deliver a draft merger agreement to
Evergreen's counsel on the morning of February 15. On February 15, 1997, Messrs.
Hicks and Ginsburg, joined by Mr. Steding, reconvened their discussions.
Messrs. Hicks and Ginsburg met again on February 16, 1997. Those meetings
led to a tentative understanding of the principal terms of a merger between
Chancellor and Evergreen, which generally is as described under "Background and
Reasons for the Merger: Evergreen" (although the Chancellor Board
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anticipated that the Surviving Corporation's board would consist of eight
directors nominated by Chancellor, Messrs. Ginsburg and de Castro from the
Evergreen Board, and one other director mutually acceptable to Chancellor and
Evergreen). That evening, the Chancellor Board convened a special meeting at
which management reported to the directors on the history of Chancellor's bid
for the Viacom Stations, the proposed terms of the Chancellor/Evergreen merger,
including anticipated sources of financing and the financial implications of the
transaction, and Chancellor's agreement to withdraw from the bidding for the
Viacom Stations, subject to the agreement of Evergreen to negotiate a legally
binding understanding of the allocation between Chancellor and Evergreen of the
benefits and burdens of the Viacom stock purchase agreement if Evergreen's bid
for the Viacom Stations were to be accepted by Viacom. The Chancellor Board also
discussed the proposed composition of the Surviving Corporation's senior
management team, which they agreed should include Mr. Hicks as Chairman of the
Board, Mr. Ginsburg as President and Chief Executive Officer, and Messrs. Dinetz
and de Castro as Co-Chief Operating Officers, and related employment matters.
After discussion, the Chancellor Board authorized management to pursue further
negotiations with Evergreen to finalize the terms of the merger on substantially
the terms described to it. The Chancellor Board agreed to reconvene on February
17, 1997 to consider the status of the negotiations with Evergreen on the terms
of the merger.
On February 17, 1997, Chancellor, Evergreen and their representatives
continued their negotiations of the terms of the draft merger agreement and of
the definitive joint purchase agreement relating to the allocation of the Viacom
Stations between the parties in the event that Chancellor and Evergreen failed
to reach an agreement concerning the proposed merger or in the event that any
such agreement failed to be consummated. The Chancellor Board met telephonically
during the evening of February 17, 1997 and discussed the status of the merger
negotiations and reviewed the terms of the draft joint purchase agreement for
the Viacom Stations, the draft merger agreement and the draft stockholders
agreement circulated to it. Mr. Hicks then invited Mr. Ginsburg, who had been
meeting with Mr. Hicks at Mr. Hicks' residence, to join the Chancellor Board's
meeting to answer questions about the status of deliberations by the Evergreen
Board and to state his personal views about the proposed transactions. Mr.
Ginsburg explained that the Evergreen Board anticipated that the Surviving
Corporation's board would consist of three members of the Surviving
Corporation's senior management, three representatives of Hicks Muse and five
other directors mutually acceptable to Chancellor and Evergreen. Based on the
outcome of this meeting, the Chancellor Board authorized Chancellor to enter
into the non-binding Memorandum of Understanding described under "Background and
Reason for the Merger: Evergreen."
On the morning of February 18, 1997, the parties entered into the
Memorandum of Understanding and publicly announced the terms of the proposed
merger and of Evergreen's purchase of the Viacom Stations. Following the
announcement, the parties continued their negotiations on the terms of the
definitive merger agreement and related documents.
The Chancellor Board met again on the morning of February 19, 1997 to
discuss the final terms of the merger agreement and the terms of Mr. Ginsburg's
proposed employment agreement with the Surviving Corporation. Mr. Hicks advised
the Chancellor Board of the composition of the Surviving Corporation's board of
directors, which the Chancellor Board concurred was an appropriate resolution of
this point of discussion in the completion of the terms of the Merger. At the
conclusion of the meeting, the Chancellor Board (other than John Massey, who was
not present at the meeting) unanimously approved the Merger and the Merger
Agreement and authorized the execution and delivery of the Merger Agreement and
related documents, which the parties subsequently signed that day.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
EVERGREEN
Stockholders Agreement. On February 19, 1997, Chancellor, Evergreen, the
Hicks Stockholders and Scott K. Ginsburg entered into the Stockholders
Agreement, pursuant to the which the Hicks Stockholders and Mr. Ginsburg agreed,
among other things, to vote all shares of capital stock of Chancellor and
Evergreen held by such parties at any meeting of the stockholders of the
respective companies in favor of the transactions
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contemplated by the Merger Agreement. In order to effect the intention of the
parties in entering into the Stockholders Agreement, the Hicks Stockholders
appointed certain officers of Evergreen as their proxy and attorney-in-fact to
vote any and all shares of the Chancellor Common Stock held by the Hicks
Stockholders at the Chancellor Special Meeting, and Mr. Ginsburg appointed
certain officers of Chancellor as his proxy and attorney-in-fact to vote any and
all shares of Evergreen Common Stock held by Mr. Ginsburg at the Evergreen
Annual Meeting. The Hicks Stockholders control approximately 90.3% of the
combined voting power of the Chancellor Common Stock (assuming exercise of all
presently outstanding options and options exercisable within 60 days after July
28, 1997). Mr. Ginsburg controls approximately 44.3% of the combined voting
power of the outstanding Evergreen Common Stock (assuming exercise of all
presently outstanding options and options exercisable within 60 days after July
25, 1997).
Indemnification; Directors' and Officers' Liability Insurance. Under the
Merger Agreement, all rights to indemnification and exculpation from liabilities
for acts or omissions occurring at or prior to the Effective Time existing as of
the Effective Time of the Merger Agreement in favor of the current or former
directors and officers of Evergreen and its subsidiaries provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation, each as
amended and restated in connection with the Merger, will survive the Merger and
continue in full force and effect in accordance with their terms for not less
than six years from the Effective Time. In addition, subject to certain
conditions, for six years after the Effective Time, Evergreen has agreed to
maintain Chancellor's current directors' and officers' insurance and
indemnification policy, to the extent that such policy provides coverage for
events occurring prior to the Effective Time, for all persons who were directors
and officers of Chancellor or Evergreen on the date of the Merger Agreement.
Legal Counsel. Eric L. Bernthal, a director of Evergreen, is a senior
partner in the law firm of Latham & Watkins, Washington, D.C., regular counsel
to Evergreen. Latham & Watkins has represented Evergreen in connection with the
Merger, the Merger Agreement and certain transactions contemplated thereby.
Employment Agreement. Evergreen has entered into a memorandum of agreement
(the "Memorandum of Agreement") with Mr. Ginsburg in connection with Evergreen's
entering into the Merger Agreement. The Memorandum of Agreement was entered in
connection with the execution of the Merger Agreement because Evergreen and
Chancellor concluded that it was desirable to extend Mr. Ginsburg's term of
employment with Evergreen in order to provide for continuity and stability of
management of Evergreen following consummation of the Merger. The Memorandum of
Agreement is intended to be replaced by a definitive employment contract prior
to consummation of the Merger; should the Merger not be consummated, the
employment agreement contemplated by the Memorandum of Agreement will not be
entered into. The Memorandum of Agreement provides that the term of Mr.
Ginsburg's employment with Evergreen will be extended through the fifth
anniversary of the consummation of the Merger, which Mr. Ginsburg may extend for
an additional five years, and provides for an initial base salary of $1,000,000
in the first year following the consummation of the Merger, to be increased each
year by a percentage equal to the percentage change in the consumer price index
during the preceding year. In addition, the Memorandum of Agreement provides for
an annual bonus of up to $3,000,000 based upon a percentage of the amount by
which Evergreen exceeds certain annual performance targets which are defined in
the Memorandum of Agreement. The Memorandum of Agreement also provides that Mr.
Ginsburg is eligible to receive options to purchase 100,000 shares per year of
the Surviving Corporation Common Stock. The Memorandum of Agreement provides
that if Mr. Ginsburg's employment is terminated prior to the fifth annual
anniversary of the consummation of the Merger, except termination for "cause" or
termination by Mr. Ginsburg for other than "good reason," Mr. Ginsburg will
receive on such termination date options to purchase the number of shares of
Surviving Corporation Common Stock that is equal to 500,000 minus the number of
shares of Surviving Corporation Common Stock subject to options received by Mr.
Ginsburg pursuant to the Memorandum of Agreement (or any definitive agreement
executed by Mr. Ginsburg and Evergreen) prior to such date. The Memorandum of
Agreement provides that all options granted to Mr. Ginsburg will be exercisable
for ten years from the date of grant of the option, at a price equal to the
market price for Evergreen's common stock on the date of grant of the option.
The Memorandum of Agreement provides that, in the event of termination of Mr.
Ginsburg's employment following the Merger, except termination for "cause" or
termination by Mr. Ginsburg for other than "good reason," Mr. Ginsburg will be
entitled to a one-time cash payment in an amount (after payment by the Surviving
Corporation of any
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excise tax imposed by Section 4999 of the Code) equal to $20,000,000. The
Memorandum of Agreement provides that Mr. Ginsburg will have registration rights
with respect to all Surviving Corporation Common Stock owned by Mr. Ginsburg
upon the consummation of the Merger and any such stock acquired thereafter. The
Memorandum of Agreement provides that Evergreen, Chancellor and Mr. Ginsburg
will work together in good faith to prepare and execute a definitive employment
agreement containing the terms of the Memorandum of Agreement, including
definitions of "cause" and "good reason", at or prior to consummation of the
Merger. As of July 30, 1997, a definitive employment agreement had not been
executed.
Financial Advisory Fee. Evergreen has agreed to pay an investment banking
firm fees totalling $4,000,000 for financial advisory services rendered in
connection with the Merger and the Viacom Acquisition.
CHANCELLOR
Indemnification; Directors' and Officer's Liability Insurance. Under the
Merger Agreement, all rights to indemnification and exculpation from liabilities
for acts or omissions occurring at or prior to the Effective Time existing as of
the Effective Time in favor of the current or former directors and officers of
Chancellor and its subsidiaries provided in the Surviving Corporation
Certificate and Surviving Corporation Bylaws, each and amended and restated in
connection with the Merger, will survive the Merger and continue in full force
and effect in accordance with their terms for not less than six years from the
Effective Time. In addition, subject to certain conditions, for six years after
the Effective Time. Evergreen has agreed to maintain Chancellor's current
directors and officers' insurance and indemnification policy, to the extent that
such policy provides coverage for events occurring prior to the Effective Time,
for all persons who were directors and officers of Chancellor or Evergreen on
the date of the Merger Agreement.
Financial Monitoring and Oversight Agreement. Chancellor and CRBC are
parties to a financial monitoring and oversight agreement (the "Financial
Monitoring and Oversight Agreement") with Hicks, Muse & Co. Partners, L.P.
("Hicks Muse Partners"), an affiliate of Hicks Muse. Pursuant thereto,
Chancellor and CRBC pay to Hicks Muse Partners an annual fee adjustable upward
or downward at the end of each fiscal year to a fee equal to 0.25% of the
budgeted consolidated annual net sales of Chancellor, provided that such fee
shall at no time be less than $500,000 per year. In the event that Chancellor or
any of its subsidiaries acquires another entity or business during the term of
the Financial Monitoring and Oversight Agreement, the annual fee for the
calendar year in which such acquisition occurs shall be adjusted prospectively
as of the closing of such acquisition to an annual amount equal to 0.25% of the
pro forma combined budgeted consolidated annual net sales of Chancellor
(including the sales of the acquired entity or business for such entire fiscal
year on a pro forma basis). Hicks Muse Partners is also entitled to
reimbursement for any out-of-pocket expenses incurred by it in connection with
rendering services under the Financial Monitoring and Oversight Agreement. In
addition, Chancellor and CRBC have agreed to indemnify Hicks Muse Partners, its
affiliates and shareholders, and their respective directors, officers, agents,
employees and affiliates from and against all claims, actions, proceedings,
demands, liabilities, damages, judgments, assessments, losses and costs,
including fees and expenses, arising out of or in connection with the services
rendered by Hicks Muse Partners in connection with the Financial Monitoring and
Oversight Agreement.
On February 17, 1997, in connection with the transactions contemplated by
the Merger Agreement, the Chancellor Board authorized an amendment to the
Financial Monitoring and Oversight Agreement to provide that, upon the
consummation of the Merger, the annual fee to be paid by the Surviving
Corporation shall be increased to an amount not less than $1 million, subject to
increase, but not decrease, based upon changes in the Consumer Price Index. The
amended Financial Monitoring and Oversight Agreement will provide that the
agreement will terminate at such time as Thomas O. Hicks and his affiliates
collectively cease to beneficially own at least two-thirds of the number of
shares of Surviving Corporation Common Stock beneficially owned by them,
collectively, immediately following the Effective Time.
Registration Rights. Chancellor is a party to that certain Amended and
Restated Stockholders Agreement, dated as of February 14, 1996 (the "Chancellor
Stockholders Agreement"), among Chancellor and certain holders of the Chancellor
Common Stock, which provides for certain registration rights for the shares of
Chancellor Common Stock held by such holders. In addition, Chancellor is also
party to two additional
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registration rights agreements relating to the Chancellor Common Stock
(collectively with the Chancellor Stockholders Agreement, the "Registration
Rights Agreements"). Each of the Registration Rights Agreements relates to
shares of Chancellor Common Stock held by certain affiliates of Hicks Muse.
In Connection with Merger, Chancellor is amending the Registration Rights
Agreements as of the Effective Time in order to clarify that such Registration
Rights Agreements shall be assumed by and apply to the Surviving Corporation and
shares of Surviving Corporation Common Stock received by the parties to such
Registration Rights Agreements in the Merger.
Termination of Financial Advisory Agreement. Chancellor and CRBC are
parties to an agreement (the "Financial Advisory Agreement") with HM2/Management
Partners, L.P. ("HM2/Management"), an affiliate of Hicks Muse. Pursuant to the
Financial Advisory Agreement, HM2/Management is entitled to receive a fee equal
to 1.5% of the transaction value (as defined) for each add-on transaction (as
defined) in which Chancellor, CRBC or any of their respective subsidiaries is
involved. The term "transaction value" means the total value of any add-on
transaction, including without limitation, the aggregate amount of the funds
required to complete the add-on transaction (excluding any fees payable pursuant
to the Financial Advisory Agreement, but including the amount of any
indebtedness, preferred stock or similar items assumed or remaining
outstanding). The term "add-on transaction" means any future proposal for a
tender offer, acquisition, sale, merger, exchange offer, recapitalization,
restructuring or similar transaction directly or indirectly involving
Chancellor, CRBC or any of their respective subsidiaries and any other person or
entity. In addition, Chancellor and CRBC have agreed to indemnify
HM2/Management, its affiliates and shareholders, and their respective directors,
officers, agents employees and affiliates from and against all claims, actions,
proceedings, demands, liabilities, damages, judgments, assessments, losses and
costs, including fees and expenses, arising out of or in connection with the
services rendered by HM2/Management in connection with the Financial Advisory
Agreement.
In connection with the execution and delivery of the Merger Agreement,
HM2/Management agreed to terminate the Financial Advisory Agreement upon the
consummation of the Merger (subject to the right to receive the fee related to
the Viacom Acquisition in the event that the Viacom Acquisition were to occur
after the consummation of the Merger), and in consideration thereof, in lieu of
any payments required to be made under the Financial Advisory Agreement in
respect of the transactions contemplated by the Merger Agreement, the Chancellor
Board authorized the payment of a fee to HM2/Management in the amount of $5.0
million upon consummation for the Viacom Acquisition and a fee of $10.0 million
upon consummation of the Merger.
Brokerage Fees. CRBC is a party to a brokerage agreement (the "Brokerage
Agreement") with Star Media, pursuant to which Star Media may have been entitled
to a fee equal to 1.0% of the transaction value of the transactions contemplated
by the Merger. In lieu of any payments otherwise required to be made pursuant to
the Brokerage Agreement, Star Media has agreed to accept, and on February 17,
1997 the Chancellor Board agreed to pay to Star Media, a fee in the amount of
$7.0 million upon the consummation of the Merger. In addition, Chancellor and
Star Media have agreed to enter into an agreement (which shall become an
obligation of the Surviving Corporation following the Merger) pursuant to which
Star Media will be engaged to act as broker with respect to the sale of certain
radio stations in Chicago and San Francisco for a fee equal to 1.0% of the
transaction value achieved in any such dispositions.
Other Financial Advisory Fees. In connection with the Merger, Chancellor
agreed to pay two investment banking firms fees totalling $5,000,000 for
services rendered in connection with the Merger and the Viacom Acquisition.
APPRAISAL AND DISSENTERS' RIGHTS
UNDER THE CERTIFICATES OF DESIGNATION GOVERNING THE CRBC SERIES A PREFERRED
STOCK AND THE CRBC JUNIOR PREFERRED STOCK, THE HOLDERS OF CRBC SERIES A
PREFERRED STOCK AND THE CRBC JUNIOR PREFERRED STOCK ARE NOT ENTITLED TO VOTE ON
THE PARENT MERGER, THE SUBSIDIARY MERGER OR ANY OTHER TRANSACTIONS CONTEMPLATED
BY THE MERGER AGREEMENT. THE SOLE INVESTMENT DECISION ARISING FROM THE MERGER
FOR HOLDERS OF CRBC SERIES A PREFERRED STOCK AND CRBC JUNIOR PREFERRED STOCK IS
WHETHER TO EXERCISE APPRAISAL RIGHTS
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UNDER SECTION 262 OF THE DGCL. UNLESS A HOLDER OF SHARES OF CRBC SERIES A
PREFERRED STOCK OR CRBC JUNIOR PREFERRED STOCK TIMELY SUBMITS A WRITTEN DEMAND
FOR APPRAISAL AND OTHERWISE COMPLIES WITH SECTION 262 OF THE DGCL WITH RESPECT
TO SUCH SHARES, EACH SUCH SHARE OUTSTANDING AT THE SUBSIDIARY MERGER EFFECTIVE
TIME WILL BE CONVERTED INTO ONE SHARE OF PREFERRED STOCK OF THE SURVIVING
SUBSIDIARY CORPORATION HAVING SUBSTANTIALLY IDENTICAL POWERS, PREFERENCES AND
RELATIVE RIGHTS AS THE CRBC SERIES A PREFERRED STOCK OR CRBC JUNIOR PREFERRED
STOCK, AS THE CASE MAY BE. NEITHER THE BOARD OF DIRECTORS OF CRBC NOR THE BOARD
OF DIRECTORS OF EMCLA IS MAKING ANY RECOMMENDATION TO HOLDERS OF CRBC SERIES A
PREFERRED STOCK OR CRBC JUNIOR PREFERRED STOCK AS TO WHETHER TO EXERCISE THEIR
APPRAISAL RIGHTS. STOCKHOLDERS CONSIDERING SEEKING APPRAISAL SHOULD RECOGNIZE
THAT THE FAIR VALUE OF THEIR SHARES AS DETERMINED UNDER SECTION 262 COULD BE
MORE THAN, THE SAME AS OR LESS THAN THE SHARES OF SURVIVING SUBSIDIARY SERIES A
PREFERRED STOCK OR SURVIVING SUBSIDIARY JUNIOR PREFERRED STOCK TO BE ISSUED
PURSUANT TO THE SUBSIDIARY MERGER.
Although holders of shares of CRBC Series A Preferred Stock and CRBC Junior
Preferred Stock are not entitled to vote on the approval and adoption of the
Merger Agreement or the transactions contemplated thereby, such holders are
entitled to appraisal rights under Section 262 of the DGCL, provided that they
comply with the conditions established by Section 262. Section 262 is reprinted
in its entirety as Annex B to this Prospectus. The following discussion does not
purport to be a complete statement of the law relating to appraisal rights and
is qualified in its entirety by reference to Annex B. This discussion and Annex
B should be reviewed carefully by any holder of CRBC Series A Preferred Stock or
CRBC Junior Preferred Stock who wishes to exercise statutory appraisal rights or
who wishes to preserve the right to do so, as failure to comply with the
procedures set forth herein or therein may result in the loss of appraisal
rights. A holder of record of shares of CRBC Series A Preferred Stock or CRBC
Junior Preferred Stock who desires to exercise appraisal rights must: (i) hold
shares of CRBC Series A Preferred Stock or CRBC Junior Preferred Stock on the
date of the making of a demand for appraisal; (ii) continuously hold such shares
through the Subsidiary Merger Effective Time, (iii) deliver a properly executed
written demand for appraisal to CRBC (or following the Subsidiary Merger
Effective Time, to the Surviving Subsidiary Corporation) within 20 days of the
date of the mailing date of this Prospectus; (iv) file any necessary petition in
the Delaware Court of Chancery (the "Delaware Court"), as more fully described
below, within 120 days after the Effective Time; and (v) otherwise satisfy all
of the conditions described more fully below and in Annex B.
A record holder of shares of CRBC Series A Preferred Stock or CRBC Junior
Preferred Stock who makes the demand described below with respect to such
shares, who continuously is the record holder of such shares through the
Effective Time and who otherwise complies with the statutory requirements of
Section 262 will be entitled, if the Subsidiary Merger is consummated, to
receive payment of the fair value of his shares of CRBC Series A Preferred Stock
or CRBC Junior Preferred Stock as appraised by the Delaware Court. All
references in Section 262 and in this summary of appraisal rights to a
"stockholder" or "holders of shares of CRBC Series A Preferred Stock or CRBC
Junior Preferred Stock" are to the record holder or holders of shares of CRBC
Series A Preferred Stock or CRBC Junior Preferred Stock.
Under Section 262, CRBC and EMCLA are required before the Subsidiary Merger
Effective Time or within 10 days thereafter to notify its stockholders eligible
for appraisal rights of the availability of such appraisal rights. This
Prospectus constitutes notice to holders of CRBC Series A Preferred Stock and
CRBC Junior Preferred Stock that appraisal rights are available to them.
Stockholders of record who desire to exercise their appraisal rights must
satisfy all of the conditions set forth herein. Each CRBC stockholder electing
to demand the appraisal of his or her shares must file with CRBC or, following
the Subsidiary Merger Effective Time, the Surviving Subsidiary Corporation a
written demand for appraisal of any shares of CRBC Series A Preferred Stock or
CRBC Junior Preferred Stock within 20 days of the date of the mailing date of
this Prospectus. Such written demand must reasonably inform CRBC or, following
the Subsidiary Merger Effective Time, the Surviving Subsidiary Corporation of
the identity of the stockholder of record and of such stockholder's intention to
demand appraisal of the CRBC Series A Preferred Stock and CRBC Junior Preferred
Stock held by such stockholder.
STOCKHOLDERS WHO DESIRE TO EXERCISE APPRAISAL RIGHTS MUST TIMELY SUBMIT A
WRITTEN DEMAND FOR APPRAISAL AND OTHERWISE COMPLY WITH SECTION 262. FAILURE TO
DO SO MAY CONSTITUTE A WAIVER OF THE STOCKHOLDER'S RIGHT OF APPRAISAL.
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A demand for appraisal must be executed by or on behalf of the stockholder
of record, fully and correctly, as such stockholder's name appears on the
certificate or certificates representing the shares of CRBC Series A Preferred
Stock or CRBC Junior Preferred Stock. A person having a beneficial interest in
shares of CRBC Series A Preferred Stock or CRBC Junior Preferred Stock that are
held of record in the name of another person, such as a broker, fiduciary or
other nominee, must act promptly to cause the record holder to follow the steps
summarized herein properly and in a timely manner to perfect any appraisal
rights. If the shares of CRBC Series A Preferred Stock or CRBC Junior Preferred
Stock are owned of record by a person other than the beneficial owner, including
a broker, fiduciary (such as a trustee, guardian or custodian) or other nominee,
such demand must be executed by or for the record owner. If the shares of CRBC
Series A Preferred Stock or CRBC Junior Preferred Stock are owned of record by
more than one person, as in a joint tenancy or tenancy in common, such demand
must be executed by or for all such joint owners. An authorized agent, including
an agent for two or more joint owners, may execute the demand for appraisal for
a stockholder of record; however, the agent must identify the record owner and
expressly disclose the fact that, in exercising the demand, such person is
acting as agent for the record owner. A record owner, such as a broker,
fiduciary or other nominee, who holds shares of CRBC Series A Preferred Stock or
CRBC Junior Preferred Stock as a nominee for others, may exercise appraisal
rights with respect to the shares held for all or less than all beneficial
owners of shares as to which such person is the record owner. In such case, the
written demand must set forth the number of shares covered by such demand. Where
the number of shares is not expressly stated, the demand will be presumed to
cover all shares of CRBC Series A Preferred Stock or CRBC Junior Preferred Stock
outstanding in the name of such record owner. A stockholder who elects to
exercise appraisal rights should mail or deliver his or her written demand to:
Chancellor Radio Broadcasting Company, 12655 N. Central Expressway, Suite 405,
Dallas, Texas 75243, Attention: Corporate Secretary, with a copy to Weil,
Gotshal & Manges LLP, 100 Crescent Court, Suite 1300, Dallas, Texas 75201,
Attention: Jeremy W. Dickens, Esq. (or, following the Subsidiary Merger
Effective Time, to Chancellor Media Corporation of Los Angeles, 433 East Las
Colinas Boulevard, Suite 1130, Dallas, Texas 75039, Attention: Corporate
Secretary, with a copy to Latham & Watkins, 1001 Pennsylvania Avenue, N.W.,
Suite 1300, Washington, D.C. 20004, Attention: John D. Watson, Jr., Esq.). The
written demand for appraisal should specify the stockholder's name and mailing
address, the number of shares of CRBC Series A Preferred Stock or CRBC Junior
Preferred Stock owned, and that the stockholder is thereby demanding appraisal
of his or her shares.
Within ten days after the Subsidiary Merger Effective Time, the Surviving
Subsidiary Corporation must provide notice of the Subsidiary Merger Effective
Time to each of its stockholders who have complied with Section 262. Within 120
days after the Subsidiary Merger Effective Time, the Surviving Subsidiary
Corporation or any stockholder who has complied with the required conditions of
Section 262 may file a petition in the Delaware Court, with a copy served on the
Surviving Subsidiary Corporation in the case of a petition filed by a
stockholder, demanding a determination of the fair value of the shares of the
dissenting stockholders of the Surviving Subsidiary Corporation. The Surviving
Subsidiary Corporation does not currently intend to file an appraisal petition
and stockholders seeking to exercise appraisal rights should not assume that the
Surviving Subsidiary Corporation will file such a petition or that the Surviving
Subsidiary Corporation will initiate any negotiations with respect to the fair
value of such shares. Accordingly, stockholders who desire to have their shares
appraised should initiate any petitions necessary for the perfection of their
appraisal rights within the time periods and in the manner prescribed in Section
262. Within 120 days after the Subsidiary Merger Effective Time, any stockholder
who has theretofore complied with the applicable provisions of Section 262 will
be entitled, upon written request, to receive from the Surviving Subsidiary
Corporation a statement setting forth the aggregate number of shares of CRBC
Series A Preferred Stock or CRBC Junior Preferred Stock with respect to which
demands for appraisal were received by CRBC (or, following the Subsidiary Merger
Effective Time, by the Surviving Subsidiary Corporation) and the number of
holders of such shares. Such written statement must be mailed within 10 days
after the written request therefor has been received by the Surviving
Corporation Subsidiary or within 10 days after expiration of the time for
delivery of demands for appraisal under Section 262, whichever is later.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court will determine which stockholders are entitled to
appraisal rights and will appraise the shares of CRBC Series A Preferred Stock
or CRBC Junior Preferred Stock owned by such stockholders, determining the fair
value of
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such shares exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining fair value,
the Delaware Court is to take into account all relevant factors. In Weinberger
v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be
considered in determining fair value in an appraisal proceeding, stating that
"proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered, and that "fair price obviously requires consideration of all
relevant factors involving the value of a company." The Delaware Supreme Court
stated that in making this determination of fair value the court must consider
market value, asset value, dividends, earnings prospects, the nature of the
enterprise and any other facts which are known or which can be ascertained as of
the date of the merger and which throw any light on future prospects of the
merged corporation. In Weinberger, the Delaware Supreme Court stated that
"elements of future value, including the nature of the enterprise, which are
known or susceptible of proof as of the date of the merger and not the product
of speculation, may be considered." Section 262, however, provides that fair
value is to be "exclusive of any element of value arising from the
accomplishment or expectation of the merger."
Stockholders considering seeking appraisal should recognize that the fair
value of their shares as determined under Section 262 could be more than, the
same as or less than the shares of Surviving Subsidiary Series A Preferred Stock
or Surviving Subsidiary Junior Preferred Stock to be issued pursuant to the
Subsidiary Merger to holders of CRBC Series A Preferred Stock, respectively, or
CRBC Junior Preferred Stock if they do not seek appraisal of their shares. The
cost of the appraisal proceeding may be determined by the Delaware Court and
taxed against the parties as the Delaware Court deems equitable in the
circumstances. Upon application of a dissenting stockholder of CRBC, the
Delaware Court may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the appraisal proceeding, including
without limitation, reasonable attorney's fees and the fees and expenses of
experts, be charged pro rata against the value of all shares of stock entitled
to appraisal.
Any holder of shares of CRBC Series A Preferred Stock or CRBC Junior
Preferred Stock who has duly demanded appraisal in compliance with Section 262
will not, after the Subsidiary Merger Effective Time, be entitled to vote for
any purpose any shares subject to such demand or to receive payment of dividends
or other distributions on such shares, except for dividends or distributions
payable to stockholders of record at a date prior to the Subsidiary Merger
Effective Time.
At any time within 60 days after the Subsidiary Merger Effective Time, any
holder of CRBC Series A Preferred Stock or CRBC Junior Preferred Stock will have
the right to withdraw such demand for appraisal and to accept the terms offered
in the Merger; after this period, such holder may withdraw such demand for
appraisal only with the written consent of the Surviving Subsidiary Corporation.
If no petition for appraisal is filed with the Delaware Court within 120 days
after the Subsidiary Merger Effective Time, stockholders' rights to appraisal
will cease, and all holders of shares of CRBC Series A Preferred Stock or CRBC
Junior Preferred Stock will be entitled to receive the Merger Consideration.
Inasmuch as the Surviving Subsidiary Corporation has no obligation to file such
a petition, and has no present intention to do so, any holder of shares of CRBC
Series A Preferred Stock or CRBC Junior Preferred Stock who desires such a
petition to be filed is advised to file it on a timely basis.
FAILURE TO TAKE ANY REQUIRED STEP IN CONNECTION WITH THE EXERCISE OF
APPRAISAL RIGHTS MAY RESULT IN TERMINATION OF SUCH RIGHTS. IN VIEW OF THE
COMPLEXITY OF THESE PROVISIONS OF THE DGCL, STOCKHOLDERS WHO ARE CONSIDERING
EXERCISING THEIR RIGHTS UNDER SECTION 262 OF THE DGCL SHOULD CONSULT WITH THEIR
LEGAL ADVISORS.
RESALE OF SURVIVING SUBSIDIARY SERIES A PREFERRED STOCK AND SURVIVING SUBSIDIARY
JUNIOR PREFERRED STOCK
All shares of Surviving Subsidiary Series A Preferred Stock and shares of
Surviving Subsidiary Junior Preferred Stock issued to stockholders of CRBC in
connection with the Merger will be registered under the Securities Act. The CRBC
Junior Preferred Stock for which the Surviving Subsidiary Junior Preferred Stock
will be issued is subject to a Registration Rights Agreement, dated January 23,
1997, among CRBC and the initial purchasers of the CRBC Junior Preferred Stock
(the "CRBC Registration Rights Agreement").
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Pursuant to the CRBC Registration Rights Agreement, CRBC agreed (i) to use its
reasonable best efforts to file a registration statement with respect to an
offer to exchange the CRBC Junior Preferred Stock (the "Exchange Offer") for
another series of exchangeable preferred stock with substantially identical
terms to the CRBC Junior Preferred Stock (the "Exchange Preferred Stock")
(except that the Exchange Preferred Stock would not contain terms with respect
to transfer restrictions) within 90 days of January 23, 1997, the issue date of
the CRBC Junior Preferred Stock (the "Issue Date") and (ii) to use its
reasonable best efforts to cause such registration statement to become effective
under the Securities Act within 180 days after the Issue Date. In the event that
applicable law or interpretations of the staff of the Commission would not
permit CRBC to effect the Exchange Offer, or if certain holders of the
Exchangeable Preferred Stock were not permitted to participate in the Exchange
Offer, CRBC agreed to use its reasonable best efforts to cause to become
effective a shelf registration statement with respect to the resale of the CRBC
Junior Preferred Stock and to keep such shelf registration statement effective
until three years after the Issue Date or such shorter period ending when all
the CRBC Junior Preferred Stock had been sold thereunder or ceased to be subject
to restrictions on transfer. The dividend rate on the CRBC Junior Preferred
Stock is subject to increase under certain circumstances if CRBC is not in
compliance with its obligations under the CRBC Registration Rights Agreement. As
of the date hereof, CRBC has not timely fulfilled its obligations under the CRBC
Registration Rights Agreement, and accordingly has accrued and will continue to
accrue additional dividends on the CRBC Junior Preferred Stock to the extent
provided for in the certificate of designation governing the CRBC Junior
Preferred Stock and the CRBC Registration Rights Agreement ("Additional
Dividends"). CRBC does not currently intend to file a registration statement
relating to the Exchange Offer for the CRBC Junior Preferred Stock or a shelf
registration statement relating to resales of CRBC Junior Preferred Stock with
the Commission. In lieu thereof, EMCLA and CRBC are registering the Surviving
Subsidiary Junior Preferred Stock that will be issued to holders of CRBC Junior
Preferred Stock under the Securities Act on this Registration Statement. Such
registration will allow for the free transfer of shares of Surviving Subsidiary
Junior Preferred Stock by holders of such shares. Accordingly, upon the
declaration by the Commission of the effectiveness of this Registration
Statement and the issuance of the Surviving Subsidiary Junior Preferred Stock at
the Subsidiary Merger Effective Time, CRBC believes that its obligations under
the CRBC Registration Rights Agreement, other than CRBC's obligation to pay
appropriate holders of the CRBC Junior Preferred Stock amounts owing as
Additional Dividends through the Subsidiary Merger Effective Time, will be
satisfied.
All shares of Surviving Subsidiary Series A Preferred Stock and Surviving
Subsidiary Junior Preferred Stock issued to stockholders of CRBC in the Merger
will be freely transferable.
ANTICIPATED ACCOUNTING TREATMENT
The Subsidiary Merger will be accounted for as a purchase of CRBC by EMCLA,
in accordance with generally accepted accounting principles. The results of
operations of the Surviving Subsidiary Corporation will consist of the results
of operations of EMCLA combined with the results of operations of CRBC from and
after the Effective Time of the Subsidiary Merger. The aggregate cost of CRBC,
as determined, shall be allocated to the assets acquired and liabilities assumed
by the Surviving Subsidiary Corporation based upon their respective fair values.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the material United States
Federal income tax consequences of the Merger. This discussion is based upon the
Code, regulations, proposed or promulgated thereunder, judicial precedent
relating thereto, and current rulings and administrative practice of the
Internal Revenue Service (the "Service"), in each case as in effect as of the
date hereof and all of which are subject to change at any time, possibly with
retroactive effect. It is assumed that shares of CRBC Series A Preferred Stock
and CRBC Junior Preferred Stock are held as "capital assets" within the meaning
of Section 1221 of the Code (i.e., property held for investment). This
discussion does not address all aspects of Federal income taxation that might be
relevant to particular holders of CRBC Series A Preferred Stock or CRBC Junior
Preferred Stock in light of their status or personal investment circumstances;
nor does it discuss the consequences to such holders who are subject to special
treatment under the Federal income tax laws, such as
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foreign persons, dealers in securities, regulated investment companies, life
insurance companies, other financial institutions, tax-exempt organizations,
pass-through entities, taxpayers who hold CRBC Series A Preferred Stock or CRBC
Junior Preferred Stock as part of a "straddle," "hedge" or "conversion
transaction" or who have a "functional currency" other than the United States
dollar. In addition, this discussion does not address the tax consequences to
holders who exercise appraisal rights pursuant to Section 262 of the DGCL.
Neither EMCLA nor CRBC has requested or will receive a ruling from the Service
as to the tax consequences of the Merger.
HOLDERS OF CRBC SERIES A PREFERRED STOCK AND CRBC JUNIOR PREFERRED STOCK
SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM
OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE,
LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
The Parent Merger and the Subsidiary Merger are each intended to quality as
a reorganization under Section 368(a) of the Code. It is a condition to the
obligation of Evergreen, EMHC and EMCLA to consummate the Merger that Evergreen
shall have received an opinion from Latham & Watkins, dated as of the same date
as the Effective Time and the Subsidiary Merger Effective Time, to the effect
that (i) the Parent Merger and the Subsidiary Merger will each be treated as a
reorganization within the meaning of Section 368(a) of the Code, (ii) no gain or
loss will be recognized by Evergreen, EMHC or Chancellor as a result of the
Parent Merger, (iii) no gain or loss will be recognized by EMCLA or CRBC as a
result of the Subsidiary Merger, (iv) each of Chancellor, Evergreen and EMHC
will be a party to the Parent Merger within the meaning of Section 368(b) of the
Code, (v) each of CRBC and EMCLA will be a party to the Subsidiary Merger within
the meaning of Section 386(b) of the Code, (vi) no gain or loss will be
recognized by the holders of the Evergreen Common Stock on the reclassification,
change and conversion of such shares into shares of Surviving Corporation Common
Stock pursuant to the Merger Agreement and (vii) no gain or loss will be
recognized by holders of Evergreen $3.00 Convertible Preferred Stock as a result
of the Merger. It is a condition to the obligation of Chancellor and CRBC to
consummate the Merger that Chancellor shall have received an opinion from Weil,
Gotshal & Manges LLP, dated as of the same date as the Effective Time and the
Subsidiary Merger Effective Time, to the effect that, except with respect to
cash received in lieu of fractional shares and except with respect to cash
received by holders exercising appraisal rights pursuant to Section 262 of the
DGCL, (i) the Parent Merger and the Subsidiary Merger will each be treated as a
reorganization within the meaning of Section 368(a) of the Code; (ii) no gain or
loss will be recognized by a holder of Chancellor Common Stock or Chancellor
Parent Convertible Preferred Stock as a result of the Parent Merger, and (iii)
no gain or loss will be recognized by any holders of the CRBC Series A Preferred
Stock and CRBC Junior Preferred Stock as a result of the Subsidiary Merger. In
rendering such opinions, counsel to each of Chancellor and Evergreen will rely
upon certain representations made by Chancellor, CRBC, Evergreen, EMHC, EMCLA,
and certain stockholders of Chancellor and of CRBC.
Assuming the Merger is treated as a reorganization within the meaning of
Section 368(a) of the Code, no gain or loss will be recognized for Federal
income tax purposes by Evergreen, EMHC, EMCLA, Chancellor or CRBC as a result of
the Merger. Except as described below with respect to cash received in lieu of
fractional shares of Chancellor Common Stock, (i) a holder of Evergreen Common
Stock will not recognize gain or loss on the reclassification, change and
conversion of such shares into Surviving Corporation Common Stock pursuant to
the Merger Agreement, (ii) a holder of Chancellor Common Stock will not
recognize gain or loss on the exchange of such shares for Surviving Corporation
Common Stock, (iii) a holder of Chancellor Parent Convertible Preferred Stock
(other than such holders exercising appraisal rights pursuant to Section 262 of
the DGCL) will not recognize any gain or loss on the exchange of such shares for
shares of Surviving Corporation 7% Convertible Preferred Stock, (iv) a holder of
CRBC Series A Preferred Stock (other than holders exercising appraisal rights
pursuant to Section 262) will not recognize any gain or loss on the exchange of
such shares for shares of Surviving Subsidiary Series A Preferred Stock and (v)
a holder of CRBC Junior Preferred Stock (other than holders exercising appraisal
rights pursuant to Section 262) will not recognize any gain or loss on the
exchange of such shares for shares of Surviving Subsidiary Junior Preferred
Stock. The aggregate tax basis of the Surviving Corporation Common Stock
received by holders of Chancellor Common Stock will be the same as the aggregate
tax basis of the Chancellor Common Stock surrendered therefor (reduced by the
amount of such tax basis allocable to fractional shares for which cash is
received),
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the aggregate tax basis of the Surviving Corporation 7% Convertible Preferred
Stock received by holders of Chancellor Parent Convertible Preferred Stock will
be the same as the aggregate tax basis of the Chancellor Parent Preferred Stock
surrendered therefor, the aggregate tax basis of the Surviving Corporation
Common Stock received by holders of Evergreen Common Stock will be the same as
the aggregate tax basis of the Evergreen Common Stock reclassified, changed and
converted therefor, the aggregate tax basis of the Surviving Subsidiary Series A
Preferred Stock received by holders of CRBC Series A Preferred Stock will be the
same as the aggregate tax basis of the CRBC Series A Preferred Stock exchanged
therefor and the aggregate tax basis of the Surviving Subsidiary Junior
Preferred Stock received by holders of CRBC Junior Preferred Stock will be the
same as the aggregate tax basis of the CRBC Junior Preferred Stock exchanged
therefor. The holding period of the Surviving Corporation Common Stock will
include the holding period of the Chancellor Common Stock surrendered therefor,
the holding period of the Surviving Corporation 7% Convertible Preferred Stock
will include the holding period of the Chancellor Parent Convertible Preferred
Stock surrendered therefor, the holding period of the Surviving Corporation
Common Stock will include the holding period of the Evergreen Common Stock
surrendered therefor, the holding period of the Surviving Subsidiary Series A
Preferred Stock will include the holding period of CRBC Series A Preferred Stock
surrendered therefor and the holding period of the CRBC Junior Preferred Stock
will include the holding period of CRBC Junior Preferred Stock surrendered
therefor.
REGULATORY CONCERNS
Federal Communications Commission
Approval Process. The ownership, operation and sale of radio broadcast
stations (including those licensed to EMCLA and CRBC) are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act. The Communications Act prohibits the assignment of an FCC
license, and the transfer of control of an FCC licensee, without the prior
consent of the FCC. For purposes of the Communications Act, Chancellor is
controlled by HM2/Chancellor, L.P. ("HM2/Chancellor"), an affiliate of Hicks
Muse, as a result of the ownership by HM2/Chancellor of shares of Chancellor
Common Stock that, in the aggregate, represent approximately 90.3% of the
combined voting power of Chancellor's outstanding voting stock. Additionally,
for purposes of the Communications Act, Evergreen is controlled by Scott K.
Ginsburg, as a result of the ownership by Mr. Ginsburg of shares of Evergreen
Common Stock that, in the aggregate, represent approximately 44.3% of the
combined voting power of Evergreen's outstanding voting stock. As a result of
the Merger and the conversion of Chancellor Common Stock and Evergreen Common
Stock into Surviving Corporation Common Stock, no individual shareholder will
control a block of voting stock sufficient to "control" the Surviving
Corporation for purposes of the Communications Act, and control, for the
purposes of the Communications Act, of EMCLA and CRBC after the Merger will pass
to the public stockholders of the Surviving Corporation as a group. Accordingly,
the Merger will result in the transfer of control of (i) the radio stations
owned and operated by Chancellor and its subsidiaries from HM2/Chancellor to the
public stockholders of the Surviving Corporation (the "Chancellor Transfer") and
(ii) the radio stations owned and operated by Evergreen from Mr. Ginsburg to the
public stockholders of the Surviving Corporation (the "Evergreen Transfer").
Because of these transfers of control, the prior approval of the FCC is
necessary before the Merger may be consummated.
Upon the filing of an application for consent to the transfer of control of
a broadcast station licensee, the FCC will issue an official public notice of
the filing of the application. Interested parties have a period of 30 days
following issuance of the public notice in which to petition to deny such
application. Applications for FCC consent to the Chancellor Transfer and the
Evergreen Transfer were filed with the FCC on April 30, 1997. Public notice of
the filing was released on May 8, 1997. Accordingly, any petitions to deny the
applications were required to be filed on or before June 9, 1997. Although one
such petition was filed, it has been settled and withdrawn. As of August 1,
1997, the consent of the FCC to the Evergreen Transfer and the Chancellor
Transfer had not yet been granted. Although there can be no assurance, Evergreen
and Chancellor expect that such consent will be granted prior to the Evergreen
Annual Meeting and the Chancellor Special Meeting. See "Risk Factors -- FCC
Consent for Merger."
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Within thirty days following FCC public notice of any grant of consent to
the Chancellor Transfer and the Evergreen Transfer, parties in interest may file
a petition for reconsideration requesting that the FCC reconsider its action.
Alternatively, in the case of a staff grant, parties in interest may within the
same thirty-day period file an "Application for Review" requesting that the FCC
review and set aside the staff grant. In the event of a staff grant, a party in
interest could take both actions, by first filing a petition for reconsideration
with the staff and later, within thirty days following public notice of denial
of that petition, filing an Application for Review. In the case of a staff
grant, the FCC may also review the staff action on its own motion within forty
days following public notice of the staff's action. The FCC may review any of
its own actions on its own motion within thirty days following public notice of
the action.
If the FCC does not, on its own motion, or upon a request by an interested
party for reconsideration or review, review a staff grant or its own action
within the time periods set forth above, any action by the FCC or its staff
granting the Chancellor Transfer and the Evergreen Transfer would become final.
The Merger Agreement provides that the parties are not obligated to consummate
the Merger upon the issuance of an FCC grant of consent to the Chancellor
Transfer and the Evergreen Transfer until such grants have become final.
However, Evergreen and Chancellor presently expect that they will waive the
condition to consummation of the Merger that such grants have become final. See
"Risk Factors -- FCC Consent for Merger."
In determining whether to grant requests for consent to such transfers, the
FCC considers a number of factors pertaining to the licensee (and proposed
licensee), including: limitations on alien ownership and the common ownership of
television broadcast, radio broadcast and daily newspaper properties, the
"character" of the licensee (and proposed licensee) and those persons or
entities that have "attributable" interests, and compliance with the Anti-Drug
Abuse Act of 1988.
Although the Merger is considered to constitute a "transfer of control" of
Chancellor from HM2/Chancellor to the public stockholders of the Surviving
Corporation as a group for the purposes of the Communications Act, the Surviving
Corporation will be deemed, as of the date of the Merger, to be an affiliate of
Hicks Muse, and certain affiliated entities for the purposes of certain
contracts applicable to Chancellor and the Surviving Corporation and its
subsidiaries and for the purposes of the federal securities laws and these
entities will be deemed to "control" the Surviving Corporation for such
purposes. This distinction arises from the use of definitions of "control" that
vary from the definition of "control" established by the FCC.
Ownership Restrictions. Pursuant to its authority under the Communications
Act, the FCC has promulgated rules that limit the ability of individuals or
entities to own or have "attributable" ownership interests in broadcast
stations, as well as in certain other mass media entities. The 1996 Act
eliminated national ownership caps on ownership of AM and FM radio stations.
Additionally, the 1996 Act increased local ownership limits. Prior to the
enactment of the 1996 Act, a single owner was limited to owning two FM and two
AM radio stations in a single large radio market with common ownership of three
stations, including two in the same service, permitted in smaller markets. After
the enactment of the 1996 Act, local ownership limits were increased as follows:
in markets with 45 or more stations, ownership is limited to eight stations, no
more than five of which can be FM or AM; in markets with 30-44 stations,
ownership is limited to seven stations, no more than four of which can be FM or
AM; in markets with 15-29 stations, ownership is limited to six stations, no
more than four of which can be FM or AM; and in markets with 14 or fewer
stations, ownership is limited to no more than 50% of the market's total and no
more than three AM or FM.
Planned Station Dispositions and Requests for Waivers of Multiple Ownership
Rules. If an acquisition will result in an acquiror having media holdings that
conflict with applicable ownership limits, the FCC may, in certain cases, grant
a permanent waiver of the relevant rule. Alternatively, the FCC may grant
temporary waivers in order to afford the acquiror a reasonable period of time
following the consummation of the transaction to come into compliance with
applicable law and regulations through the disposition of certain properties or
otherwise.
Because EMCLA owns or controls a number of radio stations in the same
markets as radio stations owned by CRBC, EMCLA and CRBC have advised the FCC in
the application for FCC approval of the Evergreen Transfer and the Chancellor
Transfer of the parties' intention to dispose of radio properties in
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certain markets to achieve compliance with the multiple ownership limits. In
this connection, EMCLA has recently completed the sale of three FM stations in
the Chicago market, one FM station in the Washington, D.C. market and two FM
stations in the San Francisco market. See "The Companies -- EMCLA -- Completed
Evergreen Transactions." Furthermore, assuming completion of each of the Merger,
the Pending Chancellor Acquisitions and the Pending Evergreen Acquisitions, the
Surviving Subsidiary Corporation would own: (i) seven stations in the
Philadelphia market, of which six would be FM and one would be AM; (ii) ten
stations in the Washington, D.C. market, of which five would be FM and five
would be AM; and (iii) eight stations in the Detroit market, of which six would
be FM and two would be AM. In addition, the overlap of certain of the Surviving
Subsidiary Corporation's stations in the San Francisco and Sacramento markets
would be such that one AM station considered by the Surviving Subsidiary
Corporation to be located in the Sacramento market would, for the purpose of the
FCC rules, be considered to broadcast in the San Francisco market. As a result
solely of the FCC's multiple ownership rules (see "-- Antitrust" below), the
Surviving Subsidiary Corporation will be required to dispose of the following
additional stations in order to comply with the FCC's multiple ownership rules:
(i) one AM station in the San Francisco or Sacramento market; (ii) one FM
station in the Philadelphia market; (iii) two AM stations in the Washington,
D.C. market; and (iv) one FM station in the Detroit market. Although binding
agreements have been entered into by EMCLA and CRBC to dispose of such stations,
there can be no assurances that such transactions will be consummated. The
nonconsummation of any of such transactions could have a material adverse effect
on EMCLA's or CRBC's ability to consummate the Merger.
License and Renewals. Radio broadcast licenses are granted for maximum
terms of up to eight years. At the time an application is made for renewal of a
radio station license, parties in interest may file petitions to deny the
application, and such parties, including members of the public, may comment upon
the service the station has provided during the preceding license term. Under
the Telecommunications Act, broadcast licenses are required to be renewed by the
FCC if it finds that: (i) the station has served the public interest,
convenience and necessity; (ii) there have been no serious violations of either
the Communications Act or the FCC's rules and regulations by the licensee; and
(iii) there have been no other violations which, taken together, constitute a
pattern of abuse. If a station's application for license renewal is denied,
other parties may thereafter file applications for FCC authorization to operate
a new station on the same frequency.
Applications for renewal of the licenses to operate WRCX(FM), Chicago,
Illinois, and KLOL-FM, Houston, Texas, each currently owned and operated by
EMCLA, are pending before the FCC. Applications for renewal of the licenses to
operate KALC-FM, Denver, Colorado, KFAN-AM, Minneapolis/St. Paul, Minnesota, and
KEEY-FM, Minneapolis/St. Paul, Minnesota, each currently owned and operated by
CRBC, are pending before the FCC. An application for renewal of the license to
operate KZPS-FM, Dallas, Texas, which is proposed to be acquired by Evergreen in
the Bonneville Acquisition, is pending before the FCC.
Under normal procedures, the FCC will not grant its consent to the transfer
of control of a licensee that is in the process of obtaining a renewal of its
license. However, under certain circumstances, the FCC may permit a
multi-station transaction, such as the proposed Merger, to proceed while a
renewal application remains pending, provided the parties agree to accept the
consequences of any action the FCC may take on the renewal application. EMCLA
and CRBC have requested, in the application for FCC approval of the Evergreen
Transfer and the Chancellor Transfer, that the proposed transaction be approved
on this basis, notwithstanding the dependency of one or more applications for
renewal of licenses held by EMCLA and CRBC subsidiaries.
Antitrust Matters
The FTC and the Antitrust Division of the DOJ, which evaluate transactions
requiring a pre-acquisition filing under the HSR Act 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 where
an operator proposes to acquire new stations in its existing markets.
Under the HSR Act and the rules promulgated thereunder, the Merger may not
be consummated until notifications have been given and certain information has
been furnished to the DOJ and the FTC and
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specified waiting period requirements have been satisfied. EMCLA and CRBC each
filed with the DOJ and the FTC a Notification and Report Form with respect to
the Merger on April 29, 1997, and the waiting period applicable to the Merger
expired on May 21, 1997.
At any time before or after the consummation of the Merger, the DOJ or the
FTC could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the Merger or
seeking the divestiture of substantial assets of EMCLA or CRBC.
In addition, state antitrust authorities may also bring legal action under
the antitrust laws. Such action could include seeking to enjoin the consummation
of the Merger or seeking divestiture of certain assets of EMCLA or CRBC. No
state authorities have indicated that they will undertake an investigation of
the Merger. Private parties may also seek to take legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Merger on antitrust grounds will not be made or, if such a
challenge is made, what the result of such challenge may be.
THE MERGER AGREEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN PROVISIONS OF THE MERGER
AGREEMENT, WHICH IS ATTACHED AS ANNEX A TO THIS PROSPECTUS AND INCORPORATED
HEREIN BY REFERENCE. SUCH SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE MERGER AGREEMENT. ALL STOCKHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN
ITS ENTIRETY.
GENERAL
The Merger Agreement provides that, following the approval and adoption of
the Merger Agreement by the stockholders of Evergreen and Chancellor and the
satisfaction or waiver of the other conditions to the Merger, (i) Chancellor
will merge with and into EMHC, and EMHC shall continue as the surviving
corporation following such merger and (ii) CRBC will merge with and into EMCLA,
and EMCLA shall continue as the surviving corporation following such merger. As
a result of the Merger, as of the Effective Time (as defined), Chancellor shall
cease to exist, and the Surviving Mezzanine Corporation shall succeed to and
assume all rights and obligations of Chancellor, and as of the Subsidiary Merger
Effective Time (as defined), CRBC shall cease to exist, and the Surviving
Subsidiary Corporation shall succeed to and assume all rights and obligations of
CRBC, in each case, in accordance with the DGCL.
EFFECTIVE TIME
The Merger Agreement provides that, subject to the requisite approval of
the stockholders of Chancellor and Evergreen, and subject to the satisfaction or
waiver of certain other conditions, each of the Parent Merger and the Subsidiary
Merger will be consummated by the filing of an appropriate certificate of merger
for the Parent Merger and the Subsidiary Merger, respectively, in accordance
with the relevant provisions of the DGCL, with the Secretary of State of the
State of Delaware. The filing of the certificate of merger for the Parent Merger
is referred to as the Effective Time, and the filing of the certificate of
merger for the Subsidiary Merger as referred to as the Subsidiary Merger
Effective Time. The Parent Merger will be consummated prior to, but on the same
day as, the Subsidiary Merger. From and after the Effective Time, the name of
the Surviving Corporation will be "Chancellor Media Corporation" and the name of
the Surviving Mezzanine Corporation will be "Chancellor Mezzanine Holdings
Corporation." From and after the Subsidiary Merger Effective Time, the name of
the Surviving Subsidiary Corporation will be "Chancellor Media Corporation of
Los Angeles."
CONVERSION OF SHARES
Upon the consummation of the Parent Merger or the Subsidiary Merger, as
applicable:
(i) Each share of Evergreen Class A Common Stock and Evergreen Class B
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares of Evergreen Common Stock held as treasury shares by
Evergreen) will be reclassified, changed and converted into one (1) share
of Surviving Corporation Common Stock;
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(ii) Each share of the Evergreen $3.00 Convertible Exchangeable
Preferred Stock issued and outstanding immediately prior to the Effective
Time will remain outstanding as one (1) share of $3.00 Convertible
Exchangeable Preferred Stock of the Surviving Corporation;
(iii) Each share of the Chancellor Class A Common Stock and Chancellor
Class B Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Chancellor Common Stock held as
treasury shares by Chancellor) will be converted into the right to receive
0.9091 shares of Surviving Corporation Common Stock;
(iv) Each share of Chancellor Parent Convertible Preferred Stock
issued and outstanding immediately prior to the Effective Time will be
converted into the right to receive one (1) share of the Surviving
Corporation 7% Convertible Preferred Stock;
(v) Each share of EMHC will remain outstanding as one (1) share of the
Common Stock of the Surviving Mezzanine Corporation;
(vi) Each share of EMCLA Common Stock outstanding will remain
outstanding as one (1) share of the Common Stock of the Surviving
Subsidiary Corporation;
(vii) Each share of common stock of CRBC issued and outstanding
immediately prior to the Subsidiary Merger Effective Time will be cancelled
and no consideration will be delivered in exchange therefor;
(viii) Each share of CRBC Series A Preferred Stock issued and
outstanding immediately prior to the Subsidiary Merger Effective Time will
be converted into the right to receive one (1) share of the Surviving
Subsidiary Series A Preferred Stock; and
(ix) Each share of CRBC Junior Preferred Stock issued and outstanding
immediately prior to the Subsidiary Merger Effective Time will be converted
into the right to receive one (1) share of the Surviving Subsidiary Junior
Preferred Stock.
EXCHANGE PROCEDURES
Promptly after the Subsidiary Merger Effective Time, a form of letter of
transmittal and instructions will be mailed to each holder of record of
certificates that, immediately prior to the Subsidiary Merger Effective Time,
represented shares of CRBC Series A Preferred Stock or CRBC Junior Preferred
Stock. After receipt of such transmittal form, each holder of such certificates
should surrender the certificates to the Bank of New York (the "Exchange
Agent"), together with such letter of transmittal duly executed and completed in
accordance with the instructions thereto. By executing such letter of
transmittal, holders of CRBC Junior Preferred Stock will be deemed to have
acknowledged that, upon issuance of all shares of Surviving Subsidiary Junior
Preferred Stock in the Subsidiary Merger and the subsequent issuance of shares
of Surviving Subsidiary Junior Preferred Stock owing as Additional Dividends to
appropriate holders of CRBC Junior Preferred Stock, CRBC's obligations under the
CRBC Registration Rights Agreement will have been satisfied. Upon surrender of
such certificates to and acceptance thereof by the Exchange Agent, each such
holder will be entitled to receive certificates of Surviving Subsidiary Series A
Preferred Stock or Surviving Subsidiary Junior Preferred Stock, evidencing the
whole number of shares of Surviving Subsidiary Series A Preferred Stock or
Surviving Subsidiary Junior Preferred Stock to which such holder is entitled
(the "Merger Consideration").
If any shares of Surviving Subsidiary Series A Preferred Stock or Surviving
Subsidiary Junior Preferred Stock are to be issued in a name other than that in
which the certificate(s) representing CRBC Series A Preferred Stock or CRBC
Junior Preferred Stock surrendered in exchange therefor is registered, the
certificates so surrendered must be properly endorsed or otherwise be in proper
form for transfer and the person requesting such exchange must pay to the
Exchange Agent any applicable stock transfer taxes or must establish to the
satisfaction of the Exchange Agent that such taxes have been paid or are not
applicable. No interest will be paid on the Merger Consideration.
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After the Subsidiary Merger Effective Time, no holder of a certificate
which, immediately prior to the Subsidiary Merger Effective Time, represented
shares of CRBC Series A Preferred Stock or CRBC Junior Preferred Stock will be
entitled to receive any dividend or other distribution from the Surviving
Subsidiary Corporation until the holder surrenders the certificate for a
certificate representing shares of Surviving Subsidiary Series A Preferred Stock
or Surviving Subsidiary Junior Preferred Stock. Upon such surrender, there will
be paid to the holder the amount of any dividends or other distributions which
after the Subsidiary Merger Effective Time theretofore became payable with
respect to the number of whole shares of Surviving Subsidiary Series A Preferred
Stock or Surviving Subsidiary Junior Preferred Stock into which such shares of
CRBC Series A Preferred Stock or CRBC Junior Preferred Stock are converted.
Until such surrender, the certificates shall be deemed to evidence only the
right to receive the appropriate Merger Consideration. No interest will be paid
on such dividends or other distributions.
Any portion of the Merger Consideration or any dividends or distributions
with respect to shares of CRBC Series A Preferred Stock or CRBC Junior Preferred
Stock that has not been distributed to the holders of the certificates
representing shares of Surviving Subsidiary Series A Preferred Stock or
Surviving Subsidiary Junior Preferred Stock within 120 days after the Subsidiary
Merger Effective Time will be delivered to the Surviving Subsidiary Corporation.
Any such holders who have not theretofore surrendered their certificates
pursuant to the relevant provisions of the Merger Agreement may look to the
Surviving Subsidiary Corporation only as a general creditor thereof for payment
of their claims for any Merger Consideration and any dividends or distributions
with respect to shares of Surviving Subsidiary Series A Preferred Stock or
Surviving Subsidiary Junior Preferred Stock.
None of Evergreen, EMHC, EMCLA, Chancellor, CRBC, the Surviving
Corporation, the Surviving Mezzanine Corporation, the Surviving Subsidiary
Corporation or the Exchange Agent will be liable in respect of any cash, shares,
dividends or distributions payable from the Merger Consideration or any
dividends or distributions with respect to shares of CRBC Series A Preferred
Stock or CRBC Junior Preferred Stock, delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any certificate or
certificates representing shares of CRBC Series A Preferred Stock or CRBC Junior
Preferred Stock are not surrendered prior to five (5) years after the Subsidiary
Merger Effective Time (or immediately prior to such earlier date on which any
Merger Consideration in respect of such certificate would otherwise escheat to
or become the property of any governmental agency or regulatory authority (a
"Governmental Entity")), any such cash, shares, dividends or distributions
payable in respect of such certificate or certificates will become the property
of the Surviving Subsidiary Corporation.
CERTIFICATES FOR SHARES OF CRBC SERIES A PREFERRED STOCK OR CRBC JUNIOR
PREFERRED STOCK WILL BE EXCHANGED FOR CERTIFICATES FOR SHARES OF SURVIVING
SUBSIDIARY SERIES A PREFERRED STOCK OR SURVIVING SUBSIDIARY JUNIOR PREFERRED
STOCK FOLLOWING CONSUMMATION OF THE SUBSIDIARY MERGER IN ACCORDANCE WITH
INSTRUCTIONS WHICH THE SURVIVING SUBSIDIARY CORPORATION WILL SEND TO HOLDERS OF
CRBC SERIES A PREFERRED STOCK OR CRBC JUNIOR PREFERRED STOCK AFTER THE MERGER.
Shares of CRBC Series A Preferred Stock or CRBC Junior Preferred Stock,
outstanding immediately prior to the Subsidiary Merger Effective Time and held
by a holder who properly demands in writing appraisal of such shares of CRBC
Series A Preferred Stock or CRBC Junior Preferred Stock, in accordance with
Section 262 and who shall not have withdrawn such demand or otherwise have
forfeited appraisal rights, shall not be converted into or represent the right
to receive the Merger Consideration therefor ("Dissenting Shares"). Such
stockholders shall be entitled to receive payment of the appraised value of such
shares of CRBC Series A Preferred Stock or CRBC Junior Preferred Stock, held by
them in accordance with the provisions of Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
securities under Section 262 shall thereupon be deemed to have been converted
into, as of the Subsidiary Merger Effective Time, the right to receive, without
any interest thereon, the applicable Merger Consideration, upon surrender, as
provided by the Merger Agreement, of the certificate or certificates that
formerly represented such securities. See "The Merger -- Appraisal Rights."
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DIRECTORS AND OFFICERS
The Merger Agreement provides that the Board of Directors of the Surviving
Subsidiary Corporation immediately after the Subsidiary Merger Effective Time
will consist of the following individuals:
James E. de Castro
Steven Dinetz
Scott K. Ginsburg
Thomas O. Hicks
Thomas J. Hodson
Perry J. Lewis
Jeffrey A. Marcus
John E. Massey
Eric C. Neuman
Lawrence D. Stuart, Jr.
It is anticipated that one additional director mutually acceptable to EMCLA
and CRBC will serve on the Board of Directors of the Surviving Subsidiary
Corporation.
The Merger Agreement further provides that the following individuals will
become officers of the Surviving Subsidiary Corporation at the Subsidiary Merger
Effective Time:
<TABLE>
<S> <C>
Thomas O. Hicks......................... Chairman of the Board
Scott K. Ginsburg....................... President and Chief Executive Officer
Steven Dinetz........................... Co-Chief Operating Officer
James E. de Castro...................... Co-Chief Operating Officer
Matthew E. Devine....................... Chief Financial Officer
</TABLE>
Each such officer will hold office from the Subsidiary Merger Effective
Time until his respective successor is duly elected or appointed and qualified
in the manner provided in the Certificate of Incorporation or Bylaws of the
Surviving Subsidiary Corporation, or as otherwise provided by applicable law.
The names, titles and officerships of other individuals who will initially hold
other officerships in the Surviving Subsidiary Corporation will be determined by
EMCLA and CRBC prior to the Subsidiary Merger Effective Time, and election of
these persons will be considered by the Board of Directors of the Surviving
Subsidiary Corporation immediately after the Subsidiary Merger Effective Time.
CERTIFICATE OF INCORPORATION AND BYLAWS
The Merger Agreement provides that (i) the Certificate of Incorporation of
EMCLA will, at the Subsidiary Merger Effective Time, be amended pursuant to the
amendment attached to the Merger Agreement (as amended, the "Surviving
Subsidiary Corporation Certificate") and (ii) the Bylaws of EMCLA immediately
prior to the Subsidiary Merger Effective Time will be the bylaws of the
Surviving Subsidiary Corporation.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties relating to, among other things: (i) the organization, standing and
similar corporate matters of Evergreen, Chancellor, EMHC, EMCLA and CRBC; (ii)
the capital structure of Evergreen, Chancellor, EMHC, EMCLA and CRBC; (iii) the
authorization, execution, delivery, performance and enforceability of the Merger
Agreement with respect to Evergreen, Chancellor, EMHC, EMCLA and CRBC; (iv)
documents filed by Evergreen, Chancellor and their respective subsidiaries with
the Commission and the accuracy of information contained therein; (v) the
absence of conflicts with the organizational and certain other documents of
Evergreen, Chancellor and their respective subsidiaries as a result of the
execution and delivery of the Merger Agreement or the consummation of the
transactions contemplated by the Merger Agreement; (vi) except as otherwise
provided in the Merger Agreement, the absence of violation of any law, rule or
regulation of any state or of the United States or any order, writ, judgment,
injunction, decree, determination or award currently in effect applicable to
Evergreen, Chancellor or their respective subsidiaries, in each case, as a
result of the execution
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and delivery of the Merger Agreement or the consummation of the transactions
contemplated by the Merger Agreement; (vii) that, except as otherwise provided
in the Merger Agreement, no consent of or filing with any governmental agency or
regulatory authority is required by Evergreen, Chancellor, EMHC, EMCLA or CRBC
in connection with the execution or delivery of the Merger Agreement or the
consummation of the transactions contemplated thereby; (viii) the absence of
material changes since the date of the most recent audited financial statements
filed with the Commission by Evergreen, Chancellor or their respective
subsidiaries with respect to the business of Evergreen, Chancellor or any of
their respective subsidiaries, except as otherwise provided in the Merger
Agreement; (ix) the validity of all authorizations issued by the FCC for the
operation of radio stations ("FCC Licenses") held by Evergreen, Chancellor and
their respective subsidiaries; (x) the compliance in all material respects with
the terms of the FCC Licenses issued to Evergreen, Chancellor and their
respective subsidiaries and the timely filing with the FCC of all applications,
reports and other disclosures with the FCC required to be made by Evergreen,
Chancellor and their respective subsidiaries; (xi) overall compliance in all
material respects with all applicable laws; (xii) the absence of any material
indebtedness, obligations or liabilities of any kind, required by GAAP to be
reflected in a consolidated balance sheet or that would have a Material Adverse
Effect (as defined in the Merger Agreement), except as otherwise provided in the
Merger Agreement; and (xii) the absence of any pending or threatened litigation
against Evergreen, Chancellor or any of the respective subsidiaries, except as
otherwise disclosed pursuant to the Merger Agreement, that would have a Material
Adverse Effect or prevent or significantly delay the consummation of the
transactions contemplated by the Merger Agreement.
CERTAIN COVENANTS
The Merger Agreement contains various customary covenants, including
covenants of each of Evergreen and Chancellor that, during the period from the
date of the Merger Agreement until the Effective Time, except as permitted by or
contemplated in the Merger Agreement, each of Evergreen and Chancellor (and each
of their respective subsidiaries), will, among other things: (i) conduct its
operations in the ordinary course of business and (ii) use its reasonable best
efforts to preserve intact its business organizations and goodwill in all
material respects and keep available the services of its respective officers and
employees as a group.
Further, each of Evergreen and Chancellor has agreed that, among other
things and subject to certain conditions and exceptions, it will not (and will
cause its subsidiaries not to), without the prior consent of the other, (i)
declare, set aside or pay any dividends on or make other distributions in
respect of its or its subsidiaries outstanding capital stock, other than as
provided in the Merger Agreement; (ii) split, combine or reclassify any of its
outstanding capital stock or issue or authorize the issuance of any securities
in lieu of or in substitution for its outstanding capital stock; (iii) purchase,
redeem or otherwise acquire any shares of outstanding capital stock or any
rights, warrants or options to acquire any such shares, other than as provided
in the Merger Agreement; (iv) issue, sell, grant, pledge or otherwise encumber
any shares of its capital stock, any other equity securities or any securities
convertible into, or any rights, warrants or options to acquire any such shares,
equity securities or convertible securities, other than as provided in the
Merger Agreement; (v) amend its certificate of incorporation, bylaws or other
such documents other than as provided in the Merger Agreement; (vi) acquire any
business or any corporation, partnership, joint venture, association or other
business organization; (vii) sell, mortgage or otherwise encumber or subject to
any lien or encumbrance or otherwise dispose of any of its properties or assets
that are material to Evergreen or Chancellor and their respective subsidiaries
taken as a whole; (viii) other than working capital borrowing in the ordinary
course of business and consistent with past practice, incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person, other than
as provided in the Merger Agreement, or make any material loans or advances to
any other person, other than Chancellor or Evergreen or any of their respective
direct or indirect wholly owned subsidiaries and other than routine advances to
employees; (ix) make any tax election or settle or compromise any income tax
liability that could reasonably be expected to be material to Chancellor or
Evergreen and their respective subsidiaries taken as a whole; (x) pay,
discharge, settle or satisfy any material claims, liabilities or obligations
other than the payment, discharge or satisfaction of certain liabilities as
provided in the Merger Agreement; (xi) make any material commitments or
agreements for capital expenditures or capital additions or betterments except
as materially consistent with the budget for
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capital expenditures as of the date of the Merger Agreement and consistent with
past practices; (xii) except as may be required by law (a) other than in the
ordinary course of business and consistent with past practice, make any
representation or promise to any employee or former director, officer or
employee of Evergreen, Chancellor or any of their respective subsidiaries which
is inconsistent with the terms of any agreement relating to employment,
severance, change of control, termination, stock options, stock purchases,
compensation, fringe benefits or other employee benefits of Evergreen or
Chancellor (each, an "Evergreen Benefit Plan" and "Chancellor Benefit Plan,"
respectively); (b) other than in the ordinary course of business and consistent
with past practice, make any change to, or amend in any way, the contracts,
salaries, wages, or other compensation of any director, employee or any agent or
consultant of Evergreen, Chancellor or any of their respective subsidiaries
other than routine changes or amendments that are required under existing
contracts; (c) adopt, enter into, amend, alter or terminate, partially or
completely, any Evergreen Benefit Plan or Chancellor Benefit Plan or any
election made pursuant to the provisions of any Evergreen Benefit Plan or
Chancellor Benefit Plan, to accelerate any payments, obligations or vesting
schedules thereunder; (d) other than in the ordinary course of business and
consistent with past practice, approve any general or company-wide pay increases
for employees; (xiii) except in the ordinary course of business, modify, amend
or terminate any material agreement, permit, concession, franchise, license or
similar instrument to which Chancellor, Evergreen or any of their respective
subsidiaries is a party or waive, release or assign any material rights or
claims thereunder; or (xiv) authorize any of, or commit or agree to take any of
the foregoing actions.
Evergreen and Chancellor have further agreed not to, and not to permit any
of their respective subsidiaries to, take any action that would or could
reasonably be expected to result in any of the conditions to the Merger as
provided in the Merger Agreement not being satisfied.
Notwithstanding the foregoing, the Merger Agreement provides that nothing
therein will prevent Evergreen or Chancellor from selling or acquiring (or
agreeing to sell or acquire) all or substantially all of the assets of one or
more radio broadcast stations and entering into financing transactions in
connection therewith, provided that the value of the consideration to be paid or
received in such transactions does not exceed $100.0 million in the aggregate
for all such radio stations. On April 9, Chancellor consented to the proposed
acquisition by Evergreen of certain stations from a subsidiary of Gannett
Company, Inc. for an aggregate purchase price of approximately $340.0 million in
cash. On April 24, Chancellor consented to the EMCLA Senior Credit Facility. On
May 1, Evergreen consented to the Chancellor Debt Tender Offer. On June 10,
Chancellor consented to the Evergreen Convertible Preferred Stock Offering. On
June 18, Evergreen consented to the CRBC 8 3/4% Notes Offering. On July 1,
Evergreen consented to the CRBC Restated Credit Facility. On July 14, Evergreen
and Chancellor each consented to the Katz Acquisition.
CONDITIONS TO THE MERGER
The respective obligations of Evergreen, Chancellor, EMHC, EMCLA and CRBC
to consummate the Merger are subject to the satisfaction or waiver of certain
conditions, including that: (i) the Merger Agreement shall have been approved by
the stockholders of Evergreen and Chancellor; (ii) the FCC shall have issued an
order, which order has not been reversed, stayed, enjoined, set aside or
suspended and with respect to which no timely request for stay, motion for
reconsideration or appeal has been filed, approving the transfer of Chancellor's
FCC Licenses without any material conditions or restrictions (see "Risk
Factors -- FCC Consent for Merger" and "The Merger -- Regulatory
Considerations -- Federal Communications Commission" above); (iii) all required
consents, approvals, permits and authorizations to the consummation of the
transactions contemplated by the Merger Agreement by Evergreen, Chancellor,
EMHC, EMCLA and CRBC shall have been obtained from any Governmental Entity
(other than the FCC) whose consent, approval, permission or authorization is
required by reason of a change in law after the date of the Merger Agreement,
except as provided in the Merger Agreement; (iv) any applicable waiting period
under the HSR Act shall have been terminated or shall have otherwise expired;
(v) there shall be in effect no temporary restraining order, preliminary or
permanent injunction or other order of any court or other legal restraint or
prohibition preventing the consummation of the Merger; (vi) the Registration
Statement shall have been declared effective by the Commission and shall not be
the subject of a stop order or proceeding seeking a stop
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order; and (vii) the shares of Surviving Corporation Common Stock to be issued
pursuant to the Merger Agreement shall have been approved for quotation on The
Nasdaq Stock Market.
The obligations of Evergreen to effect the Merger are further subject to
satisfaction of the following conditions: (i) the representations and warranties
of Chancellor and of CRBC shall have been true and correct on the date that the
Merger Agreement was entered, except as provided in the Merger Agreement; (ii)
Chancellor and CRBC shall have performed, in all material respects, all
requisite obligations required to be performed by them at or prior to the
Closing Date; and (iii) Evergreen shall have received an opinion from Latham &
Watkins on the Closing Date to the effect that, among other things and subject
to certain conditions, each of the Parent Merger and the Subsidiary Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of Code.
The obligations of Chancellor and CRBC to effect the Merger are further
subject to satisfaction of the following conditions: (i) the representations and
warranties of Evergreen, EMHC and EMCLA shall have been true and correct on the
date that the Merger Agreement was entered, except as provided in the Merger
Agreement; (ii) Evergreen, EMHC and EMCLA shall have performed, in all material
respects, all requisite obligations required to be performed by it at or prior
to the Closing Date; and (iii) Chancellor shall have received an opinion from
Weil, Gotshal & Manges LLP on the Closing Date to the effect that, among other
things and subject to certain conditions, each of the Parent Merger and the
Subsidiary Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code.
ADDITIONAL AGREEMENTS
Each of Evergreen and Chancellor has also agreed to, among other things,
and subject to certain conditions and exceptions: (i) as soon as practicable
following the date of the Merger Agreement, prepare and file with the Commission
a Joint Proxy Statement/Prospectus relating to the Parent Merger (the "Parent
Registration Statement") and a registration statement on Form S-4 relating to
the Subsidiary Merger, (the "Subsidiary Registration Statement") and to use its
best efforts to have the Parent Registration Statement and the Subsidiary
Registration Statement declared effective under the Securities Act of 1933, as
amended (the "Securities Act"), as promptly as practicable after such filing;
(ii) take all action necessary to convene a meeting of its stockholders to
submit the Merger Agreement for approval and to use its best efforts to hold
such stockholders' meeting as soon as practicable after the date of the Merger
Agreement; (iii) make, and cause its respective subsidiaries and its other
affiliates to make, all necessary filings as soon as practicable, including,
without limitation, those required under the HSR Act, the Securities Act, the
Exchange Act, and the Communications Act (including filing an application with
the FCC for the transfer of control of Chancellor's FCC Licenses and Evergreen's
FCC Licenses, which the parties must file as soon as practicable after the date
of the Merger Agreement), in order to facilitate prompt consummation of the
Merger and the other transactions contemplated by the Merger Agreement; and (iv)
give the other party the opportunity to participate in the defense or settlement
of any stockholder litigation against it and its directors relating to the
transactions contemplated by the Merger Agreement.
Evergreen and Chancellor have also further agreed not to, and not to permit
their subsidiaries to, permit any of their or their respective subsidiaries'
officers, directors or employees, investment bankers, attorneys or other
advisors or representatives to, directly or indirectly, (i) solicit, initiate or
encourage the submission of any Acquisition Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may be
reasonably be expected to lead to, any Acquisition Proposal.
"Acquisition Proposal" is defined in the Merger Agreement to include any
proposal with respect to a merger, consolidation, share exchange or similar
transaction involving Evergreen or Chancellor or any "Significant Subsidiary"
(as defined in Regulation S-X of the Commission's rules) of Evergreen or
Chancellor, or any purchase of all or any significant portion of the assets of
Evergreen or Chancellor or any Significant Subsidiary of Evergreen or
Chancellor, or any equity interest in Evergreen or Chancellor or any Significant
Subsidiary of Evergreen or Chancellor, other than the transactions contemplated
by the Merger
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Agreement, provided, however, that any currently planned acquisition or
disposition of broadcast properties disclosed in writing prior to execution and
delivery of the Merger Agreement by either Evergreen or Chancellor to the other
shall not constitute an Acquisition Proposal.
Evergreen has also agreed to, among other things, and subject to certain
exceptions and conditions: (i) prepare and file with the Commission the Parent
Registration Statement and the Subsidiary Registration Statement and take
certain actions required to be taken under applicable state securities laws in
connection with the issuance of Surviving Corporation Common Stock in the
Merger; and (ii) use its best efforts to cause the shares of Surviving
Corporation Common Stock to be issued in the Merger to be approved for quotation
on The Nasdaq Stock Market, subject to official notice of issuance, prior to the
Closing Date.
Chancellor has also agreed to, among other things, and subject to certain
exceptions and conditions, deliver to Evergreen a letter identifying all persons
who may be, at the time the Merger is submitted for approval to the stockholders
of Chancellor, "affiliates" of Chancellor for purposes of Rule 145 under the
Securities Act, and to use its best efforts to cause each such person to deliver
to Evergreen on or prior to the Closing Date a written agreement in the form
attached to the Merger Agreement.
INDEMNIFICATION AND INSURANCE
The Certificate of Incorporation and Bylaws of the Surviving Subsidiary
Corporation will contain provisions indemnifying any person who was or is
threatened to be made a party to a proceeding by reason of the fact that he or
she (i) is or was a director, officer, employee or agent of the Surviving
Subsidiary Corporation or (ii) is or was serving at the request of the Surviving
Subsidiary Corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, to the fullest extent permitted under the
DGCL, and such provisions shall not be amended, repeated or otherwise modified
for a period of six years after the Subsidiary Merger Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
any time prior to the Subsidiary Merger Effective Time were directors or
officers of Evergreen or Chancellor or any of their respective subsidiaries in
respect of actions or omissions occurring at or prior to the Subsidiary Merger
Effective Time unless such modification is required by law.
For a period of at least six (6) years after the Subsidiary Merger
Effective Time, the Surviving Subsidiary Corporation will maintain CRBC's
current directors' and officers' insurance and indemnification policies (the
"D&O Insurance") to the extent that such policies provide coverage for events
occurring prior to the Subsidiary Merger Effective Time, so long as the annual
premium therefor would not be in excess of 250% of the last annual premium paid
prior to the date of the Merger Agreement; provided, however, that the Surviving
Subsidiary Corporation may, in lieu of maintaining such existing D&O Insurance,
cause coverage to be provided under any policy maintained for the benefit of the
Surviving Subsidiary Corporation or its subsidiaries so long as the terms
thereof are not less advantageous to the beneficiaries thereof than the existing
D&O Insurance.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time: (i) by mutual written consent of Evergreen and Chancellor or (ii) by
either Evergreen or Chancellor if (a) any required approval of the stockholders
of Evergreen or Chancellor has not been obtained; (b) the Merger has not been
consummated on or before February 19, 1998 (other than as the result of the
willful and material breach of the Merger Agreement by the party seeking to
terminate it); (c) any Governmental Entity shall have issued an order, decree or
ruling or take any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such action has become final and non-appealable; or
(d) the other party has breached the requirements of the Merger Agreement
regarding stockholder approvals or Acquisition Proposals, unless the party
seeking to terminate is in material breach of the Merger Agreement.
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AMENDMENT AND MODIFICATION
Subject to the applicable provisions of the DGCL, at any time prior to the
Effective Time, the parties may modify or amend the Merger Agreement by written
agreement; provided, however, that after the approval of the stockholders of
both Evergreen and Chancellor has been obtained, no amendment may reduce the
Merger Consideration or adversely affect the rights of the Evergreen or
Chancellor stockholders without their approval.
FEES AND EXPENSES
The Merger Agreement provides that, whether or not the Merger is
consummated, each of Evergreen and Chancellor will pay its own costs and
expenses incurred by it in connection with the Merger Agreement and the
consummation of the transactions contemplated thereby; provided, however, that
all fees and expenses incurred in connection with filings pursuant to the HSR
Act, filings with the FCC under the Communications Act, and the preparation,
filing, printing, mailing and distribution of the Parent Registration Statement
and the Subsidiary Registration Statement will be split equally between
Evergreen and Chancellor.
DESCRIPTION OF SURVIVING SUBSIDIARY CORPORATION CAPITAL STOCK
GENERAL
Assuming approval of the Merger Agreement, at the Effective Time, the
Certificate of Incorporation of the Surviving Subsidiary Corporation will be the
Surviving Subsidiary Corporation Certificate and the Bylaws of the Surviving
Corporation will be the bylaws of EMCLA immediately prior to the Subsidiary
Merger Effective Time (the "Surviving Subsidiary Corporation Bylaws"). Pursuant
to the Surviving Subsidiary Corporation Certificate, the authorized capital
stock of the Surviving Subsidiary Corporation at the Subsidiary Merger Effective
Time will consist of 1,000 shares of Surviving Subsidiary Common Stock, and
10,000,000 shares of preferred stock, par value $0.01 per share, of the
Surviving Subsidiary Corporation, of which (i) 1,000,000 shares will be
designated Surviving Subsidiary Series A Preferred Stock and (ii) 3,600,000
shares will be designated Surviving Subsidiary Junior Preferred Stock.
COMMON STOCK
All issued and outstanding shares of Surviving Subsidiary Common Stock will
be held by the Surviving Mezzanine Corporation immediately after the Subsidiary
Merger Effective Time. Holders of the Surviving Subsidiary Common Stock will be
entitled to one vote per share on all matters to be voted upon by the
stockholders. Holders of Surviving Subsidiary Common Stock will not have
cumulative voting rights, and therefore holders of a majority of the shares
voting for the election of directors can elect all of the directors standing for
election.
Holders of the Surviving Subsidiary Common Stock will have no preemptive,
conversion or redemption rights and will not be subject to further calls or
assessments by the Surviving Subsidiary Corporation. All of the outstanding
shares of Surviving Subsidiary Common Stock immediately after the Subsidiary
Merger Effective Time will be validly issued, fully paid and nonassessable.
PREFERRED STOCK
The Surviving Subsidiary Certificate will provide that preferred stock of
the Surviving Subsidiary Corporation may be issued from time to time in one or
more series. The Board of Directors of the Surviving Subsidiary Corporation has
authority to fix or alter the dividend rights, dividend rates, conversion
rights, voting rights and terms of redemption (including sinking fund
provisions), redemption prices and liquidation preferences of any wholly
unissued series of preferred stock of the Surviving Subsidiary Corporation, as
well as the number of shares constituting any such unissued series and the
designation thereof, and to increase or decrease the number of shares of any
outstanding series (but not below the number of shares of such series then
outstanding), without any further vote or action by stockholders of the
Surviving Subsidiary Corporation.
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CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Upon consummation of the Merger and the transactions contemplated thereby,
there will be 5,400,000 shares of preferred stock of the Surviving Subsidiary
Corporation authorized but not designated as to any series or class, for future
issuance without additional stockholder approval. These additional shares may be
utilized for a variety of corporate purposes, including future offerings to
raise additional capital or to facilitate corporate acquisitions.
One of the effects of the existence of unissued preferred stock of the
Surviving Subsidiary Corporation may be to enable the Board of Directors of the
Surviving Subsidiary Corporation to issue shares to persons friendly to current
management which could render more difficult or discourage an attempt to obtain
control of the Surviving Subsidiary Corporation by means of a merger, tender
offer, proxy contest or otherwise, and thereby protect the continuity of
management. Such additional shares also could be used to dilute the stock
ownership of persons seeking to obtain control of the Surviving Subsidiary
Corporation.
TRANSFER AGENT
The Bank of New York will serve as the Exchange Agent and Registrar for the
Surviving Subsidiary Series A Preferred Stock and the Surviving Subsidiary
Junior Preferred Stock.
DESCRIPTION OF SURVIVING SUBSIDIARY SERIES A PREFERRED STOCK
AND 12 1/4% EXCHANGE DEBENTURES
The following summary description of the Surviving Subsidiary Series A
Preferred Stock to be issued in the Merger does not purport to be complete and
is subject to, and is qualified in its entirety by reference to the proposed
form of certificate of designation that will govern the Surviving Subsidiary
Series A Preferred Stock, a copy of which is attached to this Prospectus as
Annex C, and to the indenture governing the 12 1/4% Exchange Debentures (as
defined below), a copy of which indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
GENERAL
The Surviving Subsidiary Certificate authorizes the Surviving Subsidiary
Corporation to issue an aggregate of 10,000,000 shares of preferred stock, $.01
par value. The Surviving Subsidiary Corporation's Board of Directors has
authority to divide the preferred stock of the Surviving Subsidiary Corporation
into one or more series and has broad authority to determine the relative rights
and preferences of the shares within each series, including voting rights. At
the Subsidiary Merger Effective Time, the Surviving Subsidiary Corporation will
have authorized the issuance of 1,000,000 shares of Surviving Subsidiary Series
A Preferred Stock with an initial liquidation value of $119.444944 per share
(subject to increase in the event that the Surviving Subsidiary Series A
Preferred Stock is issued on or after November 15, 1997) and up to 3,600,000
shares of Surviving Subsidiary Junior Preferred Stock with a stated liquidation
value of $100.00 per share.
DIVIDENDS
Holders of the Surviving Subsidiary Series A Preferred Stock will be
entitled to receive, when, as and if declared by the Board of Directors of the
Surviving Subsidiary Corporation, out of funds legally available therefor,
dividends on each share of Surviving Subsidiary Series A Preferred Stock at a
rate per annum equal to 12 1/4% of the then effective liquidation preference per
share of the Surviving Subsidiary Series A Preferred Stock, payable quarterly.
If any dividend payable on any dividend payment date on or before February 15,
2001 is not declared or paid in full in cash on such dividend payment date, the
amount not paid on such dividend payment date will be added to the liquidation
preference of the Surviving Subsidiary Series A Preferred Stock on such dividend
payment date and will be deemed paid in full and will not accumulate. After
February 15, 2001, dividends may be paid only in cash out of funds legally
available therefor.
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RANKING
The Surviving Subsidiary Series A Preferred Stock ranks, with respect to
dividend rights and distribution rights on liquidation, winding-up and
dissolution (a) senior to the common stock of the Surviving Subsidiary
Corporation, to the Surviving Subsidiary Junior Preferred Stock and to each
other class of capital stock or series of preferred stock that may in the future
be established by the Board of Directors of the Surviving Subsidiary Corporation
the terms of which do not expressly provide that it ranks senior to or on a
parity with the Surviving Subsidiary Series A Preferred Stock, (b) on a parity
with each other class of capital stock or series of preferred stock that may in
the future be established by the Board of Directors of the Surviving Subsidiary
Corporation the terms of which expressly provide that such class or series will
rank on a parity with the Surviving Subsidiary Series A Preferred Stock and (c)
junior to each class of capital stock or series of preferred stock that may in
the future be established by the Board of Directors of the Surviving Subsidiary
Corporation the terms of which expressly provide that such class or series will
rank senior to the Surviving Subsidiary Series A Preferred Stock.
OPTIONAL REDEMPTION
The Surviving Subsidiary Series A Preferred Stock is redeemable (subject to
contractual and other restrictions with respect thereto, including limitations
under the EMCLA Senior Credit Facility, the CRBC 9 3/8% Indenture and the CRBC
8 3/4% Indenture, and to the legal availability of funds therefor), in whole or
in part at any time on and after February 15, 2001 at the option of the Board of
Directors of the Surviving Subsidiary Corporation, at the redemption prices
(expressed as percentages of the then effective liquidation preference thereof)
set forth below, if redeemed during the twelve-month period commencing on
February 15 of each of the years set forth below, plus accumulated and unpaid
dividends to the date of redemption:
<TABLE>
<CAPTION>
YEAR DIVIDEND
---- --------
<S> <C>
2001........................................................ 106.125%
2002........................................................ 104.900
2003........................................................ 103.675
2004........................................................ 102.450
2005........................................................ 101.225
2006 and thereafter......................................... 100.000
</TABLE>
In addition, on or prior to February 15, 1999, the Surviving Subsidiary
Corporation may, at its option, use the net cash proceeds of any Public Equity
Offering (as defined in the certificate of designation for the Surviving
Subsidiary Series A Preferred Stock) to redeem the Surviving Subsidiary Series A
Preferred Stock, in part, at a redemption price equal to 111.025% of the then
effective liquidation preference if redeemed during the twelve-month period
commencing on February 15, 1997 and 109.8% of the then effective liquidation
preference if redeemed during the twelve-month period commencing on February 15,
1998, plus, in each case, accumulated and unpaid dividends to the date of
redemption; provided, however, that after any such redemption from the proceeds
of a Public Equity Offering, the shares of Surviving Subsidiary Series A
Preferred Stock outstanding must equal at least 75% of the aggregate number of
shares of CRBC Series A Preferred Stock originally issued by CRBC; provided
further, that any such redemption must occur on or prior to 60 days after
receipt by Surviving Subsidiary Corporation of the proceeds of the Public Equity
Offering.
MANDATORY REDEMPTION
The Surviving Subsidiary Series A Preferred Stock is subject to mandatory
redemption (subject to contractual and other restrictions with respect thereto
and to the legal availability of funds therefor) in whole on February 15, 2008,
at a price equal to the then effective liquidation preference thereof, plus all
accumulated and unpaid dividends to the date of redemption.
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EXCHANGE
The Surviving Subsidiary Corporation may, at its option, subject to certain
conditions, including its ability to incur additional indebtedness under the
CRBC 9 3/8% Indenture, and the EMCLA Senior Credit Facility, on any scheduled
dividend payment date, exchange the Surviving Subsidiary Series A Preferred
Stock, in whole but not in part, for its 12 1/4% Subordinated Exchange
Debentures due 2008 (the "12 1/4% Exchange Debentures"). Holders of the
Surviving Subsidiary Series A Preferred Stock will be entitled to receive $1.00
principal amount of 12 1/4% Exchange Debentures for each $1.00 in liquidation
preference of Surviving Subsidiary Series A Preferred Stock including, to the
extent necessary, 12 1/4% Exchange Debentures in principal amounts of less than
$1,000.
The 12 1/4% Exchange Debentures, if issued, will be issued under an
indenture (the "12 1/4% Exchange Indenture") between CRBC and U.S. Trust Company
of Texas, N.A., as Trustee (the "12 1/4% Exchange Debenture Trustee"), which
indenture will be assumed by the Surviving Subsidiary Corporation upon
consummation of the Subsidiary Merger. The 12 1/4% Exchange Debentures will be
unsecured obligations of the Surviving Subsidiary Corporation, ranking
subordinate in right of payment to all senior indebtedness of the Surviving
Subsidiary Corporation, including the CRBC 9 3/8% Notes, the CRBC 8 3/4% Notes
and the indebtedness under the EMCLA Senior Credit Facility. Interest on the
12 1/4% Exchange Debentures will accrue at the same rate per annum as the stated
dividend rate on the Surviving Subsidiary Series A Preferred Stock. The 12 1/4%
Exchange Debentures will be redeemable, at the Surviving Subsidiary
Corporation's option, in whole at any time or in part from time to time, after
an initial period, at redemption prices equivalent to those relating to the
optional redemption of the Surviving Subsidiary Series A Preferred Stock. The
12 1/4% Exchange Indenture provides that upon the occurrence of a change of
control of the Surviving Subsidiary Corporation (as defined therein), each
holder will have the right to require that the Surviving Subsidiary Corporation
repurchase all or a portion of such holder's 12 1/4% Exchange Debentures at a
purchase price equal to 101% of the principal amount thereof plus accrued
interest, if any, to the date of repurchase. The 12 1/4% Exchange Indenture
contains certain customary covenants for securities comparable to the 12 1/4%
Exchange Debentures, including covenants restricting the incurrence of
additional indebtedness, the issuance of subsidiary preferred stock, the making
of certain restricted payments, the creation of dividend and other payment
restrictions affecting subsidiaries, certain transactions with affiliates, and
the lines of business in which the Surviving Subsidiary Corporation and its
subsidiaries may be engaged.
VOTING RIGHTS
Holders of the Surviving Subsidiary Series A Preferred Stock have no voting
rights except as otherwise required by law; provided that Surviving Subsidiary
Corporation may not authorize any class of capital stock that ranks senior to or
on a parity with the Surviving Subsidiary Series A Preferred Stock and may not,
subject to certain exceptions, effect a merger or sale of substantially all of
its assets, without the affirmative vote of holders of at least a majority of
the shares of Surviving Subsidiary Series A Preferred Stock then outstanding
voting or consenting, as the case may be, as one class and, provided further,
that the holders of Surviving Subsidiary Series A Preferred Stock, voting
together as a single class, shall have the right to elect the lesser of two
directors and that number of directors constituting 25% of the Board of
Directors of Surviving Subsidiary Corporation upon the occurrence of certain
events including, but not limited to, the failure by Surviving Subsidiary
Corporation on or after February 15, 2001 to pay cash dividends in full on the
Surviving Subsidiary Series A Preferred Stock for six or more quarterly dividend
periods, whether or not consecutive, the failure by Surviving Subsidiary
Corporation to discharge any mandatory redemption or repayment obligation with
respect to the Surviving Subsidiary Series A Preferred Stock, the failure by
Surviving Subsidiary Corporation to make a Change of Control Offer (as defined
in the Certificate of Designation for the Surviving Subsidiary Series A
Preferred Stock), the breach or violation of one or more of the covenants
contained in the certificate of designation for the Surviving Subsidiary Series
A Preferred Stock or the failure Surviving Subsidiary Corporation to repay at
final stated maturity, or the acceleration of the final stated maturity of
certain indebtedness of the Company (including indebtedness under the EMCLA
Senior Credit Facility, the CRBC 9 3/8% Notes and the CRBC 8 3/4% Notes).
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CHANGE OF CONTROL
The certificate of designation for the Surviving Subsidiary Series A
Preferred Stock provides that, upon the occurrence of a Change of Control (as
defined below), each holder will have the right to require that Surviving
Subsidiary Corporation repurchase all or a portion of such holder's Surviving
Subsidiary Series A Preferred Stock in cash at a purchase price equal to 101% of
the then current effective liquidation preference thereof, plus an amount in
cash equal to all accumulated and unpaid dividends per share to the date of
repurchase. If the repurchase of the Surviving Subsidiary Series A Preferred
Stock would violate or constitute a default under the EMCLA Senior Credit
Facility, the CRBC 9 3/8% Indenture, or other indebtedness of Surviving
Subsidiary Corporation, then pursuant to the certificate of designation for the
Surviving Subsidiary Series A Preferred Stock, the Surviving Subsidiary
Corporation will either (A) repay in full all such indebtedness and terminate
all commitments outstanding under the EMCLA Senior Credit Facility or (B) obtain
the requisite consents, if any, under the EMCLA Senior Credit Facility, the CRBC
9 3/8% Indenture, or such other indebtedness required to permit the repurchase
of Surviving Subsidiary Series A Preferred Stock. Consummation of the Subsidiary
Merger will not constitute a Change of Control for purposes of the foregoing. In
an offer by the Surviving Subsidiary Corporation to repurchase the Surviving
Subsidiary Series A Preferred Stock at the holder's option upon a Change of
Control, the Surviving Subsidiary Corporation will comply with Section 14(e) of
the Exchange Act and the rules and regulations promulgated thereunder, as then
in effect.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
series of related transactions) of all or substantially all of the assets of the
Surviving Subsidiary Corporation to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group"), other than to Hicks
Muse or any of its affiliates, officers and directors or to Steven Dinetz (the
"Permitted Holders"); or (ii) a majority of the Board of Directors of the
Surviving Corporation, the Surviving Mezzanine Corporation or the Surviving
Subsidiary Corporation shall consist of Persons who are not Continuing Directors
(as defined below); or (iii) the acquisition by any Person or Group (other than
the Permitted Holders) of the power, directly or indirectly, to vote or direct
the voting of securities having more than 50% of the ordinary voting power for
the election of directors of the Surviving Corporation, the Surviving Mezzanine
Corporation or the Surviving Subsidiary Corporation.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the Board of Directors of CRBC on the date of initial
issuance of the CRBC Series A Preferred Stock, (ii) was nominated for election
or elected to the Board of Directors of the Surviving Subsidiary Corporation
with the affirmative vote of a majority of the Continuing Directors who were
members of such Board of Directors at the time of such nomination or election,
or (iii) is a representative of a Permitted Holder.
With respect to the sale of "all or substantially all" of the assets of the
Surviving Subsidiary Corporation, which would constitute a Change of Control for
purposes of the certificate of designation for the Surviving Subsidiary Series A
Preferred Stock, the meaning of the phrase "all or substantially all" varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Surviving
Subsidiary Corporation and, therefore, it may be unclear whether a Change of
Control has occurred and whether the Surviving Subsidiary Series A Preferred
Stock is subject to a Change of Control Offer.
CERTAIN COVENANTS
The certificate of designation for the Surviving Subsidiary Series A
Preferred Stock contains covenants customary for securities comparable to the
Surviving Subsidiary Series A Preferred Stock, including covenants that restrict
the ability of Surviving Subsidiary Corporation and its subsidiaries to incur
additional indebtedness, pay dividends and make certain other restricted
payments, and merge or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially of the
assets of Surviving Subsidiary Corporation.
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DESCRIPTION OF SURVIVING SUBSIDIARY JUNIOR PREFERRED STOCK AND 12% EXCHANGE
DEBENTURES
The following summary description of the Surviving Subsidiary Junior
Preferred Stock to be issued in the Merger does not purport to be complete and
is subject to, and is qualified in its entirety by reference to the proposed
form of certificate of designation that will govern the Surviving Subsidiary
Junior Preferred Stock, a copy of which is attached to the Prospectus as Annex D
and to the indenture governing the 12% Exchange Debentures (as defined below), a
copy of which indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
GENERAL
At the Subsidiary Merger Effective Time, the Surviving Subsidiary
Corporation will have authorized the issuance of 1,000,000 shares of Surviving
Subsidiary Series A Preferred Stock with an initial liquidation value of
$119.444944 per share, and up to 3,600,000 shares of Surviving Subsidiary Junior
Preferred Stock with stated liquidation value of $100.00 per share.
DIVIDENDS
Holders of the Surviving Subsidiary Junior Preferred Stock will be entitled
to receive, when, as and if declared by the Board of Directors of the Surviving
Subsidiary Corporation, out of funds legally available therefor, dividends on
each share of Surviving Subsidiary Junior Preferred Stock at a rate per annum
equal to 12% of the then effective liquidation preference per share of the
Surviving Subsidiary Junior Preferred Stock, payable semi-annually. Dividends
payable on January 15, 1998 (the first dividend payment date following the
Merger) will also include Additional Dividends owed by CRBC in connection with
its obligations under the CRBC Registration Rights Agreement. See "The
Merger -- Resale of Surviving Subsidiary Series A Preferred Stock and Surviving
Subsidiary Junior Preferred Stock." All dividends on the Surviving Subsidiary
Junior Preferred Stock are cumulative. The Surviving Subsidiary Corporation, at
its option, may pay dividends on any dividend payment date occurring on or
before January 15, 2002 either in cash or in additional shares of Surviving
Subsidiary Junior Preferred Stock. After January 15, 2002, dividends may be paid
only in cash out of funds legally available therefor.
RANKING
The Surviving Subsidiary Junior Preferred Stock ranks with respect to
dividend rights and rights on liquidation, winding-up and dissolution, (a)
senior to the common stock of the Surviving Subsidiary Corporation and to each
other class of capital stock or series of preferred stock that may in the future
be established by the Board of Directors of the Surviving Subsidiary Corporation
the terms of which expressly provide that it ranks junior to or on a parity with
the Surviving Subsidiary Junior Preferred Stock, (b) on a parity with each other
class of capital stock or series of preferred stock that may in the future be
established by the Board of Directors of the Surviving Subsidiary Corporation
the terms of which expressly provide that such class or series will rank on a
parity with the Surviving Subsidiary Junior Preferred Stock and (c) junior to
the Surviving Corporation Series A Preferred Stock and to each class of capital
stock or series of preferred stock that may in the future be established by the
Board of Directors of the Surviving Subsidiary Corporation the terms of which do
not expressly provide that such class or series will rank junior to the
Surviving Corporation Series A Preferred Stock.
OPTIONAL REDEMPTION
The Surviving Subsidiary Junior Preferred Stock is redeemable (subject to
contractual and other restrictions with respect thereto, including limitations
under the EMCLA Senior Credit Facility and the CRBC 9 3/8% Indenture, the CRBC
8 3/4% Indenture and to the legal availability of funds therefor), in whole or
in part at any time on or after January 15, 2002 at the option of the Surviving
Subsidiary Corporation, at the redemption prices (expressed as percentages of
the then effective liquidation preference thereof) set forth
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<PAGE> 91
below, if redeemed during the twelve-month period commencing on January 15 of
each of the years set forth below, plus accumulated and unpaid dividends to the
date of redemption:
<TABLE>
<CAPTION>
YEAR DIVIDEND
---- --------
<S> <C>
2002........................................................ 106.00%
2003........................................................ 104.80%
2004........................................................ 103.60%
2005........................................................ 102.40%
2006........................................................ 101.20%
2007 and thereafter......................................... 100.00%
</TABLE>
In addition, on or prior to January 15, 2000, the Surviving Subsidiary
Corporation may, at its option, use the net cash proceeds of any Public Equity
Offering (as defined in the certificate of designation for the Surviving
Subsidiary Junior Preferred Stock) to redeem the Surviving Subsidiary Junior
Preferred Stock, in part, at a redemption price equal to 112% of the then
effective liquidation preference, plus, in each case, accumulated and unpaid
dividends to the date of redemption; provided, however, that after any such
redemption from the proceeds of a Public Equity Offering, there must be at least
$150.0 million aggregate liquidation preference of Surviving Subsidiary Junior
Preferred Stock outstanding; provided further, that any such redemption must
occur on or prior to 60 days after receipt by the Surviving Subsidiary
Corporation of the proceeds of the Public Equity Offering.
The Surviving Subsidiary Corporation may, at its option upon the occurrence
of a Change of Control (as defined below), redeem the Surviving Subsidiary
Junior Preferred Stock in whole but not in part at a redemption price equal to
112% of the liquidation preference thereof, together with accrued and unpaid
dividends to the date of redemption. See "-- Change of Control."
MANDATORY REDEMPTION
The Surviving Subsidiary Junior Preferred Stock is also be subject to
mandatory redemption (subject to contractual and other restrictions with respect
thereto and to the legal availability of funds therefor) in whole on January 15,
2009 at a price equal to the then effective liquidation preference thereof, plus
all accumulated and unpaid dividends to the date of redemption.
EXCHANGE
The Surviving Subsidiary Corporation may, at its option, subject to certain
conditions, including its ability to incur additional indebtedness under the
CRBC 9 3/8% Indenture, and the EMCLA Senior Credit Facility, on any scheduled
dividend payment date, exchange the Surviving Subsidiary Junior Preferred Stock,
in whole but not in part, for its 12% Subordinated Exchange Debentures due 2009
(the "12% Exchange Debentures"). Holders of the Surviving Subsidiary Junior
Preferred Stock will be entitled to receive $1.00 principal amount of 12%
Exchange Debentures for each $1.00 in liquidation preference of Surviving
Subsidiary Junior Preferred Stock including, to the extent necessary, Surviving
Subsidiary 12% Exchange Debentures in principal amounts of less than $1,000.
The 12% Exchange Debentures, if issued, will be issued under an indenture
(the "12% Exchange Indenture") between CRBC and U.S. Trust Company of Texas,
N.A., as Trustee (the "12% Exchange Debenture Trustee"), which indenture will be
assumed by the Surviving Subsidiary Corporation upon consummation of the
Subsidiary Merger. The 12% Exchange Debentures will be unsecured obligations of
the Surviving Subsidiary Corporation, ranking subordinate in right of payment to
all senior indebtedness of the Surviving Subsidiary Corporation, including the
CRBC 9 3/8% Notes, the CRBC 8 3/4% Notes and the indebtedness under the EMCLA
Senior Credit Facility. Interest on the 12% Exchange Debentures will accrue at
the same rate per annum as the stated dividend rate on the Surviving Subsidiary
Junior Preferred Stock. The 12% Exchange Debentures will be redeemable, at the
Surviving Subsidiary Corporation's option, in whole at any time or in part from
time to time, after an initial period, at redemption prices equivalent to those
relating to the optional redemption of the Surviving Subsidiary Junior Preferred
Stock. The 12% Exchange
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<PAGE> 92
Indenture provides that upon the occurrence of a change of control (as defined
therein) of the Surviving Subsidiary Corporation, each holder will have the
right to require that the Surviving Subsidiary Corporation repurchase all or a
portion of such holder's 12% Exchange Debentures at a purchase price equal to
101% of the principal amount thereof plus accrued interest, if any, to the date
of repurchase. The 12% Exchange Indenture contains certain customary covenants
for securities comparable to the 12% Exchange Debentures, including covenants
restricting the incurrence of additional indebtedness, the issuance of
subsidiary preferred stock, the making of certain restricted payment, the
creation of dividend and other repayment restrictions affecting subsidiaries,
certain transactions with affiliates, and the lines of business in which the
Surviving Subsidiary Corporation and its subsidiaries may be engaged.
VOTING RIGHTS
Holders of the Surviving Subsidiary Junior Preferred Stock will have no
voting rights except as otherwise required by law; provided that the Surviving
Subsidiary Corporation may not authorize any class of capital stock that is
senior to or on a parity with the Surviving Subsidiary Junior Preferred Stock
(subject to an exception for the authorization of up to $50.0 million initial
liquidation preference of Parity Stock) and may not, subject to certain
exceptions, effect a merger or sale of substantially all of its assets, without
the affirmative vote of holders of at least a majority of the shares of
Surviving Subsidiary Junior Preferred Stock then outstanding voting or
consenting, as the case may be, as one class and, provided further, that the
holders of Surviving Subsidiary Junior Preferred Stock, voting together as a
single class, shall have the right to elect the lesser of two directors or that
number of directors constituting 25% of the members of the Board of Directors of
the Surviving Subsidiary Corporation upon the occurrence of certain events
including, but not limited to, the failure by the Surviving Subsidiary
Corporation on or after January 15, 2002 to pay cash dividends in full on the
Surviving Subsidiary Junior Preferred Stock for three or more quarterly dividend
periods, whether or not consecutive, the failure by the Surviving Subsidiary
Corporation to discharge any mandatory redemption or repayment obligation with
respect to the Surviving Subsidiary Junior Preferred Stock, the failure by the
Company to make a Change of Control Offer (as defined in the certificate of
designation for the Surviving Subsidiary Junior Preferred Stock), the breach or
violation of one or more of the covenants contained in the certificate of
designation for the Surviving Subsidiary Junior Preferred Stock or the failure
by the Surviving Subsidiary Corporation to repay at final stated maturity, or
the acceleration of the first stated maturity of certain indebtedness of the
Surviving Subsidiary Corporation, whether or not consecutive, (including
indebtedness under the EMCLA Senior Credit Facility, the CRBC 9 3/8% Notes and
the CRBC 8 3/4% Notes).
CHANGE OF CONTROL
The certificate for designation for the Surviving Subsidiary Junior
Preferred Stock will provide that, upon the occurrence of a Change of Control
(which is defined identically to the definition of "Change of Control"
applicable to the Surviving Subsidiary Series A Preferred Stock), each holder
will have the right to require that the Surviving Subsidiary Corporation
repurchase all or a portion of such holder's Surviving Subsidiary Junior
Preferred Stock in cash at a purchase price equal to 101% of the then current
effective liquidation preference thereof, plus an amount in cash equal to all
accumulated and unpaid dividends per share to the date of repurchase. If the
repurchase of the Surviving Subsidiary Junior Preferred Stock would violate or
constitute a default under the certificate of designation for the Surviving
Subsidiary Series A Preferred Stock, the EMCLA Senior Credit Facility, the CRBC
9 3/8% Indenture, or other indebtedness of the Surviving Subsidiary Corporation,
then pursuant to the certificate of designation for the Surviving Subsidiary
Junior Preferred Stock, the Surviving Subsidiary Corporation will either (A)
repay in full all such indebtedness and terminate all commitments outstanding
under the EMCLA Senior Credit Facility or (B) obtain the requisite consents, if
any, under the EMCLA Senior Credit Facility, the CRBC 9 3/8% Indenture, or such
other indebtedness required to permit the repurchase of the Surviving Subsidiary
Corporation Preferred Stock. Consummation of the Subsidiary Merger will not
constitute a Change of Control for purposes of the foregoing. In an offer by the
Surviving Subsidiary Corporation to repurchase the Surviving Subsidiary Junior
Preferred Stock at the holder's option upon a Change of Control, the Surviving
Subsidiary Corporation will comply with Section 14(e) of the Exchange Act and
the rules and regulations promulgated thereunder, as then in effect.
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<PAGE> 93
CERTAIN COVENANTS
The certificate of designation of the Surviving Subsidiary Junior Preferred
Stock contains covenants customary for securities comparable to the Surviving
Subsidiary Junior Preferred Stock, including covenants that restrict the ability
of the Surviving Subsidiary Corporation and its subsidiaries to incur additional
indebtedness, pay dividends and make certain other restricted payments, and
merge or consolidate with any other person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially of the assets of the
Surviving Subsidiary Corporation.
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<PAGE> 94
MANAGEMENT AFTER THE MERGER
BOARD OF DIRECTORS
At the Subsidiary Merger Effective Time, the Board of Directors of the
Surviving Subsidiary Corporation shall comprise eleven directors. The directors
of the Surviving Subsidiary Corporation at the Subsidiary Merger Effective Time
will be as set forth above in "-- The Merger Agreement -- Directors and
Officers." Each Surviving Subsidiary Corporation director will hold office from
the Subsidiary Merger Effective Time until the following annual meeting of
shareholders of the Surviving Subsidiary Corporation.
EXECUTIVE OFFICERS
The initial executive officers of the Surviving Subsidiary Corporation at
the Subsidiary Merger Effective Time will be as set forth above in "-- The
Merger Agreement -- Directors and Officers."
SURVIVING SUBSIDIARY CORPORATION BOARD OF DIRECTORS
<TABLE>
<CAPTION>
<S> <C>
Thomas O. Hicks Mr. Hicks was elected Chairman of the Board and a
Chairman of the Board director of Chancellor and CRBC in April 1996. Mr.
Age: 51 Hicks is Chairman of the Board and Chief Executive
Officer of Hicks Muse, a private investment firm
located in Dallas, St. Louis, New York and Mexico
City specializing in strategic investments, leveraged
acquisitions and recapitalizations. From 1984 to May
1989, Mr. Hicks was Co-Chairman of the Board and Co-
Chief Executive Officer of Hicks & Haas,
Incorporated, a Dallas based private investment firm.
Mr. Hicks serves as a director of Sybron
International Corporation, Inc., Berg Electronics
Corp., Neodata Corporation, D.A.C. Vision, Inc. and
Olympus Real Estate Corporation.
Scott K. Ginsburg Mr. Ginsburg has been Chairman of the Board of
Chief Executive Officer Evergreen since 1990. He has been Chief Executive
Age: 44 Officer and a director of Evergreen since 1988. Mr.
Ginsburg was President of Evergreen from 1988 to 1993
and held various positions with H&G Communications,
Inc. from 1987 to 1988. Mr. Ginsburg entered the
radio broadcasting business in 1983.
</TABLE>
90
<PAGE> 95
<TABLE>
<CAPTION>
<S> <C>
James E. de Castro Mr. de Castro has been President of Evergreen since
Co-Chief Operating Officer 1993 and Chief Operating Officer and a director since
Age: 44 1989. From 1987 to 1988, Mr. de Castro held various
positions with H&G Communications, Inc. and
predecessor entities. From 1981 to 1989 Mr. de Castro
was general manager of radio stations WLUP-FM and
WLUP-AM (now known as WMVP-AM) in Chicago, and from
1989 to 1992 Mr. de Castro was general manager of
radio station KKBT-FM in Los Angeles.
Steven Dinetz Mr. Dinetz has served as President, Chief Executive
Co-Chief Operating Officer Officer and a Director of Chancellor and CRBC since
Age: 50 its formation and prior thereto was the President and
Chief Executive Officer and a Director of Chancellor
Communications, a predecessor entity of Chancellor.
Prior to joining Chancellor Communications, Mr.
Dinetz served as a radio broadcasting consultant and,
from October 1988 to January 1993, as the President
and Chief Executive Officer of D&D Broadcasting,
which Mr. Dinetz formed to acquire KOSI-FM and
KEZW-AM in Denver, Colorado from Group W
Broadcasting, Inc. in a leveraged acquisition. Mr.
Dinetz has more than 20 years experience in the radio
broadcasting industry and has previously managed 14
radio stations throughout the United States,
including stations in top 40 radio markets such as
New York City, Miami-Fort Lauderdale, Dallas-Fort
Worth, and Denver.
Thomas J. Hodson In 1994, Mr. Hodson became President of Columbia
Age: 53 Falls Aluminum Company. He had been a Vice President
of Stephens Inc. from 1986 through 1993. Mr. Hodson
has been a director of Evergreen since 1992.
Perry J. Lewis Mr. Lewis was the Chairman of Broadcasting Partners,
Age: 59 Inc. ("BPI") from its inception in 1988 until its
merger with Evergreen in 1995 and was Chief Executive
Officer of BPI from 1993 to 1995. Mr. Lewis has been
a director of Evergreen since Evergreen acquired BPI
in 1995. Mr. Lewis is a founder of Morgan, Lewis,
Githens & Ahn, an investment banking and leveraged
buyout firm which was established in 1982. Mr. Lewis
serves as a director of Aon Corporation, ITI
Technologies, Inc., Gradall Industries, Inc. and
Stuart Entertainment, Inc.
</TABLE>
91
<PAGE> 96
<TABLE>
<CAPTION>
<S> <C>
Jeffrey A. Marcus Mr. Marcus currently serves as the Chairman and Chief
Age: 50 Executive Officer of Marcus Cable Company, the ninth
largest cable television multiple system operator
(MSO) in the United States which serves over 1.2
million customers and which Mr. Marcus formed in
1990. Until November 1988, Mr. Marcus served as
Chairman and Chief Executive Officer of WestMarc
Communications, Inc., an MSO formed through the
merger in 1987 of Marcus Communications, Inc. and
Western TeleCommunications, Inc. Mr. Marcus has more
than 29 years experience in the cable television
business. Mr. Marcus is a co-owner of the Texas
Rangers Baseball Club and serves as a director or
trustee of several charitable and civic
organizations.
John H. Massey Until August 2, 1996, Mr. Massey served as the
Age: 57 Chairman of the Board and Chief Executive Officer of
Life Partners Group, Inc., an insurance holding
company, having assumed those offices in October
1994. Prior to joining Life Partners, he served,
since 1992, as the Chairman of the Board of, and
currently serves as a director of, FSW Holdings,
Inc., a regional investment banking firm. Since 1986,
Mr. Massey has served as a director of Gulf-
California Broadcast Company, a private holding
company that was sold in May 1996. From 1986 to 1992,
he also was President of Gulf-California Broadcast
Company. From 1976 to 1986, Mr. Massey was President
of Gulf Broadcast Company, which owned and operated 6
television stations and 11 radio stations in major
markets in the United States. Mr. Massey currently
serves as a director of Central Texas Bankshare
Holdings, Inc., Hill Bank and Trust Co., Hill
Bancshares Holdings, Inc., Bank of The Southwest of
Dallas, Texas, Columbus State Bank, Columbine JDS
Systems, Inc. and The Paragon Group, Inc.
Eric. C. Neuman Mr. Neuman became a director of Chancellor and CRBC
Age: 52 in April 1996. Since May 1993, Mr. Neuman has been an
officer of Hicks Muse and is currently serving as
Senior Vice President. From 1985 to 1993, Mr. Neuman
was a Managing General Partner of Communications
Partners, Ltd., a private investment firm
specializing in media and communications businesses.
</TABLE>
92
<PAGE> 97
<TABLE>
<CAPTION>
<S> <C>
Lawrence D. Stuart, Jr. Mr. Stuart became a director of Chancellor and CRBC
Age: 52 in January 1997. Since October 1995, Mr. Stuart has
served as a Managing Director and Principal of Hicks
Muse. Prior to joining Hicks Muse, from 1990 to 1995
he served as the managing partner of the Dallas
office of the law firm Weil, Gotshal & Manges LLP.
</TABLE>
COMPENSATION OF DIRECTORS
EMCLA
Directors of EMCLA who are also directors of Evergreen receive no separate
compensation for their services as directors of EMCLA. Directors of Evergreen
who are also officers of Evergreen receive no additional compensation for their
services as directors. Effective for the 1997 fiscal year, directors of
Evergreen who are not officers will receive (i) a fee of $12,000 per annum, (ii)
a $1,000 fee for attendance at meetings or, if applicable, a $500 fee for
attendance at meetings by telephone, (iii) a $500 fee for attendance at a
committee meeting held on the same day as a regularly scheduled meeting and (iv)
a $750 fee for attendance at a committee meeting held on a day other than a
regularly scheduled meeting day. Directors of Evergreen are also reimbursed for
travel expenses and other out-of-pocket costs incurred in connection with such
meetings. Additionally, all non-employee directors of Evergreen in office on the
day of Evergreen's Annual Meeting are entitled to an award of options to
purchase 7,500 shares of Evergreen Class A Common Stock at an exercise price
equal to the fair market value of such shares on the date of grant.
CRBC
Beginning in 1997, the non-employee directors of Chancellor (other than
Messrs. Hicks, Stuart and Neuman) receive an annual retainer of $25,000 for
serving as directors of Chancellor and its subsidiaries. Non-employee directors
also receive attendance fees of $1,000 ($500 in the case of telephonic meetings)
for each meeting which they attend. Directors who are officers or employees of
Chancellor or the Company are not presently expected to receive compensation for
their services as directors. Directors of Chancellor are entitled to
reimbursement of their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the Board of Directors or
committees thereof.
Each of Messrs. Marcus and Massey has been granted fully vested options to
purchase up to 13,333 shares of Chancellor Class A Common Stock at an exercise
price of $7.50 per share. These options will expire on October 12, 2004, unless
exercised prior to that date.
COMPENSATION OF EXECUTIVE OFFICERS
EMCLA
The services of EMCLA's executive officers are rendered by individuals who
are also executive officers of Evergreen, and such individuals receive no
additional compensation for the services rendered to EMCLA. The following table
sets forth all compensation, including bonuses, stock option awards and other
payments, paid or accrued by Evergreen for the three fiscal years ending
December 31, 1996, to the individuals serving as Evergreen's Chief Executive
Officer and each of Evergreen's other executive officers serving in such
capacity at the end of the last completed fiscal year whose total annual salary
and bonus exceeded $100,000 during the fiscal year ended December 31, 1996. Each
of these individuals has been and continues to be an employee of Evergreen, and
the compensation amounts in the following tables represent all compensation paid
to each such individual in connection with his or her position with Evergreen
and its subsidiaries taken as a whole.
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<PAGE> 98
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION --------------------------------------
-------------------------------------- SECURITIES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) STOCK AWARDS OPTIONS PAYOUTS COMPENSATION
------------------ ---- -------- -------- --------------- ------------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scott K. Ginsburg.... 1996 $750,000 $956,000 -- -- 187,500 -- $9,776(2)
Chairman and Chief 1995 650,000 -- -- -- -- -- 7,663(2)
Executive Officer 1994 574,000 50,000 -- -- -- 11,020(2)
James E. de Castro... 1996 $750,000 $704,000 -- -- 37,500 -- $2,455(2)
President and Chief 1995 650,000 125,000 -- -- 150,000 -- 2,455(2)
Operating Officer 1994 500,000 50,000 -- -- 75,000 -- 27,455(3)
Matthew E. Devine.... 1996 $300,000 $352,000 -- -- 18,750 -- --
Executive Vice 1995 275,000 63,000 -- -- 75,000 -- --
President, Chief 1994 194,000 25,000 -- -- 75,000 -- --
Financial Officer,
and
Treasurer
Kenneth J. O'Keefe... 1996 $250,000(4) $210,000 -- -- 150,000 -- --
Executive Vice 1995 -- -- -- -- -- -- --
President Operations 1994 -- -- -- -- -- -- --
</TABLE>
- ---------------
(1) The aggregate annual amount of prerequisites and other personal benefits,
securities or property does not exceed $50,000 or 10% of the total of the
annual salary and bonus for the named officer.
(2) Payment of term life insurance policy.
(3) Includes payment of a term life insurance policy and payments to Mr. de
Castro as compensation to offset increased costs and other expenses
associated with Mr. de Castro's temporary relocation to Los Angeles,
California, undertaken at the request of Evergreen. These amounts were
$2,455 and $25,000, respectively.
(4) Represents compensation for the period beginning March 1, 1996, when Mr.
O'Keefe joined Evergreen.
CRBC
The following table sets forth all compensation, including bonuses, stock
option awards and other payments, paid or accrued by CRBC for the fiscal years
ended December 31, 1996, 1995 and 1994, to or for the CRBC's Chief Executive
Officer and CRBC's other four most highly compensated executive officers (the
"CRBC Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- AWARDS
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OTHER($) OPTIONS(#)(1)
--------------------------- ---- --------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Steven Dinetz........................... 1996 470,283 500,000 4,235 75,000
President, Chief Executive Officer and
Director 1995 250,000 90,000 3,785 --
1994 218,117 90,000 -- 863,319(2)
George C. Toulas........................ 1996 360,070 187,500 5,718 50,000
Senior Executive Vice President and 1995 250,000 55,000 5,518 --
Regional Manager(3) 1994 54,167 15,109 -- --
Rick Eytcheson.......................... 1996 337,736 162,500 5,207 30,000
Executive Vice President and 1995 243,000 95,616 3,547 --
Regional Manager 1994 195,000 64,739 -- --
Samuel L. Weller........................ 1996 294,003 320,320 64,732 30,000
Executive Vice President and
Regional Manager(4)
Jacques Kerrest......................... 1996 225,000 175,000 8,598 35,000
Senior Vice President and
Chief Financial Officer(5)
</TABLE>
94
<PAGE> 99
- ---------------
(1) Represents stock options to purchase shares of the Class A Common Stock of
Chancellor.
(2) Gives effect to the reclassification of Chancellor's Class A Common Stock on
a 1-for-6 basis immediately prior to the consummation of Chancellor's
initial public offering (the "Chancellor Initial Public Offering").
(3) For 1994, represents compensation for the period beginning October 12, 1994,
when Mr. Toulas joined CRBC, to December 31, 1994.
(4) Represents compensation for the period beginning February 1, 1996, when Mr.
Weller joined CRBC.
(5) Mr. Kerrest resigned his position with Chancellor and CRBC in July 1997.
Option Grants in Last Fiscal Year. The following table sets forth
information regarding options to purchase Evergreen Class A Common Stock granted
by Evergreen to its Chief Executive Officer and the other executive officers
named in the Summary Compensation Table during the 1996 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE
---------------------------------------------- --------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO GRANT DATE
GRANTED EMPLOYEES IN EXERCISE OR BASE PRESENT VALUE
NAME (#)(1)(2) FISCAL YEAR PRICE ($/SHARE) EXPIRATION DATE ($)(4)
---- ---------- ------------ ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Scott K. Ginsburg........ 150,000 25.5% $21.33(2) 12/31/05 $1,792,500
37,500 6.4% 24.50(3) 12/31/05 478,125
James E. de Castro....... 37,500 6.4% 24.50(3) 12/31/04 436,875
Matthew E. Devine........ 18,750 3.2% 24.50(3) 12/31/04 218,438
Kenneth J. O'Keefe....... 150,000 25.5% 21.33(2) 03/01/06 1,545,000
</TABLE>
- ---------------
(1) Represents options to purchase shares of Evergreen Class A Common Stock
granted under Evergreen's 1995 Stock Option Plan for Executive Officers and
Key Employees (the "1995 Stock Option Plan"). The options awarded to Mr.
Ginsburg are exercisable in whole or part beginning on January 1, 2001, and
expire on December 31, 2005. The options awarded to Mr. de Castro and Mr.
Devine are exercisable in whole or part beginning January 1, 2000, and
expire on December 31, 2004. The options awarded to Mr. O'Keefe are
exercisable in whole or part beginning February 28, 1999, and expire on
March 1, 2006. The Compensation Committee of Evergreen under certain
circumstances has the discretion to accelerate the exercisability of the
options in connection with the occurrence of a change in control of
Evergreen. The options may expire earlier upon the occurrence of certain
merger or consolidation transactions involving Evergreen. Evergreen is not
required to issue and deliver any certificate for shares of Evergreen Class
A Common Stock purchased upon exercise of the option or any portion thereof
prior to fulfillment of certain conditions, including the completion of
registration or qualification of such shares of Evergreen Class A Common
Stock under federal or state securities laws and the payment to Evergreen of
all amounts required to be withheld upon exercise of the options under any
federal, state or local tax law. The holder of an option has no rights or
privileges of a stockholder in respect of any shares of Evergreen Class A
Common Stock purchasable upon exercise of the options unless and until
certificates representing such shares shall have been issued by Evergreen to
such holder. Once exercisable, the options are exercisable by the holder or,
upon the death of such holder, by his personal representatives or by any
person empowered to do so under such holder's will or under the applicable
laws of descent and distribution. The options are not transferable except by
will or by the applicable laws of descent and distribution.
(2) Represents the estimated fair value of Evergreen Class A Common Stock on
December 29, 1995, the last trading day before December 31, 1995, the date
of the grant.
(3) Represents the estimated fair value of Evergreen Class A Common Stock on
December 30, 1996, the last trading day before December 31, 1996, the date
of the grant.
(4) The present value of each grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: dividend yield of 0% for all years; expected volatility of
44.5%; risk-free interest rate of 6.0% and expected life of seven years.
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<PAGE> 100
The following table shows individual grants of stock options of Chancellor
issued to its Chief Executive Officer and other CRBC Named Executive Officers
during the fiscal year ended December 31, 1996.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR(%) ($/SH) DATE 5%($) 10%($)
---- ---------- -------------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Steven Dinetz........................... 75,000 10.6 $20.00 2/9/06 943,342 2,390,614
George C. Toulas........................ 40,000 5.7 $20.00 2/9/06 503,116 1,274,994
10,000 1.4 $36.75 10/22/06 231,119 585,700
Rick Eytcheson.......................... 25,000 3.5 $20.00 2/9/06 314,447 796,871
5,000 0.7 $36.75 10/22/06 115,559 292,850
Samuel L. Weller........................ 15,000 2.1 $20.00 2/9/06 188,668 478,123
7,500 1.1 $31.00 7/23/06 146,218 370,545
7,500 1.1 $36.75 10/22/06 173,339 439,275
Jacques Kerrest......................... 25,000 3.5 $20.00 2/9/06 314,447 796,871
5,000 0.7 $31.00 7/23/06 97,479 247,030
5,000 0.7 $36.75 10/22/06 115,559 292,850
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and Year-End Values The
following table sets forth information concerning option exercises in the year
ended December 31, 1996 by Evergreen's Chief Executive Officer and the other
executive officers named in the Summary Compensation Table, and the value of
each such executive officer's unexercised options at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott K. Ginsburg.......... -- -- -- 187,500 -- 475,500
James E. de Castro......... 15,000 418,050 547,500 187,500 12,608,775 475,500
Matthew E. Devine.......... -- -- 150,000 93,750 2,874,000 237,750
Kenneth J. O'Keefe......... -- -- -- 150,000 -- 475,500
</TABLE>
- ---------------
(1) Based upon a per share price for Evergreen Class A Common Stock of $24.50.
This price represents the closing price for the Evergreen Class A Common
Stock on The Nasdaq Stock Market on December 30, 1996.
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<PAGE> 101
The following table shows the value, as of December 31, 1996 of stock
options of Chancellor held by its Chief Executive Officer and other CRBC Named
Executive Officers. No stock options were exercised during the year ended
December 31, 1996.
1996 FISCAL YEAR END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END AT FISCAL YEAR-END
# ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
<S> <C> <C>
Steven Dinetz........................... 345,326/592,992 5,476,274/8,495,707
George C. Toulas........................ 0/50,000 0/150,000
Rick Eytcheson.......................... 0/30,000 0/93,750
Samuel L. Weller........................ 0/30,000 0/56,250
Jacques Kerrest......................... 0/35,000 0/93,750
</TABLE>
- ---------------
(1) Assuming a fair market value of $23.75 per share, which was the closing
price per share of the Chancellor Class A Common Stock on December 31, 1996.
EMPLOYMENT AGREEMENTS
Evergreen
On November 27, 1995, Evergreen entered into a new employment agreement
with Mr. de Castro that has a term through December 31, 1999 and provides for an
annual base salary beginning at $650,000 in 1995 and increasing incrementally to
$900,000 in 1999. In addition, the agreement provides for Mr. de Castro to
receive an annual incentive bonus based upon a percentage of the amount by which
Evergreen exceeds certain annual performance targets as defined in the
agreement. The agreement also provides that Mr. de Castro is eligible for
certain options to purchase Class A Common Stock. Upon execution of the
agreement, Mr. de Castro was awarded options to purchase 150,000 shares of Class
A Common Stock. Mr. de Castro is eligible to receive over the term of the
agreement options to purchase up to an additional 150,000 shares of Class A
Common Stock, subject to continued employment and satisfaction of other
conditions. The agreement terminates upon the death of Mr. de Castro and may be
terminated by Evergreen upon the disability of Mr. de Castro, for or without
"cause" or upon a "change in control" of Evergreen (as defined in the
agreement). The agreement may be terminated by Mr. de Castro in the event of a
change in control of Evergreen, in which event Mr. de Castro is entitled to
receive (i) an accelerated grant of all options to which he otherwise would have
been entitled over the term of the agreement, (ii) immediate payment of the base
salary which he otherwise would have earned over the term of the agreement,
(iii) a pro-rated annual incentive bonus and (iv) $1,250,000. During the term of
the agreement, Mr. de Castro is prohibited from engaging in certain activities
competitive with the business of Evergreen. However, with the approval of
Evergreen, Mr. de Castro may engage in activities not directly competitive with
the business of Evergreen as long as such activities do not unreasonably
interfere with Mr. de Castro's employment obligations.
On November 28, 1995, Evergreen entered into a new employment agreement
with Mr. Devine that has a term through December 31, 1999 and provides for an
annual base salary beginning at $275,000 in 1995 and increasing incrementally to
$375,000 in 1999. In addition, the agreement provides for Mr. Devine to receive
an annual incentive bonus based upon a percentage of the amount by which
Evergreen exceeds certain annual performance targets as defined in the
agreement. The agreement also provides that Mr. Devine is eligible for certain
options to purchase Class A Common Stock. Upon execution of the agreement, Mr.
Devine was awarded options to purchase 75,000 shares of Class A Common Stock.
Mr. Devine is eligible to receive over the term of the agreement options to
purchase up to an additional 75,000 shares of Class A Common Stock, subject to
continued employment and satisfaction of other conditions. The agreement
terminates upon the death of Mr. Devine and may be terminated by Evergreen upon
the disability of Mr. Devine, for or without "cause" or upon a "change in
control" of Evergreen (as defined in the agreement). The agreement may be
terminated by Mr. Devine in the event of a change in control of Evergreen, in
which event Mr. Devine is
97
<PAGE> 102
entitled to receive (i) an accelerated grant of all options to which he
otherwise would have been entitled over the term of the agreement, (ii)
immediate payment of the base salary which he otherwise would have earned over
the term of the agreement, (iii) a pro-rated annual incentive bonus and (iv)
$750,000. During the term of the agreement, Mr. Devine is prohibited from
engaging in certain activities competitive with the business of Evergreen.
However, with the approval of Evergreen, Mr. Devine may engage in activities not
directly competitive with the business of Evergreen as long as such activities
do not unreasonably interfere with Mr. Devine's employment obligations.
In February of 1996, Evergreen entered into an employment agreement with
Mr. O'Keefe that has a term through February 28, 1999 and provides for an annual
base salary beginning at $300,000 in 1996 and increasing incrementally to
$350,000 in 1998. Mr. O'Keefe was nominated for election to the Board of
Directors of Evergreen pursuant to the terms of his employment agreement. In
addition, the agreement provides for Mr. O'Keefe to receive an annual incentive
bonus based upon a percentage of the amount by which Evergreen exceeds certain
annual performance targets as defined in the agreement. The agreement also
provides that Mr. O'Keefe is eligible for certain options to purchase Class A
Common Stock. Pursuant to the agreement, Mr. O'Keefe was awarded options to
purchase 150,000 shares of Class A Common Stock. The stock options vest and
become exercisable subject to Mr. O'Keefe's continued employment by Evergreen
through February 28, 1999. However, Mr. O'Keefe may be eligible to exercise the
options on a pro rata basis in the event he is terminated prior to February 28,
1999 upon certain events specified in his employment agreement, including Mr.
O'Keefe's death or disability, a change in control of Evergreen, termination
without cause and a material breach of the employment agreement by Evergreen
leading to the resignation of Mr. O'Keefe. The agreement terminates upon the
death of Mr. O'Keefe and may be terminated by Evergreen upon the disability of
Mr. O'Keefe or for or without "cause" (as defined in the agreement). During the
term of the agreement, Mr. O'Keefe is prohibited from engaging in certain
activities competitive with the business of Evergreen. However, with the
approval of Evergreen, Mr. O'Keefe may engage in activities not directly
competitive with the business of Evergreen as long as such activities do not
materially interfere with Mr. O'Keefe's employment obligations. On January 29,
1997, the Compensation Committee of the Board of Directors of Evergreen
authorized the negotiation, execution and delivery of an amended employment
agreement for Mr. O'Keefe in order to make certain provisions of Mr. O'Keefe's
employment agreement comparable to those of Mr. de Castro and Mr. Devine, and
this amendment is currently being finalized.
On April 15, 1996, Evergreen entered into a new employment agreement with
Mr. Ginsburg, Chairman of the Board and Chief Executive Officer of Evergreen,
that has a term that extends through December 31, 2000 and provides for an
initial annual base salary of $750,000 in 1996 which increases incrementally
each year to $950,000 in 2000. In addition, the agreement provides for Mr.
Ginsburg to receive an annual incentive bonus based upon a percentage of the
amount by which Evergreen exceeds certain annual performance targets which are
defined in the agreement. The agreement also provides that Mr. Ginsburg is
eligible to receive options to purchase Class A Common Stock. Upon execution of
the Agreement, Mr. Ginsburg was awarded an option to purchase 150,000 shares of
Class A Common Stock at an exercise price of $21.33 per share (representing the
last sale price of the Class A Common Stock on the Nasdaq National Market on
December 29, 1995). Mr. Ginsburg is eligible to receive, over the term of the
agreement, options to purchase up to an additional 187,500 shares of Class A
Common Stock, subject to continued employment and satisfaction of other
conditions specified in the agreement. Upon execution of the agreement, Mr.
Ginsburg also received a one time bonus in the amount of $1,000,000 in
consideration of his extraordinary services to Evergreen including Evergreen's
strong operating performance, broadcast properties acquisition program and Mr.
Ginsburg's other activities on behalf of Evergreen. Under the agreement,
Evergreen also agreed to make to Mr. Ginsburg a ten-year unsecured loan in the
amount of $3,500,000 bearing interest at a fixed rate equal to the applicable
Federal long-term rate in effect on the date on which the loan is made. The
terms of the loan will require Mr. Ginsburg to repay principal of the loan in
five equal annual installments, commencing on the sixth anniversary of the date
on which the loan is made. As of March 1, 1997, Mr. Ginsburg has borrowed
approximately $824,000 under the loan. The agreement may be terminated by Mr.
Ginsburg in the event of a "change in control" of Evergreen, in which event Mr.
Ginsburg is entitled to receive (i) an accelerated grant of all options to which
he otherwise would have been entitled over the term of the agreement, (ii)
immediate payment of the base salary which he otherwise would have earned over
the term of the agreement and (iii) a
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<PAGE> 103
pro-rated annual incentive bonus. The agreement may be terminated by Evergreen
upon the permanent disability of Mr. Ginsburg, in which event, Mr. Ginsburg
shall receive (i) base salary for one year (payable in installments) from the
date of termination at the level in effect on the date of termination and (ii) a
pro-rated annual incentive bonus. The agreement may also be terminated by
Evergreen for or without cause, provided that, in the event such termination is
without cause, Mr. Ginsburg shall receive (i) grants of options on the same
schedule and under the same terms as if such termination had occurred on
December 31, 2000, (ii) base salary, payable in installments through December
31, 2000, in the amounts to which Mr. Ginsburg would have been entitled if such
termination had occurred on December 31, 2000, and (iii) a pro-rated annual
incentive bonus. The agreement terminates upon the death of Mr. Ginsburg, in
which event, Mr. Ginsburg's estate or legal representative shall receive the
amounts that would have been payable to Mr. Ginsburg in the event of termination
for reason of his permanent disability (set forth above). During the term of
this agreement, Mr. Ginsburg is prohibited from engaging in certain activities
competitive with the business of Evergreen.
On February 19, 1997, Evergreen entered into a memorandum of agreement with
Mr. Ginsburg in connection with Evergreen's entering into the Chancellor Merger
Agreement. For a description of the terms of the Memorandum of Agreement, see
"The Merger -- Interests of Certain Persons in the Merger --
Evergreen -- Employment Agreement."
Chancellor
Mr. Dinetz has entered into an employment agreement with Chancellor and
CRBC pursuant to which he serves as President and Chief Executive Officer of
Chancellor and CRBC. The employment agreement is currently scheduled to expire
on December 31, 2000, unless earlier terminated, and provides for a base salary
of $500,000 per year plus an annual bonus of up to $200,000 based on performance
criteria established by Chancellor's Board of Directors at the beginning of each
fiscal year. Each December 31 during the term of the employment agreement, Mr.
Dinetz's base salary for the next succeeding year shall be adjusted based upon
the Consumer Price Index, provided that his annual base salary shall never be
less than $500,000. Unless either party gives written notice to the contrary
prior to December 31 of each year the employment agreement is in effect the
employment agreement will automatically be extended for an additional year so
that, as of each December 31, the remaining term of the employment agreement
will be five years. The employment agreement also provides for participation by
Mr. Dinetz in all benefit programs maintained by Chancellor or its subsidiaries
and provides for certain life, health and disability insurance coverage for Mr.
Dinetz.
The employment agreement may be terminated by Chancellor and CRBC at any
time prior to the completion of the five year stated term. If Chancellor and
CRBC terminate Mr. Dinetz's employment agreement other than for cause (as
defined in the employment agreement), or if Mr. Dinetz voluntarily terminates
the employment agreement for good reason (as defined in the employment
agreement), Chancellor and CRBC must pay Mr. Dinetz severance compensation equal
to two years of Mr. Dinetz's base salary; provided, however, that if the
decision to terminate the employment agreement results from the failure of
Chancellor or CRBC to meet certain specified financial performance criteria, Mr.
Dinetz will be entitled to receive severance compensation equal to one year of
Mr. Dinetz's base salary.
In 1994, pursuant to his former employment agreement Mr. Dinetz was granted
options (the "Dinetz Options") to purchase 5,976,415 shares of nonvoting stock,
including (i) options vesting equally over five years (from January 10, 1994) to
purchase up to 3,307,722 shares at an exercise price of $1.00 per share and (ii)
options vesting equally over five years (from October 12, 1994) to purchase up
to 2,668,582 shares at an exercise price of $1.25 per share, in each case with
such exercise price to increase at a compound rate of 9% per annum. Of the
options granted, options for 1,062,004 shares contained a feature which
conditioned their exercise upon CRBC's attaining certain rates of return ("IRR
Options"). In September 1995, CRBC agreed with Mr. Dinetz to amend the IRR
Options to remove the rate of return feature. CRBC further agreed to amend the
exercise price for the Dinetz Options to provide that all options previously
exercisable at $1.00 per share will be exercisable at $1.25 per share and that
all options previously exercisable at $1.25 per share will be exercisable at
$1.40 per share. The Dinetz Options were also amended to remove the annual
compounding of the exercise price. In accordance with their terms, the Dinetz
Options were adjusted in connection with the recapitalization of Chancellor's
common stock immediately prior to the consummation of the initial public
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<PAGE> 104
offering of Chancellor's Class A Common Stock (the "Chancellor Initial Public
Offering"). Accordingly, Mr. Dinetz owns, on an adjusted basis, options for
487,555 shares having an option exercise price of $7.50 per share and options
for 375,764 shares having an option exercise price of $8.40 per share. In
addition, on February 9, 1996, Mr. Dinetz was granted options to purchase 75,000
shares of Chancellor Class A Common Stock pursuant to Chancellor's Stock Award
Plan.
Mr. Toulas is a party to an employment agreement with Chancellor and CRBC
pursuant to which he serves as Regional Manager of WUBE-AM, WUBE-FM, WYGY-FM and
WKYN-AM in Cincinnati, KTCJ-FM, KTCZ-AM, KDWB-FM, KEEY-FM, KFAN-AM, WBOB-FM and
KQQL-FM in Minneapolis-St. Paul, WOCL-FM, WXXL-FM, WOMX-FM and WJHM-FM in
Orlando, WGMS-FM, WBIG-FM and WTEM-AM in Washington, D.C., WHTZ-FM in New York
and WFOX-FM in Atlanta. Mr. Toulas is also a Senior Executive Vice President of
Chancellor and CRBC. Mr. Toulas's employment agreement is for a term commencing
on February 14, 1996 and ending upon December 31, 2000, unless otherwise
terminated as allowed in the agreement. The agreement provides for an initial
base salary of $375,000, with an annual increase of between three and five
percent as determined by the board of directors. Mr. Toulas is also entitled to
receive an annual bonus of up to 50% of his then base salary for each fiscal
year, beginning in fiscal year ending December 31, 1996, based on achievement of
broadcast cash flow projections established by the board of directors. The
broadcast cash flow projections will be adjusted based upon acquisitions or
disposition of stations under the supervision of Mr. Toulas. Mr. Toulas is also
entitled to the use and paid expenses of an automobile, allowance for a fitness
or similar club, and participation in all employee benefit plans maintained by
Chancellor or any of its subsidiaries. Mr. Toulas's employment agreement also
contains a noncompetition provision pursuant to which Mr. Toulas has agreed that
during the term of his employment contract and for six months thereafter he will
not engage in the broadcasting business within any community or Arbitron MSA
served by those stations managed or overseen by him. On February 14, 1996,
concurrently with the consummation of the Chancellor Initial Public Offering,
CRBC paid to Mr. Toulas $100,000 in satisfaction of a provision of his former
employment agreement providing for a possible cash payment to Mr. Toulas based
on the value of CRBC's Cincinnati stations at a specified future date. In June
1997, Mr. Toulas entered into a severance agreement with Chancellor and CRBC,
pursuant to which, in the event that Mr. Toulas' employment is terminated prior
to the first anniversary of the Merger for any reason other than Cause (as
defined in the employment agreement) or terminated by Mr. Toulas for Good Reason
(as defined in the severance agreement), in lieu of the amounts he would
otherwise be entitled under his employment agreement, Mr. Toulas will receive a
lump sum amount equal to three times his base salary as in effect immediately
prior to the Merger, and all unvested stock options held by him shall become
fully vested and immediately exercisable. Effectiveness of Mr. Toulas' severance
agreement is, pursuant to the Merger Agreement, subject to the consent of
Evergreen.
Mr. Eytcheson is a party to an employment agreement with Chancellor and
CRBC pursuant to which he serves as Regional Manager of KZLA-FM and KLAC-AM in
Los Angeles, KSAN-FM, KNEW-AM, KBGG-FM and KABL-AM in San Francisco, KGGI-FM and
KMEN-AM in Riverside-San Bernardino, and KFBK-AM, KGBY-FM and KHYL-FM in
Sacramento. Mr. Eytcheson is also an Executive Vice President of Chancellor and
CRBC. Mr. Eytcheson's employment agreement is for a two year term commencing on
February 14, 1996, and is subject to automatic successive one-year renewal terms
that take effect unless notice of non-renewal is given by CRBC to Mr. Eytcheson
within 30 days prior to the expiration of the then-current term. Mr. Eytcheson's
current base salary is $325,000 per year. Mr. Eytcheson is also entitled to
receive an annual bonus of up to 50% of his then base salary for each fiscal
year, beginning in fiscal year ending December 31, 1996, based on achievement of
broadcast cash flow projections established by the board of directors. The
broadcast cash flow projections will be adjusted based upon acquisitions or
disposition of stations under the supervision of Mr. Eytcheson. Mr. Eytcheson is
also entitled to the use and paid expenses of an automobile, allowance for a
fitness or similar club, and participation in all employee benefit plans
maintained by Chancellor or any of its subsidiaries. Mr. Eytcheson's employment
agreement also contains a noncompetition provision pursuant to which Mr.
Eytcheson has agreed that during the term of his employment contract and for one
year thereafter he will not engage in the radio broadcasting business within a
specified geographic location surrounding CRBC's stations under Mr. Eytcheson's
supervision pursuant to the employment agreement. On February 14, 1996,
concurrently with the consummation of the Chancellor Initial
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<PAGE> 105
Public Offering, CRBC lent $200,000 to Mr. Eytcheson to enable him to purchase
shares of Chancellor's Class A Common Stock in the Chancellor Initial Public
Offering. The loan will be an unsecured, non-interest bearing loan, which will
be forgiven during the next three years. CRBC made this loan to Mr. Eytcheson in
satisfaction of a provision of his former employment agreement providing for a
possible cash payment to Mr. Eytcheson based on the value of CRBC's Sacramento
stations at a specified future date. In June 1997, Mr. Eytcheson entered into a
severance agreement with Chancellor and CRBC, pursuant to which, in the event
that Mr. Eytcheson's employment is terminated prior to the first anniversary of
the Merger for any reason other than Cause (as defined in the employment
agreement) or terminated by Mr. Eytcheson for Good Reason (as defined in the
severance agreement), in lieu of the amounts he would otherwise be entitled
under his employment agreement, Mr. Eytcheson will receive a lump sum amount
equal to three times his base salary as in effect immediately prior to the
Merger, and all unvested stock options held by him shall become fully vested and
immediately exercisable. Effectiveness of Mr. Eytcheson's severance agreement
is, pursuant to the Merger Agreement, subject to the consent of Evergreen.
Mr. Weller is a party to an employment agreement with Chancellor and CRBC
pursuant to which he serves as Regional Manager of KMLE-FM, KOOL-FM, KYOT-FM,
KZON-FM, KISO-AM and KOY-AM in Phoenix, KXKL-FM, KVOD-FM, KRRF-AM, KIMN-FM and
KALC-FM in Denver, WWSW-AM and WWSW-FM in Pittsburgh, and WALK-FM, WALK-AM,
WBAB-FM, WBLI-FM, WHFM-FM and WGBB-AM in Nassau-Suffolk (Long Island). Mr.
Weller is also an Executive Vice President of Chancellor and CRBC. The initial
term of the employment agreement commenced on February 1, 1996 and continues for
twenty three months. The employment agreement provides for an annual base salary
of $340,000 and $360,000 in the fiscal years ended December 31, 1997 and 1998,
respectively. Mr. Weller is also entitled to receive a quarterly bonus based on
the percentage of the annual budgeted broadcast cash flow achieved by the
stations for which Mr. Weller has responsibility. The employment agreement also
provides that CRBC will supply Mr. Weller with other customary benefits,
including the use of a car and insurance, disability and medical benefits. The
employment agreement also contains a noncompetition provision pursuant to which
Mr. Weller has agreed, subject to certain exceptions, that during the term of
his employment contract and for six months thereafter he will not engage in the
broadcasting business within any community or Arbitron MSA served by those
stations managed or overseen by him. In June 1997, Mr. Weller entered into a
severance agreement with Chancellor and CRBC, pursuant to which, in the event
that Mr. Weller's employment is terminated prior to the first anniversary of the
Merger for any reason other than Cause (as defined in the employment agreement)
or terminated by Mr. Weller for Good Reason (as defined in the severance
agreement), in lieu of the amounts he would otherwise be entitled under his
employment agreement, Mr. Weller will receive a lump sum amount equal to three
times his base salary as in effect immediately prior to the Merger, and all
unvested stock options held by him shall become fully vested and immediately
exercisable. Effectiveness of Mr. Weller's severance agreement is, pursuant to
the Merger Agreement, subject to the consent of Evergreen.
During 1996, Mr. Kerrest was a party to an employment agreement with
Chancellor and CRBC pursuant to which he served as Senior Vice President and
Chief Financial Officer. Mr. Kerrest's employment agreement was for a two year
term commencing on February 14, 1996, and subject to automatic successive
one-year renewal terms that would take effect unless notice of non-renewal was
given by CRBC to Mr. Kerrest within 30 days prior to the expiration of the
then-current term. The agreement provided for an initial base salary of
$225,000, with an annual increase of not less than five percent as determined by
the board of directors. Mr. Kerrest was also entitled to receive an annual
bonus, beginning in fiscal year ending December 31, 1996, based on achievement
of broadcast cash flow projections established by the board of directors. The
employment agreement also provided that CRBC supply Mr. Kerrest with other
customary benefits, including the use of a car and insurance, disability and
medical benefits. In July 1997, Mr. Kerrest resigned as Senior Vice President
and Chief Financial Officer of Chancellor and CRBC. In connection therewith,
Chancellor and CRBC entered into a severance agreement with Mr. Kerrest,
pursuant to which Mr. Kerrest received a lump sum payment in lieu of the
severance amounts he would have otherwise been entitled to under his employment
agreement, and all unvested stock options held by him at the time of such
resignation became fully vested and immediately exercisable. Effectiveness of
Mr. Kerrest's severance agreement is, pursuant to the Merger Agreement, subject
to the consent of Evergreen. In addition,
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<PAGE> 106
Mr. Kerrest also entered into a consulting and non-competition agreement with
Chancellor and CRBC, pursuant to which (and subject to the consent of Evergreen)
he has agreed to provide certain financial consulting services and not to
compete in the radio broadcasting business for a period of four years from the
date of such agreement in exchange for a lump sum payment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
EMCLA
The Compensation Committee of Evergreen comprises Messrs. Sitrick, Lewis
and Hodson. No director serving as a member of the Compensation Committee is a
current or former officer or employee of Evergreen or its subsidiaries. EMCLA
does not have a Compensation Committee.
CRBC
During 1996, Messrs. Marcus and Massey served as members of the
Compensation Committee of the Board of Directors, of which Mr. Marcus acted as
chairman. Mr. Marcus is the President and Chief Executive Officer of Marcus
Cable Company, a cable television multiple system operator. An affiliate of
Hicks Muse has invested approximately $115.0 million in limited partnership
interests in Marcus Cable Company and is one of its largest limited partners.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
EMCLA
All of the issued and outstanding common stock of EMCLA is currently held
beneficially and of record by Evergreen, and following the Contribution
Transaction, will be held by EMHC. The following table lists information
concerning the beneficial ownership of Evergreen's Common Stock on March 1, 1997
by (i) each person known to Evergreen to own beneficially more than 5% of any
class of the Evergreen Common Stock, (ii) each director and executive officer of
Evergreen and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
------------------------ ------------------------ PERCENT OF TOTAL
PERCENT PERCENT VOTING POWER AS
NAME OF STOCKHOLDER SHARES(1) OF CLASS(1) SHARES(1) OF CLASS(1) ADJUSTED(1)
------------------- --------- ----------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Scott K. Ginsburg(2)(3)....... -- --% 3,114,066 100.0% 44.3%
James E. de Castro(2)......... 497,500(4) 1.3% -- -- *
Matthew E. Devine(2).......... 150,000(4) * -- -- *
Joseph M. Sitrick(5).......... 99,289(6) * -- -- *
Perry J. Lewis(7)............. 59,274(8) * -- -- *
Thomas J. Hodson(9)........... 7,500(4) * -- -- *
Kenneth J. O'Keefe(10)........ 2,000 * -- -- *
Eric L. Bernthal(11).......... 2,500(4) * -- -- *
J. & W. Seligman & Co.,
Incorporated(12)............ 2,655,449 6.8% -- -- 3.8%
FMR Corp.(13)................. 2,581,012 6.6% -- -- 3.7%
American Century
Companies(14)............... 2,102,500 5.4% -- -- 3.0%
Putnam Investments,
Inc.(15).................... 5,159,251 13.2% -- -- 7.3%
The Equitable Companies,
Incorporated(16)............ 3,769,800 9.6% -- -- 5.4%
All directors and executive
officers as a group (8
persons).................... 818,063 2.1% 3,114,066 100.0% 45.5%
</TABLE>
- ---------------
* Less than one percent (1%).
(1) The information as to beneficial ownership is based on statements furnished
to the Company by the beneficial owners. As used in this table, "beneficial
ownership" means the sole or shared power to vote, or direct the voting of
a security, or the sole or shared investment power with respect to a
security (i.e., the power to dispose of, or direct the disposition of). A
person is deemed as of any date to have
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"beneficial ownership" of any security that such person has the right to
acquire within 60 days after such date. "Beneficial ownership" does not
include the number of shares of Evergreen Class A Common Stock issuable
upon conversion of shares of Evergreen Class B Common Stock, although
shares of Evergreen Class B Common Stock are freely convertible into shares
of Evergreen Class A Common Stock. For purposes of computing the percentage
of outstanding shares held by each person named above, any security that
such person has the right to acquire within 60 days of the date of
calculation is deemed to be outstanding, but is not deemed to be
outstanding for purposes of computing the percentage ownership of any other
person.
(2) The address of Mr. Ginsburg, Mr. Devine and Mr. de Castro is Evergreen
Media Corporation, 433 E. Las Colinas Boulevard, Irving, Texas 75039.
(3) The 3,114,066 shares of Evergreen Class B Common Stock held by Mr. Ginsburg
includes 7,220 shares of Evergreen Class B Common Stock held by Mr.
Ginsburg as custodian for his children.
(4) Consists of outstanding options to purchase Evergreen Class A Common Stock
awarded pursuant to Evergreen's various stock option plans.
(5) The address of Mr. Sitrick is Blackburn & Company, Incorporated, 201 N.
Union Street, Suite 340, Alexandria, Virginia, 22314.
(6) Includes 91,789 shares of Evergreen Class A Common Stock owned by Mr.
Sitrick and 7,500 options to purchase Evergreen Class A Common Stock
awarded pursuant to Evergreen's Non-Employee Director Stock Option Plan.
(7) The address of Mr. Lewis is MLGAL Partners, L.P., Two Greenwich Plaza,
Greenwich, Connecticut, 06830.
(8) Includes 51,774 shares of Evergreen Class A Common Stock owned by Mr. Lewis
and 7,500 options to purchase Evergreen Class A Common Stock awarded
pursuant to Evergreen's Non-Employee Director Stock Option Plan.
(9) The address of Mr. Hodson is Columbia Falls Aluminum Company, 12115 Hinson
Road, Little Rock, Arkansas, 72212.
(10) The address of Mr. O'Keefe is Evergreen Media Corporation, 99 Revere Beach
Parkway, Medford, Massachusetts, 02155.
(11) The address of Mr. Bernthal is Latham & Watkins, 1001 Pennsylvania Avenue,
N.W., Washington, D.C., 20004.
(12) The address of J. & W. Seligman & Co., Incorporated is 100 Park Avenue, New
York, New York, 10017. Share ownership for J. & W. Seligman & Co.,
Incorporated is based on the Schedule 13D filed by such person with the
Securities and Exchange Commission on February 12, 1997.
(13) The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts,
02109. Share ownership for FMR Corp. is based on the Schedule 13G filed by
such person with the Securities and Exchange Commission on February 11,
1997.
(14) The address of American Century Companies is 4500 Main Street, P.O. Box
418210, Kansas City, Missouri, 64141-9210. Share ownership for American
Century Companies, Inc. is based on the Schedule 13G filed by such person
with the Securities and Exchange Commission on February 5, 1997.
(15) The address of Putnam Investments, Inc. is One Post Office Square, Boston,
Massachusetts, 02109. Share ownership for Putnam Investments, Inc. is based
on the Schedule 13G, Amendment No. 1, filed by such person with the
Securities and Exchange Commission on January 29, 1997.
(16) The address of The Equitable Companies, Incorporated is 787 Seventh Avenue,
New York, New York 10019. Share ownership for The Equitable Companies,
Incorporated is based on the Schedule 13G, Amendment No. 1, filed by such
person with the Securities and Exchange Commission on January 10, 1997.
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<PAGE> 108
CRBC
All of the issued and outstanding common stock of CRBC is currently held
beneficially and of record by Chancellor. As of June 12, 1997, (i) the number
and percentage of outstanding shares of each class of the capital stock of
Chancellor that are beneficially owned by (a) each person or group known by the
Company to own beneficially more than 5% of any class of the capital stock of
Chancellor, (b) each director of Chancellor; (c) each CRBC Named Executive
Officer and (d) all directors and executive officers of Chancellor as a group
and (ii) the combined percentage of all classes of the capital stock of
Chancellor that is beneficially owned by each of such persons or group of
persons. Except as noted below, each individual or entity named below is
believed to have sole investment and voting power with respect to all the shares
of capital stock reflected below.
<TABLE>
<CAPTION>
CHANCELLOR CLASS A CHANCELLOR CLASS B
COMMON STOCK(1) COMMON STOCK(2)
-------------------- -------------------- PERCENT OF
NUMBER PERCENT NUMBER PERCENT PERCENT OF ECONOMIC
OF SHARES OF CLASS OF SHARES OF CLASS VOTING POWER INTEREST
--------- -------- --------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
5% STOCKHOLDERS
Thomas O. Hicks(3)............................. 1,815,365 17.4% 8,484,410 99.3% 90.3% 54.2%
c/o Hicks Muse,
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Hicks Muse Parties(4).......................... 1,277,625 12.2% 8,484,410 99.3% 89.8% 51.4%
c/o Hicks Muse,
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Putnam Investments, Inc.(5).................... 1,915,365 18.3% -- -- 2.0% 10.1%
One Post Office Square
Boston, Massachusetts 02109
AIM Management Group Inc.(6)................... 818,000 7.8% -- -- * 4.3%
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
OFFICERS AND DIRECTORS
Thomas O. Hicks(3)............................. 1,815,365 17.4% 8,484,410 99.3% 90.3% 54.2%
Steven Dinetz(7)............................... 474,488 4.4% 63,500 * 1.2% 2.8%
George C. Toulas(8)............................ 30,333 * -- -- * *
Rick Eytcheson(9).............................. 30,833 * -- -- * *
Samuel L. Weller(10)........................... 13,500 * -- -- * *
Jeffrey A. Marcus(11).......................... 35,000 * -- -- * *
John Massey(11)................................ 23,333 * -- -- * *
Eric C. Neuman................................. 1,000 * -- -- * *
Lawrence D. Stuart, Jr......................... 5,451 * -- -- * *
All directors and executive officers of
Chancellor as a group(3)(12)................. 2,475,586 22.7% 8,547,910 100% 91.2% 56.5%
</TABLE>
- ---------------
* Less than one percent.
(1) The holders of Chancellor Class A Common Stock are entitled to one vote per
share on all matters submitted to a vote of stockholders of Chancellor. In
addition, the holders of the Chancellor Class A Common Stock are entitled
as a class to elect two members of the Board of Directors of Chancellor.
(2) The holders of the Chancellor Class B Common Stock are entitled to vote
with the holders of the Chancellor Class A Common Stock on all mattes
submitted to a vote of stockholders of Chancellor, except with respect to
the election of the Class A directors, certain "going private" transactions
and as otherwise required by law. Each share of Chancellor Class B Common
Stock is entitled to ten votes per share on all matters submitted to a vote
of stockholders.
(3) Includes 343,672 shares owned of record by Thomas O. Hicks, 190,712 shares
owned of record by Mr. Hicks as the trustee for certain trusts of which his
children are beneficiaries and 3,356 shares owned of record by Mr. Hicks as
the co-trustee of a trust for the benefit of unrelated parties. Also
includes 1,346,801 shares of Chancellor Class B Common Stock owned of
record by the Chancellor Business
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Trust (as defined) and 1,277,625 shares of Chancellor Class A Common Stock
and 7,137,609 shares of Chancellor Class B Common Stock owned by five
limited partnerships of which the ultimate general partners are entities
controlled by Mr. Hicks or Hicks Muse. Thomas O. Hicks is the controlling
stockholder of Hicks Muse and serves as Chairman of the Board, President,
Chief Executive Officer, Chief Operating Officer and Secretary of Hicks
Muse. Accordingly, Mr. Hicks may be deemed to be the beneficial owner of
all or a portion of the stock owned of record by such limited partnerships.
Mr. Hicks disclaims beneficial ownership of the shares of Chancellor Class
A Common Stock and Chancellor Class B Common Stock not owned by him of
record.
(4) Includes 1,346,801 shares of Chancellor Class B Common Stock owned of
record by the Chancellor Business Trust, 1,277,625 shares of Chancellor
Class A Common Stock and 7,137,609 shares of Chancellor Class B Common
Stock owned by five limited partnerships of which the ultimate general
partners are entities controlled by Mr. Hicks or Hicks Muse. Thomas O.
Hicks is the controlling stockholder of Hicks Muse and serves as Chairman
of the Board, President, Chief Executive Officer, Chief Operating Officer
and Secretary of Hicks Muse. Accordingly, Mr. Hicks may be deemed to be the
beneficial owner of all or a portion of the stock owned of record by such
limited partnerships. John R. Muse, Charles W. Tate, Jack D. Furst,
Lawrence D. Stuart, Jr., Michael J. Levitt and Alan B. Menkes are officers,
directors and minority stockholders of Hicks Muse and as such may be deemed
to share with Mr. Hicks the power to vote or dispose of shares of stock
held by such partnerships. Messrs. Hicks, Muse, Tate, Furst, Stuart, Levitt
and Menkes disclaim the existence of a group and each of them disclaim
beneficial ownership of shares of stock not owned of record by him. See
"Certain Transactions -- Chancellor Business Trust and Related Registration
Rights Agreement."
(5) Includes shares of Chancellor Class A Common Stock which may be deemed to
be beneficially owned by Putnam Investment Management, Inc. and the Putnam
Advisory Company, Inc. ("PAC"), each wholly-owned subsidiaries of such
person and registered investment advisors to certain investment companies
which hold shares of Chancellor Class A Common Stock. Except for the power
to vote, 100,596 of such shares that is shared by PAC with respect to those
shares owned by its institutional clients, each mutual fund's trustees
retain the power to vote the shares of Chancellor Class A Common Stock held
by such fund.
(6) Includes shares held by two wholly-owned subsidiaries of such person that
are registered investment advisors.
(7) Includes (i) options presently exercisable and exercisable within 60 days
of the date of this document to purchase up to 465,338 shares of Chancellor
Class A Common Stock, (ii) 600 shares held in an individual retirement
account for the benefit of Mr. Dinetz and (ii) 550 shares held by Mr.
Dinetz's daughter. Mr. Dinetz disclaims beneficial ownership of the shares
of Chancellor Class A Common Stock not owned by him of record.
(8) Includes options presently exercisable and exercisable within 60 days of
the date of this document to purchase up to 12,000 shares of Chancellor
Class A Common Stock.
(9) Includes (i) options presently exercisable within 60 days of the date of
this document to purchase up to 7,500 shares of Chancellor Class A Common
Stock and (ii) 6,667 shares held in an individual retirement account for
the benefit of Mr. Eytcheson.
(10) Includes options presently exercisable and exercisable within 60 days of
the date of this document to purchase up to 6,000 shares of Chancellor
Class A Common Stock.
(11) Includes options presently exercisable and exercisable within 60 days of
the date of this document by each of Messrs. Marcus and Massey to purchase
up to 13,333 shares of Chancellor Class A Common Stock, and (ii) in the
case of Mr. Massey, 10,000 shares of Chancellor Class A Common Stock held
by his wife as her separate property.
(12) Includes rights and options presently exercisable and exercisable within 60
days of the date of this document to purchase up to 562,004 shares of
Chancellor Class A Common Stock.
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Surviving Subsidiary Corporation
The following table lists information regarding anticipated beneficial
ownership of Surviving Corporation Common Stock immediately following
consummation of the Merger by directors and executive officers of the Surviving
Corporation and their affiliates, as well as all directors and executive
officers as a group.
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER SHARES PERCENT(1)
------------------- ------ ----------
<S> <C> <C>
Thomas O. Hicks............................................ 9,363,525(2) 15.7%
Scott K. Ginsburg.......................................... 3,114,066(3) 5.2%
James E. de Castro......................................... 497,500(4) *
Steven Dinetz.............................................. 432,493(5) *
Matthew E. Devine.......................................... 150,000(6) *
Perry J. Lewis............................................. 59,274(7) *
Thomas J. Hodson........................................... 7,500(8) *
Eric C. Neuman............................................. 909 *
John H. Massey............................................. 21,212(9) *
Jeffrey A. Marcus.......................................... 43,939(10) *
Lawrence D. Stuart, Jr. ................................... 4,955 *
Hicks Muse Affiliates...................................... 9,363,525(11) 15.7%
All directors and executive officers as a group............ 13,695,373(12) 22.6%
</TABLE>
- ---------------
* Less than one percent.
(1) Assumes that 59,507,371 primary shares of Surviving Corporation Common
Stock would be issued and outstanding immediately after consummation of the
Merger.
(2) Includes 312,423 shares to be owned of record by Mr. Hicks, 173,376 shares
to be owned of record by Mr. Hicks as trustee for certain trusts of which
his children are beneficiaries and 3,050 shares to be owned of record by
Mr. Hicks as co-trustee of a trust for the benefit of unrelated parties.
Also includes 1,224,376 shares to be owned of record by the Chancellor
Business Trust and 7,650,289 shares to be owned by five limited
partnerships of which the ultimate general partners are entities controlled
by Mr. Hicks or Hicks Muse. Mr. Hicks is the controlling stockholder of
Hicks Muse and serves as Chairman of the Board, President, Chief Executive
Officer, Chief Operating Officer and Secretary of Hicks Muse. Accordingly,
Mr. Hicks may be deemed to be the beneficial owner of all or a portion of
the stock owned of record by such limited partnerships. Mr. Hicks intends
to disclaim beneficial ownership of shares of stock that will not be owned
of record by him.
(3) Includes 7,200 shares that would be held by Mr. Ginsburg as custodian for
his children.
(4) Consists of options to purchase 497,500 shares.
(5) Includes (i) options to purchase 424,175 shares, (ii) 545 shares to be held
by an individual retirement account for the benefit of Mr. Dinetz and (iii)
500 shares to be held by Mr. Dinetz's daughter. Mr. Dinetz intends to
disclaim beneficial ownership of the shares of Surviving Corporation Common
Stock that would not be owned by him of record.
(6) Consists of options to purchase 150,000 shares.
(7) Consists of 51,774 shares to be owned of record by Mr. Lewis and options to
purchase 7,500 shares.
(8) Consists of options to purchase 7,500 shares.
(9) Consists of options to purchase 12,121 shares and 9,091 shares to be held
by Mr. Massey's wife as her separate property.
(10) Includes options to purchase 12,121 shares.
(11) Includes 312,423 shares to be owned of record by Thomas O. Hicks, 173,376
shares to be owned by Mr. Hicks as trustee for certain trusts of which his
children are beneficiaries, 3,050 shares to be owned of record by Mr. Hicks
as co-trustee of a trust for the benefit of unrelated parties, 1,224,376
shares to be owned of record by the Chancellor Business Trust and 7,650,289
shares to be owned of record by five limited partnerships of which the
ultimate general partners are entities controlled by Mr. Hicks or Hicks
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<PAGE> 111
Muse. Mr. Hicks is the controlling stockholder of Hicks Muse and serves as
Chairman of the Board, President, Chief Executive Officer, Chief Operating
Officer and Secretary of Hicks Muse. Accordingly, Mr. Hicks may be deemed
to be the beneficial owner of all or a portion of the stock owned of record
by such limited partnerships. John R. Muse, Charles W. Tate, Jack D. Furst,
Lawrence D. Stuart, Jr., Michael J. Levitt and Alan B. Menkes are officers,
directors and minority stockholders of Hicks Muse and as such may be deemed
to share with Mr. Hicks the power to vote or dispose of shares of stock to
be held by such partnerships. Messrs. Hicks, Muse, Tate, Furst, Stuart,
Levitt and Menkes disclaim the existence of a group and each of them intend
to disclaim beneficial ownership of shares of stock that will not be owned
of record by him.
(12) Includes options to purchase 1,110,917 shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EMCLA
Eric L. Bernthal, who serves on the Board of Directors of Evergreen, is a
partner in the law firm of Latham & Watkins, regular legal counsel to Evergreen.
Under the terms of Evergreen's employment agreement with Mr. Ginsburg,
dated April 15, 1996, Evergreen has agreed to make to Mr. Ginsburg a ten-year
unsecured loan. For a discussion of the terms of the loan, see "Management After
the Merger -- Employment Agreements -- Evergreen."
CRBC
Financial Monitoring and Oversight Agreement
Chancellor and CRBC have entered into the Financial Monitoring and
Oversight Agreement with Hicks Muse Partners, an affiliate of Hicks Muse. For a
discussion of the terms of the Financial Monitoring and Oversight Agreement as
well as the amendment thereto that has been authorized in connection with the
transactions contemplated by the Merger Agreement, see "The Merger -- Interests
of Certain Persons -- Chancellor."
Financial Advisory Agreement
Chancellor and CRBC are parties to the Financial Advisory Agreement with
HM2/Management. For a discussion of the terms of the Financial Advisory
Agreement as well as the proposed termination thereof authorized in connection
with the transactions contemplated by the Merger Agreement, see "The Merger --
Interests of Certain Persons -- Chancellor."
Chancellor Stockholders Agreement
Certain stockholders of Chancellor have entered into the Chancellor
Stockholders Agreement with Chancellor. For a discussion of the terms of the
Chancellor Stockholders Agreement, as well as the proposed amendment thereof
authorized in connection with the Merger, see "The Merger -- Interests of
Certain Persons -- Chancellor."
Chancellor Business Trust and Related Registration Rights Agreement
At the time of the acquisition of the American Media Station Group,
affiliates of Hicks Muse and certain investment funds operated by Fidelity
Investments formed a business trust (the "Chancellor Business Trust") to hold
shares of the capital stock of Chancellor. The Chancellor Business Trust
currently holds 15.8% of the Chancellor Class B Common Stock. HM2/Management/GP
Partners, L.P., an affiliate of Hicks Muse (the "Hicks Muse Manager"), acts as
manager for, and has a beneficial interest in, the Chancellor Business Trust.
Prior to its dissolution, the Chancellor Business Trust is entitled to
registration rights under the Stockholders Agreement for the shares of
Chancellor Common Stock held by it. Upon dissolution of the Chancellor Business
Trust and the distribution to the beneficiaries thereof (other than the Hicks
Muse Manager) of the Chancellor Class B Common Stock held by the Chancellor
Business Trust, such stock will automatically
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<PAGE> 112
convert into Chancellor Class A Common Stock. Such beneficiaries, including the
Hicks Muse Manager, will be entitled to certain registration rights set forth in
a Registration Rights Agreement between Chancellor and the trust unitholders.
Under that agreement, the trust unitholders, subject to certain limitations, are
entitled to require Chancellor to effect a "shelf" registration under the
Securities Act and to keep effective the registration statement for such
offering for a period of 36 months for the purpose of allowing such trust
unitholders to dispose of the shares of Chancellor Common Stock held by them. In
addition, after the dissolution of the Chancellor Business Trust and the
distribution of the Common Stock held thereby, the trust unitholders are
entitled to participate, subject to certain limitations, in any offering
registered under the Securities Act effected by Chancellor for its own account.
The Chancellor Business Trust may be dissolved at any time by the Hicks Muse
Manager. The Chancellor Business Trust dissolves by its terms on February 9,
1998.
Hicks Muse Equity Investment
In August, 1996, an affiliate of Hicks Muse purchased 1,185,521 shares of
the Chancellor Class A Common Stock for approximately $23.0 million in
accordance with an agreement entered into between Hicks Muse and Chancellor in
February 1996. The proceeds of this equity investment were contributed by
Chancellor to the capital of CRBC and were used to repay borrowings under CRBC's
previous credit agreement.
Purchase of Exchangeable Preferred Stock
In connection with the funding of the Shamrock Acquisition, affiliates of
Hicks Muse purchased $12.5 million initial liquidation preference of CRBC's 14%
Senior Exchangeable Preferred Stock for a purchase price of approximately $11.9
million (or 95% of the initial liquidation preference of such shares) and
received in connection therewith an aggregate of 92,774 shares of Chancellor
Class A Common Stock. The net proceeds of the sale of the 12 1/4% Preferred
Stock were used to retire CRBC's 14% Senior Exchangeable Preferred Stock at a
redemption price of 96.5% of the initial liquidation preference thereof, plus
accumulated and unpaid dividends to the redemption date. The Hicks Muse
purchasers, along with the other purchasers of the 14% Senior Exchangeable
Preferred Stock, are entitled to registration rights for the sale of the shares
of Chancellor Class A Common Stock issued in connection with the sale of such
preferred stock.
EXPERTS
The consolidated financial statements of Evergreen Media Corporation of Los
Angeles and subsidiaries, the combined financial statements of WMZQ Inc. and
Viacom Broadcasting East Inc., the financial statements of WDRQ Inc., the
combined financial statements of Riverside Broadcasting Co., Inc. and WAXQ Inc.,
the financial statements of WLIT Inc., the combined financial statements of KYSR
Inc. and KIBB Inc., the financial statements of WDRQ Inc., the financial
statements of WDAS-AM/FM (station owned and operated by Beasley FM Acquisition
Corp.), and the financial statements of KKSF-FM/KDFC-FM and AM (stations owned
and operated by The Brown Organization) included in this Prospectus have been
audited by KPMG Peat Marwick LLP, independent certified public accountants, to
the extent and for the periods indicated in their reports thereon. Such
financial statements have been included in this Prospectus in reliance upon the
authority of said firm as experts in accounting and auditing.
The financial statements of Century Chicago Broadcasting, L.P. as of and
for the year ended December 31, 1996, included in this Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The combined balance sheet of WJLB/WMXD, Detroit as of December 31, 1996
and the related combined statements of operations and cash flows for the year
then ended, and the combined balance sheets of the Colfax Communications, Inc.
Radio Group as of December 31, 1996, 1995 and 1994 and the related combined
statements of income (loss), changes in partners' equity and cash flows for each
of the three years in the period ended December 31, 1996, included in this
Prospectus, have been audited by Arthur Andersen
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LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
The consolidated balance sheets as of December 31, 1996 and 1995 and the
consolidated statements of operations, changes in common stockholder's equity
and cash flows for each of the three years ended December 31, 1996, of
Chancellor Radio Broadcasting Company and Subsidiaries, the consolidated
statements of operations, changes in common stockholders' equity, and cash flows
of Trefoil Communications, Inc. and subsidiaries for the period January 1, 1996
through February 13, 1996, included in this Prospectus have been included in
this Prospectus in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The financial statements of Trefoil Communications, Inc. as of and for the
years ended December 31, 1995 and 1994 included in this Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
LEGAL MATTERS
The validity of the shares of Surviving Subsidiary Series A Preferred Stock
and Surviving Subsidiary Junior Preferred Stock to be issued in the Merger will
be passed upon by, and an opinion with respect to certain tax consequences of
the Merger to Evergreen, EMHC and EMCLA will be rendered to Evergreen, EMHC and
EMCLA by Latham & Watkins, Washington, D.C. Eric L. Bernthal, a director of
Evergreen, is a partner of Latham & Watkins and owns options to purchase 7,500
shares of Evergreen Class A Common Stock.
An opinion with respect to certain tax consequences of the Merger to
Chancellor and CRBC will be rendered to Chancellor and CRBC by Weil, Gotshal &
Manges LLP, Dallas, Texas and New York, New York. A partner of Weil, Gotshal &
Manges LLP owns 2,166 shares of Chancellor Class A Common Stock.
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GLOSSARY OF CERTAIN TERMS AND MARKET AND INDUSTRY DATA
"12% Exchange Debentures" refers to the 12% Subordinated Exchange
Debentures due 2009 of the Surviving Subsidiary Corporation that may be issued
to holders of Surviving Subsidiary Junior Preferred Stock in exchange therefor.
"12% Exchange Indenture" refers to the indenture between CRBC and U.S.
Trust Company of Texas, N.A. governing the 12% Exchange Debentures.
"12% Exchange Debenture Trustee" refers to U.S. Trust Company of Texas,
N.A., as trustee under the 12% Exchange Indenture.
"12 1/4% Exchange Debentures" refers to the 12 1/4% Subordinated Exchange
Debentures due 2008 of the Surviving Subsidiary Corporation that may be issued
to holders of Surviving Subsidiary Series A Preferred Stock in exchange
therefor.
"12 1/4% Exchange Indenture" refers to the indenture between CRBC and U.S.
Trust Company of Texas, N.A. governing the 12 1/4% Exchange Debentures.
"12 1/4% Exchange Debenture Trustee" refers to U.S. Trust Company of Texas,
N.A., as trustee under the 12 1/4% Exchange Indenture.
"1996 Evergreen Equity Offering" refers to the sale on October 17, 1996 of
9,000,000 shares of Evergreen Class A Common Stock in a public offering.
"1996 Evergreen Preferred Stock Conversion" refers to the conversion of
1,608,297 shares of formerly outstanding Evergreen $3.00 convertible
exchangeable preferred stock into 5,025,916 shares of Evergreen Class A Common
Stock and the redemption of the remaining 1,703 shares of formerly outstanding
$3.00 convertible exchangeable preferred stock.
"ABC" refers to affiliates of Capital Cities/ABC Radio.
"ABC/Detroit Disposition" refers to the pending sale by Chancellor of
WDRQ-FM in Detroit to ABC for $37.0 million in cash.
"ABC/Washington Disposition" refers to the sale by Evergreen on July 7,
1997 of WJZW-FM in Washington, D.C. to ABC for $68.0 million in cash.
"BCF" or "Broadcast Cash Flow" consists of station operating income
excluding depreciation and amortization, corporate general and administrative
expense. Although not calculated in accordance with generally accepted
accounting principles, broadcast cash flow is widely used in the broadcast
industry as a measure of a company's operating performance. Nevertheless, this
measure should not be considered in isolation or as a substitute for operating
income, cash flows from operating activities or any other measure for
determining operating performance or liquidity that is calculated in accordance
with generally accepted accounting principles. Broadcast cash flow does not take
into account debt service requirements and other commitments and, accordingly,
broadcast cash flow is not necessarily indicative of amounts that may be
available for reinvestment in business or other discretionary uses.
"Beasley" refers to Beasley FM Acquisition Corp.
"Beasley Acquisition" refers to the acquisition by Evergreen on May 1, 1997
from Beasley of WDAS-FM/AM in Philadelphia for $103.0 million in cash.
"Bonneville" refers to Bonneville International Corporation and its
affiliates.
"Bonneville Acquisition" refers to the pending acquisition by Evergreen of
KZPS-FM and KDGE-FM in Dallas from Bonneville for $83.5 million in cash.
"Bonneville Dispositions" refers to the Bonneville/WPNT Disposition, the
Bonneville/WLUP Disposition and the Bonneville/KDFC Disposition.
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"Bonneville/KDFC Disposition" refers to the sale by Evergreen on July 21,
1997 of KDFC-FM in San Francisco to Bonneville for $50.0 million in cash.
"Bonneville/WLUP Disposition" refers to the disposition by Evergreen on
July 14, 1997 of WLUP-FM in Chicago to Bonneville that is expected to result in
a deferred exchange for one or more radio stations within 180 days after July
14, 1997. In the event that such exchange does not take place, Evergreen will
receive gross proceeds from the disposition of WLUP-FM of $80.0 million in cash.
"Bonneville/WPNT Disposition" refers to the sale by Evergreen on June 19,
1997 to Bonneville of WPNT-FM in Chicago for $75.0 million in cash.
"Century Acquisition" refers to the acquisition by Evergreen on May 30,
1997 from Century of WPNT-FM in Chicago for $73.75 million.
"Chancellor" refers to Chancellor Broadcasting Company.
"Chancellor Special Meeting" refers to the 1997 Special Meeting of
stockholders of Chancellor.
"Chancellor Board" refers to the Board of Directors of Chancellor.
"Chancellor Common Stock" refers to Chancellor Class A Common Stock and
Chancellor Class B Common Stock, collectively.
"Chancellor Interim Financing" refers to the $170.0 million interim loan
that Chancellor received on July 2, 1997 in connection with the Chancellor
Viacom Acquisition.
"Chancellor Media Corporation" refers to the name of the Surviving
Corporation and the new name of Evergreen following the Merger.
"Chancellor Mezzanine Holdings Corporation" refers to the name of the
Surviving Mezzanine Corporation following the Merger.
"Chancellor Offerings" refers to various equity offerings of Chancellor and
CRBC during 1996 and 1997.
"Chancellor Parent Convertible Preferred Stock" refers to the 7%
Convertible Preferred Stock of Chancellor, which will be converted into
Surviving Corporation Convertible Preferred Stock with substantially identical
rights and preferences upon consummation of the Merger.
"Chancellor Transfer" refers to the transfer of control of the radio
stations owned and operated by Chancellor and its subsidiaries from
HM2/Chancellor to the public stockholders of the Surviving Corporation.
"Chancellor Viacom Acquisition" refers to the acquisition by CRBC on July
2, 1997 from Viacom of the subsidiaries of Viacom that own and operate KYSR-FM
and KIBB-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in Detroit for
approximately $489.8 million plus various other direct acquisition costs.
"Colfax Acquisition" refers to the acquisition by CRBC on January 23, 1997
of Colfax Communications for approximately $383.7 million.
"Completed Chancellor Transactions" refers to (i) the Shamrock Acquisition,
(ii) the Houston/Denver Exchange, (iii) the Colfax Acquisition, (iv) the Omni
Acquisition, (v) the WWWW/WDFN Disposition, (vi) the Milwaukee Disposition,
(vii) the West Palm Beach Exchange and (viii) the Chancellor Viacom Acquisition.
"Completed Evergreen Transactions" refers to (i) the acquisition by EMCLA
on January 17, 1996 of Pyramid Communications, Inc. for approximately $316.3
million, (ii) the acquisition by EMCLA on August 14, 1996 of KYLD-FM in San
Francisco for $44.0 million in cash, (iii) the exchange by EMCLA on November 26,
1996 of WKLB-FM for WGAY-FM, (iv) the acquisition by EMCLA on October 18, 1996
of WEDR-FM in Miami for $65.0 million in cash, (v) the dispositions on July 19,
1996 and August 1, 1996 of WHTT-FM/AM and WSJZ-FM in Buffalo, respectively, (vi)
the WWWW/WDFN Acquisition, (vii) the
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KKSF/KDFC Acquisition, (viii) the Secret/Detroit Acquisition, (ix) the Greater
Media Exchange, (x) the Beasley Acquisition, (xi) the EZ Transaction, (xii) the
Century Acquisition, (xiii) the Crawford Disposition, (xiv) the Evergreen Viacom
Acquisition, (xv) the San Francisco Frequency Disposition, (xvi) the
ABC/Washington Disposition and (xvii) the Bonneville Dispositions.
"Completed Transactions" refers to the Completed Evergreen Transactions and
the Completed Chancellor Transactions.
"Crawford Disposition" refers to the sale on June 3, 1997 by Evergreen of
WEJM-FM in Chicago to affiliates of Crawford Broadcasting for $14.75 million in
cash.
"CRBC" refers to Chancellor Radio Broadcasting Company, a direct subsidiary
of Chancellor, and its consolidated subsidiaries.
"CRBC 8 3/4% Indenture" refers to the indenture governing the $200.0
million principal amount of 8 3/4% Senior Subordinated Notes due 2007 of CRBC.
"CRBC 8 3/4% Notes" refers to the 8 3/4% Senior Subordinated Notes due 2007
of CRBC, which will be assumed by the Surviving Subsidiary Corporation upon
consummation of the Merger.
"CRBC 8 3/4% Notes Offering" refers to the private offering and resale
pursuant to Rule 144A under the Securities Act of 1933, as amended, of CRBC's
8 3/4% Senior Subordinated Notes due 2007, which generated gross proceeds of
$200 million.
"CRBC 9 3/8% Indenture" refers to the indenture governing the $200.0
million principal amount of 9 3/8% Senior Subordinated Notes due 2004 of CRBC.
"CRBC 9 3/8% Notes" refers to the 9 3/8% Senior Subordinated Notes due 2004
of CRBC, which will be assumed by the Surviving Subsidiary Corporation upon
consummation of the Merger.
"CRBC Junior Preferred Stock" refers to the 12% Exchangeable Preferred
Stock of CRBC, which will be converted into preferred stock of the Surviving
Subsidiary Corporation with substantially identical rights and preferences upon
consummation of the Merger.
"CRBC Restated Credit Agreement" refers to the senior credit facility among
CRBC and certain lenders and Bankers Trust Company, as Managing Agent for such
lenders, dated as of July 2, 1997, pursuant to which CRBC's credit facility was
increased to a total commitment of $750.0 million.
"CRBC Series A Preferred Stock" refers to the 12 1/4% Senior Cumulative
Exchangeable Preferred Stock of CRBC, which will be converted into preferred
stock of the Surviving Subsidiary Corporation with substantially identical
rights and preferences upon consummation of the Merger.
"Denver Acquisition" refers to the pending acquisition by CRBC of KXPK-FM
in Denver from Ever Green Wireless LLC for $26.0 million in cash.
"Dissenting Shares" refers to those shares held by a holder of Chancellor
Parent Convertible Preferred Stock, who properly demands appraisal in accordance
with Section 262 of the Delaware General Corporate Law.
"Dividend Payment Date" refers to those dates on which the holders of
Surviving Corporation Convertible Preferred Stock will be entitled to receive
cash dividends, when, as and if declared by the Board of Directors of the
Surviving Corporation.
"Douglas" refers to affiliates of Douglas Broadcasting.
"Douglas Chicago Disposition" refers to the pending sale by EMCLA of
WEJM-AM in Chicago to Douglas for $7.5 million in cash.
"Douglas AM Dispositions" refers to the pending sale by EMCLA of KDFC-AM in
San Francisco and WBZS-AM and WZHF-AM in Washington, D.C. to Douglas for $18.0
million, payable in the form of a promissory note.
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"Effective Time" refers to the time at which the Parent Merger will become
effective. As defined in the Merger Agreement, the Parent Merger will become
effective at the time of filing of the Certificate of Merger for the Parent
Merger.
"EMCLA" refers to Evergreen Media Corporation of Los Angeles, a direct,
wholly owned subsidiary of EMHC, and its consolidated subsidiaries.
"EMCLA Senior Credit Facility" refers to the senior credit facility among
EMCLA and certain lenders and Toronto Dominion (Texas), Inc., as Administrative
Agent for such lenders, dated as of April 25, 1997, as amended on June 26, 1997,
pursuant to which EMCLA's credit facility was increased to a total commitment of
$1.75 billion and which, upon consummation of the Merger, shall increase to at
least $2.50 billion.
"EMHC" refers to Evergreen Mezzanine Holdings Corporation, a direct, wholly
owned subsidiary of Evergreen.
"Evergreen Annual Meeting" refers to the 1997 Annual Meeting of
stockholders of Evergreen.
"Evergreen" refers to Evergreen Media Corporation.
"Evergreen Board" refers to the Board of Directors of Evergreen.
"Evergreen Common Stock" refers to Evergreen Class A Common Stock and
Evergreen Class B Common Stock, collectively
"Evergreen Convertible Preferred Stock Offering" refers to the offering
pursuant to Rule 144A under the Securities Act of 1933, as amended, of
Evergreen's $3.00 convertible exchangeable preferred stock, which generated
aggregate gross proceeds of $299.5 million.
"Evergreen Transfer" refers to the transfer of the radio stations owned and
operated by Evergreen from Mr. Ginsburg to the public stockholders of the
Surviving Corporation.
"Evergreen Viacom Acquisition" refers to the acquisition by EMCLA on July
2, 1997 from Viacom of the subsidiaries of Viacom that own and operate WLTW-FM
and WAXQ-FM in New York and WMZQ-FM, WJZW-FM, WZHF-AM and WBZS-AM in Washington,
D.C. for approximately $607.7 million plus various other direct acquisition
costs.
"Exchange Agent" refers to the Bank of New York.
"Exchange Ratio" refers to the number of shares of the Surviving
Corporation Common Stock to be received upon conversion of one share of
Chancellor Class A Common Stock or Chancellor Class B Common Stock.
"EZ" refers to EZ Communications, Inc.
"EZ Exchange" refers to the exchange on May 15, 1997 by EMCLA of WPEG-FM,
WBAV-FM/AM, WRFX-FM and WFNZ-AM in Charlotte to EZ in return for WIOQ-FM and
WUSL-FM in Philadelphia.
"EZ Sale" refers to the sale on May 15, 1997 by EMCLA of WNKS-FM in
Charlotte to EZ for $10.0 million in cash.
"EZ Transaction" refers to the EZ Sale and EZ Exchange.
"FCC Consent" refers to FCC approval for the transfer of control from
Evergreen and Chancellor to the Surviving Corporation of the FCC licenses and
authorizations held by Evergreen and its licensee subsidiaries and by Chancellor
and its licensee subsidiaries.
"Financing Transactions" refers to the Evergreen Convertible Preferred
Stock Offering and borrowings by EMCLA under the EMCLA Senior Credit Facility.
"Gannett" refers to Gannett Co., Inc.
"Gannett Agreements" refers to the three separate Asset Purchase Agreements
dated April 4, 1997 between Evergreen and Pacific and Southern Company, Inc., a
subsidiary of Gannett.
113
<PAGE> 118
"Gannett Acquisition" refers to the pending acquisition by Evergreen from a
subsidiary of Gannett of WGCI-FM/AM in Chicago, KKBQ-FM/AM in Houston and
KHKS-FM in Dallas, for an aggregate purchase price of $340.0 million in cash.
"Greater Media" refers to affiliates of Greater Media Radio, Inc.
"Greater Media Exchange" refers to the exchange on April 3, 1997 by EMCLA
of WQRS-FM in Detroit to Greater Media in return for WWRC-AM in Washington, D.C.
and $9.5 million in cash.
"Greater Media Disposition" refers to the pending sale by Evergreen of
WFLN-FM in Philadelphia to Greater Media for $41.8 million in cash.
"Hicks Muse" refers to Hicks, Muse, Tate & Furst Incorporated.
"Hicks Stockholders" refers to Thomas O. Hicks and certain stockholders of
Chancellor that are affiliated with Hicks that are party to the Stockholders
Agreement.
"HM2/Chancellor" refers to HM2/Chancellor, L.P. an affiliate of Hicks Muse.
"Houston/Denver Exchange" refers to the exchange by Chancellor on July 31,
1996 of KTBZ-FM and $5.6 million in cash for KIMN-FM and KALC-FM in Denver.
"Katz Acquisition" refers to the pending acquisition of Katz Media Group,
Inc., a full-service media representation firm, by a jointly-owned affiliate of
Evergreen and Chancellor in a tender offer transaction valued at approximately
$373 million.
"KKSF/KDFC Acquisition" refers to the acquisition by Evergreen on January
31, 1997 of KKSF-FM and KDFC-FM/AM in San Francisco from The Brown Organization
for $115.0 million in cash.
"Memorandum of Agreement" refers to the memorandum of agreement dated
February 19, 1997, between Evergreen and Scott K. Ginsburg, as agreed and
acknowledged by Chancellor and CRBC.
"Merger" refers to the Parent Merger and the Subsidiary Merger.
"Merger Agreement" refers to the Agreement and Plan of Merger dated as of
February 19, 1997, as amended and restated, among Chancellor, CRBC, Evergreen,
EMHC and EMCLA.
"Milwaukee Disposition" refers to the disposition on March 31, 1997 by CRBC
of WMIL-FM and WOKY-AM in Milwaukee for $41.3 million in cash.
"OCF" refers to operating cash flow.
"Old Chancellor Communications" refers to KFBK-AM/KGBY-FM, a division of
Group W Radio, Inc. (Cal.), which Chancellor Communications acquired in January
1994.
"Omni Acquisition" refers to the acquisition by CRBC on February 13, 1997
of three FM stations in Orlando, two FM stations and one AM station in West Palm
Beach and two FM stations in Jacksonville from OmniAmerica Group for $166.0
million in cash and common stock of Chancellor valued at $15.0 million.
"Parent Merger" refers to the merger of Chancellor with and into EMHC
"Pending Chancellor Acquisitions" refers to the Denver Acquisition.
"Pending Chancellor Transactions" refers to the Pending Chancellor
Acquisitions and the ABC/Detroit Disposition.
"Pending Dispositions" refers to the Pending Evergreen Dispositions and the
ABC/Detroit Disposition.
"Pending Evergreen Acquisitions" refers to the Gannett Acquisition, the
Secret/Philadelphia Acquisition and the Bonneville Acquisition.
"Pending Evergreen Dispositions" refers to the Douglas Chicago Disposition,
the Greater Media Disposition and the Douglas AM Dispositions.
114
<PAGE> 119
"Pending Evergreen Transactions" refers to the Pending Evergreen
Dispositions and the Pending Evergreen Acquisitions.
"Pending Transactions" refers to the Pending Evergreen Transactions, the
Pending Chancellor Transactions and the Merger.
"Permitted Holders" refers to Hicks Muse or any of its affiliates, officers
and directors or Steven Dinetz.
"Required Dispositions" refers to the Douglas Chicago Disposition and the
Douglas AM Dispositions.
"San Francisco Frequency Disposition" refers to the sale by Evergreen on
July 7, 1997 to Susquehanna Radio Corp. of the FCC authorizations and certain
transmission equipment currently used in the operation of KYLD-FM for $44.0
million in cash.
"Secret" refers to Secret Communications, L.P.
"Secret/Detroit Acquisition" refers to the acquisition by EMCLA on April 1,
1997 of WMXD-FM and WJLB-FM in Detroit from Secret for $168.0 million in cash.
"Secret/Philadelphia Acquisition" refers to the pending acquisition by
EMCLA of WFLN-FM in Philadelphia from Secret for $37.75 million in cash.
"SFX" refers to SFX Broadcasting Inc.
"SFX Exchange" refers to the exchange agreement, which by its terms has
expired and consummation of which is uncertain, pursuant to which CRBC would
exchange WAPE-FM and WFYV-FM in Jacksonville and $11.0 million to SFX for
WBAB-FM, WBLI-FM, WHFM-FM and WGBB-AM in Nassau/Suffolk (Long Island).
"Shamrock Acquisition" refers to the acquisition by CRBC on February 14,
1996 of Trefoil Communications, Inc. and its wholly owned subsidiary, Shamrock
Broadcasting, Inc., for approximately $408.0 million.
"Subsidiary Merger" refers to the merger of CRBC into EMCLA.
"Subsidiary Merger Effective Time" refers to the time at which the
Subsidiary Merger will become effective. As defined in the Merger Agreement, the
Subsidiary Merger will become effective at the time of filing of the Certificate
of Merger for the Subsidiary Merger.
"Surviving Corporation" refers to Chancellor Media Corporation, the new
name of Evergreen, following the Merger.
"Surviving Corporation 7% Convertible Preferred Stock" refers to the 7%
Convertible Preferred Stock of the Surviving Corporation to be issued in the
Parent Merger, which will have substantially identical powers, preferences and
relative rights as the Chancellor Parent Convertible Preferred Stock.
"Surviving Corporation Common Stock" refers to the Common Stock, par value
$.01 per share, of the Surviving Corporation to be issued in the Merger.
"Surviving Mezzanine Corporation" refers to the corporation which will
survive the merger of Chancellor with and into EMHC.
"Surviving Subsidiary Corporation" refers to the corporation which will
survive the merger of CRBC with and into EMCLA.
"Surviving Subsidiary Series A Preferred Stock" refers to the 12 1/4%
Senior Cumulative Exchangeable Preferred Stock of the Surviving Subsidiary
Corporation to be issued in the Subsidiary Merger, which will have substantially
identical powers, preferences and relative rights as the CRBC Series A Preferred
Stock.
"Surviving Subsidiary Junior Preferred Stock" refers to the 12%
Exchangeable Preferred Stock of the Surviving Subsidiary Corporation to be
issued in the Subsidiary Merger, which will have substantially identical powers,
preferences and relative rights as the CRBC Junior Preferred Stock.
115
<PAGE> 120
"Stockholders Agreement" refers to the Agreement, dated February 19, 1997,
among Scott K. Ginsburg and the Hicks Stockholders pursuant to which Mr.
Ginsburg and the Hicks Stockholders have agreed to vote the shares of capital
stock of Evergreen and Chancellor, respectively, in favor of the Merger
Agreement and the transactions contemplated thereby.
"Viacom" refers to Viacom International, Inc.
"Viacom Acquisition" refers to the acquisition by EMCLA and CRBC on July 2,
1997 of the Viacom Subsidiaries pursuant to the Viacom Stock Purchase Agreement
and the Viacom Joint Purchase Agreement.
"Viacom Joint Purchase Agreement" refers to the Agreement dated February
19, 1997 among Evergreen, EMCLA, Chancellor and CRBC and which governed certain
aspects of the Viacom Acquisition as among those parties.
"Viacom Stock Purchase Agreement" refers to the Agreement dated February
16, 1997 between Evergreen and Viacom International, Inc. pursuant to which
EMCLA agreed to acquire from Viacom all of the issued and outstanding capital
stock of certain subsidiaries of Viacom.
"Viacom Stations" refers to radio stations WLTW-FM and WAXQ-FM in New York,
KYSR-FM and KIBB-FM in Los Angeles, WMZQ-FM, WJZW-FM, WZHF-AM and WBZS-AM in
Washington, D.C., WLIT-AM in Chicago and WDRQ-FM in Detroit.
"West Palm Beach Exchange" refers to the exchange by CRBC on March 28, 1997
of WEAT-FM/AM and WOLL-FM in West Palm Beach for KSTE-FM in Sacramento and $33.0
million in cash.
"WWWW/WDFN Acquisition" refers to the acquisition by EMCLA on January 31,
1997 from Chancellor of WWWW-FM and WDFN-AM in Detroit for $30.0 million in
cash.
"WWWW/WDFN Disposition" refers to the sale by CRBC on January 31, 1997 of
WWWW-FM and WDFN-AM in Detroit for $30.0 million in cash.
Unless otherwise indicated herein, (i) market ranking by radio advertising
revenue and market radio advertising revenue have been obtained from Duncan's
Radio Market Guide (1997 ed.) and (ii) all audience share data and audience
rankings, except where specifically stated to the contrary, have been derived
from Arbitron Radio Market Reports, Metro Audience Trends, Spring 1997. The
Arbitron Company (Copyright 1997).
116
<PAGE> 121
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial statements are
presented using the purchase method of accounting for all acquisitions and
reflect (i) the combination of consolidated historical financial data of EMCLA,
CRBC, each of the stations acquired in the Completed Evergreen Transactions and
the Completed Chancellor Transactions and each of the stations to be acquired by
EMCLA in the Pending Evergreen Acquisitions or CRBC in the Pending Chancellor
Acquisitions and (ii) the elimination of the consolidated historical data of the
stations sold by EMCLA and CRBC in the Completed Evergreen Dispositions and the
Completed Chancellor Dispositions and stations to be sold or swapped by EMCLA or
CRBC in the Pending Evergreen Dispositions and the Pending Chancellor
Dispositions. The unaudited pro forma condensed combined balance sheet data at
March 31, 1997 presents adjustments for those Completed Transactions consummated
since such date, the Pending Transactions and the Financing Transactions as if
each such transaction had occurred at March 31, 1997. The unaudited pro forma
condensed combined statement of operations data for the twelve months ended
December 31, 1996 and the three months ended March 31, 1997 present adjustments
for the following transactions as if each had occurred on January 1, 1996: (i)
the Completed Transactions, (ii) the 1996 Equity Offering, (iii) the 1996
Preferred Stock Conversion (as defined), (iv) the Chancellor Offerings, (v) the
Pending Transactions and (vi) the Financing Transactions. No adjustments are
presented to the unaudited pro forma condensed combined balance sheet data or
the unaudited pro forma condensed combined statement of operations data in
respect of (i) the Bonneville Acquisition and the Denver Acquisition, because
such transactions have not been completed and do not constitute the acquisition
of a significant business, either individually or in the aggregate, and are
unrelated for purposes of Rule 3-05 and Rule 11-01 of Regulation S-X of the
Commission's rules and (ii) the Douglas AM Dispositions, because such
transaction does not constitute the disposition of a significant business for
purposes of Rule 11-01 of Regulation S-X of the Commission's rules. In addition,
the following transactions, which were completed after the preparation of the
pro forma financial statements, are identified herein as "Pending Transactions":
(i) the Crawford Disposition; (ii) the Bonneville/WPNT Disposition; (iii) the
Evergreen Viacom Acquisition; (iv) the Chancellor Viacom Acquisition; (v) the
ABC/Washington Disposition; (vi) the San Francisco Frequency Disposition; (vii)
the Bonneville/WLUP Disposition and (viii) the Bonneville/KDFC Disposition.
Finally, the pro forma financial information reflects CRBC's previously pending
SFX Exchange; however, there is substantial uncertainty as to whether the SFX
Exchange will be consummated. See "Business -- CRBC -- Recent
Developments -- Pending Chancellor Transactions -- SFX Exchange." In the opinion
of EMCLA's and CRBC's management, any differences in the pro forma financial
statements that would result from the completion of such previously pending
transactions or from the non-consummation of the SFX Exchange are not material
to such presentations either individually or in the aggregate.
The purchase method of accounting has been used in the preparation of the
unaudited pro forma condensed combined financial statements. Under this method
of accounting, the aggregate purchase price is allocated to assets acquired and
liabilities assumed based on their estimated fair values. For purposes of the
unaudited pro forma condensed combined financial statements, the purchase prices
of the stations acquired and to be acquired in the Completed Transactions and
the Pending Transactions have been allocated based primarily on information
furnished by management of the acquired stations. The final allocation of the
respective purchase prices of the stations acquired and to be acquired in the
Completed Transactions and the Merger are determined a reasonable time after
consummation of such transactions and are based on a complete evaluation of the
assets acquired and liabilities assumed. Accordingly, the information presented
herein may differ from the final purchase price allocation.
In the opinion of EMCLA's management, all adjustments have been made that
are necessary to present fairly the pro forma data.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the respective financial statements and related notes
thereto of CRBC and EMCLA which are included elsewhere in this Prospectus. The
unaudited pro forma condensed combined financial statements are presented for
illustrative purposes only and are not necessarily indicative of the results of
operations or financial position that would have been achieved had the
transactions reflected therein been consummated as of the dates indicated, or of
the results of operations or financial positions for any future periods or
dates.
P-1
<PAGE> 122
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AT MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA EMCLA PRO PRO FORMA
EMCLA AS ADJUSTMENTS FORMA AS ADJUSTMENTS CRBC AS
ADJUSTED FOR FOR THE ADJUSTED FOR FOR THE ADJUSTED FOR
1997 COMPLETED PENDING THE PENDING PENDING THE PENDING
EVERGREEN EVERGREEN EVERGREEN CRBC CHANCELLOR CHANCELLOR
TRANSACTIONS(1) TRANSACTIONS TRANSACTIONS HISTORICAL TRANSACTIONS TRANSACTIONS
--------------- ------------ ------------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets................... $ 90,327 $ 12,841(2) $ 103,168 $ 61,279 $ 11,412(3) $ 70,991
(1,700)(4)
Property and equipment, net...... 61,493 8,720(2) 70,213 68,180 6,030(3) 74,210
Assets held for sale............. 50,000 (50,000)(2) -- -- -- --
Intangible assets, net........... 1,275,952 710,449(2) 1,986,401 978,094 461,290(3) 1,439,384
Other assets..................... 64,241 (53,750)(2) 10,491 68,170 (53,750)(3) 19,643
(777)(7)
6,000(8)
---------- -------- ---------- ---------- -------- ----------
Total assets................... $1,542,013 $628,260 $2,170,273 $1,175,723 $428,505 $1,604,228
========== ======== ========== ========== ======== ==========
LIABILITIES AND STOCKHOLDER'S
EQUITY:
Liabilities
Current portion of long-term
debt........................... $ -- $ -- $ -- $ 12,500 $(12,500)(5) $ --
Other current liabilities........ 22,144 3,620(2) 25,764 23,693 4,185(3) 27,878
---------- -------- ---------- ---------- -------- ----------
Total current liabilities...... 22,144 3,620 25,764 36,193 (8,315) 27,878
Long-term debt, excluding current
portion........................ 882,375 280,307(2) 1,162,682 524,121 250,797(3) 805,918
12,500(5)
69,000(6)
(60,000)(6)
3,500(7)
200,000(8)
(194,000)(8)
Deferred tax liabilities
(assets)....................... 87,714 19,710(2) 107,424 373 (3,600)(6) (4,938)
(1,711)(7)
Other liabilities................ 823 -- 823 786 -- 786
---------- -------- ---------- ---------- -------- ----------
Total liabilities.......... 993,056 303,637 1,296,693 561,473 268,171 829,644
Redeemable preferred stock....... -- -- -- 307,174 -- 307,174
STOCKHOLDER'S EQUITY:
Preferred stock.................. -- -- -- -- -- --
Common stock..................... 1 -- 1 1 -- 1
Additional paid in capital....... 663,046 288,018(2) 951,064 332,901 170,000(3) 502,901
Accumulated deficit.............. (114,090) 36,605(2) (77,485) (25,826) (5,400)(6) (35,492)
(2,566)(7)
(1,700)(4)
---------- -------- ---------- ---------- -------- ----------
Total stockholder's equity..... 548,957 324,623 873,580 307,076 160,334 467,410
---------- -------- ---------- ---------- -------- ----------
Total liabilities and
stockholder's equity......... $1,542,013 $628,260 $2,170,273 $1,175,723 $428,505 $1,604,228
========== ======== ========== ========== ======== ==========
<CAPTION>
PRO FORMA
ADJUSTMENTS COMPANY
FOR THE PRO FORMA
MERGER COMBINED
----------- ----------
<S> <C> <C>
ASSETS:
Current assets................... $ -- $ 174,159
Property and equipment, net...... -- 144,423
Assets held for sale............. -- --
Intangible assets, net........... 426,783(9) 4,134,058(11)
281,490(10)
Other assets..................... -- 30,134
-------- ----------
Total assets................... $708,273 $4,482,774
======== ==========
LIABILITIES AND STOCKHOLDER'S
EQUITY:
Liabilities
Current portion of long-term
debt........................... $ -- $ --
Other current liabilities........ -- 53,642
-------- ----------
Total current liabilities...... -- 53,642
Long-term debt, excluding current
portion........................ 198,000(9) 2,166,600
Deferred tax liabilities
(assets)....................... 281,490(10) 383,976
Other liabilities................ -- 1,609
-------- ----------
Total liabilities.......... 479,490 2,605,827
Redeemable preferred stock....... 12,029(9) 319,203
STOCKHOLDER'S EQUITY:
Preferred stock.................. -- --
Common stock..................... (1)(9) 1
Additional paid in capital....... 181,263(9) 1,635,228
Accumulated deficit.............. 35,492(9) (77,485)
-------- ----------
Total stockholder's equity..... 216,754 1,557,744
-------- ----------
Total liabilities and
stockholder's equity......... $708,273 $4,482,774
======== ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-2
<PAGE> 123
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
EMCLA AS PRO FORMA CRBC AS
ADJUSTED FOR PENDING ADJUSTMENTS FOR ADJUSTED FOR
COMPLETED EVERGREEN PENDING EMCLA COMPLETED
EVERGREEN TRANSACTIONS EVERGREEN PRO FORMA CHANCELLOR
YEAR ENDED DECEMBER 31, 1996 TRANSACTIONS(12) HISTORICAL(13) TRANSACTIONS AS ADJUSTED TRANSACTIONS(18)
- ----------------------------------- ---------------- -------------- --------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Gross revenues..................... $393,904 $84,351 $ -- $478,255 $276,459
Less: agency commissions........... (50,574) (12,421) -- (62,995) (35,020)
-------- ------- -------- -------- --------
Net revenues....................... 343,330 71,930 -- 415,260 241,439
Station operating expenses
excluding depreciation and
amortization..................... 200,794 29,085 -- 229,879 151,843
Depreciation and amortization...... 127,659 (142) 50,620(14) 178,137 35,432
Corporate general and
administrative expenses.......... 7,797 1,411 (1,100)(15) 8,108 5,354
Stock option compensation.......... -- -- -- -- 3,800
-------- ------- -------- -------- --------
Operating income (loss)............ 7,080 41,576 (49,520) (864) 45,010
Interest expense................... 64,120 -- 23,384(16) 87,504 47,159
Other (income) expense............. (618) 459 -- (159) (148)
-------- ------- -------- -------- --------
Income (loss) before income
taxes............................ (56,422) 41,117 (72,904) (88,209) (2,001)
Income tax expense (benefit)....... (14,142) 9,699 (19,825)(17) (24,268) 3,200
-------- ------- -------- -------- --------
Net income (loss).................. (42,280) 31,418 (53,079) (63,941) (5,201)
Preferred stock dividends.......... -- -- -- -- 38,400
-------- ------- -------- -------- --------
Income (loss) attributable to
common stock..................... $(42,280) $31,418 $(53,079) $(63,941) $(43,601)
======== ======= ======== ======== ========
OTHER FINANCIAL DATA:
Broadcast cash flow................ $142,536 $42,845 $ -- $185,381 $ 89,596
<CAPTION>
PRO FORMA
PENDING ADJUSTMENTS FOR
CHANCELLOR PENDING CRBC PRO FORMA COMPANY
TRANSACTIONS CHANCELLOR PRO FORMA ADJUSTMENTS FOR PRO FORMA
YEAR ENDED DECEMBER 31, 1996 HISTORICAL(19) TRANSACTIONS AS ADJUSTED THE MERGER COMBINED
- ----------------------------------- -------------- --------------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Gross revenues..................... $57,789 $ (1,963)(20) $332,285 $ -- $ 810,540
Less: agency commissions........... (9,152) -- (44,172) -- (107,167)
------- -------- -------- --------- ---------
Net revenues....................... 48,637 (1,963) 288,113 -- 703,373
Station operating expenses
excluding depreciation and
amortization..................... 24,562 (4,000)(20) 172,405 -- 402,284
Depreciation and amortization...... 6,427 5,803(21) 47,662 105,102(25) 330,901
Corporate general and
administrative expenses.......... 2,347 (1,807)(22) 5,894 (832)(26) 13,170
Stock option compensation.......... -- -- 3,800 -- 3,800
------- -------- -------- --------- ---------
Operating income (loss)............ 15,301 (1,959) 58,352 (104,270) (46,782)
Interest expense................... 6,374 17,355(23) 70,888 1,520(28) 159,912
Other (income) expense............. -- -- (148) -- (307)
------- -------- -------- --------- ---------
Income (loss) before income
taxes............................ 8,927 (19,314) (12,388) (105,790) (206,387)
Income tax expense (benefit)....... 4,422 (8,577)(24) (955) (33,305)(29) (58,528)
------- -------- -------- --------- ---------
Net income (loss).................. 4,505 (10,737) (11,433) (72,485) (147,859)
Preferred stock dividends.......... -- -- 38,400 -- 38,400
------- -------- -------- --------- ---------
Income (loss) attributable to
common stock..................... $ 4,505 $(10,737) $(49,833) $ (72,485) $(186,259)
======= ======== ======== ========= =========
OTHER FINANCIAL DATA:
Broadcast cash flow................ $24,075 $ 2,037 $115,708 $ -- $ 301,089
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-3
<PAGE> 124
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
EMCLA AS PRO FORMA CRBC AS
ADJUSTED FOR PENDING ADJUSTMENTS ADJUSTED FOR PENDING
COMPLETED EVERGREEN FOR EMCLA COMPLETED CHANCELLOR
EVERGREEN TRANSACTIONS THE PENDING PRO FORMA CHANCELLOR TRANSACTIONS
TRANSACTIONS(12) HISTORICAL(13) TRANSACTIONS AS ADJUSTED TRANSACTIONS(18) HISTORICAL(19)
---------------- -------------- ------------ ----------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 1997
Gross revenues............... $ 95,520 $22,998 $ -- $118,518 $ 65,832 $11,867
Less: agency commissions..... (12,155) (3,011) -- (15,166) (8,007) (1,960)
-------- ------- -------- -------- -------- -------
Net revenues................. 83,365 19,987 -- 103,352 57,825 9,907
Station operating expenses
excluding depreciation and
amortization............... 53,935 8,217 -- 62,152 38,828 5,111
Depreciation and
amortization............... 30,958 (606) 13,266(14) 43,618 8,862 1,078
Corporate general and
administrative expenses.... 2,330 306 (232)(15) 2,404 1,712 239
Merger expense............... -- -- -- -- 2,056 --
Stock option compensation.... -- -- -- -- 950 --
-------- ------- -------- -------- -------- -------
Operating income (loss)...... (3,858) 12,070 (13,034) (4,822) 5,417 3,479
Interest expense, net........ 14,905 -- 5,417(16) 20,322 11,740 1,594
Other (income) expense....... (108) -- -- (108) (1,632) --
-------- ------- -------- -------- -------- -------
Income (loss) before income
taxes...................... (18,655) 12,070 (18,451) (25,036) (4,691) 1,885
Income tax expense
(benefit).................. (5,128) 2,816 (4,799)(17) (7,111) (876) 788
-------- ------- -------- -------- -------- -------
Net income (loss)............ (13,527) 9,254 (13,652) (17,925) (3,815) 1,097
Preferred stock dividends.... -- -- -- -- 9,639 --
-------- ------- -------- -------- -------- -------
Income (loss) attributable to
common stock............... $(13,527) $ 9,254 $(13,652) $(17,925) $(13,454) $ 1,097
======== ======= ======== ======== ======== =======
OTHER FINANCIAL DATA:
Broadcast cash flow.......... $ 29,430 $11,770 $ -- $ 41,200 $ 18,997 $ 4,796
<CAPTION>
PRO FORMA
ADJUSTMENTS FOR
PENDING CRBC PRO FORMA COMPANY
CHANCELLOR PRO FORMA ADJUSTMENTS FOR PRO FORMA
TRANSACTIONS AS ADJUSTED THE MERGER COMBINED
--------------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31,
Gross revenues............... $ (1,070)(20) $ 76,629 $ -- $195,147
Less: agency commissions..... -- (9,967) -- (25,133)
-------- -------- -------- --------
Net revenues................. (1,070) 66,662 -- 170,014
Station operating expenses
excluding depreciation and
amortization............... (1,541)(20) 42,398 -- 104,550
Depreciation and
amortization............... 1,526(21) 11,466 26,646(25) 81,730
Corporate general and
administrative expenses.... (176)(22) 1,775 (247)(26) 3,932
Merger expense............... -- 2,056 (2,056)(27) --
Stock option compensation.... -- 950 -- 950
-------- -------- -------- --------
Operating income (loss)...... (879) 8,017 (24,343) (21,148)
Interest expense, net........ 4,338(23) 17,672 1,984(28) 39,978
Other (income) expense....... -- (1,632) -- (1,740)
-------- -------- -------- --------
Income (loss) before income
taxes...................... (5,217) (8,023) (26,327) (59,386)
Income tax expense
(benefit).................. (2,121)(24) (2,209) (8,038)(29) (17,358)
-------- -------- -------- --------
Net income (loss)............ (3,096) (5,814) (18,289) (42,028)
Preferred stock dividends.... -- 9,639 -- 9,639
-------- -------- -------- --------
Income (loss) attributable to
common stock............... $ (3,096) $(15,453) $(18,289) $(51,667)
======== ======== ======== ========
OTHER FINANCIAL DATA:
Broadcast cash flow.......... $ 471 $ 24,264 $ -- $ 65,464
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
P-4
<PAGE> 125
ADJUSTMENTS TO EMCLA'S HISTORICAL CONDENSED COMBINED BALANCE SHEET RELATED TO
THE 1997 COMPLETED EVERGREEN TRANSACTIONS COMPLETED AFTER MARCH 31, 1997
(1) The historical balance sheet of EMCLA at March 31, 1997 and the pro forma
adjustments related to the 1997 Completed Evergreen Transactions that were
completed after March 31, 1997 is summarized below:
<TABLE>
<CAPTION>
ADJUSTMENTS EMCLA AS
FOR ADJUSTED FOR
EMCLA 1997 COMPLETED 1997 COMPLETED
HISTORICAL EVERGREEN EVERGREEN
AT 3/31/97 TRANSACTIONS TRANSACTIONS
---------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Current assets............................... $ 90,327 $ -- $ 90,327
Property and equipment, net.................. 51,356 10,137(a) 61,493
Assets held for sale......................... 50,000 50,000
Intangible assets, net....................... 928,440 347,512(a) 1,275,952
Other assets................................. 66,532 (5,500)(a) 64,241
3,209(b)
---------- -------- -----------
Total assets.............................. $1,186,655 $355,358 $ 1,542,013
========== ======== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY:
Liabilities:
Current portion of long-term debt............ $ -- $ -- $ --
Other current liabilities.................... 22,144 -- 22,144
---------- -------- -----------
Total current liabilities................. 22,144 -- 22,144
Long-term debt, excluding current portion...... 535,375 337,000(a) 882,375
10,000(b)
Deferred tax liabilities....................... 84,789 5,302(a) 87,714
(2,377)(b)
Other liabilities.............................. 823 -- 823
---------- -------- -----------
Total liabilities......................... 643,131 349,925 993,056
Stockholder's equity:
Common stock................................. 1 -- 1
Additional paid-in capital................... 663,046 -- 663,046
Accumulated deficit.......................... (119,523) 9,847(a) (114,090)
(4,414)(b)
---------- -------- -----------
Total stockholder's equity................ 543,524 5,433 548,957
---------- -------- -----------
Total liabilities and stockholder's
equity.................................. $1,186,655 $355,358 $ 1,542,013
========== ======== ===========
</TABLE>
(a) Reflects the 1997 Completed Evergreen Transactions that were completed
after March 31, 1997 as follows:
<TABLE>
<CAPTION>
PROPERTY AND DEFERRED (INCREASE) INCREASE IN
1997 COMPLETED PURCHASE EQUIPMENT, INTANGIBLE TAX ACCUMULATED DECREASE IN LONG-TERM
EVERGREEN TRANSACTIONS PRICE NET(I) ASSETS, NET(I) LIABILITIES DEFICIT OTHER ASSETS DEBT
---------------------- -------- ------------ -------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
WJLB-FM/WMXD-FM(ii)... $168,000 $ 2,441 $165,559 $ -- $ -- -- $168,000
WWRC-AM(iii).......... 22,500 5,692 16,808 -- -- -- 22,500
WDAS-FM/AM(iv)........ 103,000 3,000 100,000 -- -- -- 103,000
WNKS-FM(v)............ (10,000) (694) (4,488) (1,686) (3,132) -- (10,000)
WUSL-FM/WIOQ-FM(vi)... -- -- -- -- -- -- --
WPNT-FM(vii).......... 73,750 626 73,124 -- -- 5,500 68,250
WEJM-FM(viii)......... (14,750) (928) (3,491) (3,616) (6,715) -- (14,750)
-------- ------- -------- ------- ------- -------- --------
Total $342,500 $10,137 $347,512 $(5,302) $(9,847) $ 5,500 $337,000
======== ======= ======== ======= ======= ======== ========
</TABLE>
- ---------------
(i) The amounts allocated to net property and equipment and net
intangible assets (consisting of broadcast licenses, goodwill and
other identifiable intangible assets) are based upon preliminary
appraisals of the assets acquired.
P-5
<PAGE> 126
(ii) On April 1, 1997, EMCLA acquired, in the Secret/Detroit
Acquisition, WJLB-FM and WMXD-FM in Detroit for $168,000 in cash.
(iii) On April 3, 1997, EMCLA swapped, in the Greater Media Exchange,
WQRS-FM in Detroit (which EMCLA acquired on April 3, 1997 for
$32,000 in cash) in exchange for WWRC-AM in Washington, D.C. and
$9,500 in cash. The net purchase price to EMCLA of WWRC-AM was
therefore $22,500.
(iv) On May 1, 1997, EMCLA acquired, in the Beasley Acquisition,
WDAS-FM/AM in Philadelphia for $103,000 in cash.
(v) On May 15, 1997, EMCLA sold, in the EZ Sale, WNKS-FM in Charlotte
for $10,000 in cash and recognized a gain of $3,132, net of taxes
of $1,686.
(vi) On May 15, 1997, EMCLA exchanged, in the EZ Exchange, 5 of its 6
stations in the Charlotte market (WPEG-FM, WBAV-FM/AM, WRFX-FM and
WFNZ-AM) for WUSL-FM and WIOQ-FM in Philadelphia.
(vii) On May 30, 1997, EMCLA acquired, in the Century Acquisition,
WPNT-FM in Chicago for $73,750 in cash. The $5,500 decrease in
other assets represents $5,000 in funds paid to the seller in
exchange for the option to purchase the station and $500 in escrow
funds which were classified as other assets at March 31, 1997.
(viii) On June 3, 1997, EMCLA sold, in the Crawford Disposition, WEJM-FM
in Chicago for $14,750 in cash.
(b) On April 25, 1997, EMCLA entered into the EMCLA Senior Credit
Facility, which amended and restated its prior senior credit
facility. The EMCLA Senior Credit Facility provides for a $500,000
term loan facility and a revolving loan facility of up to
$1,250,000. Reflects (i) the adjustment to write-off the
unamortized balance of deferred loan fees of $4,414 (net of a tax
benefit of $2,377) at March 31, 1997 as an extraordinary item and
(ii) the adjustment to record estimated new loan fees of $10,000 to
be incurred in connection with the refinancing of EMCLA's prior
senior credit facility and financed through additional bank
borrowings under the EMCLA Senior Credit Facility. The deferred
loan fees will be amortized ratably over the term of the EMCLA
Senior Credit Facility.
P-6
<PAGE> 127
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PENDING EVERGREEN TRANSACTIONS
(2) Reflects the Pending Evergreen Transactions as follows:
<TABLE>
<CAPTION>
PROPERTY
PURCHASE/ AND ASSETS
PENDING EVERGREEN TRANSACTIONS (SALES) CURRENT EQUIPMENT, HELD INTANGIBLE CURRENT DEFERRED TAX
AT MARCH 31, 1997 PRICE ASSETS NET(A) FOR SALE ASSETS, NET(A) LIABILITIES LIABILITIES(B)
- ------------------------------ --------- ------- ---------- -------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
WFLN-FM(d).................... $ 37,750 $ -- $ 660 $ -- $ 37,090 $ -- $ --
WFLN-FM(d).................... (41,800) -- (660) -- (37,090) -- (1,417)
WEJM-AM(e).................... (7,500) -- (759) -- (2,857) -- (1,359)
WPNT-FM(f).................... (75,000) -- (626) -- (73,124) -- (438)
WLUP-FM(g).................... (80,000) -- (483) -- (33,597) -- (16,072)
KDFC-FM(h).................... (50,000) -- -- (50,000) -- -- --
San Francisco Frequency(i).... (44,000) -- (989) -- (41,800) -- (424)
Evergreen Viacom
Acquisition(j).............. 610,625 12,841 6,092 68,000 527,312 (3,620) --
WJZW-FM(k).................... (68,000) -- -- (68,000) -- -- --
Gannett(l).................... 340,000 -- 5,485 -- 334,515 -- --
-------- ------- ------- -------- -------- ------- --------
$622,075 $12,841 $ 8,720 $(50,000) $710,449 $(3,620) $(19,710)
======== ======= ======= ======== ======== ======= ========
<CAPTION>
(INCREASE) INCREASE INCREASE IN
DECREASE (DECREASE) IN ADDITIONAL
PENDING EVERGREEN TRANSACTIONS ACCUMULATED IN OTHER LONG-TERM PAID-IN
AT MARCH 31, 1997 DEFICIT(C) ASSETS DEBT CAPITAL
- ------------------------------ ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
WFLN-FM(d).................... $ -- $ -- $ 37,750 $ --
WFLN-FM(d).................... (2,633) -- (41,800) --
WEJM-AM(e).................... (2,525) -- (7,500) --
WPNT-FM(f).................... (812) -- (75,000) --
WLUP-FM(g).................... (29,848) -- (80,000) --
KDFC-FM(h).................... -- -- (50,000) --
San Francisco Frequency(i).... (787) -- (44,000) --
Evergreen Viacom
Acquisition(j).............. -- 53,750 268,857 288,018
WJZW-FM(k).................... -- -- (68,000) --
Gannett(l).................... -- -- 340,000 --
-------- ------- -------- --------
$(36,605) $53,750 $280,307 $288,018
======== ======= ======== ========
</TABLE>
P-7
<PAGE> 128
(a) EMCLA has assumed that historical balances of net property and equipment to
be acquired approximate fair value for the preliminary allocation of the
purchase price. Such amounts are based primarily on information provided by
management of the respective stations to be acquired in the Pending
Evergreen Transactions. EMCLA, on a preliminary basis, has allocated the
$527,312 of intangible assets related to the Evergreen Viacom Acquisition
and $334,515 of intangible assets related to the Gannett Acquisition to
broadcast licenses, goodwill and other identifiable intangible assets. This
preliminary allocation is based on historical information from prior
acquisitions.
(b) Represents the tax effect upon consummation of the transaction.
(c) Represents the gain on sale, net of tax, upon consummation of the
transaction.
(d) On August 12, 1996, EMCLA entered into an agreement to acquire, in the
Secret/Philadelphia Acquisition, WFLN-FM in Philadelphia for $37,750 in
cash. On April 4, 1997, EMCLA entered into an agreement to sell, in the
Greater Media Disposition, WFLN-FM in Philadelphia for $41,800 in cash.
(e) On March 19, 1997, EMCLA entered into an agreement to sell, in the Douglas
Chicago Disposition, WEJM-AM in Chicago for $7,500 in cash.
(f) On April 10, 1997, EMCLA entered into an agreement to sell, in the
Bonneville Dispositions, WPNT-FM in Chicago for $75,000 in cash.
(g) On April 10, 1997, EMCLA entered into an agreement to sell, in the
Bonneville Dispositions, WLUP-FM in Chicago for $80,000 in cash.
(h) On April 10, 1997, EMCLA entered into an agreement to sell, in the
Bonneville Dispositions, KDFC-FM in San Francisco for $50,000 in cash. The
assets of KDFC-FM are classified as assets held for sale at March 31, 1997
in connection with the purchase price allocation of the acquisition of
KKSF-FM/KDFC-FM/AM on January 31, 1997 and no gain or loss will be
recognized by EMCLA upon consummation of the KDFC-FM sale.
(i) On April 8, 1997, EMCLA entered into an agreement to sell, in the San
Francisco Frequency Disposition, the San Francisco 107.7 MHz FM dial
position and transmission facility and the call letters from CRBC's KSAN-FM
in San Francisco for $44,000 in cash.
(j) On February 19, 1997, EMCLA and CRBC entered into the Viacom Joint Purchase
Agreement whereby in the event the Viacom Acquisition occurs prior to the
consummation of the Chancellor Merger, EMCLA will purchase 6 of the 10
Viacom stations in the Evergreen Viacom Acquisition for $595,000 plus
working capital ($10,125 at March 31, 1997) and estimated acquisition costs
of $5,500 for an aggregate purchase price of $610,625. The stations to be
acquired by EMCLA in the Evergreen Viacom Acquisition include WAXQ-FM and
WLTW-FM in New York and WMZQ-FM, WZHF-AM, WJZW-FM and WBZS-AM in Washington,
D.C. The assets of WJZW-FM in Washington, D.C. are classified as assets held
for sale in connection with the purchase price allocation of the Evergreen
Viacom Acquisition (see (k) below). The Evergreen Viacom Acquisition will be
financed with (i) the contribution to EMCLA by Evergreen of the estimated
net proceeds of $288,018 from the private placement of $299,500 liquidation
amount of Evergreen $3.00 Convertible Preferred Stock; (ii) additional bank
borrowings under the EMCLA Senior Credit Facility of $268,857 and (iii)
$53,750 in escrow funds paid by EMCLA on February 19, 1997 and classified as
other assets at March 31, 1997.
(k) On April 11, 1997, EMCLA entered into an agreement to sell, in the
ABC/Washington Disposition, WJZW-FM in Washington (to be acquired as part of
the Evergreen Viacom Acquisition) for $68,000 in cash. The assets of WJZW-FM
are classified as assets held for sale in connection with the purchase price
allocation of the Evergreen Viacom Acquisition and no gain or loss will be
recognized by EMCLA upon consummation of the sale.
(l) On April 4, 1997, EMCLA entered into an agreement to acquire, in the Gannett
Acquisition, 5 radio stations in 3 major markets from P&S, including
WGCI-FM/AM in Chicago, KHKS-FM in Dallas, and KKBQ-FM/AM in Houston for
$340,000. The pro forma combined financial statements assume that the
transaction will close by December 26, 1997 and that no upward adjustment in
the purchase price will occur.
P-8
<PAGE> 129
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE PENDING CHANCELLOR TRANSACTIONS
(3) Reflects the Pending Chancellor Transactions as follows:
<TABLE>
<CAPTION>
DECREASE INCREASE
PURCHASE/ PROPERTY AND ASSETS IN (DECREASE) IN
PENDING CHANCELLOR (SALES) CURRENT EQUIPMENT, HELD INTANGIBLE CURRENT OTHER LONG-TERM
TRANSACTIONS PRICE ASSETS NET FOR SALE ASSETS, NET LIABILITIES ASSETS DEBT
------------------ --------- ------- ------------ -------- ----------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WBAB-FM, WBLI-FM,
WBGG-AM, WHFM-
FM(a)............... $11,000 $ -- $1,494 $ -- $ 9,506 $ -- $ -- $ 11,000
Chancellor Viacom
Acquisition(b)...... 500,547 11,412 4,536 37,000 451,784 (4,185) 53,750 276,797
WDRQ-FM(c)............ (37,000) -- -- (37,000) -- -- -- (37,000)
-------- ------- ------ -------- -------- ------- ------- --------
Total......... $474,547 $11,412 $6,030 $ -- $461,290 $(4,185) $53,750 $250,797
======== ======= ====== ======== ======== ======= ======= ========
<CAPTION>
INCREASE
IN
ADDITIONAL
PENDING CHANCELLOR PAID-IN
TRANSACTIONS CAPITAL
------------------ ----------
<S> <C>
WBAB-FM, WBLI-FM,
WBGG-AM, WHFM-
FM(a)............... $ --
Chancellor Viacom
Acquisition(b)...... 170,000
WDRQ-FM(c)............ --
--------
Total......... $170,000
========
</TABLE>
- ---------------
(a) On July 1, 1996, CRBC entered into an agreement to exchange, in the SFX
Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida (which were acquired
as part of the Omni Acquisition on February 13, 1997, see 16(e) below), and
$11,000 in cash for WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Long Island.
See "Risk Factors -- Antitrust Matters." The amounts allocated to net
property and equipment and net intangible assets (consisting of broadcast
licenses, goodwill and other identifiable intangibles) are based upon
preliminary appraisals of the assets to be acquired.
(b) On February 19, 1997, CRBC and EMCLA entered into the Viacom Joint Purchase
Agreement whereby in the event the Viacom Acquisition occurs prior to the
consummation of the Merger, CRBC will be required to purchase 4 of the 10
Viacom stations in the Chancellor Viacom Acquisition for $480,000 plus
working capital ($7,547 at March 31, 1997) and estimated acquisition costs
of $13,000 for an aggregate purchase price of $500,547. The stations to be
acquired by CRBC include KYSR-FM and KIBB-FM in Los Angeles, WLIT-FM in
Chicago and WDRQ-FM in Detroit. The assets of WDRQ-FM are classified as
assets held for sale in connection with the purchase price allocation of the
Chancellor Viacom Acquisition (see (c) below). The Chancellor Viacom
Acquisition will be financed through (i) additional bank borrowings of
$276,797 under the CRBC Restated Credit Agreement (see (4) below); (ii)
escrow funds of $53,750 paid by CRBC on February 19, 1997 and classified as
other assets at March 31, 1997 and (iii) Chancellor's borrowings under the
Chancellor Interim Financing for estimated net proceeds of $170,000 which
will be contributed to CRBC by Chancellor. CRBC has assumed that historical
balances of net property and equipment approximate fair value for the
preliminary allocation of the purchase price. Such amounts are based
primarily on information provided by the management of Viacom. The
intangible assets of $451,784 have been allocated to broadcast licenses,
goodwill and other identifiable intangibles on a preliminary basis. This
preliminary allocation is based on historical information from prior
acquisitions.
(c) On April 11, 1997, CRBC entered into an agreement to sell, in the
ABC/Detroit Disposition, WDRQ-FM in Detroit (to be acquired as part of the
Chancellor Viacom Acquisition) for $37,000 in cash. The assets of WDRQ-FM
are classified as assets held for sale in connection with the purchase price
allocation of the Chancellor Viacom Acquisition and no gain or loss will be
recognized by CRBC upon consummation of the sale.
(4) Reflects funds of $1,700 distributed to Chancellor by CRBC for payment of
costs incurred by Chancellor in connection with the Chancellor Interim
Financing.
(5) In connection with the Chancellor Viacom Acquisition, CRBC expects to
refinance its senior credit agreement (when and as amended, the "CRBC
Restated Credit Agreement"). The CRBC Restated Credit Agreement is expected
to provide for a $400,000 term loan facility and a $350,000 revolving loan
facility. Reflects the $12,500 adjustment to decrease current maturities of
long-term debt under the CRBC Restated Credit Agreement to $0.
P-9
<PAGE> 130
(6) Reflects an extraordinary charge of $5,400 for estimated early call premiums
and fees of $9,000 (less a tax benefit of $3,600) to be incurred in
connection with the redemption of CRBC's 12.5% Senior Subordinated Notes
($60,000 principal amount). The redemption will be financed through
additional borrowings of $69,000 under CRBC's senior credit agreement.
(7) Reflects (i) the adjustment to write-off the unamortized balance of deferred
loan fees of $2,566 (net of a tax benefit of $1,711) at March 31, 1997
related to the CRBC 12.5% Senior Subordinated Notes and the CRBC's previous
senior credit agreement as an extraordinary item and (ii) the adjustment to
record estimated new loan fees of $3,500 to be incurred in connection with
the CRBC Restated Credit Agreement and financed through additional bank
borrowings under such agreement.
(8) Reflects the estimated net proceeds of $194,000 from CRBC's issuance of
$200,000 of its 8 3/4% Senior Subordinated Notes. The net proceeds will be
used to reduce bank borrowings under the CRBC Restated Credit Agreement.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET RELATED TO
THE CHANCELLOR MERGER
(9) Merger Purchase Price Information. In connection with the Merger, each
outstanding share of Chancellor Common Stock will be converted into the
right to receive 0.9091 shares of Surviving Corporation Common Stock. For
purposes of the unaudited pro forma condensed combined financial statements,
the fair market value of Common Stock is calculated by using $31.00 per
share which is based on the market price of the Evergreen Class A Common
Stock on and around the announcement date of the Merger on February 19,
1997. The aggregate purchase price is summarized below:
<TABLE>
<S> <C>
EXCHANGE OF CHANCELLOR COMMON STOCK:
Shares of Chancellor Common Stock outstanding............... 18,985,122
Exchange ratio.............................................. .9091
----------
Shares of Surviving Corporation Common Stock to be issued in
connection with the Merger................................ 17,259,374
==========
AGGREGATE PURCHASE PRICE:
Chancellor debt and equity assumed at fair values:
Estimated fair value of Surviving Corporation Common Stock
to be issued in connection with the Merger (17,259,374
shares @ $31.00 per share)................................ $ 535,041
Chancellor Parent Convertible Preferred Stock............... 111,454
Stock options issued by Chancellor.......................... 37,669
Chancellor Interim Financing................................ 170,000
CRBC debt and equity assumed at fair values:
Long-term debt outstanding:
Revolving Loan......................................... 5,918
Term Loan.............................................. 400,000
CRBC 9 3/8% Senior Notes............................... 200,000
CRBC 8 3/4% Senior Notes............................... 200,000
-------
Total long-term debt outstanding.......................... 805,918
CRBC Series A Preferred Stock............................. 114,670
CRBC Junior Preferred Stock............................... 204,533
Financial advisors, legal, accounting and other professional
fees...................................................... 28,000
----------
Aggregate purchase price.................................... $2,007,285
==========
</TABLE>
P-10
<PAGE> 131
To record the aggregate purchase price of the Merger and eliminate certain
CRBC historical balances as follows:
<TABLE>
<CAPTION>
ELIMINATION
OF CRBC
PURCHASE HISTORICAL
PRICE BALANCES MERGER NET
ALLOCATION AS ADJUSTED FINANCING ADJUSTMENT
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Current assets........................ $ 70,991 $ (70,991) $ -- $ --
Property and equipment, net(a)........ 74,210 (74,210) -- --
Intangible assets(a).................. 1,866,167 (1,439,384) -- 426,783
Other assets.......................... 19,643 (19,643) -- --
Current liabilities................... (27,878) 27,878 -- --
Long-term debt........................ -- 805,918 (1,003,918)(b) (198,000)
Deferred tax liabilities (assets)..... 4,938 (4,938) -- --
Other liabilities..................... (786) 786 -- --
Redeemable preferred stock............ -- 307,174 (319,203)(c) (12,029)
Common stock.......................... -- 1 -- 1
Additional paid-in capital............ -- 502,901 (684,164)(d) (181,263)
Accumulated deficit................... -- (35,492) -- (35,492)
---------- ----------- ----------- ---------
Aggregate Purchase Price.............. $2,007,285 $ -- $(2,007,285) $ --
========== =========== =========== =========
</TABLE>
- ---------------
(a) EMCLA has assumed that historical balances of net property and equipment to
be acquired approximate fair value for the preliminary allocation of the
purchase price. EMCLA, on a preliminary basis, has allocated the $1,866,167
of intangible assets to broadcast licenses, goodwill and other intangible
assets. This preliminary allocation is based upon historical information
from prior acquisitions and appraisals provided by the management of CRBC.
(b) Reflects the adjustment to record debt assumed or incurred by the Surviving
Corporation including (i) CRBC's long-term debt of $805,918; (ii) the
Chancellor Interim Financing of $170,000 (without giving effect to any
paid-in-kind interest thereon) assumed by Evergreen and retired by EMCLA
through bank borrowings under the Senior Credit Facility distributed to
Evergreen and (iii) additional bank borrowings of $28,000 required to
finance estimated financial advisors, legal, accounting and other
professional fees.
(c) Reflects the adjustment to record the estimated fair value of redeemable
preferred stock to be issued by EMCLA in exchange for (i) the CRBC Series A
Preferred Stock of $114,670 (including accrued and unpaid dividends of
$14,670) and (ii) the CRBC Junior Preferred Stock of $204,533 (including
accrued and unpaid dividends of $4,533).
(d) Reflects the portion of the Aggregate Purchase Price contributed by
Evergreen on behalf of EMCLA to consummate the Merger, including (i)
additional paid-in capital of $535,041 related to 17,259,374 shares of the
Surviving Corporation Common Stock to be issued in connection with the
Merger; (ii) Chancellor's 7% Convertible Preferred Stock of $111,454
(including accrued and unpaid dividends of $1,454) and (iii) the fair value
of stock options assumed by the Surviving Corporation of $37,669. The
$37,669 fair value of the Chancellor Stock Options was estimated using the
Black-Scholes option pricing model and the Merger exchange ratio of .9091
applied to Chancellor's outstanding options and exercise prices. At March
31, 1997, Chancellor had 1,928,900 options outstanding with exercise prices
ranging from $7.50 to $36.75.
(10) To record a $281,490 deferred tax liability related to the difference
between the financial statement carrying amount and the tax basis of CRBC
acquired assets.
P-11
<PAGE> 132
(11) The Company Pro Forma Combined intangible assets of $4,134,058 consist of
the following at March 31, 1997:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
-----------
<S> <C> <C>
Broadcast licenses......................................... 15-40 $3,429,606
Goodwill................................................... 15-40 513,271
Other intangibles.......................................... 1-40 399,556
----------
$4,342,433
Less: accumulated amortization............................. (208,375)
----------
Net intangible assets...................................... $4,134,058
==========
</TABLE>
Evergreen discloses broadcast license value separately from goodwill and
amortizes such intangible assets over an estimated average life of 15 years,
whereas, Chancellor groups all broadcast license value with goodwill and
amortizes such intangibles assets over an estimated average life of 40 years. In
connection with the application of purchase accounting for the Merger, broadcast
license value and goodwill have been separately identified and disclosed and
amortized over an estimated average life of 15 years in accordance with
Evergreen's policies and procedures. The intangible assets have been treated in
a consistent manner for the Combined Company in the Unaudited Combined Condensed
Pro Forma Financial Statements and, following the consummation of the Merger,
will be accounted for similarly in the Surviving Corporation's financial
statements.
EMCLA amortizes such intangible assets using the straight-line method over
estimated useful lives ranging from 1 to 40 years. EMCLA continually evaluates
the propriety of the carrying amount of goodwill and other intangible assets as
well as the amortization period to determine whether current events or
circumstances warrant adjustments to the carrying value and/or revised estimates
of useful lives. This evaluation consists of the projection of undiscounted
operating income before depreciation, amortization, nonrecurring charges and
interest for each of EMCLA's radio stations over the remaining amortization
periods of the related intangible assets. The projections are based on a
historical trend line of actual results since the acquisitions of the respective
stations adjusted for expected changes in operating results. To the extent such
projections indicate that undiscounted operating income is not expected to be
adequate to recover the carrying amounts of the related intangible assets, such
carrying amounts are written down by charges to expense.
P-12
<PAGE> 133
EMCLA'S HISTORICAL CONDENSED COMBINED STATEMENTS OF OPERATIONS AND ADJUSTMENTS
RELATED TO THE COMPLETED EVERGREEN TRANSACTIONS
(12) EMCLA's historical condensed combined statement of operations for the year
ended December 31, 1996 and the three months ended March 31, 1997 and pro
forma adjustments related to the Completed Evergreen Transactions are
summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS
--------------------------------------------------------------------
WWRC-AM WWWW-FM/
PYRAMID KYLD-FM WGAY-FM WEDR-FM WDFN-AM
EMCLA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
COMPLETED EVERGREEN TRANSACTIONS(A) HISTORICAL 1-1/1-17(B) 1/1-4/30(C) 1/1-6/17(D) 1/1-10/18(E) 1/1-2/14(F)
- ----------------------------------- ---------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $337,405 $2,144 $ 2,308 $ 3,264 $ 7,933 $ 839
Less: agency commissions........... (43,555) (216) (363) (409) (1,066) (102)
-------- ------ ------- ------- ------- -----
Net revenues....................... 293,850 1,928 1,945 2,855 6,867 737
Station operating expenses
excluding depreciation and
amortization..................... 174,344 1,489 1,885 3,493 2,933 815
Depreciation and amortization...... 93,749 502 749 314 29 45
Corporate general and
administrative expenses.......... 7,797 123 256 477 1,401 --
-------- ------ ------- ------- ------- -----
Operating income (loss)............ 17,960 (186) (945) (1,429) 2,504 (123)
Interest expense................... 37,527 343 1,094 -- -- --
Other (income) expense............. (477) (5) (97) 5 (15) --
-------- ------ ------- ------- ------- -----
Income (loss) before income taxes.. (19,090) (524) (1,942) (1,434) 2,519 (123)
Income tax expense (benefit)....... (2,896) -- -- (453) -- --
-------- ------ ------- ------- ------- -----
Income (loss) attributable to
common stock..................... $(16,194) $ (524) $(1,942) $ (981) $ 2,519 $(123)
======== ====== ======= ======= ======= =====
OTHER FINANCIAL DATA:
Broadcast Cash Flow................ $119,506 $ 439 $ 60 $ (638) $ 3,934 $ (78)
<CAPTION>
ACQUISITIONS
--------------------------------------------------------
KKSF-FM/ WJLB-FM/ WUSL-FM
KDFC-FM/AM WMXD-FM WDAS-FM/AM WIOQ-FM
HISTORICAL HISTORICAL HISTORICAL HISTORICAL
COMPLETED EVERGREEN TRANSACTIONS(A) 1/1-10/31(G) 1/1-8/31(H) 1/1-12/31(I) 1/1-12/31(J)
- ----------------------------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $13,646 $15,408 $16,809 $20,152
Less: agency commissions........... (1,746) (1,881) (2,142) (2,369)
------- ------- ------- -------
Net revenues....................... 11,900 13,527 14,667 17,783
Station operating expenses
excluding depreciation and
amortization..................... 6,358 5,721 7,759 9,519
Depreciation and amortization...... 2,351 2,415 2,763 --
Corporate general and
administrative expenses.......... -- 1,005 620 533
------- ------- ------- -------
Operating income (loss)............ 3,191 4,386 3,525 7,731
Interest expense................... 429 1,406 79 3,001
Other (income) expense............. (48) -- (39) 58
------- ------- ------- -------
Income (loss) before income taxes.. 2,810 2,980 3,485 4,672
Income tax expense (benefit)....... -- 180 -- --
------- ------- ------- -------
Income (loss) attributable to
common stock..................... $ 2,810 $2,800 $ 3,485 $ 4,672
======= ======= ======= =======
OTHER FINANCIAL DATA:
Broadcast Cash Flow................ $ 5,542 $7,806 $ 6,908 $ 8,264
<CAPTION>
DISPOSITIONS
------------------------------------------
WPEG-FM
WBAV-FM/AM EMCLA AS
WRFX-FM ADJUSTED FOR
WFNZ-FM WNKS-FM WEJM-FM COMPLETED
HISTORICAL HISTORICAL HISTORICAL PRO FORMA EVERGREEN
COMPLETED EVERGREEN TRANSACTIONS(A) 1/1-12/31(J) 1/1-12/31(K) 1/1-12/31(L) ADJUSTMENTS TRANSACTIONS
- ----------------------------------- ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Gross revenues..................... $(20,818) $ (3,303) $(1,883) $ -- $393,904
Less: agency commissions........... 2,733 337 205 -- (50,574)
-------- -------- ------- -------- --------
Net revenues....................... (18,085) (2,966) (1,678) -- 343,330
Station operating expenses
excluding depreciation and
amortization..................... (9,509) (2,461) (1,552) -- 200,794
Depreciation and amortization...... -- (548) (1,203) 26,493(m) 127,659
Corporate general and
administrative expenses.......... -- -- -- (4,415)(n) 7,797
-------- -------- ------- -------- --------
Operating income (loss)............ (8,576) 43 1,077 (22,078) 7,080
Interest expense................... -- -- -- 20,241(o) 64,120
Other (income) expense............. -- -- -- -- (618)
-------- -------- ------- -------- --------
Income (loss) before income taxes.. (8,576) 43 1,077 (42,319) (56,422)
Income tax expense (benefit)....... -- -- -- (10,973)(p) (14,142)
-------- -------- ------- -------- --------
Income (loss) attributable to
common stock..................... $ (8,576) $ 43 $ 1,077 $(31,346) $(42,280)
======== ======== ======= ======== ========
OTHER FINANCIAL DATA:
Broadcast Cash Flow................ $ (8,576) $ (505) $ (126) $ -- $142,536
</TABLE>
P-13
<PAGE> 134
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------- ---------------------------------------
WPEG-FM
WUSL-FM WBAV-FM/AM
WIOQ-FM WRFX-FM WNKS-FM
WDAS-FM/AM HISTORICAL WFNZ-FM HISTORICAL WEJM-FM
EMCLA HISTORICAL 1/1- HISTORICAL 1/1- HISTORICAL
COMPLETED EVERGREEN TRANSACTIONS(A) HISTORICAL 1/1-3/31(I) 3/31(J) 1/1-3/31(J) 3/31(K) 1/1-3/31(L)
----------------------------------- ---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 1997
Gross revenues....................... $93,812 $3,471 $4,376 $(4,932) $(807) $(400)
Less: agency commissions............. (11,915) (471) (530) 638 83 40
------- ------ ------ ------- ----- -----
Net revenues......................... 81,897 3,000 3,846 (4,294) (724) (360)
Station operating expenses excluding
depreciation and amortization...... 52,984 1,931 2,367 (2,346) (634) (367)
Depreciation and amortization........ 26,015 657 -- -- (141) (165)
Corporate general and administrative
expenses........................... 2,330 128 94 -- -- --
------- ------ ------ ------- ----- -----
Operating income (loss).............. 568 284 1,385 (1,948) 51 172
Interest expense..................... 8,053 14 660 -- -- --
Other (income) expense............... (165) 57 -- -- -- --
------- ------ ------ ------- ----- -----
Income (loss) before income taxes.... (7,320) 213 725 (1,948) 51 172
Income tax expense (benefit)......... (1,309) -- -- -- -- --
------- ------ ------ ------- ----- -----
Income (loss) attributable to common
stock.............................. $(6,011) $ 213 $ 725 $(1,948) $ 51 $ 172
======= ====== ====== ======= ===== =====
OTHER FINANCIAL DATA:
Broadcast cash flow.................. $28,913 $1,069 $1,479 $(1,948) $ (90) $ 7
======= ====== ====== ======= ===== =====
<CAPTION>
EMCLA AS
ADJUSTED FOR
COMPLETED
PRO FORMA EVERGREEN
COMPLETED EVERGREEN TRANSACTIONS(A) ADJUSTMENTS TRANSACTIONS
----------------------------------- ----------- ------------
<S> <C> <C>
THREE MONTHS ENDED MARCH 31, 1997
Gross revenues....................... $ -- $ 95,520
Less: agency commissions............. -- (12,155)
------- --------
Net revenues......................... -- 83,365
Station operating expenses excluding
depreciation and amortization...... -- 53,935
Depreciation and amortization........ 4,592(m) 30,958
Corporate general and administrative
expenses........................... (222)(n) 2,330
------- --------
Operating income (loss).............. (4,370) (3,858)
Interest expense..................... 6,178(o) 14,905
Other (income) expense............... -- (108)
------- --------
Income (loss) before income taxes.... (10,548) (18,655)
Income tax expense (benefit)......... (3,819)(p) (5,128)
------- --------
Income (loss) attributable to common
stock.............................. $(6,729) $(13,527)
======= ========
OTHER FINANCIAL DATA:
Broadcast cash flow.................. $ -- $ 29,430
======= ========
</TABLE>
- ---------------
(a) On May 30, 1997, EMCLA acquired, in the Century Acquisition, WPNT-FM in
Chicago for $73,750 in cash of which $5,500 was paid as escrow funds in July
1996. On April 10, 1997, EMCLA entered into an agreement to sell, in the
Bonneville Dispositions, WPNT-FM in Chicago for $75,000 in cash. The results
of operations of WPNT are excluded as the acquisition and disposition is
deemed to have occurred on January 1, 1996.
(b) On January 17, 1996, EMCLA acquired Pyramid Communications, Inc.
("Pyramid"), a radio broadcasting company with 12 radio stations (9 FM and 3
AM) in five markets (Chicago, Philadelphia, Boston, Charlotte, and Buffalo)
(the "Pyramid Acquisition"). The total purchase price, including acquisition
costs, allocated to net assets acquired was approximately $316,343 of which
$315,000 was financed through additional borrowings under EMCLA's prior
senior credit facility. The historical financial data of Pyramid for the
period of January 1, 1996 to January 17, 1996 excludes the combined net
losses of approximately $60 for WHTT-FM, WHTT-AM and WSJZ-FM in Buffalo (the
"Buffalo Transactions") which were sold in 1996 for $32,000 in cash.
(c) On August 14, 1996, EMCLA acquired KYLD-FM in San Francisco for $44,000 in
cash. EMCLA had previously been operating KYLD-FM under a time brokerage
agreement since May 1, 1996.
(d) On November 26, 1996, EMCLA exchanged WKLB-FM in Boston (which EMCLA
acquired on May 3, 1996 for $34,000 in cash) for WGAY-FM in Washington, D.C.
On April 3, 1997, EMCLA exchanged, in the Greater Media Exchange, WQRS-FM in
Detroit (which EMCLA acquired on April 3, 1997 for $32,000 in cash) for
WWRC-AM in Washington, D.C. and $9,500 in cash. EMCLA had previously been
operating WGAY-FM and WWRC-AM under time brokerage agreements since June 17,
1996.
(e) On October 18, 1996, EMCLA acquired WEDR-FM in Miami for $65,000 in cash.
(f) On January 31, 1997, EMCLA acquired, in the WWWW/WDFN Acquisition, WWWW-FM
and WDFN-AM in Detroit from CRBC for $30,000 in cash (of which $1,500 was
paid as escrow funds in January 1996). EMCLA had previously provided certain
sales and promotional functions to WWWW-FM and WDFN-AM under a joint sales
agreement since February 14, 1996 and subsequently operated the stations
under a time brokerage agreement since April 1, 1996.
(g) On January 31, 1997, EMCLA acquired, in the KKSF/KDFC Acquisition, KKSF-FM
and KDFC-FM/AM in San Francisco for $115,000 in cash (of which $10,000 was
paid as escrow funds in November 1996). EMCLA had previously been operating
the stations under a time brokerage agreement since November 1, 1996.
(h) On April 1, 1997, EMCLA acquired, in the Secret/Detroit Acquisition, WJLB-FM
and WMXD-FM in Detroit for $168,000 in cash. EMCLA had previously been
operating the stations under a time brokerage agreement since September 1,
1996.
(i) On May 1, 1997, EMCLA acquired, in the Beasley Acquisition, WDAS-FM/AM in
Philadelphia for $103,000 in cash.
P-14
<PAGE> 135
(j) On May 15, 1997, EMCLA exchanged, in the EZ Exchange, 5 of its 6 stations
in the Charlotte market (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for
WUSL-FM and WIOQ-FM in Philadelphia.
(k) On May 15, 1997, EMCLA sold, in the EZ Sale, WNKS-FM in Charlotte for
$10,000 in cash.
(l) On June 3, 1997, EMCLA sold, in the Crawford Disposition, WEJM-FM in
Chicago for $14,750 in cash.
(m) Reflects incremental amortization related to the Completed Evergreen
Transactions and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
COMPLETED EVERGREEN TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1996 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE
-------------------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Pyramid Acquisition (ii)......... 1/1-1/17 $325,871 $ 1,026 $ 409 $ 617
KYLD-FM.......................... 1/1-8/14 43,659 1,811 640 1,171
WEDR-FM.......................... 1/1-10/18 63,757 3,400 -- 3,400
WGAY-FM.......................... 1/1-11/26 32,538 1,964 -- 1,964
WWWW-FM/WDFN-AM.................. 1/1-12/31 26,590 1,773 7 1,766
KKSF-FM/KDFC-AM (iii)............ 1/1-12/31 63,500 4,233 868 3,365
WJLB-FM/WMXD-FM.................. 1/1-12/31 165,559 11,037 2,145 8,892
WWRC-AM.......................... 1/1-12/31 16,808 1,121 -- 1,121
WDAS-FM/AM....................... 1/1-12/31 100,000 6,667 2,470 4,197
-------- ------- ------ -------
Total.................. $838,282 $33,032 $6,539 $26,493
======== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL INTANGIBLE HISTORICAL ADJUSTMENT
COMPLETED EVERGREEN TRANSACTIONS AMORTIZATION ASSETS, AMORTIZATION AMORTIZATION FOR NET
THREE MONTHS ENDED MARCH 31, 1997 PERIOD(I) NET EXPENSE(I) EXPENSE INCREASE
--------------------------------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
WWWW-FM/WDFN-AM.................. 1/1-1/31 $ 26,590 $ 148 $ -- $ 148
KKSF-FM/KDFC-AM (iii)............ 1/1-1/31 63,500 353 -- 353
WJLB-FM/WMXD-FM.................. 1/1-3/31 165,559 2,759 -- 2,759
WWRC-AM.......................... 1/1-3/31 16,808 280 -- 280
WDAS-FM/AM....................... 1/1-3/31 100,000 1,667 615 1,052
-------- ------- ------ -------
Total.................. $372,457 $ 5,207 $ 615 $ 4,592
======== ======= ====== =======
</TABLE>
(i) Intangible assets are amortized on a straight-line basis over an
estimated average 15 year life. The incremental amortization period
represents the period of the year that the station was not owned by
EMCLA.
(ii) Intangible assets for the Pyramid Acquisition of $325,871 includes
$61,218 resulting from the recognition of deferred tax liabilities and
excludes approximately $29,915 of the purchase price allocated to the
Buffalo Stations which were sold during the year ended December 31,
1996.
(iii) Intangible assets for KKSF-FM and KDFC-AM excludes approximately
$50,000 of the purchase price allocated to KDFC-FM which has been
classified as assets held for sale.
Historical depreciation expense of the Completed Evergreen Transactions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation and amortization may differ based upon final purchase price
allocations.
(n) Reflects the elimination of duplicate corporate expenses of $4,415 for the
year ended December 31, 1996 and $222 for the three months ended March 31,
1997 related to the Completed Evergreen Transactions.
P-15
<PAGE> 136
(o) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Evergreen Transactions, the 1996 Evergreen
Equity Offering and the amendment and restatement of EMCLA's senior credit
agreement:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Acquisitions............................ $969,250 $495,250
Completed Dispositions............................ (56,750) (24,750)
New Loan Fees..................................... 10,000 10,000
-------- --------
Total additional bank borrowings.................... $922,500 $480,500
======== ========
Interest expense at 7.0%............................ $ 41,596 $ 6,852
Less: historical interest expense................... (6,352) (674)
-------- --------
Net increase in interest expense.................... 35,244 6,178
Reduction in interest expense on bank debt related
to the application of net proceeds of the 1996
Evergreen Equity Offering contributed to EMCLA of
$264,236 at 7.0% for the period January 1, 1996 to
October 22, 1996.................................. (15,003) --
-------- --------
Total adjustment for net increase in interest
expense........................................... $ 20,241 $ 6,178
======== ========
</TABLE>
(p) Reflects the income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated
effective tax rate on a pro forma basis to income (loss) before income
taxes for historical and pro forma adjustment amounts.
P-16
<PAGE> 137
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
RELATED TO THE PENDING EVERGREEN TRANSACTIONS
(13) The detail of the historical financial data of the stations to be
acquired or disposed of in the Pending Evergreen Transactions for the
year ended December 31, 1996 and the three months ended March 31, 1997
has been obtained from the historical financial statements of the
respective stations and is summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
--------------------------- ---------------------------------------------------------
EVERGREEN
VIACOM
ACQUISITION GANNETT WFLN-FM WEJM-AM WLUP-FM KDFC-FM
EVERGREEN PENDING TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
YEAR ENDED DECEMBER 31, 1996(A) 1/1-12/31(b) 1/1-12/31(c) 9/1-12/31(d) 1/1-12/31(e) 1/1-12/31(f) 1/1-12/31(g)
------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues........................ $ 67,926 $52,028 $(1,455) $(807) $(17,024) $(5,138)
Less: agency commissions.............. (10,493) (6,819) 159 88 2,332 643
-------- ------- ------- ----- -------- -------
Net revenues.......................... 57,433 45,209 (1,296) (719) (14,692) (4,495)
Station operating expenses excluding
depreciation and amortization....... 26,598 25,031 (725) (665) (11,697) (2,300)
Depreciation and amortization......... 6,267 1,760 (800) (516) (1,585) (853)
Corporate general and administrative
expenses............................ 1,617 -- -- -- -- --
-------- ------- ------- ----- -------- -------
Operating income (loss)............... 22,951 18,418 229 462 (1,410) (1,342)
Interest expense...................... -- -- -- -- -- --
Other (income) expense................ 459....... -- -- -- -- --
-------- ------- ------- ----- -------- -------
Income (loss) before income taxes..... 22,492 18,418 229 462 (1,410) (1,342)
Income tax expense (benefit).......... 10,612.... -- -- -- -- --
-------- ------- ------- ----- -------- -------
Net income (loss)..................... $ 11,880 $18,418 $ 229 $ 462 $ (1,410) $(1,342)
======== ======= ======= ===== ======== =======
OTHER FINANCIAL DATA:
Broadcast Cash Flow................... $ 30,835 $20,178 $ (571) $ (54) $ (2,995) $(2,195)
<CAPTION>
DISPOSITIONS
-------------------------------------------
TOTAL
SAN FRANCISCO PENDING
FREQUENCY WJZW-FM EVERGREEN
EVERGREEN PENDING TRANSACTIONS HISTORICAL HISTORICAL TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996(A) 1/1-12/31(h) 1/1-12/31(i) HISTORICAL
------------------------------- ------------- ------------ ------------
<S> <C> <C> <C>
Gross revenues........................ $(2,736) $(8,443) $ 84,351
Less: agency commissions.............. 358 1,311 (12,421)
------- ------- --------
Net revenues.......................... (2,378) (7,132) 71,930
Station operating expenses excluding
depreciation and amortization....... (3,159) (3,998) 29,085
Depreciation and amortization......... (3,826) (589) (142)
Corporate general and administrative
expenses............................ -- (206) 1,411
------- ------- --------
Operating income (loss)............... 4,607 (2,339) 41,576
Interest expense...................... -- -- --
Other (income) expense................ -- -- 459
------- ------- --------
Income (loss) before income taxes..... 4,607 (2,339) 41,117
Income tax expense (benefit).......... -- (913) 9,699
------- ------- --------
Net income (loss)..................... $ 4,607 $(1,426) $ 31,418
======= ======= ========
OTHER FINANCIAL DATA:
Broadcast Cash Flow................... $ 781 $(3,134) $ 42,845
</TABLE>
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------- -----------------------------------------------------
EVERGREEN
VIACOM
ACQUISITION GANNETT WFLN-FM WEJM-AM WLUP-FM KDFC-FM
EVERGREEN PENDING TRANSACTIONS HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
THREE MONTHS ENDED MARCH 31, 1997(A) 1/1-3/31(b) 1/1-3/31(c) 1/1-3/31(d) 1/1-3/31(e) 1/1-3/31(f) 1/1-3/31(g)
------------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues......................... $ 17,027 $ 12,392 $ (908) $(172) $(2,762) $(278)
Less: agency commissions............... (2,788) (1,082) 93 17 355 26
-------- -------- ------ ----- ------- -----
Net revenues........................... 14,239 11,310 (815) (155) (2,407) (252)
Station operating expenses excluding
depreciation and amortization........ 6,917 6,908 (539) (157) (2,894) (224)
Depreciation and amortization.......... 1,101 435 (600) (70) (385) --
Corporate general and administrative
expenses............................. 341 -- -- -- -- --
-------- -------- ------ ----- ------- -----
Operating income (loss)................ 5,880 3,967 324 72 872 (28)
Interest expense....................... -- -- -- -- -- --
Other (income) expense................. -- -- -- -- -- --
-------- -------- ------ ----- ------- -----
Net income (loss)...................... 5,880 3,967 324 72 872 (28)
Income tax expense..................... 2,946 -- -- -- -- --
-------- -------- ------ ----- ------- -----
Net income (loss)...................... $ 2,934 $ 3,967 $ 324 $ 72 $ 872 $ (28)
======== ======== ====== ===== ======= =====
OTHER FINANCIAL DATA
Broadcast Cash Flow.................... $ 7,322 $ 4,402 $ (276) $ 2 $ 487 $ (28)
<CAPTION>
DISPOSITIONS
---------------------------
TOTAL
SAN FRANCISCO PENDING
FREQUENCY WJZW-FM EVERGREEN
EVERGREEN PENDING TRANSACTIONS HISTORICAL HISTORICAL TRANSACTIONS
THREE MONTHS ENDED MARCH 31, 1997(A) 1/1-3/31(h) 1/1-3/31(i) HISTORICAL
------------------------------------ ------------- ----------- ------------
<S> <C> <C> <C>
Gross revenues......................... $ (574) ($1,727) $22,998
Less: agency commissions............... 72 296 (3,011)
------ ------- -------
Net revenues........................... (502) (1,431) 19,987
Station operating expenses excluding
depreciation and amortization........ (868) (926) 8,217
Depreciation and amortization.......... (949) (138) (606)
Corporate general and administrative
expenses............................. -- (35) 306
------ ------- -------
Operating income (loss)................ 1,315 (332) 12,070
Interest expense....................... -- -- --
Other (income) expense................. -- -- --
------ ------- -------
Net income (loss)...................... 1,315 (332) 12,070
Income tax expense..................... -- (130) 2,816
------ ------- -------
Net income (loss)...................... $1,315 $(202) $ 9,254
====== ======= =======
OTHER FINANCIAL DATA
Broadcast Cash Flow.................... $ 366 $(505) $11,770
</TABLE>
P-17
<PAGE> 138
- ---------------
(a) On May 30, 1997, EMCLA acquired, in the Century Acquisition, WPNT-FM in
Chicago for $73,750 in cash of which $5,500 was paid as escrow funds in July
1996. On April 10, 1997, EMCLA entered into an agreement to sell, in the
Bonneville Dispositions, WPNT-FM in Chicago for $75,000 in cash. The results
of operations of WPNT are excluded as the acquisition and disposition is
deemed to have occurred on January 1, 1996.
(b) On February 19, 1997, EMCLA and CRBC entered into the Viacom Joint Purchase
Agreement whereby in the event the Viacom Acquisition occurs prior to the
consummation of the Merger, EMCLA will purchase 6 of the 10 Viacom stations
in the Evergreen Viacom Acquisition for $595,000 plus working capital
($10,125 at March 31, 1997) and estimated acquisition costs of $5,500 for an
aggregate purchase price of $610,625. The stations to be acquired by EMCLA
in the Evergreen Viacom Acquisition include WAXQ-FM and WLTW-FM in New York
and WMZQ-FM, WZHF-AM, WJZW-FM and WBZS-AM in Washington, D.C. The Viacom
results of operations reflect the financial performance of WAXQ-FM for six
months of the year that the station was operated by Viacom (July 1, 1996 to
December 31, 1996) combined with net income of $851 for the first half of
the year when the station was under prior ownership.
(c) On April 4, 1997, EMCLA entered into an agreement to acquire, in the Gannett
Acquisition, 5 radio stations in 3 major markets from P&S including
WGCI-FM/AM in Chicago, KHKS-FM in Dallas, and KKBQ-FM/AM in Houston
("Gannett") for $340,000 in cash.
(d) On August 12, 1996, EMCLA entered into an agreement to acquire, in the
Secret/Philadelphia Acquisition, WFLN-FM in Philadelphia for $37,750 in
cash. On April 8, 1997, EMCLA entered into an agreement to sell, in the
Greater Media Disposition, WFLN-FM in Philadelphia for $41,800 in cash.
EMCLA has been operating WFLN-FM under a time brokerage agreement since
September 1, 1996.
(e) On March 19, 1997, EMCLA entered into an agreement to sell, in the Douglas
Chicago Disposition, WEJM-AM in Chicago for $7,500 in cash.
(f) On April 10, 1997, EMCLA entered into an agreement to sell, in the
Bonneville Dispositions, WLUP-FM in Chicago for $80,000 in cash.
(g) On January 31, 1997, EMCLA acquired, in the KKSF/KDFC Acquisition, KKSF-FM
and KDFC-FM/AM in San Francisco for $115,000 in cash. EMCLA had previously
been operating KKSF-FM and KDFC-FM/AM under a time brokerage agreement since
November 1, 1996. On April 10, 1997, EMCLA entered into an agreement to sell
KDFC-FM in San Francisco for $50,000 in cash. The assets of KDFC-FM are
classified as assets held for sale in connection with the purchase price
allocation of the acquisition of KKSF-FM/KDFC-FM/AM. Accordingly, KDFC-FM
net income of approximately $304 for the period February 1, 1997 through
March 31, 1997 has been excluded from EMCLA's historical condensed statement
of operations. Therefore, the KDFC-FM condensed statement of operations
includes results of operations for January 1, 1997 through January 31, 1997
(the time brokerage agreement holding period in 1997) for the three months
ended March 31, 1997.
(h) On April 8,1997, EMCLA entered into an agreement to sell, in the San
Francisco Frequency Disposition, the San Francisco 107.7 MHz FM dial
position and transmission facility and the call letters from CRBC's KSAN-FM
in San Francisco for $44,000 in cash.
(i) On April 11, 1997, EMCLA entered into an agreement to sell, in the
ABC/Washington Disposition, WJZW-FM in Washington (to be acquired as part of
the Evergreen Viacom Acquisition) for $68,000 in cash.
P-18
<PAGE> 139
(14) Reflects incremental amortization related to the assets acquired in the
Pending Evergreen Transactions (see notes 2(j) and 2(l)) and is based on
the allocation of the total consideration as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
Amortization expense on $861,827 additional
intangible assets amortized on a straight-line
basis over a 15 year period........................ $57,455 $14,364
Less: historical amortization expense................ (6,835) (1,098)
------- -------
Adjustment for net increase in amortization
expense............................................ $50,620 $13,266
======= =======
</TABLE>
Historical depreciation expense of the Pending Evergreen Transactions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation and amortization may differ based upon final purchase price
allocations.
(15) Reflects the elimination of duplicate corporate expenses of $1,100 for the
year ended December 31, 1996 and $232 for the three months ended March 31,
1997 related to the Pending Evergreen Transactions.
(16) Reflects the adjustment to interest expense in connection with the
consummation of the Pending Evergreen Transactions:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
Additional bank borrowings related to:
Pending Acquisitions............................... $ 700,357 $ 700,357
Pending Dispositions............................... (366,300) (366,300)
--------- ---------
Total additional bank borrowings..................... $ 334,057 $ 334,057
========= =========
Interest expense on additional bank borrowings at
7.0%............................................... $ 23,384 $ 5,417
========= =========
</TABLE>
(17) Reflects the income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated
effective tax rate on a pro forma basis to income (loss) before income
taxes for historical and pro forma adjustment amounts.
P-19
<PAGE> 140
ADJUSTMENTS TO CRBC'S HISTORICAL CONDENSED COMBINED STATEMENT OF OPERATIONS
RELATED TO THE COMPLETED CHANCELLOR TRANSACTIONS
(18) CRBC's historical condensed combined statement of operations for the year
ended December 31, 1996 and the three months ended March 31, 1997 and pro
forma adjustments related to the Completed Chancellor Transactions is
summarized below:
<TABLE>
<CAPTION>
ACQUISITIONS
-----------------------------------------------------------------------------------
KIMN-
FM/
KALC-FM KOOL-FM
SHAMROCK HISTORICAL COLFAX HISTORICAL SUNDANCE
COMPLETED CHANCELLOR TRANSACTIONS CRBC HISTORICAL 1/1- HISTORICAL 1/1- HISTORICAL
YEAR ENDED DECEMBER 31, 1996 HISTORICAL(a) 1/1-2/14(b) 3/31(c) 1/1-12/31(d) 3/31(d) 1/1-9/12(d)
- --------------------------------- ------------- ----------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................... $203,188 $ 9,698 $2,010 $51,745 $1,665 $13,844
Less: agency commissions......... (24,787) (1,234) (259) (6,626) (234) (1,740)
-------- ------- ------ ------- ------- -------
Net revenues..................... 178,401 8,464 1,751 45,119 1,431 12,104
Station operating expenses
excluding depreciation and
amortization................... 111,210 7,762 1,523 28,584 852 7,678
Depreciation and amortization.... 20,877 595 511 4,494 229 1,242
Corporate general and
administrative expenses........ 4,845 2,215 -- -- -- --
Stock option compensation........ 3,800 -- -- -- -- --
-------- ------- ------ ------- ------- -------
Operating income (loss).......... 37,669 (2,108) (283) 12,041 350 3,184
Interest expense................. 35,704 1,380 -- 4,369 299 --
Other (income) expense........... 68 49 312 (179) -- 25
-------- ------- ------ ------- ------- -------
Income (loss) before income
taxes.......................... 1,897 (3,537) (595) 7,851 51 3,159
Income tax expense (benefit)..... 4,612 -- -- -- -- --
-------- ------- ------ ------- ------- -------
Net income (loss)................ (2,715) (3,537) (595) 7,851 51 3,159
Preferred stock dividends........ 11,557 -- -- -- -- --
-------- ------- ------ ------- ------- -------
Income (loss) attributable to
common stock................... $(14,272) $(3,537) $ (595) $ 7,851 $ 51 $ 3,159
======== ======= ====== ======= ======= =======
OTHER FINANCIAL DATA:
Broadcast Cash Flow.............. $ 67,191 $ 702 $ 228 $16,535 $ 579 $ 4,426
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------ ----------------------------------------
PRO FORMA
WMIL-FM/ ADJUSTMENTS
OMNI KSTE-FM WWWW-FM/ KTBZ-FM WOKY-AM FOR THE
HISTORICAL HISTORICAL WDFN-AM HISTORICAL HISTORICAL COMPLETED
COMPLETED CHANCELLOR TRANSACTIONS 1/1- 1/1- HISTORICAL 1/1- 1/1- CHANCELLOR
YEAR ENDED DECEMBER 31, 1996 6/30(e) 7/31(f) 1/1-2/14(g) 2/14(c) 12/31(h) TRANSACTIONS
- --------------------------------- ----------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues................... $8,710 $1,411 $(839) $ (399) $(9,552) $ (5,022)(i)
Less: agency commissions......... (1,211) (149) 102 48 1,070 --
------ ------ ----- ------- ------- --------
Net revenues..................... 7,499 1,262 (737) (351) (8,482) (5,022)
Station operating expenses
excluding depreciation and
amortization................... 4,985 1,244 (815) (521) (4,896) (5,763)(i)
Depreciation and amortization.... 1,458 375 (45) (42) (539) 7,831(j)
(1,554)(k)
Corporate general and
administrative expenses........ -- -- -- -- -- (1,706)(l)
Stock option compensation........ -- -- -- -- -- --
------ ------ ----- ------- ------- --------
Operating income (loss).......... 1,056 (357) 123 212 (3,047) (3,830)
Interest expense................. -- -- -- -- -- 5,407(m)
Other (income) expense........... (404) -- -- -- (19) --
------ ------ ----- ------- ------- --------
Income (loss) before income
taxes.......................... 1,460 (357) 123 212 (3,028) (9,237)
Income tax expense (benefit)..... -- -- -- -- -- (1,412)(n)
------ ------ ----- ------- ------- --------
Net income (loss)................ 1,460 (357) 123 212 (3,028) (7,825)
Preferred stock dividends........ -- -- -- -- -- 26,843(o)
------ ------ ----- ------- ------- --------
Income (loss) attributable to
common stock................... $1,460 $ (357) $ 123 $ 212 $(3,028) $(34,668)
====== ====== ===== ======= ======= ========
OTHER FINANCIAL DATA:
Broadcast Cash Flow.............. $2,514 $ 18 $ 78 $ 170 $(3,586) $ 741
<CAPTION>
CRBC AS
ADJUSTED FOR
COMPLETED
COMPLETED CHANCELLOR TRANSACTIONS CHANCELLOR
YEAR ENDED DECEMBER 31, 1996 TRANSACTIONS
- --------------------------------- ------------
<S> <C>
Gross revenues................... $276,459
Less: agency commissions......... (35,020)
--------
Net revenues..................... 241,439
Station operating expenses
excluding depreciation and
amortization................... 151,843
Depreciation and amortization.... 35,432
Corporate general and
administrative expenses........ 5,354
Stock option compensation........ 3,800
--------
Operating income (loss).......... 45,010
Interest expense................. 47,159
Other (income) expense........... (148)
--------
Income (loss) before income
taxes.......................... (2,001)
Income tax expense (benefit)..... 3,200
--------
Net income (loss)................ (5,201)
Preferred stock dividends........ 38,400
--------
Income (loss) attributable to
common stock................... $(43,601)
========
OTHER FINANCIAL DATA:
Broadcast Cash Flow.............. $ 89,596
</TABLE>
P-20
<PAGE> 141
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS CRBC AS
FOR THE ADJUSTED FOR
COLFAX COMPLETED COMPLETED
COMPLETED CHANCELLOR TRANSACTIONS CRBC HISTORICAL CHANCELLOR CHANCELLOR
THREE MONTHS ENDED MARCH 31, 1997(A) HISTORICAL 1/1 - 1/23(d) TRANSACTIONS TRANSACTIONS
------------------------------------ ---------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Gross revenues............................ $ 63,477 $3,183 $ (828)(i) $ 65,832
Less: agency commissions.................. (7,623) (384) -- (8,007)
-------- ------ ------- --------
Net revenues.............................. 55,854 2,799 (828) 57,825
Station operating expenses excluding
depreciation and amortization........... 38,187 1,872 (1,231)(i) 38,828
Depreciation and amortization............. 8,109 -- 835(j) 8,862
(82)(k)
Corporate general and administrative
expenses................................ 1,712 -- -- 1,712
Merger expense............................ 2,056 -- 2,056
Stock option compensation................. 950 -- -- 950
-------- ------ ------- --------
Operating income (loss)................... 4,840 927 (350) 5,417
Interest expense.......................... 11,420 320(m) 11,740
Other (income) expense.................... (1,632) -- (1,632)
-------- ------ ------- --------
Income (loss) before income taxes......... (4,948) 927 (670) (4,691)
Income tax expense (benefit).............. (400) (476)(n) (876)
-------- ------ ------- --------
Net income (loss)......................... (4,548) 927 (194) (3,815)
Preferred stock dividends................. 8,135 -- 1,504(o) 9,639
-------- ------ ------- --------
Income (loss) attributable to common
stock................................... $(12,683) $ 927 $(1,698) $(13,454)
======== ====== ======= ========
OTHER FINANCIAL DATA:
Broadcast Cash Flow....................... $ 17,667 $ 927 $ 403 $ 18,997
</TABLE>
- ---------------
(a) On November 22, 1996, CRBC acquired WKYN-AM in Cincinnati for $1,400 in
cash. CRBC had been previously operating WKYN-AM under a time brokerage
agreement since January 1, 1996. Therefore, CRBC's historical results of
operations for the year ended December 31, 1996 and the three months ended
March 31, 1997 include the results of operations of WKYN-AM.
(b) On February 14, 1996, CRBC acquired Shamrock Broadcasting, Inc., a radio
broadcasting company with 19 radio stations (11 FM and 8 AM) located in 10
markets (Los Angeles, New York, San Francisco, Houston, Atlanta, Detroit,
Denver, Minneapolis-St. Paul, Phoenix and Pittsburgh). The total purchase
price, including acquisition costs, allocated to net assets acquired was
approximately $408,000.
(c) On July 31, 1996, CRBC exchanged KTBZ-FM in Houston (which was acquired on
February 14, 1996 as part of the Shamrock Acquisition) and $5,600 in cash
for KIMN-FM and KALC-FM in Denver. CRBC had previously entered into a time
brokerage agreement to sell substantially all of the broadcast time of
KTBZ-FM effective February 14, 1996. In addition, CRBC had been previously
operating KIMN-FM and KALC-FM under a time brokerage agreement since April
1, 1996.
(d) On January 23, 1997, CRBC acquired Colfax Communications, a radio
broadcasting company, with 12 radio stations (8 FM and 4 AM) located in 4
markets (Minneapolis-St. Paul, Phoenix, Washington, D.C. and Milwaukee
markets). The total purchase price, including acquisition costs, allocated
to net assets acquired was approximately $383,700. The Colfax Acquisition
was financed through (i) a private placement by CRBC of the CRBC Series A
Preferred Stock for net proceeds of $191,817; (ii) a private placement by
Chancellor of $110,000 of Chancellor Parent Convertible Preferred Stock for
net proceeds of $105,546; (iii) additional bank borrowings under CRBC's
previous senior credit agreement of $65,937 and (iv) $20,400 in escrow
funds. The historical financial data of Colfax for the year ended December
31, 1996 excludes the combined net income of approximately $224 for KLTB-FM,
KARO-FM and KIDO-AM in Boise, Idaho which CRBC did not acquire as part of
the Colfax Acquisition. The Colfax historical condensed statement of
operations for the year ended December 31, 1996, does not include the
results of operations of the following: (i) KOOL-FM for the period January
1, 1996 to March 31, 1996
P-21
<PAGE> 142
and (ii) WMIL-FM and WOKY-AM in Milwaukee and KZON-FM, KISO-AM, KYOT-FM and
KOY-AM in Phoenix which were owned and operated by Sundance Broadcasting,
Inc. ("Sundance") for the period January 1, 1996 to September 12, 1996. On
March 31, 1997, CRBC sold WMIL-FM and WOKY-AM in Milwaukee for $41,253 in
cash. The assets of WMIL-FM and WOKY-AM are classified as assets held for
sale in connection with the purchase price allocation of the Colfax
Acquisition. Accordingly, WMIL-FM and WOKY-AM net income of approximately
$41 for the period January 23, 1997 through March 31, 1997 has been excluded
from the Colfax historical condensed statement of operations for the three
months ended March 31, 1997.
(e) On February 13, 1997, CRBC acquired substantially all of the assets and
assumed certain liabilities of the OmniAmerica Group including 8 radio
stations (7 FM and 1 AM) located in 3 markets (Orlando, West Palm Beach and
Jacksonville). The total purchase price, including acquisition costs,
allocated to net assets acquired was approximately $181,046. The Omni
Acquisition was financed through (i) additional bank borrowings under CRBC's
previous senior credit agreement of $166,046 and (ii) the issuance of
555,556 shares of the Chancellor Class A Common Stock valued at $15,000 or
$27.00 per share which was contributed to CRBC by Chancellor. Prior to the
consummation of the Omni Acquisition, CRBC had entered into an agreement to
operate the stations under a time brokerage agreement effective July 1,
1996. Additionally, prior to consummation of the West Palm Beach Exchange
(see (f) below) on March 28, 1997 and the SFX Exchange (see note 18(a)),
CRBC entered into time brokerage agreements to sell substantially all of the
broadcast time of WEAT-FM/AM and WOLL-FM in West Palm Beach and WAPE-FM and
WFYV-FM in Jacksonville effective July 1, 1996. The historical financial
data of Omni for the period January 1, 1996 to June 30, 1996 represents the
results of operations for the Orlando stations (WOMX-FM, WXXL-FM and
WJHM-FM). The results of operations for WEAT-FM/AM and WOLL-FM in West Palm
Beach and WAPE-FM and WFYV-FM in Jacksonville are not included as the
acquisition and disposition of these stations is deemed to have occurred on
January 1, 1996.
(f) On March 28, 1997, CRBC exchanged, in the West Palm Beach Exchange,
WEAT-FM/AM and WOLL-FM in West Palm Beach, Florida, which were acquired as
part of the Omni Acquisition, for KSTE-FM in Sacramento and $33,000 in cash.
CRBC had previously been operating KSTE-FM under a time brokerage agreement
since August 1, 1996.
(g) On January 31, 1997, CRBC sold, in the WWWW/WDFN Disposition, WWWW-FM and
WDFN-AM in Detroit, which were acquired on February 14, 1996 as part of the
Shamrock Acquisition, to Evergreen for $30,000 in cash. Prior to the
completion of the sale, CRBC had entered into a joint sales agreement
effective February 14, 1996 and a time brokerage agreement effective April
1, 1996 to sell substantially all of the broadcast time of WWWW-FM and
WDFN-AM to EMCLA pending the completion of the sale.
(h) On March 31, 1997, CRBC sold, in the Milwaukee Disposition, WMIL-FM and
WOKY-AM in Milwaukee, which were acquired as part of the Colfax Acquisition
on January 23, 1997, for $41,253 in cash.
(i) Reflects the elimination of time brokerage agreement fees received and paid
by CRBC as follows:
<TABLE>
<CAPTION>
COMPLETED CHANCELLOR TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996 MARKET PERIOD REVENUE EXPENSE
--------------------------------- --------------- ---------- ------- -------
<S> <C> <C> <C> <C>
WWWW-FM/WDFN-AM........................... Detroit 2/14-12/31 $(2,937) $ (598)
KTBZ-FM................................... Houston 2/14-7/31 (1,113) (265)
WOMX-FM, WXXL-FM, WJHM-FM................. Orlando 7/1-12/31 -- (3,900)
WEAT-FM/AM, WOLL-FM....................... West Palm Beach 7/1-12/31 (972) (1,000)
------- -------
Total adjustment for decrease in gross revenues and expenses........... $(5,022) $(5,763)
======= =======
</TABLE>
P-22
<PAGE> 143
<TABLE>
<CAPTION>
COMPLETED CHANCELLOR TRANSACTIONS
THREE MONTHS ENDED MARCH 31, 1997 MARKET PERIOD REVENUE EXPENSE
--------------------------------- --------------- -------- ------- -------
<S> <C> <C> <C> <C>
WWWW-FM/WDFN-AM.............................. Detroit 1/1-1/31 $(235) $ (16)
WOMX-FM, WXXL-FM, WJHM-FM.................... Orlando 1/1-2/13 -- (911)
WEAT-FM/AM, WOLL-FM.......................... West Palm Beach 1/1-3/28 (593) (304)
----- -------
Total adjustment for decrease in gross revenues and expenses............ $(828) $(1,231)
===== =======
</TABLE>
Gross revenues of the Completed Chancellor Transactions exclude any time
brokerage agreement payments received from CRBC.
(j) Reflects incremental amortization related to the Completed Chancellor
Transactions and is based on the following allocation to intangible assets:
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
YEAR ENDED DECEMBER 31, 1996 PERIOD ASSETS, NET EXPENSE(i) EXPENSE INCREASE
--------------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Shamrock............................ 1/1-2/14 $361,425 $ 1,104 $ 393 $ 711
KIMN-FM/KALC-FM..................... 1/1-3/31 8,285 52 341 (289)
Omni................................ 1/1-12/31 171,837 4,296 161 4,135
Colfax.............................. 1/1-12/31 317,894 7,947 3,861 4,086
KSTE-FM............................. 1/1-12/31 (32,475) (812) -- (812)
-------- ------- ------ ------
Total............................................. $826,966 $12,587 $4,756 $7,831
======== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
INCREMENTAL HISTORICAL ADJUSTMENT
COMPLETED CHANCELLOR TRANSACTIONS AMORTIZATION INTANGIBLE AMORTIZATION AMORTIZATION FOR NET
THREE MONTHS ENDED MARCH 31, 1997 PERIOD ASSETS, NET EXPENSE(i) EXPENSE INCREASE
--------------------------------- ------------ ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Omni................................ 1/1-2/13 $171,837 $ 525 $ -- $ 525
Colfax.............................. 1/1-1/23 317,894 508 -- 508
KSTE-FM............................. 1/1-3/28 (32,475) (198) -- (198)
-------- ----- ------ -----
Total............................... $457,256 $ 835 $ -- $ 835
======== ===== ====== =====
</TABLE>
- ---------------
(i) Intangible assets are amortized on a straight-line basis over an
estimated average 40 year life by CRBC. In connection with purchase
accounting for the Merger, intangible assets will be amortized over an
estimated average life of 15 years in accordance with EMCLA's
accounting policies and procedures.
Historical depreciation expense of the Completed Chancellor Transactions is
assumed to approximate depreciation expense on a pro forma basis. Actual
depreciation and amortization may differ based upon final purchase price
allocations.
(k) Reflects the elimination of disposed stations' historical depreciation and
amortization expense of $1,554 for the year ended December 31, 1996 (KTBZ-FM
of $642 and WWWW-FM/WDFN-AM of $912 for the period of February 14, 1996 to
December 31, 1996) and $82 for the three months ended March 31, 1997
(WWWW-FM/WDFN-AM for the period of January 1, 1997 to January 31, 1997)
recognized by CRBC during the time brokerage agreement holding period.
(l) Reflects the elimination of duplicate corporate expenses of $1,706 for the
year ended December 31, 1996 related to the Completed Chancellor
Transactions.
(m) Reflects the adjustment to interest expense in connection with the
consummation of the Completed Chancellor Transactions, the February 1996 and
August 1996 equity offerings of Chancellor, the issuance
P-23
<PAGE> 144
of the CRBC Series A Preferred Stock, and the refinancing of the CRBC's
previous senior credit agreement on January 23, 1997:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
Additional bank borrowings related to:
Completed Acquisitions.............................. $ 667,383 $ 231,983
Completed Dispositions.............................. (104,253) (104,253)
New Loan Fees....................................... 2,874 2,874
--------- ---------
Total additional bank borrowings...................... $ 566,004 $ 130,604
========= =========
Interest expense at 7.5%.............................. $ 14,834 $ 320
Less: historical interest expense..................... (6,048) --
--------- ---------
Net increase in interest expense...................... 8,786 320
Reduction in interest expense on bank debt related to
the application of net proceeds of the following:
February 1996 Offering proceeds contributed to CRBC
of $155,475 for the period January 1, 1996 to
February 14, 1996 at 7.5%........................ (1,425) --
August 1996 Offering proceeds contributed to CRBC of
$23,050 for the period January 1, 1996 to August
9, 1996 at 7.5%.................................. (1,052) --
CRBC Series A Preferred Stock proceeds of $96,171
for the period January 1, 1996 to February 14,
1996 at 7.5%..................................... (902) --
--------- ---------
Total decrease in interest expense.................... (3,379) --
--------- ---------
Total adjustment for net increase in interest
expense............................................. $ 5,407 $ 320
========= =========
</TABLE>
(n) Reflects the income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated
effective tax rate on a pro forma basis to income (loss) before income taxes
for historical and pro forma adjustment amounts.
(o) Reflects incremental dividends and accretion on preferred stock as follows:
<TABLE>
<CAPTION>
THREE MONTHS
DATE OF YEAR ENDED ENDED
ISSUANCE DECEMBER 31, 1996 MARCH 31, 1997
----------------- ----------------- --------------
<S> <C> <C> <C>
CRBC Series A Preferred Stock........... February 26, 1996 $ 1,441 $ --
CRBC Junior Preferred Stock............. January 23, 1997 25,402 1,504
------- ------
Total dividends and accretion........... $26,843 $1,504
======= ======
</TABLE>
P-24
<PAGE> 145
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
RELATED TO THE PENDING CHANCELLOR TRANSACTIONS
(19) The detail of the historical financial data of the stations to be acquired
in the Pending Chancellor Transactions for the year ended December 31, 1996
and the three months ended March 31, 1997 has been obtained from the
historical financial statements of the respective companies and is
summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 THREE MONTHS ENDED
----------------------------------------- MARCH 31, 1997
WBAB-FM ------------------
WBLI-FM CHANCELLOR CHANCELLOR
WGBB-AM VIACOM PENDING VIACOM
WHFM-FM ACQUISITION CHANCELLOR ACQUISITION
HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL
PENDING CHANCELLOR TRANSACTIONS 1/1-6/30(a) 1/1-12/31(b) HISTORICAL 1/1-3/31(b)
- --------------------------------------- ----------- ------------ ------------ ------------------
<S> <C> <C> <C> <C>
Gross revenues......................... $5,726 $52,063 $57,789 $11,867
Less: agency commissions............... (619) (8,533) (9,152) (1,960)
------- ------- ------- -------
Net revenues........................... 5,107 43,530 48,637 9,907
Station operating expenses excluding
depreciation and amortization........ 3,676 20,886 24,562 5,111
Depreciation and amortization.......... 2,141 4,286 6,427 1,078
Corporate general and administrative
expenses............................. 1,024 1,323 2,347 239
------- ------- ------- -------
Operating income (loss)................ (1,734) 17,035 15,301 3,479
Interest expense....................... -- 6,374 6,374 1,594
------- ------- ------- -------
Net income (loss)...................... (1,734) 10,661 8,927 1,885
Income tax expense..................... -- 4,422 4,422 788
------- ------- ------- -------
Income (loss) attributable to common
stock................................ $(1,734) $ 6,239 $ 4,505 $ 1,097
======= ======= ======= =======
OTHER FINANCIAL DATA:..................
Broadcast Cash Flow.................... $1,431 $22,644 $24,075 $ 4,796
</TABLE>
- ---------------
(a) On July 1, 1996, CRBC entered into an agreement to exchange, in the SFX
Exchange, WAPE-FM and WFYV-FM in Jacksonville, Florida (which were acquired
as part of the Omni Acquisition) (see note 16(e)), and $11,000 in cash for
WBAB-FM, WBLI-FM, WGBB-AM, and WHFM-FM in Long Island.
(b) On February 19, 1997, CRBC and EMCLA entered into the Viacom Joint Purchase
Agreement whereby in the event the Viacom Acquisition occurs prior to the
consummation of the Chancellor Merger, CRBC will be required to purchase 4
of the 10 Viacom stations in the Chancellor Viacom Acquisition for $480,000
plus working capital ($7,547 at March 31, 1997) and estimated acquisition
costs of $13,000 for an aggregate purchase price of $500,547. The stations
to be acquired by CRBC in the Chancellor Viacom Acquisition include KYSR-FM
and KIBB-FM in Los Angeles, WLIT-FM in Chicago and WDRQ-FM in Detroit. On
April 14, 1997, CRBC entered into an agreement to sell WDRQ-FM in Detroit
(to be acquired as part of the Chancellor Viacom Acquisition) for $37,000 in
cash; consequently, only the results of operations of the Viacom Stations in
Los Angeles and Chicago have been given effect in the Pro Forma Financial
Statements.
(20) Reflects the elimination of time brokerage agreement fees received and paid
by CRBC as follows:
<TABLE>
<CAPTION>
PENDING CHANCELLOR TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996 MARKET PERIOD REVENUE EXPENSE
------------------------------- ----------- --------- ------- -------
<S> <C> <C> <C> <C>
WAPE-FM, WFYV-FM............................................ Jacksonville 7/1-12/31 $(1,963) $(2,000)
WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM.......................... Long Island 7/1-12/31 -- (2,000)
------- -------
Total adjustment for decrease in gross revenues and expenses........................ $(1,963) $(4,000)
======= =======
</TABLE>
P-25
<PAGE> 146
<TABLE>
<CAPTION>
PENDING CHANCELLOR TRANSACTIONS
THREE MONTHS ENDED MARCH 31, 1997 MARKET PERIOD REVENUE EXPENSE
--------------------------------- ----------- --------- ------- -------
<S> <C> <C> <C> <C>
WAPE-FM, WFYV-FM............................................ Jacksonville 1/1-3/31 $(1,070) $ (541)
WBAB-FM, WBLI-FM, WGBB-AM, WHFM-FM.......................... Long Island 1/1-3/31 -- (1,000)
------- -------
Total adjustment for decrease in gross revenues and expenses........................ $(1,070) $(1,541)
======= =======
</TABLE>
(21) Reflects incremental amortization related to the Pending Chancellor
Transactions (see note 3) and is based on the allocation of the total
consideration as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
<S> <C> <C>
Amortization expense on $461,290
additional intangible assets amortized
on a straight-line basis over a period
of 40 years........................... $11,533 $ 2,883
Less: Historical amortization expense... (5,730) (1,357)
------- -------
Adjustment for net increase in
amortization expense.................. $ 5,803 $ 1,526
======= =======
</TABLE>
Historical depreciation expense, of the Pending Chancellor Transactions,
is assumed to approximate depreciation expense on a pro forma basis.
Actual depreciation and amortization may differ based upon final
purchase price allocations.
(22) Reflects the elimination of duplicate corporate expenses of $1,807 for
the year ended December 31, 1996 and $176 for the three months ended
March 31, 1997 related to the Pending Chancellor Transactions.
(23) Reflects the adjustment to interest expense in connection with the
consummation of the Pending Chancellor Transactions and the
refinancing of CRBC's bank borrowings under the CRBC Restated Credit
Agreement:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
<S> <C> <C>
Additional bank borrowings related to:
Pending Acquisitions....................... $341,547 $341,547
Pending Dispositions....................... (37,000) (37,000)
Loan Fees.................................. 3,500 3,500
-------- --------
Total additional bank borrowings............. $308,047 $308,047
======== ========
Interest expense on additional bank
borrowings at 7.5%......................... $ 23,104 $ 5,776
Less: historical interest expense of the
stations being acquired in the Pending
Chancellor Transactions.................... (6,374) (1,594)
-------- --------
Net increase in interest expense............. 16,730 4,182
Reduction in interest expense resulting from
the redemption of CRBC's 12.5% Subordinated
Notes of $60,000........................... (7,500) (1,875)
Interest expense on $69,000 additional bank
borrowings at 7.5% related to the
redemption of CRBC's 12.5% Subordinated
Notes...................................... 5,175 1,294
Interest expense on $200,000 8 3/4% Senior
Subordinated Notes related to the CRBC
8 3/4% Notes Offering...................... 17,500 4,375
Reduction in interest expense resulting from
the $194,000 decrease in bank borrowings at
7.5% related to the CRBC 8 3/4% Notes
Offering................................... (14,550) (3,638)
-------- --------
Total adjustment for net increase in interest
expense.................................... $ 17,355 $ 4,338
======== ========
</TABLE>
P-26
<PAGE> 147
(24) Reflects the income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated
effective tax rate on a pro forma basis to income (loss) before income
taxes for historical and pro forma adjustment amounts.
ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
RELATED TO THE MERGER
(25) Reflects incremental amortization related to the Merger and is based on the
allocation of the total consideration as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
Amortization expense on $2,147,657 intangible assets
(representing all intangible assets being acquired
in or arising from the Merger), which consists of
$1,866,167 of intangible assets being acquired
from CRBC (see note 9(a)) and $281,490 resulting
from the recognition of deferred tax liabilities
(see note 10), amortized in each case on a
straight-line basis over a period of 15 years..... $143,177 $35,794
Less: Historical amortization expense............... (38,075) (9,148)
-------- -------
Adjustment for net increase in amortization
expense........................................... $105,102 $26,646
======== =======
</TABLE>
Historical depreciation expense, of Chancellor, is assumed to approximate
depreciation expense on a pro forma basis. Actual depreciation and
amortization may differ based upon final purchase price allocations.
(26) Reflects the elimination of duplicate corporate expenses of $832 for the
year ended December 31, 1996 and $247 for the three months ended March 31,
1997 related to the Merger.
(27) Reflects the elimination of merger expenses of $2,056 for the three months
ended March 31, 1997 incurred by CRBC in connection with the Merger.
(28) Reflects the adjustment to interest expense in connection with the
consummation of the Merger:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
Interest expense on $198,000 additional bank
borrowings related to (i) the retirement of
Chancellor Interim Financing of $170,000 and (ii)
estimated financial advisors, legal, accounting
and other professional fees of $28,000 at 7.0%.... $ 13,860 $ 3,465
Reduction in interest expense related to the
application of the 7.0% interest rate to
Evergreen's bank debt prior to the refinancing of
the EMCLA Senior Credit Facility and to CRBC's
bank debt prior to consummation of the
Merger............................................ (12,340) (1,481)
-------- -------
Net increase in interest expense.................... $ 1,520 $ 1,984
======== =======
</TABLE>
(29) Reflects the income tax benefit related to pro forma adjustments. The
adjustment to income taxes reflects the application of the estimated
effective tax rate on a pro forma basis to income (loss) before income
taxes for historical and pro forma adjustment amounts.
P-27
<PAGE> 148
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
Independent Auditors' Report.............................. F-4
Consolidated Balance Sheets as of December 31, 1995 and
1996 and March 31, 1997 (unaudited).................... F-5
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996 and for the three
months ended March 31, 1996 and 1997 (unaudited)....... F-6
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 1994, 1995 and 1996 and for
the three months ended March 31, 1997 (unaudited)...... F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and for the three
months ended March 31, 1996 and 1997 (unaudited)....... F-8
Notes to Consolidated Financial Statements................ F-9
</TABLE>
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
Report of Independent Accountants......................... F-23
Consolidated Balance Sheets as of December 31, 1995 and
1996................................................... F-24
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996....................... F-25
Consolidated Statements of Changes in Common Stockholder's
Equity for the years ended December 31, 1994, 1995 and
1996................................................... F-26
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996....................... F-27
Notes to Consolidated Financial Statements................ F-28
Unaudited Consolidated Balance Sheets as of December 31,
1996 and March 31, 1997................................ F-44
Unaudited Consolidated Statements of Operations for the
three months ended March 31, 1996 and 1997............. F-45
Unaudited Consolidated Statements of Changes in
Stockholder's Equity for the three months ended March
31, 1997............................................... F-46
Unaudited Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and 1997............. F-47
Notes to Unaudited Consolidated Financial Statements...... F-48
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
Independent Auditors' Report.............................. F-53
Combined Balance Sheets as of December 31, 1995 and 1996
and March 31, 1997 (unaudited)......................... F-54
Combined Statements of Earnings for the years ended
December 31, 1994, 1995 and 1996 and the three months
ended March 31, 1996 and 1997 (unaudited).............. F-55
Combined Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and the three months
ended March 31, 1996 and 1997 (unaudited).............. F-56
Notes to Combined Financial Statements.................... F-57
F-1
<PAGE> 149
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WMZQ INC. AND VIACOM BROADCASTING EAST INC.:
Independent Auditors' Report.............................. F-62
Combined Balance Sheets as of December 31, 1995 and 1996
and March 31, 1997
(unaudited)............................................ F-63
Combined Statements of Earnings for the years ended
December 31, 1994, 1995 and 1996 and the three months
ended March 31, 1996 and 1997 (unaudited).............. F-64
Combined Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and the three months
ended March 31, 1996 and 1997 (unaudited).............. F-65
Notes to Combined Financial Statements.................... F-66
KKSF-FM/KDFC-FM AND AM (A DIVISION OF THE BROWN
ORGANIZATION):
Independent Auditors' Report.............................. F-71
Balance Sheets as of December 31, 1995 and 1996........... F-72
Statements of Earnings and Division Equity for the years
ended December 31, 1995 and 1996....................... F-73
Statements of Cash Flows for the years ended December 31,
1995 and 1996.......................................... F-74
Notes to Financial Statements............................. F-75
WDAS-AM/FM (STATION OWNED AND OPERATED BY BEASLEY FM
ACQUISITION CORP.):
Independent Auditors' Report.............................. F-80
Balance Sheets as of December 31, 1996 and March 31, 1997
(unaudited)............................................ F-81
Statements of Earnings and Station Equity for the year
ended December 31, 1996 and the three months ended
March 31, 1996 and 1997 (unaudited).................... F-82
Statements of Cash Flows for the year ended December 31,
1996 and the three months ended March 31, 1996 and 1997
(unaudited)............................................ F-83
Notes to Financial Statements............................. F-84
CENTURY CHICAGO BROADCASTING, L.P.:
Report of Independent Accountants......................... F-88
Balance Sheets as of December 31, 1996 and March 31, 1997
(unaudited)............................................ F-89
Statements of Operations and Partners' Deficit for the
year ended December 31, 1996 and the three months ended
March 31, 1996 and 1997 (unaudited).................... F-90
Statements of Cash Flows for the year ended December 31,
1996 and the three months ended March 31, 1996 and 1997
(unaudited)............................................ F-91
Notes to Financial Statements............................. F-92
WJLB/WMXD, DETROIT:
Report of Independent Public Accountants.................. F-97
Combined Balance Sheets as of December 31, 1996 and March
31, 1997 (unaudited)................................... F-98
Combined Statements of Operations for the year ended
December 31, 1996 and for the three months ended March
31, 1996 and 1997 (unaudited).......................... F-99
Combined Statements of Cash Flows for the year ended
December 31, 1996 and for the three months ended March
31, 1996 and 1997 (unaudited).......................... F-100
Notes to Combined Financial Statements.................... F-101
KYSR INC. AND KIBB INC.:
Independent Auditors' Report.............................. F-106
Combined Balance Sheets as of December 31, 1995 and 1996
and March 31, 1997
(unaudited)............................................ F-107
Combined Statements of Operations for the years ended
December 31, 1994, 1995 and 1996 and the three months
ended March 31, 1996 and 1997 (unaudited).............. F-108
Combined Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and the three months
ended March 31, 1996 and 1997 (unaudited).............. F-109
Notes to Combined Financial Statements.................... F-110
</TABLE>
F-2
<PAGE> 150
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WLIT INC.:
Independent Auditors' Report.............................. F-115
Balance Sheets as of December 31, 1995 and 1996 and March
31, 1997 (unaudited)................................... F-116
Statements of Earnings for the years ended December 31,
1994, 1995 and 1996 and the three months ended March
31, 1996 and 1997 (unaudited).......................... F-117
Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 and the three months ended March
31, 1996 and 1997 (unaudited).......................... F-118
Notes to Financial Statements............................. F-119
WDRQ INC.:
Independent Auditors' Report.............................. F-124
Balance Sheets as of December 31, 1995 and 1996 and March
31, 1997 (unaudited)................................... F-125
Statements of Earnings for the years ended December 31,
1994, 1995 and 1996 and the three months ended March
31, 1996 and 1997 (unaudited).......................... F-126
Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 and the three months ended March
31, 1996 and 1997 (unaudited).......................... F-127
Notes to Financial Statements............................. F-128
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
Report of Independent Accountants......................... F-133
Report of Independent Accountants......................... F-134
Consolidated Balance Sheets as of December 31, 1994 and
1995................................................... F-135
Consolidated Statements of Operations for the years ended
December 31, 1994 and 1995 and the period ended
February 13, 1996...................................... F-136
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1994 and 1995 and for the
period ended February 13, 1996......................... F-137
Consolidated Statements of Cash Flows for the years ended
December 31, 1994 and 1995 and for the period ended
February 13, 1996...................................... F-138
Notes to Consolidated Financial Statements................ F-139
COLFAX COMMUNICATIONS, INC. RADIO GROUP
Report of Independent Public Accountants.................. F-148
Combined Balance Sheets as of December 31, 1996, 1995, and
1994................................................... F-149
Combined Statements of Income for the years ended December
31, 1996, 1995, and 1994............................... F-150
Combined Statements of Changes in Partners' Equity for the
years ended December 31, 1996, 1995, and 1994.......... F-151
Combined Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994...................... F-152
Notes to Consolidated Financial Statements................ F-153
</TABLE>
F-3
<PAGE> 151
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Evergreen Media Corporation of Los Angeles:
We have audited the accompanying consolidated balance sheets of Evergreen
Media Corporation of Los Angeles and subsidiaries as of December 31, 1995 and
1996, and the related consolidated statements of operations, stockholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. 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 Evergreen
Media Corporation of Los Angeles and subsidiaries as of December 31, 1995 and
1996, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
January 31, 1997, except for note 2(c),
which is as of February 19, 1997
F-4
<PAGE> 152
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31,
----------------------------- ---------------
1995 1996 1997
------------ -------------- ---------------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................... $ 3,430 $ 3,060 $ 5,269
Accounts receivable, less allowance for doubtful
accounts of $2,000 in 1995, $2,292 in 1996 and $3,469
in 1997.............................................. 45,413 85,159 79,139
Prepaid expenses and other.............................. 2,146 6,352 5,919
-------- ---------- ----------
Total current assets............................ 50,989 94,571 90,327
Property and equipment, net (note 3)...................... 37,839 48,193 51,356
Intangible assets, net (note 4)........................... 458,787 853,643 928,440
Assets held for sale...................................... -- -- 50,000
Other assets, net......................................... 4,732 24,552 66,532
-------- ---------- ----------
$552,347 $1,020,959 $1,186,655
======== ========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses (note 5).......... $ 15,892 $ 26,366 $ 21,992
Current portion of long-term debt (note 6).............. 4,000 26,500 --
Other current liabilities............................... 541 284 152
-------- ---------- ----------
Total current liabilities....................... 20,433 53,150 22,144
Long-term debt, excluding current portion (note 6)........ 197,000 331,500 535,375
Deferred tax liabilities (note 8)......................... 29,233 86,098 84,789
Other liabilities......................................... 1,104 800 823
-------- ---------- ----------
Total liabilities............................... 247,770 471,548 643,131
-------- ---------- ----------
Stockholder's equity (notes 2 and 7):
Common stock, $.01 par value. Authorized shares 1,000;
issued and outstanding 1,000 shares.................. 1 1 1
Paid-in capital......................................... 398,074 662,922 663,046
Accumulated deficit..................................... (93,498) (113,512) (119,523)
-------- ---------- ----------
Total stockholder's equity...................... 304,577 549,411 543,524
Commitments and contingencies (notes 2, 6 and 10).........
-------- ---------- ----------
$552,347 $1,020,959 $1,186,655
======== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 153
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------ ------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Gross revenues........................... $125,478 $186,365 $337,405 $ 60,782 $93,812
Less agency commissions................ 15,962 23,434 43,555 7,411 11,915
-------- -------- -------- -------- -------
Net revenues................... 109,516 162,931 293,850 53,371 81,897
-------- -------- -------- -------- -------
Operating expenses:
Station operating expenses excluding
depreciation and amortization....... 68,852 97,674 174,344 37,426 52,984
Depreciation and amortization.......... 30,596 47,005 93,749 22,676 26,015
Corporate general and administrative... 2,672 4,475 7,797 1,492 2,330
-------- -------- -------- -------- -------
Operating expenses............. 102,120 149,154 275,890 61,594 81,329
-------- -------- -------- -------- -------
Operating income (loss)........ 7,396 13,777 17,960 (8,223) 568
-------- -------- -------- -------- -------
Nonoperating income (expenses):
Interest expense....................... (13,809) (19,199) (37,527) 8,973 7,888
Gain on disposition of assets (note
2).................................. 6,991 -- -- -- --
Other income (expense), net............ (539) (236) 477 -- --
-------- -------- -------- -------- -------
Nonoperating expenses, net..... (7,357) (19,435) (37,050) 8,973 7,888
-------- -------- -------- -------- -------
Income (loss) before income
taxes and extraordinary
item......................... 39 (5,658) (19,090) (17,196) (7,320)
Income tax expense (benefit) (note 8).... -- 192 (2,896) (2,923) (1,309)
-------- -------- -------- -------- -------
Income (loss) before
extraordinary item........... 39 (5,850) (16,194) (14,273) (6,011)
Extraordinary item -- loss on
extinguishment of debt (note 6)........ (3,585) -- -- -- --
-------- -------- -------- -------- -------
Net loss....................... $ (3,546) $ (5,850) $(16,194) $(14,273) $(6,011)
======== ======== ======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 154
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- PAID-IN ACCUMULATED STOCKHOLDER'S
AMOUNT SHARES CAPITAL DEFICIT EQUITY
------ ------ ------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1993............. $1 1,000 195,409 (74,442) 120,968
Distribution to Parent.................. -- -- (239) -- (239)
Dividend to Parent...................... -- -- -- (4,830) (4,830)
Net loss........................ -- -- -- (3,546) (3,546)
-- ------ ------- -------- -------
Balances at December 31, 1994............. 1 1,000 195,170 (82,818) 112,353
Net capital contributed by Parent....... -- -- 202,904 -- 202,904
Dividend to Parent...................... -- -- -- (4,830) (4,830)
Net loss........................ -- -- -- (5,850) (5,850)
-- ------ ------- -------- -------
Balances at December 31, 1995............. 1 1,000 398,074 (93,498) 304,577
Net capital contributed by Parent....... -- -- 264,848 -- 264,848
Dividend to Parent...................... -- -- -- (3,820) (3,820)
Net loss........................ -- -- -- (16,194) (16,194)
-- ------ ------- -------- -------
Balances at December 31, 1996............. 1 1,000 662,922 (113,512) 549,411
Net capital contributed by Parent....... -- -- 124 -- 124
Net loss........................ -- -- -- (6,011) (6,011)
-- ------ ------- -------- -------
Balances at March 31, 1997 (unaudited).... $1 1,000 663,046 (119,523) 543,524
== ====== ======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 155
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------- ---------------------
1994 1995 1996 1996 1997
-------- --------- --------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................. $ (3,546) $ (5,850) $ (16,194) $ (14,273) $ (6,011)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation....................... 4,528 5,508 7,707 1,784 2,419
Amortization of goodwill,
intangible assets and other
assets........................... 26,068 41,497 86,042 20,892 23,596
Provision for doubtful accounts.... 754 904 2,179 677 1,254
Deferred income tax benefit........ - (479) (4,353) (2,923) (1,309)
Gain on disposition of assets...... (6,991) - - - -
Loss on extinguishment of debt..... 3,585 - - - -
Changes in certain assets and
liabilities, net of effects of
acquisitions:
Accounts receivable.............. (5,051) (6,628) (28,146) 9,771 4,766
Prepaid expenses and other
current assets................ 84 724 (2,804) (713) 433
Accounts payable and accrued
expenses...................... 1,194 4,405 4,560 (383) (5,911)
Other assets..................... (724) (184) (354) (80) (19)
Other liabilities................ (21) 490 (587) 108 23
-------- --------- --------- --------- ---------
Net cash provided by operating
activities.................. 19,880 40,387 48,050 14,860 19,241
-------- --------- --------- --------- ---------
Cash flows from investing activities:
Acquisitions, net of cash acquired.... (44,921) (188,004) (457,764) (314,826) (83,500)
Escrow deposits on pending
acquisitions....................... -- -- (17,000) -- (53,750)
Assets held for sale.................. 19,101 -- 32,000 -- (50,000)
Capital expenditures.................. (5,227) (2,642) (6,543) (344) (672)
Other................................. (1,881) (1,466) (12,631) (336) (6,461)
-------- --------- --------- --------- ---------
Net cash used by investing
activities.................. (32,928) (192,112) (461,938) (315,506) (194,383)
-------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt............................... 36,000 186,000 447,750 319,750 192,250
Principal payments on long-term
debt............................... (14,000) (159,000) (290,750) (10,750) (14,875)
Payments on other long-term
liabilities........................ (646) (694) (569) (95) (132)
Cash contributed by Parent............ -- 132,766 264,848 320 124
Cash distributed to Parent............ (239) -- -- -- --
Dividend to Parent.................... (4,830) (4,830) (3,820) (1,208) --
Payments for debt issuance costs...... (4,602) (303) (3,941) (3,585) (16)
-------- --------- --------- --------- ---------
Net cash provided by financing
activities.................. 11,683 153,939 413,518 304,432 177,351
-------- --------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents........................... (1,365) 2,214 (370) 3,786 2,209
Cash and cash equivalents at beginning
of period............................. 2,581 1,216 3,430 3,430 3,060
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of
period................................ $ 1,216 $ 3,430 $ 3,060 $ 7,216 $ 5,269
======== ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 156
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES IN THOUSANDS OF DOLLARS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Evergreen Media Corporation of Los Angeles and subsidiaries, (a
wholly-owned subsidiary of Evergreen Media Corporation ("Evergreen" or
"Parent")), own and operate commercial radio stations in various geographical
regions across the United States, primarily in the top ten radio revenue
markets.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of Evergreen
Media Corporation of Los Angeles and its subsidiaries (collectively, the
"Company") all of which are wholly owned. Significant intercompany balances and
transactions have been eliminated in consolidation.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(d) Intangible Assets
Intangible assets consist primarily of broadcast licenses, goodwill and
other identifiable intangible assets. The Company amortizes such intangible
assets using the straight-line method over estimated useful lives ranging from 1
to 40 years. The Company continually evaluates the propriety of the carrying
amount of goodwill and other intangible assets as well as the amortization
period to determine whether current events or circumstances warrant adjustments
to the carrying value and/or revised estimates of useful lives. This evaluation
consists of the projection of undiscounted operating income before depreciation,
amortization, nonrecurring charges and interest for each of the Company's radio
stations over the remaining amortization periods of the related intangible
assets. The projections are based on a historical trend line of actual results
since the acquisitions of the respective stations adjusted for expected changes
in operating results. To the extent such projections indicate that undiscounted
operating income is not expected to be adequate to recover the carrying amounts
of the related intangible assets, such carrying amounts are written down by
charges to expense. At this time, the Company believes that no significant
impairment of goodwill and other intangible assets has occurred and that no
reduction of the estimated useful lives is warranted.
(e) Debt Issuance Costs
The costs related to the issuance of debt are capitalized and amortized to
expense over the lives of the related debt. During the years ended December 31,
1994, 1995 and 1996, the Company recognized amortization of debt issuance costs
of $712,000, $631,000 and $1,113,000, respectively, which amounts are included
in amortization expense in the accompanying consolidated statements of
operations.
(f) Barter Transactions
The Company trades commercial air time for goods and services used
principally for promotional, sales and other business activities. An asset and
liability is recorded at the fair market value of the goods or services
received. Barter revenue is recorded and the liability relieved when commercials
are broadcast and barter expense is recorded and the asset relieved when goods
or services are received or used. Barter amounts are not significant to the
Company's consolidated financial statements.
F-9
<PAGE> 157
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(g) Income Taxes
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable earnings. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount more likely than not to be
realized. Income tax expense is the total of tax payable for the period and the
change during the period in deferred tax assets and liabilities.
The Company is included in the consolidated federal income tax returns
filed by Evergreen. Federal taxes are calculated on a separate return basis in
the accompanying consolidated financial statements.
(h) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
Fees received or paid pursuant to various time brokerage agreements are
recognized as gross revenues or amortized to expense, respectively, over the
term of the agreement using the straight-line method.
(i) Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers
temporary cash investments purchased with original maturities of three months or
less to be cash equivalents.
The Company paid approximately $12,852,000, $19,134,000 and $37,042,000 for
interest in 1994, 1995 and 1996, respectively. The Company paid approximately
$733,000 for income taxes in 1996.
(j) Derivative Financial Instruments
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to manage
well-defined interest rate risks related to interest on the Company's
outstanding debt.
As interest rates change under interest rate swap and cap agreements, the
differential to be paid or received is recognized as an adjustment to interest
expense. The Company is not exposed to credit loss as its interest rate swap
agreements are with the participating banks under the Company's senior credit
facility.
(k) Omission of Per Share Information
Net loss per share is not presented as such information is not meaningful.
All 1,000 issued and outstanding shares of the Company's common stock are owned
by Evergreen during the three-year period ended December 31, 1996.
(l) Disclosure of Certain Significant Risks and Uncertainties
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.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers and the geographic
diversification of the Company's customer base. The Company performs ongoing
credit evaluations of its customers and believes that adequate allowances for
any
F-10
<PAGE> 158
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
uncollectible trade receivables are maintained. At December 31, 1995 and 1996,
no receivable from any customer exceeded 5% of stockholder's equity and no
customer accounted for more than 10% of net revenues in 1994, 1995 or 1996.
(m) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(n) Stock-Based Compensation
The Company does not have any stock compensation plans under which it
grants stock awards to employees. Evergreen grants stock options to the
Company's officers and other key employees on behalf of the Company.
Prior to January 1, 1996, Evergreen accounted for its' stock option plans
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, Evergreen 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 and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. Evergreen has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosures of SFAS No. 123.
(o) Unaudited Interim Financial Information
In the opinion of management, the unaudited interim consolidated financial
statements as of and for the three months ended March 31, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring items, which are
necessary for a fair presentation of the results for the interim periods
presented. The results for the interim periods ended March 31, 1996 and 1997 are
not necessarily indicative of results to be expected for any other interim
period or for the full year.
(2) ACQUISITIONS AND DISPOSITIONS
(a) Completed Transactions
In April 1994, the Company acquired radio station KIOI-FM in San Francisco,
California for cash consideration of approximately $44,921,000. This acquisition
was funded with proceeds received from the sale of stations WAPE-FM and WFYV-FM
in Jacksonville (which sale closed in April 1994) and additional borrowings
under the Company's senior credit facility. The Company received proceeds of
$19,500,000 less closing costs from the sale of WAPE-FM and WFYV-FM and
recognized a gain of $7,328,000 on such sale.
F-11
<PAGE> 159
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1995, the Company and Evergreen acquired Broadcasting Partners, Inc.
("BPI"), a publicly traded radio broadcasting company with seven FM and four AM
radio stations, eight of which are in the nation's ten largest radio markets
(the "BPI Acquisition"). The BPI Acquisition was effected through the merger of
a wholly-owned subsidiary of the Company with and into BPI, with BPI surviving
the merger as a wholly-owned subsidiary of the Company. The BPI Acquisition
included the conversion of each outstanding share of BPI common stock into the
right to receive $12.00 in cash and .69 shares of Evergreen's Class A Common
Stock, resulting in total cash payments of $94,813,000 and the issuance of
5,611,009 shares of Evergreen's Class A Common Stock valued at $12.50 per share.
In addition, the Company retired existing BPI debt of $81,926,000 and incurred
various other direct acquisition costs. The total purchase price, including
closing costs, allocated to net assets acquired was approximately $258,634,000.
On January 17, 1996, the Company and Evergreen acquired Pyramid
Communications, Inc. ("Pyramid"), a radio broadcasting company with nine FM and
three AM radio stations in five radio markets (Chicago, Philadelphia, Boston,
Charlotte and Buffalo) (the "Pyramid Acquisition"). The Pyramid Acquisition was
effected through the merger of a wholly-owned subsidiary of the Company with and
into Pyramid with Pyramid surviving the merger as a wholly-owned subsidiary of
the Company. The total purchase price, including closing costs, allocated to net
assets acquired was approximately $316,343,000 in cash.
On May 3, 1996, the Company acquired WKLB-FM in Boston for $34,000,000 in
cash plus various other direct acquisition costs. On November 26, 1996, the
Company exchanged WKLB-FM in Boston (now known as WROR-FM) for WGAY-FM in
Washington, D.C. The Company had previously been operating WGAY-FM under a time
brokerage agreement and selling substantially all of the broadcast time of
WKLB-FM under a time brokerage agreement, in each case since June 17, 1996,
pending completion of the exchange.
On July 19, 1996, the Company sold WHTT-FM and WHTT-AM in Buffalo for
$19,500,000 in cash and on August 1, 1996, the Company sold WSJZ-FM in Buffalo
for $12,500,000 in cash (collectively, the "Buffalo Stations"). The assets of
the Buffalo Stations were classified as assets held for sale in the Pyramid
Acquisition and no gain or loss was recognized by the Company upon consummation
of the sales. The combined net income of the Buffalo stations of approximately
$733,000 has been excluded from the consolidated statement of operations for the
year ended December 31, 1996. The excess of the proceeds over the carrying
amounts at the dates of sale approximated $2,561,000 (including interest costs
during the holding period of approximately $1,169,000) and has been accounted
for as an adjustment to the original purchase price of the Pyramid Acquisition.
The Company had previously entered into time brokerage agreements (effective
April 15, 1996 for WSJZ-FM and April 25, 1996 for WHTT-FM and WHTT-AM) to sell
substantially all of the broadcast time of these stations pending completion of
the sales.
On August 14, 1996, the Company acquired KYLD-FM in San Francisco for
$44,000,000 in cash plus various other direct acquisition costs. The Company had
previously been operating KYLD-FM under a time brokerage agreement since May 1,
1996.
On October 18, 1996, the Company acquired WEDR-FM in Miami for $65,000,000
in cash plus various other direct acquisition costs.
On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit
for $30,000,000 in cash plus various other direct acquisition costs. The Company
had previously provided certain sales and promotional functions to WWWW-FM and
WDFN-AM under a joint sales agreement since February 14, 1996 and subsequently
operated the stations under a time brokerage agreement since April 1, 1996.
On January 31, 1997, the Company acquired KKSF-FM, KDFC-FM and KDFC-AM in
San Francisco for $115,000,000 in cash plus various other direct acquisitions
costs. The Company had previously been operating KKSF-FM and KDFC-FM under a
time brokerage agreement since November 1, 1996.
F-12
<PAGE> 160
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisitions discussed above were accounted for as purchases.
Accordingly, the accompanying consolidated financial statements include the
results of operations of the acquired entities from the dates of acquisition.
A summary of the net assets acquired follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
Working capital, including cash of $492 in 1995 and
$1,011 in 1996...................................... $ (79) $ 12,012 $ 11,218
Property and equipment................................ 1,762 11,684 11,519
Assets held for sale.................................. -- -- 32,000
Intangible assets..................................... 43,238 264,650 465,824
Deferred tax liability................................ -- (29,712) (61,218)
------- -------- --------
$44,921 $258,634 $459,343
======= ======== ========
</TABLE>
The consolidated condensed pro forma results of operations data for 1995
and 1996, as if the 1995 and 1996 acquisitions and dispositions occurred at
January 1, 1995, follow:
<TABLE>
<CAPTION>
1995 1996
-------- --------
(UNAUDITED)
<S> <C> <C>
Net revenues................................................ $263,569 $306,388
Operating income (loss)..................................... (1,540) 15,531
Net loss.................................................... (21,471) (8,030)
</TABLE>
(b) Pending Transactions
On June 13, 1996, the Company entered into an agreement to acquire WWRC-AM
in Washington, D.C. for $22,500,000 in cash. The Company has subsequently agreed
with the owner of WWRC-AM to exchange WQRS-FM in Detroit (which, as discussed
below, the Company has agreed to acquire in a separate purchase for $32,000,000
in cash) in return for WWRC-AM and $9,500,000 in cash. The Company has been
operating WWRC-AM under a time brokerage agreement since June 17, 1996.
On July 15, 1996, the Company entered into an agreement to acquire WPNT-FM
in Chicago for $73,750,000 in cash.
On August 12, 1996, the Company entered into an agreement to acquire
WMXD-FM and WJLB-FM in Detroit for $168,000,000 in cash and WFLN-FM in
Philadelphia for $37,750,000 in cash. The Company also entered into an agreement
to operate WMXD-FM, WJLB-FM and WFLN-FM under time brokerage agreements
effective September 1, 1996. The Company and Evergreen also entered into a
separate agreement on August 12, 1996 to acquire WQRS-FM in Detroit for
$32,000,000 in cash. As discussed above, the Company will immediately swap
WQRS-FM at closing in return for WWRC-AM in Washington and $9,500,000 in cash.
On September 4, 1996, the Company entered into a binding letter of intent
to swap five of its six stations in the Charlotte, N.C. market (WPEG-FM,
WBAV-FM, WBAV-AM, WRFX-FM and WFNZ-AM), which were acquired as part of the BPI
Acquisition and the Pyramid Acquisition, for WIOQ-FM and WUSL-FM in
Philadelphia. As part of this transaction, the Company has also agreed to sell
its sixth radio station in Charlotte, WNKS-FM, for $10,000,000 in cash. On
December 5, 1996, the Company entered into definitive agreements regarding these
stations.
On September 19, 1996, the Company entered into an agreement to acquire
WDAS-FM and WDAS-AM in Philadelphia for $103,000,000 in cash.
F-13
<PAGE> 161
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consummation of each Pending Transaction is subject to various conditions,
including approval from the FCC and the expiration or early termination under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). The Company believes that such conditions will be satisfied in the
ordinary course, but there can be no assurance that this will be the case.
Completion of the above pending transactions would result in the Company's
ownership of six FM stations in the Chicago and Philadelphia markets, or one
station in each market in excess of the maximum number of FM stations under
common ownership permitted by the Telecommunications Act of 1996 (the "1996
Act"). Therefore, the Company will be required to divest one FM station in each
market in order to comply with the 1996 Act.
Escrow funds of $17,000,000 paid by the Company in connection with the
completed transactions subsequent to year end and the pending transactions have
been classified as other assets at December 31, 1996 in the accompanying
consolidated balance sheet.
(c) Chancellor Broadcasting Merger and Viacom Acquisition
On February 16, 1997, the Company entered into a stock purchase agreement
with Viacom International, Inc. ("Viacom") whereby the Company agreed to acquire
all of the issued and outstanding capital stock of certain subsidiaries of
Viacom ("Viacom Subsidiaries") for an aggregate purchase price of $1,075,000,000
in cash. The Viacom Subsidiaries own and operate ten radio stations in five
major markets.
On February 19, 1997, the Company and Evergreen entered into an agreement
to merge with Chancellor Broadcasting Company ("Chancellor") and Chancellor
Radio Broadcasting Company, in a stock-for-stock transaction with the Company
remaining as the surviving corporation.
On February 19, 1997, the Company and Evergreen and Chancellor entered into
a joint purchase agreement whereby in the event that consummation of the
Company's stock purchase agreement with Viacom occurs prior to consummation of
the transaction with Chancellor, Chancellor will be required to purchase the
Viacom Subsidiaries that own and operate four of the ten stations for
$480,000,000 and the Company will purchase the Viacom Subsidiaries that own and
operate the remaining six stations for $595,000,000. In the event consummation
of the stock purchase agreement with Viacom occurs after the consummation of the
transaction with Chancellor, the surviving corporation will acquire the stock of
the Viacom Subsidiaries.
Completion of the Chancellor Merger and the Viacom Acquisition would result
in the Company's ownership of a number of stations in the Chicago, San
Francisco, Washington, D.C., Detroit and Sacramento markets in excess of the
maximum number of stations under common ownership permitted by the 1996 Act.
Therefore, the Company will be required to divest the following stations in
order to comply with the 1996 Act: (i) one FM station in the Chicago market;
(ii) two FM stations in the San Francisco market; (iii) one FM station and two
AM stations in the Washington, D.C. market; (iv) one FM station in the Detroit
market; and (v) one AM station in the Sacramento market.
F-14
<PAGE> 162
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ------- -------
<S> <C> <C> <C>
Broadcast and other equipment........................ 3-15 years $36,428 $47,937
Buildings and improvements........................... 3-20 years 8,570 11,735
Furniture and fixtures............................... 5- 7 years 6,429 8,392
Land................................................. -- 6,524 7,379
------- -------
57,951 75,443
Less accumulated depreciation........................ 20,112 27,250
------- -------
$37,839 $48,193
======= =======
</TABLE>
(4) INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- -------- --------
<S> <C> <C> <C>
Broadcast licenses................................ 15-40 years $187,024 $498,766
Goodwill.......................................... 15-40 years 70,317 131,775
Other intangibles................................. 1-40 years 291,203 397,062
-------- --------
548,544 1,027,603
Less accumulated amortization..................... 89,757 173,960
-------- --------
$458,787 $853,643
======== ========
</TABLE>
In addition to broadcast licenses and goodwill, categories of other
intangible assets include: (i) premium advertising revenue base (the value of
the higher radio advertising revenues in certain of the Company's markets as
compared to other markets of similar population); (ii) advertising client base
(the value of the well-established advertising base in place at the time of
acquisition of certain stations); (iii) talent contracts (the value of
employment contracts between certain stations and their key employees); (iv)
fixed asset delivery premium (the benefit expected from the Company's ability to
operate fully constructed and operational stations from the date of
acquisition), and (v) premium audience growth pattern (the value of expected
above-average population growth in a given market).
(5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at December
31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Accounts payable............................................ $11,081 $20,311
Accrued payroll............................................. 1,816 4,413
Accrued interest............................................ 1,304 1,642
Accrued dividends........................................... 1,020 --
Accrued income taxes........................................ 671 --
------- -------
$15,892 $26,366
======= =======
</TABLE>
F-15
<PAGE> 163
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Senior Credit Facility (a).................................. $187,000 $348,000
Senior Notes (b)............................................ 14,000 10,000
-------- --------
Total long-term debt........................................ 201,000 358,000
Less current portion........................................ 4,000 26,500
-------- --------
$197,000 $331,500
======== ========
</TABLE>
(a) Senior Credit Facility
On November 6, 1992, the Company entered into a variable rate loan
agreement with a group of banks providing for a $115,000,000 term loan and a
revolving loan of up to $55,000,000. On November 28, 1994, amounts outstanding
under this agreement were retired with borrowings under a new senior credit
facility (the "Senior Credit Facility") which provided for a $150,000,000 term
loan ("Term Loan") and a revolving loan of up to $200,000,000 ("Revolving
Loan"). In connection with this debt restructuring, the Company wrote off the
unamortized balance of deferred debt issuance costs of $3,585,000 as an
extraordinary charge.
In connection with the Pyramid Acquisition, the Company amended and
restated the Senior Credit Facility. Under the amended agreement, dated January
17, 1996, the $150,000,000 Term Loan and $200,000,000 Revolving Loan remained in
place, and the Company also established an additional revolving facility of up
to $275,000,000 (the "New Revolving Loan").
Borrowings under the Senior Credit Facility bear interest at a rate based,
at the option of the Company, on the participating banks' prime rate or
Eurodollar rate, plus an incremental rate. Without giving effect to the interest
rate swap and cap agreements described in the following paragraph, the interest
rate on the $150,000,000 outstanding under the Term Loan at December 31, 1996
was 7.03% on a blended basis, based on Eurodollar rates, and the interest rates
on $185,000,000 and $5,000,000 of advances outstanding under the Revolving Loan
were 7.17% and 8.625% at December 31, 1996, based on the Eurodollar and prime
rates, respectively. The interest rate on the $8,000,000 outstanding under the
New Revolving Loan at December 31, 1996 was 7.13% on a blended basis, based on
Eurodollar rates. The Company pays fees of 1/2% per annum on the aggregate
unused portion of the loan commitment, in addition to an annual agent's fee.
As required by the terms of the Senior Credit Facility, the Company has
entered into interest rate swap agreements with certain of the participating
banks under the Senior Credit Facility. These swap agreements have the effect of
reducing the impact of changes in interest rates on the Company's floating rate
debt under the Senior Credit Facility. At December 31, 1996, interest rate swap
agreements covering a notional balance of $425,000,000 were outstanding. These
outstanding swap agreements mature from 1997 through 1999 and require the
Company to pay fixed rates of 4.96%-6.38% plus an incremental rate while the
counterparty pays a floating rate based on the six-month London Interbank
Borrowing Offered Rate ("LIBOR"). In addition to these swap agreements, in
connection with the BPI Acquisition the Company assumed interest rate cap
agreements. The outstanding interest rate cap agreement at December 31, 1996
covers a notional balance of $10,000,000 and provides for a fixed rate of 8.0%
and matures during 1997. During the years ended December 31, 1995 and 1996, the
Company recognized charges (income) under its interest rate swap and cap
agreements of $(275,000) and $110,584, respectively. Because the interest rate
swap and cap agreements are with banks that are lenders under the Senior Credit
Facility, the Company is not exposed to credit loss.
The Term Loan is payable in quarterly installments beginning March 31, 1997
and ending June 30, 2002, while availability under the Revolving Loan reduces
quarterly commencing March 31, 1997 and ending
F-16
<PAGE> 164
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 2002. Availability under the New Revolving Loan reduces quarterly
beginning March 31, 1998 and ending December 31, 2002.
(b) Senior Notes
The Company issued $20,000,000 of senior notes (the "Senior Notes") in
1989. The Senior Notes bear interest at 11.59% per annum payable quarterly and
principal is payable in equal quarterly installments of $1,000,000 through May
1999.
(c) Other
The Senior Credit Facility and the Senior Notes each contain certain
financial and operational covenants and other restrictions with which the
Company must comply, including, among others, limitations on capital
expenditures, corporate overhead and the incurrence of additional indebtedness,
restrictions on the use of borrowings, paying cash dividends and redeeming or
repurchasing Evergreen's capital stock, and requirements to maintain certain
financial ratios, including cash flow and debt service coverage (as defined).
The Senior Credit Facility also separately restricts the Company from making
certain acquisitions without the prior consent of the lenders. If the Company
increases its leverage beyond certain specified levels in order to effect an
acquisition, the Senior Notes require that the Company prepay all principal and
accrued interest thereunder, together with a "make whole" premium equal to the
amount of unearned interest, based on current market rates, through the original
maturity date.
Substantially all of the Company's assets are pledged as security for the
Senior Credit Facility and Senior Notes under the loan agreements. The
obligations of the Company under the Senior Credit Facility and Senior Notes
rank pari passu.
A summary of the future maturities of long-term debt follows:
<TABLE>
<S> <C>
1997........................................................ $26,500
1998........................................................ 76,500
1999........................................................ 63,250
2000........................................................ 70,000
2001........................................................ 72,500
Thereafter.................................................. 49,250
</TABLE>
(7) STOCK COMPENSATION
Evergreen has established the 1992, 1993 and 1995 Key Employee Stock Option
Plans (the "Employee Option Plans") which provide for the issuance of stock
options to officers and other key employees of the Company and its subsidiaries.
The Employee Option Plans make available for issuance an aggregate of 1,957,500
shares of Evergreen's Class A Common Stock. Options issued under the Employee
Option Plans have varying vesting periods as provided in separate stock option
agreements and generally carry an expiration date of ten years subsequent to the
date of issuance. Options issued under the 1993 and 1995 Employee Option Plans
are required to have exercise prices equal to or in excess of the fair market
value of Evergreen's Class A Common Stock on the date of issuance.
In May 1995, Evergreen also established the Stock Option Plan for
Non-Employee Directors (the "Director Plan") which provides for the issuance of
stock options to non-employee directors of the Company. The Director Plan makes
available for issuance an aggregate of 225,000 shares of Class A Common Stock.
Options issued under the Director Plan have exercise prices equal to the fair
market value of the Evergreen Class A Common Stock on the date of issuance, vest
over a three year period and have an expiration date of ten years subsequent to
the date of issuance.
F-17
<PAGE> 165
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the BPI Acquisition, Evergreen assumed outstanding
options to purchase 94,000 shares of BPI common stock held by BPI employees.
Options to purchase approximately 87,000 shares of the Evergreen's Class A
Common Stock vested and became exercisable on May 12, 1996.
Evergreen applies APB Opinion No. 25 in accounting for its Employee Option
Plans and, accordingly, no compensation cost has been recognized for its stock
options in the consolidated financial statements. Had Evergreen determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net loss would have been increased to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Net loss:
As reported............................................... $(5,850) $(16,194)
Pro forma................................................. (8,787) (20,969)
</TABLE>
Pro forma net loss reflects only options granted in 1995 and 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net loss amounts presented
above because compensation cost is reflected over the options' vesting period of
one year and compensation cost for options granted during 1994 is not
considered.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1995 and 1996: dividend yield of 0% for all
years; expected volatility of 44.5%; risk-free interest rate of 6.0% and
expected lives ranging from three to seven years.
Following is a summary of activity in the employee option plans and
agreements discussed above for the years ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year.......................... 877,500 $ 0.01 978,000 $ 3.10 1,289,874 $ 6.91
Granted....................... 280,500 10.67 413,138 16.17 587,250 23.12
Exercised..................... (180,000) 0.01 (25,500) 1.29 (83,403) 8.54
Canceled...................... - - (75,764) 8.59 (13,729) 9.91
-------- ------ --------- ------ --------- ------
Outstanding at end of year...... 978,000 $ 3.10 1,289,874 $ 6.91 1,779,992 $11.93
======== ====== ========= ====== ========= ======
Options exercisable at year
end........................... 697,500 945,000 967,742
======== ========= =========
Weighted average fair value of
options granted during the
year.......................... $ 8.54 $ 9.76
====== ======
</TABLE>
F-18
<PAGE> 166
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
1996 LIFE PRICE 1996 PRICE
-------------- ----------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$0.01......................... 660,000 6.3 years $ 0.01 660,000 $ 0.01
$9.69 to 12.33................ 307,742 7.9 years 10.49 307,742 10.49
$21.33 to 26.75............... 812,250 8.8 years 22.49 - -
--------- ------ ------- ------
1,779,992 $11.93 967,742 $ 3.29
========= ====== ======= ======
</TABLE>
(8) INCOME TAXES
Income tax expense attributed to loss from continuing operations consists
of:
<TABLE>
<CAPTION>
1995 1996
----- -------
<S> <C> <C>
Current tax expense:
Federal................................................... $ 246 $ 485
State..................................................... 425 972
----- -------
Total current tax expense......................... 671 1,457
Deferred federal benefit.................................... (479) (4,353)
----- -------
Total income tax expense (benefit)................ $ 192 $(2,896)
===== =======
</TABLE>
The Company did not incur significant tax expense during the years ended
December 31, 1994 as its operations did not generate taxable income.
Total income tax expense (benefit) differed from the amount computed by
applying the U.S. federal statutory income tax rate of 35% to loss from
continuing operations for the years ended December 31, 1994, 1995 and 1996 as a
result of the following:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Computed "expected" tax benefit........................... $(1,172) $(1,980) $(6,682)
Amortization of goodwill.................................. 355 788 2,477
Net operating loss carryforwards for which no tax benefit
was recognized.......................................... 760 923 --
State income taxes, net of federal benefit................ -- 276 632
Other, net................................................ 57 185 677
------- ------- -------
$ -- $ 192 $(2,896)
======= ======= =======
</TABLE>
F-19
<PAGE> 167
EVERGREEN MEDIA CORPORATION OF LOS ANGELES 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 liabilities at December 31, 1995 and
1996 are presented below:
<TABLE>
<CAPTION>
1995 1996
-------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 18,748 $ 13,519
Accrued compensation primarily relating to stock
options................................................ 1,787 1,687
Other..................................................... 649 1,215
-------- ---------
Total deferred tax assets......................... 21,184 16,421
-------- ---------
Deferred tax liabilities:
Property and equipment and intangibles, primarily
resulting from difference in bases from BPI and Pyramid
Acquisitions........................................... (49,884) (101,761)
Other....................................................... (533) (758)
-------- ---------
Total deferred tax liabilities.................... (50,417) (102,519)
-------- ---------
Net deferred tax liability........................ $(29,233) (86,098)
======== =========
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes, such as net operating loss carryforwards. As a result
of the application of purchase accounting to the BPI Acquisition in May 1995,
the Company recognized deferred tax assets of $15,380,000, which had not been
recognized by the Company in previous periods. Recognition of these assets
effectively reduced goodwill resulting from the acquisitions by a corresponding
amount.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. The Company expects the
deferred tax assets at December 31, 1996 to be realized as a result of the
reversal during the carryforward period of existing taxable temporary
differences giving rise to deferred tax liabilities, the generation of taxable
income in the carryforward period and the disposition of one or more of its
stations.
At December 31, 1996, the Company has net operating loss carryforwards
available to offset future taxable income of approximately $38,600,000 which
begin to expire in 2004. Approximately $29,700,000 of such net operating loss
carryforwards are subject to annual use limitations of up to $2,800,000 per
year.
(9) OPERATING LEASES
The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from one to
ten years and require the Company to pay all executory costs such as maintenance
and insurance. Rental expense for operating leases (excluding those with lease
terms of one month or less that were not renewed) was approximately $2,193,000,
$3,073,000 and $5,462,000 during 1994, 1995 and 1996, respectively.
F-20
<PAGE> 168
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C>
1997.................................. $4,658
1998.................................. 4,001
1999.................................. 4,015
2000.................................. 3,625
2001.................................. 3,559
</TABLE>
(10) COMMITMENTS AND CONTINGENCIES
In August 1993, Evergreen terminated an agreement with Sagittarius
Broadcasting Company (an affiliate of Infinity Broadcasting Corporation) and One
Twelve, Inc. (collectively, the "Claimants" or the "Plaintiffs") pursuant to
which programming featuring radio personality Howard Stern was broadcast on
radio station WLUP-AM (now WMVP-AM) in Chicago. The Claimants allege that
termination of the agreement was wrongful and have sued Evergreen in the Supreme
Court of the State of New York, County of New York (the "Court"). The agreement
required payments to the Claimants in the amount of $2,600,000 plus five percent
of advertising revenues generated by the programming over the three-year term of
the agreement. A total of approximately $680,000 was paid to the Claimants
pursuant to the agreement prior to termination. Claimants' original complaint
alleged claims for breach of contract, indemnification, breach of fiduciary duty
and fraud. Plaintiffs' aggregate prayer for relief in the original complaint
totaled $45,000,000. On July 12, 1994, the Court granted the Evergreen's motion
to dismiss Plaintiffs' claims for fraud and breach of fiduciary duty. On June 6,
1995, the Court denied the Plaintiff's motion for summary judgment on their
contract and indemnification claims and this order has been affirmed on appeal.
On May 17, 1996, after the close of discovery, Evergreen filed a motion for
summary judgment, seeking the dismissal of the remaining claims in the original
complaint. On July 1, 1996, Plaintiffs moved for leave to amend their complaint
in order to add claims for breach of the covenant of good faith and fair
dealing, tortious interference with business advantage and prima facia punitive
damages in excess of $25,000,000. On March 13, 1997, the Court denied the
Evergreen's motion for summary judgment, allowed Plaintiffs' request to amend
the complaint to add a claim for breach of the covenant of good faith and fair
dealing, and denied Plaintiffs' request to amend the complaint to add claims for
tortious interference with business advantage and prima facia tort. Evergreen
believes that it acted within its rights in terminating the agreement.
The Company and Evergreen are also involved in various other claims and
lawsuits which are generally incidental to its business. The Company is
vigorously contesting all such matters and believes that their ultimate
resolution will not have a material adverse effect on its consolidated financial
position, results of operations or cash flows.
Evergreen offers substantially all of its employees voluntary participation
in a 401(k) Plan. The Company may make discretionary contributions to the plan;
however, no such contributions were made by the Company during 1994, 1995 or
1996.
F-21
<PAGE> 169
EVERGREEN MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments for which the estimated fair value of the
instrument differs significantly from its carrying amounts at December 31, 1995
and 1996. The fair value of a financial instrument is defined as the amount at
which the instrument could be exchanged in a current transaction between willing
parties.
<TABLE>
<CAPTION>
1995 1996
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest rate swaps..................... $ -- $ 272 $ -- $ (199)
Long-term debt -- Senior Notes.......... (14,000) (15,443) (10,000) (10,572)
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
Cash and cash equivalents, accounts receivable and accounts
payable: The carrying amount of these assets and liabilities approximates
fair value because of the short maturity of these instruments.
Interest rate swaps: The fair value of the interest rate swap and cap
contracts is estimated by obtaining quotations from brokers. The fair value
is an estimate of the amounts that the Company would receive (pay) at the
reporting date if the contracts were transferred to other parties or
canceled by the broker. The carrying amounts of receivables (payables)
under interest rate swaps and caps are included in accrued expenses in the
accompanying consolidated balance sheets.
Long-term debt: The fair values of the Company's Senior Notes are
based on discounted cash flows under the Senior Notes using interest rates
currently available to the Company for similar debt issues. As amounts
outstanding under the Company's Senior Credit Facility agreements bear
interest at current market rates, their carrying amounts approximate fair
market value.
(12) SUBSEQUENT EVENTS (UNAUDITED)
On April 1, 1997, the Company swapped WQRS-FM in Detroit (which the Company
acquired on the same date for $32.0 million in cash), in exchange for WWRC-AM in
Washington, D.C. and $9.5 million in cash.
On May 1, 1997, the Company acquired WDAS-FM/AM in Philadelphia for $103.0
million in cash plus various other direct acquisition costs.
On April 25, 1997, the Company and a syndicate of commercial banks entered
into a second Amended and Restated Loan Agreement (as amended, the "Senior
Credit Facility") with a total current commitment of $1.75 billion. The Senior
Credit Facility consists of a $1.25 billion revolving credit facility and a $500
million term loan facility. The loans bear interest at a rate based, at the
option of the Company, on the participating banks' prime rate or Eurodollar rate
plus an incremental rate.
F-22
<PAGE> 170
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Chancellor Radio Broadcasting Company:
We have audited the accompanying consolidated balance sheets of Chancellor
Radio Broadcasting Company and Subsidiaries (collectively the "Company") as of
December 31, 1995 and 1996 and the related consolidated statements of
operations, changes in common stockholder's equity, and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of December 31, 1995 and 1996 and the consolidated 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.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
February 13, 1997,
except for Note 15 as
to which the date is
February 19, 1997
F-23
<PAGE> 171
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash...................................................... $ 1,314,214 $ 3,788,546
Accounts receivable, net of allowance for doubtful
accounts of $263,528 and $1,023,660, respectively...... 13,243,292 46,584,705
Prepaid expenses and other................................ 546,405 2,753,731
------------ ------------
Total current assets.............................. 15,103,911 53,126,982
Restricted cash........................................... -- 20,363,329
Property and equipment, net............................... 17,925,845 49,122,932
Intangibles and other, net................................ 203,808,395 551,406,094
Deferred financing costs, net............................. 4,284,413 16,723,346
------------ ------------
Total assets...................................... $241,122,564 $690,742,683
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,873,888 $ 4,409,389
Accrued liabilities....................................... 4,692,948 12,529,831
Accrued interest.......................................... 2,710,891 6,868,839
Current portion of long-term debt......................... 4,062,500 400,000
------------ ------------
Total current liabilities......................... 13,340,227 24,208,059
Long-term debt............................................ 168,107,242 354,913,499
Deferred income taxes..................................... 4,952,361 2,606,314
Other..................................................... -- 801,572
------------ ------------
Total liabilities................................. 186,399,830 382,529,444
------------ ------------
Commitments (Note 11)
Redeemable senior cumulative exchangeable preferred stock,
par value $.01 per share; 1,000,000 shares authorized,
none and 1,000,000 shares issued and outstanding,
respectively; preference in liquidation of $109,110,301... -- 107,222,416
Common stockholder's equity:
Common stock, par value $.01 per share; 2,000 shares
authorized, 1,000 shares issued and outstanding,
respectively........................................... 10 10
Additional paid-in capital................................ 66,359,990 219,520,102
Accumulated deficit....................................... (11,637,266) (18,529,289)
------------ ------------
Total common stockholder's equity................. 54,722,734 200,990,823
------------ ------------
Total liabilities and stockholder's equity........ $241,122,564 $690,742,683
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE> 172
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
Gross broadcasting revenues............. $30,080,829 $ 73,278,860 $203,188,125
Less agency commissions................. 3,763,734 8,956,717 24,786,594
----------- ------------ ------------
Net revenues.................. 26,317,095 64,322,143 178,401,531
----------- ------------ ------------
Operating expenses:
Programming, technical and news....... 5,678,829 11,734,285 40,987,411
Sales and promotion................... 7,137,039 17,556,256 47,026,490
General and administrative............ 2,844,284 8,174,189 23,195,565
Depreciation and amortization......... 2,954,159 8,256,268 20,877,374
Corporate expenses.................... 599,657 1,815,535 4,844,985
Stock option compensation............. -- 6,360,000 3,800,000
----------- ------------ ------------
19,213,968 53,896,533 140,731,825
----------- ------------ ------------
Income from operations........ 7,103,127 10,425,610 37,669,706
Other (income) expense:
Interest expense...................... 5,246,827 18,114,549 35,703,862
Other, net............................ (19,265) 42,402 68,419
----------- ------------ ------------
Income (loss) before provision
for income taxes and
extraordinary loss.......... 1,875,565 (7,731,341) 1,897,425
Provision for income taxes.............. 1,163,716 3,799,955 4,612,551
----------- ------------ ------------
Net income (loss) before
extraordinary loss.......... 711,849 (11,531,296) (2,715,126)
Extraordinary loss on early
extinguishment of debt, net of income
tax benefit........................... 817,819 -- 4,176,897
----------- ------------ ------------
Net loss...................... (105,970) (11,531,296) (6,892,023)
Dividends and accretion on preferred
stock................................. -- -- 11,556,943
Loss on repurchase of preferred stock... -- -- 16,570,065
----------- ------------ ------------
Net loss attributable to
common stock................ $ (105,970) $(11,531,296) $(35,019,031)
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE> 173
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
---------------- ADDITIONAL ACCUMULATED
SHARES AMOUNT PAID-IN CAPITAL DEFICIT TOTAL
------ ------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993.............. -- -- -- -- --
Issuance of common stock on January
10, 1994........................... 1,000 $ 10 $ 25,499,990 -- $ 25,500,000
Issuance of common stock on October
12, 1994........................... 1,000 10 34,499,990 -- 34,500,000
Net loss.............................. -- -- -- $ (105,970) (105,970)
------ ---- ------------ ------------ ------------
Balance, December 31, 1994.............. 2,000 20 59,999,980 (105,970) 59,894,030
Stock option compensation............. -- -- 6,360,000 -- 6,360,000
Contribution of stock held by
affiliate of Hicks, Muse, Tate &
Furst.............................. (1,000) (10) 10 -- --
Net loss.............................. -- -- -- (11,531,296) (11,531,296)
------ ---- ------------ ------------ ------------
Balance, December 31, 1995.............. 1,000 10 66,359,990 (11,637,266) 54,722,734
Loss on repurchase of preferred
stock.............................. -- -- (16,570,065) -- (16,570,065)
Dividends and accretion on preferred
stock.............................. -- -- (11,556,943) -- (11,556,943)
Capital contributions................. -- -- 181,287,120 -- 181,287,120
Net loss.............................. -- -- -- (6,892,023) (6,892,023)
------ ---- ------------ ------------ ------------
Balance, December 31, 1996.............. 1,000 $ 10 $219,520,102 $(18,529,289) $200,990,823
====== ==== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE> 174
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996
------------- ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $ (105,970) $(11,531,296) $ (6,892,023)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 2,954,159 8,256,268 20,877,374
Amortization of deferred financing costs...... 226,000 791,000 2,633,583
Stock option compensation..................... -- 6,360,000 3,800,000
Deferred income taxes......................... 1,490,716 3,788,877 4,548,481
Extraordinary loss............................ 490,819 -- 4,176,897
Changes in assets and liabilities, net of the
effects of acquired businesses:
Accounts receivable, net.................... (9,675,567) (2,343,520) (13,408,364)
Prepaids and other.......................... 216,036 (214,868) (982,637)
Accounts payable............................ 1,509,064 (541,914) 1,429,070
Accrued liabilities......................... 1,334,397 447,196 3,706,725
Accrued interest............................ 2,251,654 459,237 4,157,948
------------- ------------ -------------
Net cash provided by operating
activities............................. 691,308 5,470,980 24,047,054
------------- ------------ -------------
Cash flows from investing activities:
Purchases of broadcasting properties............. (204,509,849) (24,351,529) (439,533,609)
Purchases of other property and equipment........ (238,648) (1,709,897) (3,208,553)
------------- ------------ -------------
Net cash used in investing activities.... (204,748,497) (26,061,426) (442,742,162)
------------- ------------ -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt......... 168,910,299 -- 277,627,630
Proceeds from borrowings under revolving debt
facility...................................... 5,639,237 54,458,819 101,966,762
Repayment of long-term debt...................... (25,000,000) (2,437,500) (109,816,233)
Repayments of borrowings under revolving debt
facility...................................... (3,975,539) (31,633,467) (105,540,183)
Issuance of preferred stock...................... -- -- 175,412,322
Repurchase of preferred stock.................... -- -- (95,462,423)
Additional capital contributions................. 60,000,000 -- 178,525,254
Distribution of additional paid in capital....... -- -- (1,038,134)
Payment of preferred stock dividends............. -- -- (505,555)
------------- ------------ -------------
Net cash provided by financing
activities............................. 205,573,997 20,387,852 421,169,440
------------- ------------ -------------
Net increase (decrease) in cash.......... 1,516,808 (202,594) 2,474,332
Cash, at beginning of year......................... -- 1,516,808 1,314,214
------------- ------------ -------------
Cash, at end of year............................... $ 1,516,808 $ 1,314,214 $ 3,788,546
============= ============ =============
Supplemental Disclosure of Cash Flow Information
(Note 5):
Cash paid during the period for:
Interest......................................... $ 2,769,173 $ 16,864,312 $ 28,912,331
Income taxes..................................... $ -- $ -- $ 62,407
Non-cash financing:
Dividends and accretion on preferred stock....... $ -- $ -- $ 11,556,943
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE> 175
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
Chancellor Radio Broadcasting Company, formerly Chancellor Broadcasting
Company ("Chancellor Radio Broadcasting") and its wholly owned subsidiaries
(collectively, the "Company") operate in a single industry segment, which
segment encompasses the ownership and management of radio broadcast stations
located in markets throughout the United States. Chancellor Radio Broadcasting,
a wholly owned subsidiary of Chancellor Broadcasting Company, formerly
Chancellor Corporation ("Chancellor"), was formed in June 1994 to acquire and
operate radio stations owned by American Media, Inc. and two corporations and
one partnership affiliated with American Media, Inc. (collectively, the
"American Media Station Group") and by Chancellor Communications Corporation
("Chancellor Communications"). That transaction was consummated on October 12,
1994. Chancellor Communications was formed in 1993 to acquire and operate radio
stations KGBY-FM and KFBK-AM. That transaction closed on January 10, 1994 and
the consolidated financial statements include the activity of all the stations
since their respective dates of acquisition.
In June 1995, the 1,000 shares of common stock of Chancellor Communications
held by an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse")
were exchanged for additional shares of common stock of Chancellor, which
subsequently contributed these shares to Chancellor Radio Broadcasting as an
additional capital contribution. As a result, Chancellor Communications became a
wholly owned subsidiary of Chancellor Radio Broadcasting. Chancellor
Communications was then merged with the Company. The transactions had no effect
on the financial position or results of operations of the Company.
Chancellor Broadcasting Licensee Company is a wholly-owned non-operating
legal entity formed to hold title to the Company's broadcast licenses. Such
entity has no significant other assets and no material liabilities,
contingencies or commitments. Consistent with industry practice for financial
reporting purposes, no material value has been specifically allocated to the
licenses. Accordingly, no financial statement information has been provided
herein due to its immateriality to investors.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Chancellor
and its subsidiaries Chancellor Broadcasting and Chancellor Broadcasting
Licensee Company for all periods presented, and its subsidiaries Trefoil
Communications, Inc., Shamrock Broadcasting Inc., Shamrock Radio Licenses, Inc.,
Shamrock Broadcasting Licenses of Denver, Inc. and Shamrock Broadcasting of
Texas, Inc. from their date of acquisition. All significant intercompany
accounts and transactions have been eliminated.
Cash
The Company maintains cash in demand deposits with financial institutions.
The Company had no cash equivalents during the periods presented. All highly
liquid investments with an original maturity of less than three months are
considered cash equivalents.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation and
amortization. Depreciation is determined using the straight-line method over the
estimated useful lives of the various classes of assets, which range from three
to twenty-five years. Leasehold improvements are amortized over the shorter of
their useful lives or the terms of the related leases. Costs of repairs and
maintenance are charged to operations as incurred.
F-28
<PAGE> 176
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Intangibles
Goodwill represents the excess of cost over the fair values of the
identifiable tangible and other intangible net assets acquired and is being
amortized over the straight-line method over forty years. Other intangible
assets comprise amounts paid for pending acquisitions, agreements not to
compete, a tower lease advantage and organization costs incurred in the
incorporation of the Company. Other intangibles, excluding pending acquisition
costs, are being amortized by the straight-line method over their estimated
useful lives ranging from three to ten years. Pending acquisition costs are
deferred and capitalized as part of completed acquisitions or expensed in the
period in which the pending acquisition is terminated.
The Company evaluates intangible assets for potential impairment by
analyzing the operating results, future cash flows on an undiscounted basis,
trends and prospects of the Company's stations, as well as by comparing them to
their competitors. The Company also takes into consideration recent acquisition
patterns within the broadcast industry, the impact of recently enacted or
potential FCC rules and regulations and any other events or circumstances which
might indicate potential impairment.
Deferred Financing Costs
Costs associated with obtaining debt financing are capitalized and
amortized using the interest method over the term of the related debt. As a
result of refinancing the Company's original credit facility, during the year
ended December 31, 1994 unamortized deferred financing costs of approximately
$818,000 were expensed as an extraordinary item in the consolidated statements
of operations. As a result of refinancing the Company's second credit facility,
the early redemption of $20.0 million of its existing notes (defined) and the
prepayment of $18.7 million of it's a Term Loan Facility (defined) from its
third credit facility, during the year ended December 31, 1996 unamortized
deferred financing costs of $3.4 million, less $543,500 of tax benefit, were
expensed as an extraordinary item in the consolidated statements of operations.
Approximately $5.1 million, $118,000 and $18.6 million of new financing costs
were incurred for the years ended December 31, 1994, 1995 and 1996,
respectively. Accumulated amortization at December 31, 1995 and 1996, amounted
to approximately $959,000 and $2.8 million, respectively.
Revenue Recognition
Broadcasting operations derive revenue primarily from the sale of program
time and commercial announcements to local, regional and national advertisers.
Revenue is recognized when the programs and commercial announcements are
broadcast.
Barter Transactions
Barter transactions represent advertising time exchanged for promotional
items, advertising, supplies, equipment, and services. Barter revenue is
recorded at the fair value of the goods or services received and is recognized
in income when the advertisements are broadcast. Goods or services are charged
to expense when received or used. Advertising time owed and goods or services
due the Company are included in accounts payable and accounts receivable,
respectively.
Advertising Costs
The Company incurs various marketing and promotional costs to add and
maintain listenership. These costs are expensed as incurred and totaled
approximately $1.4 million, $4.2 million and $16.2 million for the years ended
December 31, 1994, 1995 and 1996, respectively.
F-29
<PAGE> 177
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Option Compensation
Stock option compensation expense is recognized in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees".
Income Taxes
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable earnings. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount more likely than not to be
realized. Income tax expense is the tax payable for the period and the change
during the period in deferred tax assets and liabilities.
Chancellor, Chancellor Radio Broadcasting and Chancellor Broadcasting
Licensee Company have elected to file consolidated federal income tax returns
(the "Chancellor Group") and Trefoil Communications, Inc., Shamrock Broadcasting
Inc., Shamrock Radio Licenses, Inc., Shamrock Broadcasting Licenses of Denver,
Inc. and Shamrock Broadcasting of Texas, Inc. have elected to file consolidated
federal income tax returns (the "Shamrock Group"). Each of these groups have
entered into a tax sharing agreement governing the allocation of any
consolidated federal income tax liability among its members. In general, each
subsidiary allocates and pays income taxes computed as if each subsidiary filed
a separate federal income tax return. Similar principles apply to any
consolidated state and local income tax liabilities.
Concentration of Credit Risk
The Company's revenue and accounts receivable primarily relate to
advertising of products and services within the radio stations' broadcast areas.
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers. Credit
losses have been within management's expectations and adequate allowances for
any uncollectible trade receivables are maintained.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
Land....................................................... $ 1,572,229 $ 3,036,663
Building and building improvements......................... 3,159,848 9,202,378
Towers and antenna systems................................. 3,689,972 14,476,104
Studio, technical and transmitting equipment............... 7,830,375 23,026,564
Office equipment, furniture and fixtures................... 2,484,261 5,521,010
Record library............................................. 1,800,510 2,193,236
Vehicles................................................... 362,787 1,117,908
Construction in progress................................... 503,504 78,877
----------- -----------
21,403,486 58,652,740
Less accumulated depreciation.............................. (3,477,641) (9,529,808)
----------- -----------
$17,925,845 $49,122,932
=========== ===========
</TABLE>
F-30
<PAGE> 178
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
was $0.9 million, $2.6 million and $6.5 million, respectively.
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Goodwill................................................. $205,971,820 $567,377,120
Noncompete agreements.................................... 1,950,000 2,025,000
Tower lease advantage.................................... 305,000 305,000
Pending acquisition costs................................ 3,246,265 2,620,474
Other.................................................... 45,718 626,220
------------ ------------
211,518,803 572,953,814
Less accumulated amortization............................ (7,710,408) (21,547,720)
------------ ------------
$203,808,395 $551,406,094
============ ============
</TABLE>
Amortization expense for intangible assets for the years ended December 31,
1994, 1995 and 1996 was $2.0 million, $5.7 million and $14.3 million,
respectively.
5. ACQUISITIONS AND DISPOSITIONS OF BROADCASTING PROPERTIES
On January 9, 1994, Chancellor Communications purchased substantially all
the assets and assumed certain liabilities of KGBY-FM and KFBK-AM for
approximately $49.5 million, including acquisition costs. Liabilities assumed
were limited to certain ongoing contractual rights and obligations. The
acquisition has been accounted for as a purchase and, accordingly, the results
of operations associated with the acquired assets have been included in the
accompanying statements from the date of acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Property and equipment.................................... $ 4,921
Goodwill and other intangibles............................ 44,401
Prepaid expenses and other assets......................... 413
Accrued liabilities....................................... (205)
-------
Total acquisition................................. $49,530
=======
</TABLE>
On October 12, 1994, Chancellor Radio Broadcasting purchased substantially
all the assets and assumed certain liabilities consisting solely of accrued
expenses and future payments under ongoing contracts of the American Media
Station Group (other than KHYL-FM in Sacramento, California) for approximately
$139.5 million in cash, including acquisition costs and payments in respect of
agreements not to compete. On the same date, Chancellor Communications purchased
all the assets and certain liabilities consisting solely of accrued expenses and
future payments under ongoing contracts of KHYL-FM for approximately $15.5
million in cash, including acquisition costs and payments in respect of an
agreement not to compete. These acquisitions have been accounted for as
purchases and, accordingly, the results of operations associated with the
acquired assets have been included in the accompanying statements from the date
of acquisition.
F-31
<PAGE> 179
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Property and equipment.................................... $ 12,671
Goodwill and other intangibles............................ 142,618
Prepaid expenses and other assets......................... 353
Accrued liabilities....................................... (662)
--------
Total acquisition................................. $154,980
========
</TABLE>
Simultaneously with the closing of these transactions, Chancellor acquired
all of Chancellor Communications' outstanding nonvoting stock in exchange for
newly issued shares of Chancellor's nonvoting stock. Chancellor contributed all
the acquired shares of Chancellor Communication's nonvoting stock to Chancellor
Radio Broadcasting, as a result of which Chancellor Communications became a
subsidiary of Chancellor Radio Broadcasting. Because these entities are under
common management and control, this exchange has been accounted for at
historical cost in a manner similar to a pooling of interests.
On July 31, 1995, the Company purchased substantially all the assets and
assumed certain liabilities of KDWB-FM for approximately $22.6 million,
including acquisition costs. Liabilities assumed were limited to certain ongoing
contractual rights and obligations. The acquisition has been accounted for as a
purchase and, accordingly, the results of operations associated with the
acquired assets have been included in the accompanying statements from the date
of acquisition.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Property and equipment................ $ 1,866
Goodwill and other intangibles........ 21,032
Prepaid expenses and other assets..... 82
Other liabilities..................... (383)
-------
Total acquisition............. $22,597
=======
</TABLE>
On February 14, 1996, the Company acquired all of the outstanding capital
stock of Trefoil Communications, Inc. ("Trefoil") for approximately $408.0
million, including acquisition costs. Trefoil is a holding company, the sole
asset of which is the capital stock of Shamrock Broadcasting, Inc. ("Shamrock
Broadcasting"). The acquisition of Trefoil was financed through a new credit
agreement, new senior subordinated notes, Chancellor's initial public stock
offering, senior exchangeable preferred stock and the issuance of unregistered
common stock of Chancellor. The acquisition of Trefoil was accounted for as a
purchase for financial accounting purposes and a non-taxable business
combination for tax purposes and, accordingly, the results of operations
associated with the acquired assets have been included in the accompanying
statements from the date of acquisition.
F-32
<PAGE> 180
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Cash.................................. $ 38
Accounts receivable, net.............. 18,636
Prepaid expenses and other assets..... 1,274
Property and equipment................ 36,429
Goodwill and other intangibles........ 361,425
Deferred tax asset.................... 5,464
Accrued liabilities................... (14,564)
Other noncurrent liabilities.......... (702)
--------
Total acquisition............. $408,000
========
</TABLE>
Simultaneously with the acquisition of Trefoil, the Company entered into a
time brokerage agreement with Evergreen Media Corporation for the outsourcing of
certain limited functions of WWWW-FM and WDFN-AM, both Detroit stations acquired
with Trefoil, and an option to purchase such stations for $30.0 million of cash.
These stations were operated pursuant to this agreement until January 30, 1997,
the date on which the disposition of these stations occurred. Subsequent to the
acquisition of Trefoil, KTBZ-FM, a Houston station acquired with Trefoil, was
operated by Secret Communications, L.P. ("Secret") under a Local Marketing
Agreement ("LMA")/Exchange Agreement with the Company. In March 1996, the
Company entered into an agreement to exchange KTBZ-FM and $5.6 million of cash
to Secret for KALC-FM and KIMN-FM, Denver, Colorado. The Company began managing
certain limited functions of these stations, pursuant to an LMA, effective April
1, 1996 and closed on the exchange of the stations effective July 31, 1996. The
exchange has been accounted for using the fair values of the assets exchanged
plus the $5.6 million of additional cash and $0.8 million of additional
acquisition costs, and was allocated to the net assets acquired based upon their
estimated fair market values. The excess of the purchase price over the
estimated fair value of net assets acquired amounted to approximately $28.7
million, which has been accounted for as goodwill and is being amortized over 40
years using the straight line method.
The exchange is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Prepaid expenses and other assets......................... $ 163
Property and equipment.................................... 2,363
Goodwill and other intangibles............................ 28,657
Accrued liabilities....................................... (138)
-------
Total acquisition................................. $31,045
=======
</TABLE>
On May 15, 1996, the Company entered into an agreement to acquire
substantially all the assets and certain liabilities of OmniAmerica Group
("Omni") for an aggregate price of $178.0 million, including $163.0 million of
cash and $15.0 million of Chancellor's Class A Common Stock. On June 24, 1996,
the Company entered into an agreement with American Radio Systems Corporation
("American Radio") whereby it will exchange the West Palm Beach, Florida
stations acquired from Omni for American Radio's KSTE-AM and $33.0 million of
cash. KSTE-AM is located in Rancho Cordova, California and is part of the
Sacramento market. On July 1, 1996, Chancellor entered into an agreement with
SFX Broadcasting, Inc. ("SFX") whereby it will exchange the Jacksonville,
Florida stations being acquired pursuant to the Omni acquisition agreement and
$11.0 million of cash for SFX's WBAB-FM, WBLI-FM, WGBB-AM and WHFM-FM,
Nassau-Suffolk, New York. Pursuant to various agreements, the Company began
managing certain limited functions of the remaining Omni stations and the SFX
stations beginning July 1, 1996, and station KSTE-AM beginning August 1, 1996.
F-33
<PAGE> 181
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On November 22, 1996, the Company acquired substantially all the assets of
WKYN-AM, Florence, Kentucky, for approximately $1.4 million, including
transaction costs. WKYN-AM serves the Cincinnati, Ohio market.
On January 23, 1997, the Company acquired substantially all the assets and
certain liabilities of Colfax Communications ("Colfax") for an aggregate price
of $373.0 million. Liabilities assumed were limited to certain ongoing
contractual rights and obligations. The acquisition will be accounted for as a
purchase. Pursuant to the acquisition agreement, at December 31, 1996 the
Company had $20.4 million of cash in a restricted escrow account which was
remitted to Colfax at closing. On January 29, 1997, the Company entered into an
agreement to sell WMIL-FM and WOKY-AM, Milwaukee, Wisconsin stations acquired
from Colfax, to Clear Channel Radio, Inc. for $40.0 million in cash.
On February 13, 1997, the Company acquired substantially all the assets and
certain liabilities of Omni. Liabilities assumed were limited to certain ongoing
contractual rights and obligations. The acquisition will be accounted for as a
purchase.
The following summarizes the unaudited consolidated pro forma data as
though the acquisitions of KDWB-FM, Shamrock Broadcasting Company and KIMN-FM
and KALC-FM had occurred as of the beginning of 1995 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------------------------ ------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- ----------- ---------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenue............................... $ 64,322 $162,360 $178,402 $187,198
Net income (loss) before extraordinary
loss.................................... (11,531) (8,319) (2,715) (310)
Net loss.................................. (11,531) (8,319) (6,892) (310)
</TABLE>
The following summarizes the unaudited consolidated pro forma balance sheet
as of December 31, 1996 as though the acquisition of Colfax, the issuance of the
Exchangeable Preferred Stock, the issuance of Chancellor's Convertible Preferred
Stock (including the over-allotment), and the New Credit Agreement had occurred
on that date (in thousands):
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- -----------
(UNAUDITED)
<S> <C> <C>
Total assets................................................ $690,743 $1,053,833
======== ==========
Current liabilities......................................... $ 24,208 $ 40,598
Long-term liabilities....................................... 358,322 410,359
Preferred stock............................................. 107,222 404,585
Common stockholder's equity................................. 200,991 198,291
-------- ----------
Total liabilities and stockholders' equity.................. $690,743 $1,053,833
======== ==========
</TABLE>
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
---------- -----------
<S> <C> <C>
Salaries................................................... $ 534,297 $ 3,697,072
Sales commissions.......................................... 889,010 2,149,167
Rep commissions............................................ 561,189 1,549,048
Other...................................................... 2,708,452 5,134,544
---------- -----------
$4,692,948 $12,529,831
========== ===========
</TABLE>
F-34
<PAGE> 182
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Term loan............................................... $ 67,562,500 $ 74,968,527
Revolving credit loan................................... 24,607,242 20,344,972
Subordinated notes due 2004............................. 80,000,000 260,000,000
------------ ------------
172,169,742 355,313,499
Less current portion.................................... 4,062,500 400,000
------------ ------------
$168,107,242 $354,913,499
============ ============
</TABLE>
The Company's term and revolving credit facilities were refinanced on
January 23, 1997, in conjunction with the acquisition of Colfax Communications
under a new bank credit agreement (the "New Credit Agreement") with Bankers
Trust Company, as administrative agent, and other institutions party thereto.
The New Credit Agreement includes a $225.0 million term loan facility (the "Term
Loan Facility") and a revolving loan facility (the "Revolving Loan Facility"
and, together with the Term Loan, the "New Bank Financing"). The Revolving Loan
Facility originally provides for borrowings up to $120.0 million, which is
subsequently reduced as and when the Company receives the net cash proceeds of
the pending station swaps and dispositions. In connection with the refinancing
of the term and revolving loan facilities, the Company incurred an extraordinary
charge to write-off deferred finance costs of approximately $4.5 million.
The New Bank Financing is collateralized by (i) a first priority perfected
pledge of all capital stock and notes owned by the Company and (ii) a first
priority perfected security interest in all other assets (including receivables,
contracts, contract rights, securities, patents, trademarks, other intellectual
property, inventory, equipment and real estate) owned by the Company, excluding
FCC licenses, leasehold interests in studio or office space and leasehold and
partnership interests in tower or transmitter sites in which necessary consents
to the granting of a security interest cannot be obtained without payments to
any other party or on a timely basis. The New Bank Financing also is guaranteed
by the subsidiaries of Chancellor and Chancellor Radio Broadcasting, whose
guarantees are collateralized by a first priority perfected pledge of the
capital stock Chancellor Radio Broadcasting.
The Term Loan Facility is due in increasing quarterly installments
beginning in 1997 and matures in January 2003. All outstanding borrowings under
the Revolving Facility mature in January 2003. The facilities bear interest at a
rate equal to, at the Company's option, the prime rate of Bankers Trust Company,
as announced from time to time, or the London Inter-Bank Offered Rate ("LIBOR")
in effect from time to time, plus an applicable margin rate. The Company pays
quarterly commitment fees in arrears equal to either .375% or .250% per annum on
the unused portion of the Revolving Facility, depending upon whether the
Company's leverage ratio is equal to or greater than 4.5:1 or less than 4.5:1,
respectively. The bank financing facilities which existed on December 31, 1996
accrued interest at the prime rate plus 1.25% (9.5%) on $3.3 million and the
LIBOR rate plus 2.50% (8.125%) on $92.0 million of borrowings.
In connection with the IPO (defined), the Company redeemed 25% of its
Existing Notes (defined) for approximately $22.2 million. The redemption was
completed in March 1996 and resulted in an extraordinary charge of $2.8 million.
The remaining $60.0 million 12 1/2% Senior Subordinated Notes due 2004 (the
"Existing Notes") mature October 1, 2004, and bear interest at 12.5% per annum.
On February 14, 1996, in conjunction with the acquisition of Trefoil
Communications, Inc., the Company issued $200.0 million aggregate principal
amount of 9 3/8% Senior Subordinated Notes due 2004 (the "New Notes" and,
together with the Existing Notes, the "Notes"), which mature on October 1, 2004,
and bear interest at 9.375% per annum. Interest on the Notes is paid
semi-annually. The Existing and New Notes are redeemable, in whole or in part,
at the option of the Company on or after October 1, 1999 and February 1, 2000,
respectively, at redemption prices expressed as a percentage of the principal
amount, ranging from 100.000% to 105.556%,
F-35
<PAGE> 183
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
plus accrued interest thereon to the date of acquisition. In addition, prior to
January 31, 1999, the Company may redeem up to 25% of the original aggregate
principal amount of the New Notes with the net proceeds of one or more public
equity offerings. The Notes are unsecured obligations of the Company, ranking
subordinate in right of payment to all senior debt of the Company. The New Notes
rank pari passu in right of payment to the Existing Notes. The Notes are
guaranteed on a senior subordinated basis by Chancellor Radio Broadcasting
Company's subsidiaries.
Scheduled debt maturities for the Company's outstanding long-term debt at
December 31, 1996 for each of the next five years and thereafter are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 400,000
1998........................................................ 400,000
1999........................................................ 9,874,886
2000........................................................ 11,296,119
2001........................................................ 17,469,864
Thereafter.................................................. 315,872,630
------------
$355,313,499
============
</TABLE>
See Note 5 for pro forma effects of the New Bank Financing subsequent to
year end. Both the New Bank Financing and Notes indentures contain certain
covenants, including, among others, limitations on the incurrence of additional
debt, in the case of the New Bank Financing; requirements to maintain certain
financial ratios; and restrictions on the payment of dividends to stockholders
and from the subsidiaries to Chancellor.
8. CAPITAL STRUCTURE
In February 1996, Chancellor sold 7.7 million shares of its Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), in an initial
public offering, (the "IPO"), which generated net proceeds of $142.4 million,
and in a private placement, issued $100.0 million of exchangeable redeemable
preferred stock (the "Acquisition Preferred Stock") of Chancellor Radio
Broadcasting and 742,192 shares of Class A common stock of Chancellor to an
affiliated entity and other investors.
Immediately prior to the IPO, Chancellor effected a recapitalization of its
current capital stock. Pursuant to the recapitalization, each six shares of
Chancellor's Nonvoting Stock were reclassified into one share of Class A Common
Stock. Each six shares of Chancellor's Voting Stock were reclassified into one
share of Class B Common Stock and each six shares of Convertible Nonvoting Stock
were reclassified into one share of Class C Common Stock. In connection with the
recapitalization, 63,334 shares of Class A Common Stock were exchanged for an
equal number of shares of Class B Common Stock, and an additional 8,484,410
shares of Class A Common Stock were exchanged for an equal number of shares of
Class C Common Stock. The recapitalization has been given retroactive effect in
the financial statements.
In February 1996, subsequent to the IPO, the Company completed a private
placement of $100.0 million of newly authorized Senior Cumulative Exchangeable
Preferred Stock (the "Old Preferred Stock"). Upon completion, the proceeds of
the Old Preferred Stock were used to redeem the Acquisition Preferred Stock and
55,664 shares of Class A Common Stock. The redemption resulted in a charge to
net loss attributable to common stock of approximately $16.6 million and an
additional reduction of paid-in capital of approximately $1.0 million.
In June 1996, the holders of Chancellor's Class C Common Stock filed an
application with the FCC to convert the stock into Chancellor's Class B Common
Stock. The holders of Class C Common Stock received approval of their
applications and subsequently converted their stock on October 22, 1996.
F-36
<PAGE> 184
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In August 1996 pursuant to an agreement entered into at the time of the
IPO, Chancellor sold 1.2 million shares of Class A Common Stock in a private
placement to an affiliated entity, which generated proceeds of $23.0 million
which were contributed to Chancellor Radio Broadcasting.
In September 1996, the Company completed an exchange offering whereby it
exchanged the Old Preferred Stock for 1,000,000 shares of 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock (the "Senior Exchangeable
Preferred Stock") in a transaction registered under the Securities Act of 1933,
as amended. The terms of the Senior Exchangeable Preferred Stock are
substantially identical to those of the Old Preferred Stock. Dividends on the
Senior Exchangeable Preferred Stock accrue from its date of issuance and are
payable quarterly commencing November 15, 1996, at a rate per annum of 12 1/4%
of the then effective liquidation preference per share. Dividends may be paid,
at the Company's option, on any dividend payment date occurring on or prior to
February 15, 2001 either in cash or by adding such dividends to the then
effective liquidation preference of the Senior Exchangeable Preferred Stock. The
Senior Exchangeable Preferred Stock is redeemable at the Company's option, in
whole or in part at any time on or after February 15, 2001, at various
redemption prices, plus, accumulated and unpaid dividends to the date of
redemption. In addition, prior to February 15, 1999, the Company may, at its
option, redeem the Senior Exchangeable Preferred Stock with the net cash
proceeds from one or more Public Equity Offerings (as defined), at various
redemption prices, plus, accumulated and unpaid dividends to the redemption
date; provided, however, that after any such redemption there is outstanding at
least 75% of the number of shares of Senior Exchangeable Preferred Stock
originally issued.
The Company is required, subject to certain conditions, to redeem all of
the Senior Exchangeable Preferred Stock outstanding on February 15, 2008, at a
redemption price equal to 100% of the then effective liquidation preference
thereof, plus, accumulated and unpaid dividends to the date of redemption. Upon
the occurrence of a change of control (as defined), the Company must offer to
purchase all of the then outstanding shares of Senior Exchangeable Preferred
Stock at a price equal to 101% of the then effective liquidation preference
thereof, plus, accumulated and unpaid dividends to the date of purchase. Subject
to certain conditions, the Senior 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 12 1/4% subordinated exchange debentures due 2008.
On January 23, 1997, Chancellor completed a private placement of $100.0
million of newly authorized 7% Convertible Preferred Stock (the "Convertible
Preferred Stock") and Chancellor Radio Broadcasting completed a private
placement of $200.0 million of newly authorized 12% Exchangeable Preferred Stock
(the "Exchangeable Preferred Stock").
Dividends on the Convertible Preferred Stock accrue from its date of
issuance and are payable quarterly commencing April 15, 1997, at a rate per
annum of 7% of the liquidation preference per share. The liquidation preference
of the Convertible Preferred Stock is $50.00 per share, and requires cash
dividends of $7.7 million per year. Because Chancellor is a holding company with
no assets other than the common stock of the Company, Chancellor will rely
solely on the dividends from the Company to satisfy its dividend payment
obligation on the 7% Convertible Preferred Stock. The Convertible Preferred
Stock is convertible at the option of the holder at any time after March 23,
1997, unless previously redeemed, into Class A Common Stock of Chancellor at a
conversion price of $32.90 pre share of Class A Common Stock, subject to
adjustment in certain events. In addition, after January 19, 2000, the Company
may, at its option, redeem the Convertible Preferred Stock, in whole or in part,
at specified redemption prices plus accrued and unpaid dividends through the
redemption date. Upon the occurrence of a change of control (as defined),
Chancellor must, subject to certain conditions, offer to purchase all of the
then outstanding shares of Convertible Preferred Stock at a price equal to 101%
of the liquidation preference thereof, plus accrued and unpaid dividends to the
date of purchase.
F-37
<PAGE> 185
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Dividends on the Exchangeable Preferred Stock will accrue from the date of
its issuance and will be payable semi-annually commencing July 15, 1997, at a
rate per annum of 12% of the liquidation preference per share. Dividends may be
paid, at the Company's option, on any dividend payment date occurring on or
prior to January 15, 2002 either in cash or in additional shares of Exchangeable
Preferred Stock. The liquidation preference of the Exchangeable Preferred Stock
will be $100.00 per share. The Exchangeable Preferred Stock is redeemable at the
Company's option, in whole or in part at any time on or after January 15, 2002,
at the redemption prices set forth herein, plus accrued and unpaid dividends to
the date of redemption. In addition, prior to January 15, 2000, the Company may,
at its option, redeem the Exchangeable Preferred Stock with the net cash
proceeds from one or more Public Equity Offerings (as defined), at various
redemption prices plus accrued and unpaid dividends to the redemption date;
provided, however, that after any such redemption there is outstanding at least
$150.0 million aggregate liquidation preference of Exchangeable Preferred Stock.
The Company is required, subject to certain conditions, to redeem all of the
Exchangeable Preferred Stock outstanding on January 15, 2009, at a redemption
price equal to 100% of the liquidation preference thereof, plus accrued and
unpaid dividends to the date of redemption. Upon the occurrence of a Change of
Control (as defined), the Company will, subject to certain conditions, offer to
purchase all of the then outstanding shares of Exchangeable Preferred Stock at a
price equal to 101% of the liquidation preference thereof, plus accrued and
unpaid dividends to the repurchase date. In addition, prior to January 15, 1999,
upon the occurrence of a Change of Control, the Company will have the option to
redeem the Exchangeable Preferred Stock in whole but not in part at a redemption
price equal to 112% of the liquidation preference thereof, plus accrued and
unpaid dividends to the date of redemption. The Exchangeable Preferred Stock
will, with respect to dividend rights and rights on liquidation, rank junior to
the Senior Exchangeable Preferred Stock. 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 12%
subordinated exchange debentures due 2009, including any such securities paid in
lieu of cash interest.
In addition to the accrued dividends discussed above, the recorded value of
the Senior Exchangeable Preferred Stock, the Convertible Preferred Stock and the
Exchangeable Preferred Stock includes or will include an amount for the
accretion of the difference between the stock's fair value at date of issuance
and its mandatory redemption amount, calculated using the effective interest
method.
9. INCOME TAXES
All of the Company's revenues were generated in the United States. The
provision for income taxes for continuing operations consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Current:
State.................................................... $ -- $ 11,098 $ 64,070
Deferred:
Federal.................................................. 1,267,109 3,220,528 3,866,209
State.................................................... 223,607 568,329 682,272
---------- ---------- ----------
Total provision.................................. $1,490,716 $3,799,955 $4,612,551
========== ========== ==========
</TABLE>
F-38
<PAGE> 186
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense differs from the amount computed by applying the federal
statutory income tax rate of 34% to income before income taxes for the following
reasons:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1994 1995 1996
---------- ----------- ----------
<S> <C> <C> <C>
U.S. federal income tax at statutory
rate.................................. $ 637,692 $(2,628,656) $ 645,125
State income taxes, net of federal
benefit............................... 112,533 (463,880) 113,846
Valuation allowance provided for loss
carryforward generated during the
current period........................ 720,490 6,589,750 307,000
Reconciliation of return to estimate.... -- 71,510 --
Permanent difference.................... 20,001 231,231 3,546,580
---------- ----------- ----------
$1,490,716 $ 3,799,955 $4,612,551
========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
----------- ------------
<S> <C> <C>
The deferred tax assets (liabilities)
consist of the following:
Loss carryforwards expiring 2009 and
2010............................... $ 4,766,240 $ 11,806,985
Deferred stock option compensation
deduction.......................... 2,544,000 4,064,000
Tax credits........................... -- 2,951,555
Other................................. 105,411 680,819
----------- ------------
Gross deferred tax assets.......... 7,415,651 19,503,359
----------- ------------
Depreciation and amortization......... (5,057,772) (21,488,463)
----------- ------------
Deferred tax assets valuation
allowance.......................... (7,310,240) (621,210)
----------- ------------
Net deferred tax liabilities....... $(4,952,361) $ (2,606,314)
=========== ============
</TABLE>
The deferred tax valuation allowance was originally established due to the
uncertainty surrounding the realizability of the Company's deferred tax assets
using the "more likely than not" criteria. During the fourth quarter of 1996,
the Company revised its estimate of the likelihood that it will realize the
majority of its deferred tax assets and adjusted its valuation allowance
accordingly. This revised estimate was the direct result of the acquisition of
Trefoil. Reversal of the valuation allowance related to deferred tax assets
which existed on the date of acquisition or which were acquired as a result of
the Trefoil acquisition were credited against the original purchase accounting
allocation to goodwill. The reversal of the valuation allowance related to
deferred tax assets generated subsequent to the acquisition were credited as a
reduction of income tax expense and extraordinary losses as appropriate.
The Company's tax credits and net operating loss carryforwards at December
31, 1996 begin expiring in 1997 and 2001, respectively. The Company has provided
a valuation allowance for those tax credits which do not meet a "more likely
than not" realizability test.
10. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) Savings Plan, whereby eligible employees can
contribute up to either 15% of their salary, per year, subject to certain
maximum contribution amounts. Prior to 1996, the Company had not made any
contributions to the plan, nor is it required to in future periods. However, the
Company did elect to make a discretionary match for 1996 of approximately
$250,000. Employees become eligible to participate in the plan after the
completion of one year of service and the attainment of age twenty-one.
F-39
<PAGE> 187
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS
The Company leases real property, office space, broadcasting equipment and
office equipment under various noncancellable operating leases. Certain of the
Company's leases contain escalation clauses, renewal options and/or purchase
options. In addition, the Company assumed lease obligations in connection with
the acquisition of Trefoil on February 14, 1996. The Company also has employment
and rating survey agreements in excess of one year, and has entered into a
twelve-year financial monitoring and oversight agreement with Hicks Muse & Co.
Partners, L.P., which is an affiliate of Hicks, Muse, Tate & Furst Incorporated.
Future minimum payments under the noncancellable operating lease agreements
at December 31, 1996 are approximately as follows:
<TABLE>
<S> <C>
1997........................................................ $ 6,023,586
1998........................................................ 4,865,095
1999........................................................ 4,277,779
2000........................................................ 3,564,247
2001........................................................ 2,805,282
Thereafter.................................................. 13,080,261
-----------
$34,616,250
===========
</TABLE>
Rent expense was approximately $227,000, $1.3 million and $4.8 million for
the years ended December 31, 1994, 1995 and 1996, respectively.
12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
For cash, short-term debt, and other current amounts receivable and
payable, and the variable-rate term debt, the carrying amount approximates fair
value.
For the fixed-rate long-term debt, the fair value is estimated based on
quoted market prices. The carrying values at December 31, 1995 and 1996 was
$80.0 million and $260.0 million, respectively, and the estimated fair values at
each date were $85.4 million and $267.8 million, respectively.
For Chancellor Radio Broadcasting's Senior Exchangeable Preferred Stock,
the fair value of $113.75 per share at December 31, 1996 is estimated based on
quoted market prices.
13. STOCK-BASED COMPENSATION
During 1994, Chancellor's Board of Directors granted options to purchase
996,068 shares of its common stock to the senior management of the Company at
exercise prices of $6.00 and $7.50. The option agreements vest over a five year
period and originally contained certain performance criteria and indexed
exercise prices. On September 30, 1995, Chancellor entered into an agreement
with its senior management to substantially revise and amend these option
agreements to eliminate certain of the performance criteria provisions and to
adjust and fix the exercise prices at $7.50 and $8.40, respectively. Management
developed an estimate of the fair value of the stock options in the amount of
$19.0 million. Based upon this estimate and the applicable vesting periods, the
Company recognized stock option compensation expense and a corresponding credit
to equity of $6.4 million in 1995, with the remaining amount to be amortized
over an approximate four year period.
During 1994, Chancellor's Board of Directors adopted a stock option plan
for its non-employee directors providing for the grant of options and stock
awards for up to 480,000 shares of its common stock. Upon
F-40
<PAGE> 188
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
election to the Board of Directors, each person shall be granted a stock option
to purchase a number of shares of common stock equal to the number of shares of
common stock acquired by purchase by such person upon their initial election to
the Board of Directors. Each option shall be immediately vested, will have a
maximum term of ten years and an exercise price, as determined by the plan
committee, equal to or greater than the fair market value of the common stock on
the respective dates of grant.
In February 1996, Chancellor's Board of Directors adopted a stock award
plan for the Company's management, employees and non-employee directors, elected
after the date of adoption of the plan, providing for the grant of options and
stock awards for up to 916,456 shares of Chancellor's Class A Common Stock. The
Company's compensation committee has the sole authority to grant stock options
and to establish option exercise prices and vesting schedules. However,
per-share exercise prices shall not be less than the fair market value of the
stock on the respective date of grant and if the compensation committee does not
determine a vesting schedule, such option shall vest 20% on the first
anniversary of the respective date of grant and the remaining 80% shall vest pro
rata on a monthly basis over the four-year period following the first
anniversary of the date of grant. Non-employee directors elected after the
effective date of this plan automatically are granted a fully-vested option to
purchase 5,000 shares of Chancellor's Class A Common Stock on the date he or she
first becomes a member of the Board of Directors. Terms of all options are
limited to ten years.
A summary of the Company's option activity follows. The Company has elected
to continue expense recognition under Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" and accordingly, has included
certain required pro forma information. Estimates of weighted-average grant-date
fair values of options granted and pro forma option compensation amounts were
determined using the Black-Scholes Single Option approach assuming an expected
option term of 6 years, interest rates ranging from 5.5% to 7.2%, a dividend
yield of zero and a volatility factor of .4 (zero for options issued prior to
the Company's initial public offering in February 1996).
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1996 1994 1995
-------------------------- ---------------------------- ----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------- ---------------- --------- ---------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year.... -- $ -- 996,068 $7.27 1,022,734 $ 7.89
Granted:
Exercise price:
equals FMV...... 996,068 7.27 26,666 7.50 713,916 26.03
less than FMV... -- -- 996,068 7.90 -- --
Exercised.......... -- -- -- -- -- --
Canceled........... -- -- (996,068) 7.27 (9,000) 24.51
------- ------ --------- ------ --------- -------
End of year.......... 996,068 $7.27 1,022,734 $7.89 1,727,650 $15.30
======= ====== ========= ====== ========= =======
Exercisable as of end
of year............ -- $ -- 225,879 $7.85 431,758 $ 8.06
======= ====== ========= ====== ========= =======
Weighted-average
grant-date fair
value of options
granted:
Exercise price:
equals FMV...... -- 3.59 12.69
less than FMV... -- 21.56 --
</TABLE>
F-41
<PAGE> 189
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- ---------------------------
WEIGHTED AVERAGE
---------------------------
RANGE OF REMAINING EXERCISE WEIGHTED AVERAGE
EXERCISE PRICES SHARES CONTRACTUAL LIFE PRICE SHARES EXERCISE PRICE
- --------------- --------- ---------------- -------- ------- -----------------
<S> <C> <C> <C> <C> <C>
$ 7.50 -- $ 7.50 577,971 7.06 $ 7.50 247,188 $7.50
8.40 -- 8.40 444,763 7.83 8.40 177,904 8.40
20.00 -- 25.25 431,916 9.14 20.51 6,666 20.00
31.00 -- 36.75 273,000 9.75 34.81 -- --
--------- ----- ------ ------- ------
$ 7.50 -- $36.75 1,727,650 8.20 $15.30 431,758 $8.06
========= ===== ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Historical net loss................................. $(11,531,296) $(6,892,023)
Pro forma adjustment for stock option
compensation...................................... (781,465) (1,524,302)
Pro forma tax benefit............................... 312,586 609,721
------------ -----------
Pro forma net loss.................................. $(12,000,175) $(7,806,604)
============ ===========
</TABLE>
14. RELATED PARTY TRANSACTIONS
The Company has entered into a twelve-year agreement (the "Financial
Monitoring and Oversight Agreement") with Hicks Muse & Co. Partners, L.P.
("Hicks Muse Partners") and HM2/Management Partners, L.P. ("HM2"), each of which
is an affiliate of Hicks Muse. Chancellor and the Company paid Hicks Muse
Partners an annual fee of $82,000, $200,000 and $408,000 for financial oversight
and monitoring services for the years ended December 31, 1994, 1995 and 1996,
respectively. The annual fee is adjustable each December 31, according to a
formula based on changes in the consumer price index. HM2 received fees of
approximately $0.3 million, $2.4 million and $6.2 million upon consummation of
the acquisitions of KDWB-FM, the American Media Station Group and Trefoil
Communications, Inc., respectively, and is entitled to receive a fee equal to
1.5% of the transaction value (as defined) upon the consummation of each add-on
transaction (as defined) involving Chancellor or any of its subsidiaries.
Effective April 1, 1996, the Company entered into a revised financial
monitoring and oversight agreement with Hicks & Muse & Co. Partners, L.P. and
HM2/Management Partners, L.P., each of which is an affiliate of Hicks, Muse,
Tate & Furst Incorporated. The annual fee for financial oversight and monitoring
services to the Company has been adjusted to $500,000. The annual fee is
adjustable each January 1, to an amount equal to the budgeted consolidated
annual net sales of the Company for the then-current fiscal year, multiplied by
0.25%, provided, however, that in no event shall the annual fee be less than
$500,000.
The Financial Monitoring and Oversight Agreement makes available the
resources of HM2 and Hicks Muse Partners concerning a variety of financial
matters. The services that have been and will continue to be provided by HM2 and
Hicks Muse Partners could not otherwise be obtained by Chancellor and the
Company without the addition of personnel or the engagement of outside
professional advisors.
In February of 1996, the Company lent $200,000 to an affiliate of the
Company. The loan is unsecured, does not bear interest and will be forgiven
during the next three years.
15. SUBSEQUENT EVENTS
On February 14, 1997, Chancellor Radio Broadcasting completed a private
placement of an additional $10.0 million of Convertible Preferred Stock pursuant
to its over-allotment option. The net proceeds of this offering were used to
repay borrowings under the Revolving Credit Facility.
F-42
<PAGE> 190
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On February 19, 1997, Chancellor and Chancellor Radio Broadcasting entered
into an agreement to merge with Evergreen Media Corporation ("Evergreen") in a
stock-for-stock transaction (the "Merger"), with Evergreen remaining as the
surviving corporation (the "Surviving Company"). Pursuant to the agreement,
shareholders of the Company's common stock will receive 0.9091 shares of
Evergreen's common stock. Consummation of the merger is subject to shareholder
approval and certain other closing conditions including regulatory approval.
On February 19, 1997, the Company and Evergreen entered into a joint
purchase agreement whereby in the event that consummation of the stock purchase
agreement between Evergreen and Viacom International, Inc. ("Viacom") occurs
prior to the consummation of the Merger, the Company will be required to
purchase the Viacom subsidiaries which own four of the ten Viacom stations for
$480.0 million and Evergreen will be required to purchase the Viacom
subsidiaries which own six of the ten Viacom stations for $595.0 million. In the
event that consummation of the stock purchase agreement between Evergreen and
Viacom occurs after the consummation of the Merger, the Surviving Company will
acquire the stock of certain Viacom subsidiaries which own and operate ten radio
stations in five major markets. Consummation of the transaction is dependent
upon certain closing conditions, including regulatory approval.
16. UNCERTAINTIES AND THE USE OF ESTIMATES AND ASSUMPTIONS
On February 8, 1996, the President signed into law the Telecommunications
Act of 1996. Among other things, this legislation requires the Federal
Communications Commission (the "FCC"), to relax its numerical restrictions on
local ownership and affords renewal applicants significant new protections from
competing applications for their broadcast licenses. The new legislation will
enable the Company to retain all of its radio stations and to acquire more
properties; at the same time, this legislation will also allow other broadcast
entities to increase their ownership in markets where the Company currently
operates stations. The Company's management is unable to determine the ultimate
effect of this legislation on its competitive environment.
The pending acquisition, exchange and merger agreements are subject to
various governmental approvals, including the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
Federal Communications Commission.
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 dates of financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual amounts could differ from those estimates.
17. RECENT ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per
Share" in March 1997, which establishes standards for computing and presenting
earnings per share. The disclosure requirements of SFAS No. 128 will be
effective for the Company's financial statements beginning in 1997. Management
has not yet determined the impact that the adoption of SFAS No. 128 will have on
the financial statements of the Company.
F-43
<PAGE> 191
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ----------
<S> <C> <C>
Current assets:
Cash...................................................... $ 3,789 $ 4,982
Accounts receivable, net of allowance for doubtful
accounts of $1,024 and $1,308, respectively............ 46,585 53,037
Prepaid expenses and other................................ 2,754 3,260
-------- ----------
Total current assets.............................. 53,128 61,279
Restricted cash........................................... 20,363 53,750
Property and equipment, net............................... 49,123 68,180
Intangibles and other, net................................ 551,406 978,094
Deferred financing costs, net............................. 16,723 14,420
-------- ----------
Total assets...................................... $690,743 $1,175,723
======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 4,409 $ 5,280
Accrued liabilities....................................... 12,530 16,402
Accrued interest.......................................... 6,869 2,011
Current portion of long-term debt......................... 400 12,500
-------- ----------
Total current liabilities......................... 24,208 36,193
Long-term debt............................................ 354,914 524,121
Deferred income taxes..................................... 2,606 373
Other..................................................... 802 786
-------- ----------
Total liabilities................................. 382,530 561,473
-------- ----------
Redeemable senior cumulative exchangeable preferred stock,
par value $.01 per share; 1,000,000 shares authorized,
issued and outstanding, preference in liquidation of
$112,451,803.............................................. 107,222 110,695
Redeemable cumulative exchangeable preferred stock, par
value $.01 per share; none and 3,600,000 shares
authorized, respectively, none and 2,000,000 shares issued
and outstanding, respectively, preference in liquidation
of $200,000,000........................................... -- 196,479
Common stockholder's equity:
Common stock, par value $.01 per share, 2,000 shares
authorized, 1,000 shares issued and outstanding........ 1 1
Additional paid-in capital................................ 219,519 332,901
Accumulated deficit....................................... (18,529) (25,826)
-------- ----------
Total common stockholder's equity................. 200,991 307,076
-------- ----------
Total liabilities and stockholder's equity........ $690,743 $1,175,723
======== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-44
<PAGE> 192
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Gross broadcasting revenues............. $ 29,089 $ 63,477
Less agency commissions................. 3,447 7,623
-------- --------
Net revenues....................... 25,642 55,854
-------- --------
Operating expenses:
Programming, technical and news....... 5,145 13,871
Sales and promotion................... 6,943 15,963
General and administrative............ 4,404 8,353
Depreciation and amortization......... 4,525 8,109
Corporate expenses.................... 1,008 1,712
Merger expense........................ -- 2,056
Stock option compensation............. 950 950
-------- --------
22,975 51,014
-------- --------
Income from operations............. 2,667 4,840
Other (income) expense:
Interest expense...................... 7,647 11,420
Other, net............................ 6 (1,632)
-------- --------
Loss before provision for income
taxes and extraordinary loss...... (4,986) (4,948)
Provision for income taxes.............. 939 (400)
-------- --------
Loss before extraordinary loss..... (5,925) (4,548)
Extraordinary loss on early
extinguishment of debt, net of income
tax benefit........................... 4,646 2,749
-------- --------
Net loss........................... (10,571) (7,297)
Dividends and accretion on preferred
stock................................. 1,660 8,135
Loss on repurchase of preferred stock... 16,570 --
-------- --------
Net loss attributable to common
stock............................. $(28,801) $(15,432)
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-45
<PAGE> 193
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997.................... 1,000 $ 1 $219,519 $(18,529) $200,991
Dividends and accretion on preferred
stock..................................... -- -- (8,135) -- (8,135)
Capital contributions....................... -- 121,517 -- 121,517
Net loss.................................... -- -- -- (7,297) (7,297)
----- ----- -------- -------- --------
Balance, March 31, 1997..................... 1,000 $ 1 $332,901 $(25,826) $307,076
===== ===== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-46
<PAGE> 194
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (10,571) $ (7,297)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 4,525 8,109
Amortization of deferred financing costs............... 502 610
Stock option compensation.............................. 950 950
Deferred income taxes.................................. 939 (400)
Gain on disposition of stations........................ -- (1,513)
Extraordinary loss..................................... 4,646 2,749
Changes in assets and liabilities, net of the effects
of acquired businesses:
Accounts receivable.................................. 2,949 6,774
Prepaids and other................................... 58 14
Accounts payable..................................... 761 (530)
Accrued liabilities.................................. 458 1,437
Accrued interest..................................... 3,568 (4,858)
--------- ---------
Net cash provided by operating activities......... 8,785 6,045
--------- ---------
Cash flows from investing activities:
Purchases of broadcasting properties...................... (405,566) (582,327)
Dispositions of broadcasting properties................... -- 103,259
Purchases of other property and equipment................. (820) (1,564)
--------- ---------
Net cash used in investing activities............. (406,386) (480,632)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................. 277,958 222,111
Proceeds from borrowings under revolving debt facility.... 28,609 170,433
Repayments of long-term debt.............................. (89,785) (74,968)
Repayments of borrowings under revolving debt facility.... (52,250) (139,157)
Issuances of preferred stock.............................. 175,390 191,817
Repurchase of preferred stock............................. (95,462) --
Additional capital contributions.......................... 155,886 105,544
Distribution of additional paid in capital................ (1,038) --
Payment of preferred stock dividends...................... (506) --
--------- ---------
Net cash provided by financing activities......... 398,802 475,780
--------- ---------
Net increase in cash.............................. 1,201 1,193
Cash, at beginning of period................................ 1,314 3,789
--------- ---------
Cash, at end of period...................................... $ 2,515 $ 4,982
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-47
<PAGE> 195
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Chancellor
Radio Broadcasting Company ("Chancellor Radio Broadcasting") and its
subsidiaries (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997. Chancellor
Radio Broadcasting is a direct subsidiary of Chancellor Broadcasting Company
("Chancellor"). Certain prior year amounts have been reclassified to conform
with the current year's presentation, which had no effect on net income or
stockholder's equity.
2. ACQUISITIONS AND DISPOSITIONS
On January 23, 1997, the Company acquired substantially all the assets and
certain liabilities of Colfax Communications, Inc. and its affiliates ("Colfax")
for an aggregate price of $383.7 million. Liabilities assumed were limited to
certain ongoing contractual rights and obligations. The acquisition was
accounted for as a purchase. Pursuant to the acquisition agreement, at December
31, 1996 the Company had $20.4 million of cash in a restricted escrow account
which was remitted to Colfax at closing. On January 29, 1997, the Company
entered into an agreement to sell WMIL-FM and WOKY-AM, Milwaukee, Wisconsin
stations acquired in this transaction, to Clear Channel Radio, Inc. for $41.3
million in cash. Accordingly, these stations were recorded as assets held for
sale with no results of operations or gain or loss recognized. Interest
capitalized on this investment amounted to $580,000. The disposition of these
stations was completed on March 31, 1997.
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Accounts receivable, net................................ $ 13,234
Prepaid and other assets................................ 470
Property and equipment.................................. 14,624
Goodwill and other intangibles.......................... 317,894
Other noncurrent assets................................. 46
Assets held for sale.................................... 41,253
Accrued liabilities..................................... (3,821)
--------
$383,700
========
</TABLE>
On January 30, 1997, the Company completed the sale of WWWW-FM and WDFN-AM
to Evergreen Media Corporation ("Evergreen") for $30.0 million in cash. The
pre-tax gain of $1.5 million is included in other income.
On February 13, 1997, the Company acquired substantially all the assets and
certain liabilities of OmniAmerica Group ("Omni") for $166.0 million of cash and
$15.0 million of Chancellor Class A Common Stock. Liabilities assumed were
limited to certain ongoing contractual rights and obligations. The acquisition
was accounted for as a purchase.
F-48
<PAGE> 196
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisition is summarized as follows (in thousands):
<TABLE>
<S> <C>
Assets acquired and liabilities assumed:
Property and equipment.................................. $ 9,209
Goodwill and other intangibles.......................... 171,837
--------
$181,046
========
</TABLE>
On February 19, 1997, Chancellor and Chancellor Radio Broadcasting entered
into an agreement to merge with Evergreen in a stock-for-stock transaction (the
"Merger"), with Evergreen remaining as the surviving corporation. Pursuant to
the agreement, shareholders of the Company's common stock will receive 0.9091
shares of Evergreen's common stock. Consummation of the merger is subject to
shareholder approval and certain other closing conditions including regulatory
approval. The Company has incurred $2.1 million of merger costs which have been
expensed in the current period.
On February 19, 1997, the Company and Evergreen entered into a joint
purchase agreement whereby in the event that consummation of the stock purchase
agreement between Evergreen and Viacom International, Inc. ("Viacom") occurs
prior to the consummation of the Merger, the Company will be required to
purchase the Viacom subsidiaries which own four of the ten Viacom stations for
$480.0 million, plus net working capital, and Evergreen will be required to
purchase the Viacom subsidiaries which own six of the ten Viacom stations for
$595.0 million, plus net working capital. In the event that consummation of the
stock purchase agreement between Evergreen and Viacom occurs after the
consummation of the Merger, the Surviving Company will acquire the stock of
certain Viacom subsidiaries which own and operate ten radio stations in five
major markets. Consummation of the transaction is dependent upon certain closing
conditions, including regulatory approval.
On March 24, 1997, the Company exchanged the West Palm Beach stations
acquired from Omni for one AM station in Sacramento, California and
approximately $33.0 million in cash from American Radio Systems Corporation (the
"American Radio Exchange").
The following summarizes the unaudited consolidated pro forma data as
though the acquisitions of Shamrock Broadcasting Company, KIMN-FM and KALC-FM,
Colfax, Omni and KSTE-AM, the dispositions of KTBZ-FM, WWWW-FM and WDFN-AM and
the related financing transactions had occurred as of the beginning of 1996 (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1997
---------------------- ----------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenue................................ $ 25,642 $ 46,014 $ 55,854 $ 57,826
Loss before extraordinary loss............. (5,925) (5,552) (4,548) (2,325)
Net loss attributable to common stock...... (28,801) (14,865) (15,432) (12,772)
</TABLE>
3. LONG-TERM DEBT
The Company's term and revolving credit facilities were refinanced on
January 23, 1997, in conjunction with the acquisition of Colfax under a new bank
credit agreement (the "New Credit Agreement") with Bankers Trust Company, as
administrative agent, and other institutions party thereto. The New Credit
Agreement includes a $225.0 million term loan facility (the "Term Loan
Facility") and a $120.0 million revolving loan facility (the "Revolving Loan
Facility" and, together with the Term Loan, the "New Bank Financing"). In
connection with the refinancing of the term and revolving loan facilities in
January 1997, the Company incurred an extraordinary charge to write-off deferred
finance costs of approximately $4.5 million.
F-49
<PAGE> 197
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is negotiating a restated credit agreement (the "Restated
Credit Agreement") in order to finance the Viacom purchase. The Company
anticipates that the Restated Credit Agreement will consist of a $400.0 million
term loan facility and a $350.0 million revolving loan facility; however, the
terms of the Restated Credit Agreement are subject to negotiation with its
lenders. Also, Chancellor is negotiating a $170.0 million bridge loan facility,
the proceeds from which will be contributed to Chancellor Radio Broadcasting in
connection with the Viacom acquisition.
The New Bank Financing is collateralized by (i) a first priority perfected
pledge of all capital stock and notes owned by the Company and (ii) a first
priority perfected security interest in all other assets (including receivables,
contracts, contract rights, securities, patents, trademarks, other intellectual
property, inventory, equipment and real estate) owned by the Company, excluding
FCC licenses, leasehold interests in studio or office space and leasehold and
partnership interests in tower or transmitter sites in which necessary consents
to the granting of a security interest cannot be obtained without payments to
any other party or on a timely basis. The New Bank Financing also is guaranteed
by the subsidiaries of Chancellor and Chancellor Radio Broadcasting, whose
guarantees are collateralized by a first priority perfected pledge of the
capital stock of Chancellor Radio Broadcasting. The Term Loan Facility is due in
increasing quarterly installments beginning in 1997 and matures in January 2003.
All outstanding borrowings under the Revolving Facility mature in January 2003.
The facilities bear interest at a rate equal to, at the Company's option, the
prime rate of Bankers Trust Company, as announced from time to time, or the
London Inter-Bank Offered Rate ("LIBOR") in effect from time to time, plus an
applicable margin rate. The Company pays quarterly commitment fees in arrears
equal to either .375% or .250% per annum on the unused portion of the Revolving
Facility, depending upon whether the Company's leverage ratio is equal to or
greater than 4.5:1 or less than 4.5:1, respectively. The bank financing
facilities which existed on March 31, 1997 accrued interest at the prime rate
plus 1.00% (8.25%) on $9.6 million and the LIBOR rate plus 2.00% (7.5%) on
$267.0 million of borrowings.
Scheduled debt maturities for the Company's outstanding long-term debt at
March 31, 1997 for each of the next five calendar years and thereafter are as
follows, in thousands:
<TABLE>
<S> <C>
1997...................................................... $ 9,375
1998...................................................... 21,875
1999...................................................... 34,375
2000...................................................... 43,125
2001...................................................... 48,750
Thereafter................................................ 379,121
--------
$536,621
========
</TABLE>
On May 2, 1997, the Company commenced a tender offer for all $60.0 million
of its outstanding 12 1/2% Senior Subordinated Notes (the "Tender Offer"). The
Company expects to pay a premium and intends to finance the Tender Offer with
additional borrowings under its New Credit Agreement. The Tender Offer and the
financing thereof are subject to the approval of the Company's existing lenders.
Management expects to complete the Tender Offer prior to the consummation of the
Viacom acquisition.
4. CAPITAL STRUCTURE
During the first quarter of 1997, Chancellor completed a private placement
of $110.0 million of newly authorized 7% Convertible Preferred Stock (the
"Convertible Preferred Stock") and Chancellor Radio Broadcasting completed a
private placement of $200.0 million of newly authorized 12% Exchangeable
Preferred Stock (the "Exchangeable Preferred Stock").
Dividends on the Convertible Preferred Stock accrue from its date of
issuance and are payable quarterly commencing April 15, 1997, at a rate per
annum of 7% of the liquidation preference per share. Because
F-50
<PAGE> 198
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Chancellor is a holding company with no assets other than the common stock of
Chancellor Radio Broadcasting, Chancellor will rely on dividends from Chancellor
Radio Broadcasting to permit Chancellor to pay cash dividends in full on the
Convertible Preferred Stock. As of March 31, 1997, the accrued dividends for the
Convertible Preferred Stock amounted to $1.5 million. The Convertible Preferred
Stock is convertible at the option of the holder at any time after March 23,
1997, unless previously redeemed, into Class A Common Stock of Chancellor at a
conversion price of $32.90 per share of Class A Common Stock, subject to
adjustment in certain events. In addition, after January 19, 2000, the Company
may, at its option, redeem the Convertible Preferred Stock, in whole or in part,
at specified redemption prices plus accrued and unpaid dividends through the
redemption date. Upon the occurrence of a change of control (as defined),
Chancellor must, subject to certain conditions, offer to purchase all of the
then outstanding shares of Convertible Preferred Stock at a price equal to 101%
of the liquidation preference thereof, plus accrued and unpaid dividends to the
date of purchase.
Dividends on the Exchangeable Preferred Stock will accrue from the date of
its issuance and will be payable semi-annually commencing July 15, 1997, at a
rate per annum of 12% of the liquidation preference per share. Dividends may be
paid, at the Company's option, on any dividend payment date occurring on or
prior to January 15, 2002 either in cash or in additional shares of Exchangeable
Preferred Stock. The Exchangeable Preferred Stock is redeemable at the Company's
option, in whole or in part at any time on or after January 15, 2002, at the
redemption prices set forth herein, plus accrued and unpaid dividends to the
date of redemption. In addition, prior to January 15, 2000, the Company may, at
its option, redeem the Exchangeable Preferred Stock with the net cash proceeds
from one or more Public Equity Offerings (as defined), at various redemption
prices plus accrued and unpaid dividends to the redemption date; provided,
however, that after any such redemption there is outstanding at least $150.0
million aggregate liquidation preference of Exchangeable Preferred Stock. The
Company is required, subject to certain conditions, to redeem all of the
Exchangeable Preferred Stock outstanding on January 15, 2009, at a redemption
price equal to 100% of the liquidation preference thereof, plus accrued and
unpaid dividends to the date of redemption. Upon the occurrence of a Change of
Control (as defined), the Company will, subject to certain conditions, offer to
purchase all of the then outstanding shares of Exchangeable Preferred Stock at a
price equal to 101% of the liquidation preference thereof, plus accrued and
unpaid dividends to the repurchase date. In addition, prior to January 15, 1999,
upon the occurrence of a Change of Control, the Company will have the option to
redeem the Exchangeable Preferred Stock in whole but not in part at a redemption
price equal to 112% of the liquidation preference thereof, plus accrued and
unpaid dividends to the date of redemption. The Exchangeable Preferred Stock
will, with respect to dividend rights and rights on liquidation, rank junior to
the Senior Exchangeable Preferred Stock. 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 12%
subordinated exchange debentures due 2009, including any such securities paid in
lieu of cash interest.
In addition to the accrued dividends discussed above, the recorded value of
the Senior Exchangeable Preferred Stock and the Exchangeable Preferred Stock
includes an amount for the accretion of the difference between the stock's fair
value at date of issuance and its mandatory redemption amount, calculated using
the effective interest method.
5. EMPLOYEE STOCK OPTION PLAN
In January 1997, the Board of Directors granted options to purchase 125,750
shares of Class A Common Stock with an exercise price of $28.75 per share, the
fair market value of the stock on the date of grant.
F-51
<PAGE> 199
CHANCELLOR RADIO BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES
Income tax expense (benefit) differs from the amount computed by applying
the federal statutory income tax rate of 34% to loss before income taxes and
dividends and accretion on preferred stock of subsidiary for the following
reasons, dollars in thousands:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1997
------- -------
<S> <C> <C>
U.S. federal income tax at statutory
rate.................................. $(3,275) $(1,682)
State income taxes, net of federal
benefit............................... (578) (297)
Valuation allowance provided for loss
carryforward generated during the
current period........................ 4,667 --
Permanent difference.................... -- 1,564
Other................................... 125 15
------- -------
$ 939 $ (400)
======= =======
</TABLE>
7. NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standard No. 128, "Earnings per Share"
was issued in February 1997, which establishes standards for computing and
presenting earnings per share (EPS) and applies to entities with publicly held
common stock or potential common stock. The disclosure requirements of SFAS No.
128 will be effective for the Company's financial statements beginning with the
annual report for 1997. Management does not believe that the implementation of
SFAS 128 will have a material effect on its financial statements.
F-52
<PAGE> 200
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Evergreen Media Corporation:
We have audited the accompanying combined balance sheets of Riverside
Broadcasting Co., Inc. and WAXQ Inc. as of December 31, 1995 and 1996, and the
related combined statements of earnings and cash flows for each of the years in
the three-year period ended December 31, 1996. These combined financial
statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Riverside
Broadcasting Inc. and WAXQ Inc. as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 14, 1997
F-53
<PAGE> 201
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Accounts receivable, less allowance
for doubtful accounts of $99 in
1995, $208 in 1996 and $168 in
1997............................... $ 5,507 $ 9,713 $8,810
Prepaid expenses and other current
assets............................. 178 381 523
Deferred income taxes................. 45 829 829
------- ------- -------
Total current assets.......... 5,730 10,923 10,162
Property and equipment, net (note 4).... 1,075 4,177 4,474
Intangible assets, net (note 5)......... 47,422 66,626 66,114
------- ------- -------
$54,227 $81,726 $80,750
======= ======= =======
LIABILITIES AND EQUITY
Current liabilities -- accounts payable
and accrued expenses.................. $ 1,167 $ 3,669 $1,977
Deferred income taxes................... 222 4,373 4,373
Equity (note 9)......................... 52,838 73,684 74,400
Commitments and contingencies (note
10)...................................
------- ------- -------
$54,227 $81,726 $80,750
======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-54
<PAGE> 202
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
COMBINED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues.......................... $28,254 $25,862 $37,321 $ 6,224 $11,072
Less agency commissions and national
rep fees........................... 4,700 4,342 5,892 1,013 1,799
------- ------- ------- ------- -------
Net revenues.................. 23,554 21,520 31,429 5,211 9,273
------- ------- ------- ------- -------
Operating expenses:
Station operating expenses excluding
depreciation and amortization...... 9,212 9,069 12,447 2,238 4,179
Depreciation and amortization......... 1,662 1,676 4,528 419 632
Corporate general and
administrative..................... 945 980 943 255 221
------- ------- ------- ------- -------
Operating expenses................. 11,819 11,725 17,918 2,912 5,032
------- ------- ------- ------- -------
Operating income................... 11,735 9,795 13,511 2,299 4,241
Other expense (note 3).................. -- -- 459 -- --
------- ------- ------- ------- -------
Earnings before income taxes....... 11,735 9,795 13,052 2,299 4,241
Income tax expense (note 6)............. 6,053 5,154 6,683 1,168 2,168
------- ------- ------- ------- -------
Net earnings.................. $ 5,682 $ 4,641 $ 6,369 $ 1,131 $ 2,073
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-55
<PAGE> 203
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Cash flows provided by operating activities:
Net earnings................................... $ 5,682 $ 4,641 $ 6,369 $ 1,131 $ 2,073
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation................................ 153 168 286 42 120
Amortization of goodwill.................... 1,509 1,508 1,811 377 512
Changes in certain assets and liabilities:
Deferred income taxes..................... 32 110 (603) -- --
Accounts receivable, net.................. (676) 659 (4,172) 693 903
Prepaid expenses and other current
assets................................. 12 103 (203) (92) (142)
Accounts payable and accrued expenses..... (192) (483) 2,502 (200) (1,692)
------- ------- ------- ------- -------
Net cash provided by operating
activities........................... 6,520 6,706 5,990 1,951 1,774
------- ------- ------- ------- -------
Cash flows used by investing activities --capital
expenditures................................... (150) (129) (695) (125) (417)
------- ------- ------- ------- -------
Net cash used by financing
activities -- distribution to parent........... (6,370) (6,577) (5,295) (1,826) (1,357)
------- ------- ------- ------- -------
Increase (decrease) in cash...................... -- -- -- -- --
Cash at beginning of period...................... -- -- -- -- --
------- ------- ------- ------- -------
Cash at end of period............................ $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
Noncash financing activities -- contribution of
radio station net assets by parent (note 3).... $ -- $ -- $19,772 $ -- --
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-56
<PAGE> 204
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The accompanying combined financial statements include the accounts of
Riverside Broadcasting Co., Inc. and WAXQ Inc. (collectively, the "Company").
The Company owns and operates two commercial radio stations in the New York City
market -- WLTW-FM and WAXQ-FM and is wholly owned by Viacom International Inc.
("Viacom" or "Parent"), a wholly owned subsidiary of Viacom, Inc. Significant
intercompany accounts and transactions have been eliminated in combination.
On February 16, 1997, Viacom entered into a stock purchase agreement to
sell all the issued and outstanding shares of capital stock of WAXQ Inc. and
Riverside Broadcasting Co., Inc. in the New York City market, KYSR Inc. and KIBB
Inc. in the Los Angeles market, Viacom Broadcasting East Inc. and WMZQ Inc. in
the Washington, DC market, WLIT Inc. in the Chicago market and WDRQ Inc. in the
Detroit market (collectively, the "Viacom Radio Properties") to Evergreen Media
Corporation of Los Angeles ("Evergreen"), for $1.075 billion in cash ("Proposed
Transaction"). The Proposed Transaction is expected to close after the
expiration or termination of the applicable waiting periods under the HSR Act
and approval by the Federal Communications Commission ("FCC"). Contemporaneous
with this transaction, Evergreen entered into a joint purchase agreement with
Chancellor Broadcasting Company ("Chancellor") under which Chancellor agreed to
acquire the Chicago, Detroit and Los Angeles Viacom radio properties referred to
above for $480 million from Evergreen or from Viacom directly.
The accompanying combined financial statements reflect the carve-out
historical results of operations and financial position of Riverside
Broadcasting Co., Inc. and WAXQ Inc. These financial statements are not
necessarily indicative of the results that would have occurred if the Company
had been a separate stand-alone entity during the periods presented.
The financial statements do not include Viacom's corporate assets or
liabilities not specifically identifiable to the Company. Corporate overhead
allocations have been included in the accompanying statements of earnings in
corporate general and administrative expense and station operating expenses.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(b) Intangible Assets
Intangible assets consist primarily of broadcast licenses. The Company
amortizes such intangible assets using the straight-line method over 40 years.
The Company continually evaluates the propriety of the carrying amount of
intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists of the projection of
undiscounted operating income before depreciation, amortization, nonrecurring
charges and interest over the remaining amortization periods of the related
intangible assets. At this time, the Company believes that no significant
impairment of intangible assets has occurred and that no reduction of the
estimated useful lives is warranted.
(c) Barter Transactions
The Company trades commercial air time 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
F-57
<PAGE> 205
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
services to be received. Barter revenue is recorded and the liability relieved
when commercials are broadcast and barter expense is recorded and the asset
relieved when goods or services are received or used.
(d) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable earnings. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount more likely than not to be realized. Income
tax expense is the total of tax payable for the period and the change during the
period in deferred tax assets and liabilities.
(f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(g) Fair Value
The carrying amount of accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments.
(h) Disclosure of Certain Significant Risks and Uncertainties
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.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers in the Company's
customer base. The Company performs ongoing credit evaluations of its customers
and believes that adequate allowances for any uncollectible trade receivables
are maintained. No one customer accounted for more than 10% of net revenues in
1994, 1995, or 1996.
(i) Unaudited Interim Financial Information
In the opinion of management, the unaudited interim combined financial
statements as of and for the three months ended March 31, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring
F-58
<PAGE> 206
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
items, which are necessary for a fair presentation of the results for the
interim periods presented. The results for the interim periods ended March 31,
1996 and 1997 are not necessarily indicative of results to be expected for any
other interim period or for the full year.
(3) ACQUISITIONS AND DISPOSITIONS
On August 1, 1996, Viacom exchanged the assets of KBSG-AM/FM and KNDD-FM in
Seattle for the assets of WAXQ-FM in New York. The transaction was accounted for
as a nonmonetary exchange and was based on the recorded amounts of the
nonmonetary assets relinquished. For the period from July 1, 1996 to July 31,
1996, Viacom operated WAXQ-FM under a time brokerage agreement.
Station start-up costs, including fees paid pursuant to the time brokerage
agreement, amounting to $2,431,000, were capitalized and amortized during 1996.
Acquisition-related costs are reflected in the accompanying financial statements
as other expense.
A summary of net assets relinquished by Viacom in connection with the
exchange is as follows:
<TABLE>
<S> <C>
Working capital............................................. $ 34
Property and equipment...................................... 2,693
Intangible assets........................................... 21,015
Deferred taxes.............................................. (3,970)
-------
$19,772
=======
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ------ ------
<S> <C> <C> <C>
Broadcast facilities.................................. 8-20 years $1,971 $4,783
Office equipment and other............................ 5-8 years 557 754
Construction in progress.............................. 10 389
------ ------
2,538 5,926
Accumulated depreciation.............................. 1,463 1,749
------ ------
$1,075 $4,177
====== ======
</TABLE>
(5) INTANGIBLE ASSETS
Intangible assets at December 31, 1995 and 1996 consist of broadcast
licenses which are being amortized over forty years and are presented net of
accumulated amortization of $13,177 and $14,988, respectively.
(6) INCOME TAXES
The Company's results of operations are included in the combined U.S.
federal and certain combined and separate state income tax returns of Viacom
International Inc.
The tax provisions and deferred tax liabilities presented have been
determined as if the Company were a stand-alone business filing separate tax
returns. Current tax liabilities are recorded through the equity account with
Viacom.
F-59
<PAGE> 207
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current:
Federal.................................................. $3,889 $3,258 $4,672
State and local.......................................... 2,132 1,786 2,614
Deferred:
Federal.................................................. 21 71 (356)
State.................................................... 11 39 (247)
------ ------ ------
$6,053 $5,154 $6,683
====== ====== ======
</TABLE>
A reconciliation of the U.S. Federal statutory tax rate to the Company's
effective tax rate on earnings before income taxes is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. tax rate..................................... 35.0% 35.0% 35.0%
Amortization of intangibles................................. 4.6 5.4 4.3
State and local taxes, net of federal tax benefit........... 11.9 12.1 11.8
Other, net.................................................. 0.1 0.1 0.1
---- ---- ----
Effective tax rate........................................ 51.6% 52.6% 51.2%
==== ==== ====
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes. These temporary differences are primarily the result
of fixed asset basis differences and bad debt expense.
(7) DEBT AND INTEREST COST
Viacom has not allocated any portion of its debt or related interest cost
to the Company, and no portion of Viacom's debt is specifically related to the
operations of the Company. Accordingly, the Company's financial statements
include no charges for interest.
(8) RELATED PARTY TRANSACTIONS
Intercompany balances between the Company and Viacom resulting from normal
trade activity are reflected in Equity in the accompanying combined financial
statements (see note 9).
Viacom provides services for the Company in management, accounting and
financial reporting, human resources and information systems. The allocation of
these expenses, which is generally based on revenue dollars, is reflected in the
accompanying combined financial statements as corporate general and
administrative expense. Management believes that the method of allocation of
corporate overhead is reasonable.
Viacom has a noncontributory pension plan covering substantially all of its
employees, including the employees of the Company. Costs related to these plans
are allocated to the Company based on payroll dollars. The Company recognized
expense related to these costs in the amounts of $63, $41 and $97 for 1994, 1995
and 1996, respectively. The assets and the related benefit obligation of the
plans will not be transferred to the Company upon consummation of the Proposed
Transaction, therefore, such assets and obligations are not included in the
notes to the Company's combined financial statements.
Viacom utilizes a centralized cash management system. As a result, the
Company carries minimal cash. Disbursements are funded by the Parent upon demand
and cash receipts are transferred to the Parent daily.
F-60
<PAGE> 208
RIVERSIDE BROADCASTING CO., INC. AND WAXQ INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company, from time to time, enters into transactions with companies
owned by or affiliated with Viacom. Generally, services received from such
related parties are charged to the Company at amounts which would be incurred in
transactions between unrelated entities.
(9) EQUITY
Equity represents Viacom's ownership interest in the recorded net assets of
the Company. All cash transactions and intercompany transactions flow through
the equity account. A summary of the activity is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of period.......... $ 55,462 $ 54,774 $ 52,838
Net earnings............................ 5,682 4,641 6,369
Net intercompany activity............... (6,370) (6,577) 14,477
-------- -------- --------
Balance at end of period................ $ 54,774 $ 52,838 $ 73,684
======== ======== ========
</TABLE>
(10) COMMITMENTS AND CONTINGENCIES
The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from one to
ten years and require the Company to pay all executory costs such as maintenance
and insurance. Rental expense for operating leases (excluding those with lease
terms of one month or less that were not renewed) was approximately $192, $155
and $442 during 1994, 1995 and 1996, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1997.................................... $ 709
1998.................................... 722
1999.................................... 759
2000.................................... 795
2001.................................... 818
Thereafter.............................. 2,411
------
$6,214
======
</TABLE>
F-61
<PAGE> 209
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Evergreen Media Corporation:
We have audited the accompanying combined balance sheets of WMZQ Inc. and
Viacom Broadcasting East Inc. as of December 31, 1995 and 1996, and the related
combined statements of earnings and cash flows for each of the years in the
three-year period ended December 31, 1996. These combined financial statements
are the responsibility of the Companies' management. Our responsibility is to
express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of WMZQ Inc.
and Viacom Broadcasting East Inc. as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 14, 1997, except for note 10,
which is as of April 14, 1997
F-62
<PAGE> 210
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------ MARCH 31,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Accounts receivable, less allowance
for doubtful accounts of $150 in
1995, $235 in 1996 and $152 in
1997............................... $ 4,893 $ 5,401 $ 4,283
Prepaid expenses and other current
assets............................. 467 629 811
Deferred income taxes (note 5)........ 60 94 94
------- ------- -------
Total current assets.......... 5,420 6,124 5,188
Property and equipment, net (note 3).... 2,407 2,316 2,339
Intangible assets, net (note 4)......... 50,204 48,695 48,319
------- ------- -------
$58,031 $57,135 $55,846
======= ======= =======
LIABILITIES AND EQUITY
Current liabilities -- accounts payable
and accrued expenses.................. $ 2,411 $ 2,458 $ 2,325
Deferred income taxes (note 5).......... 1,899 2,121 2,123
Equity (note 8)......................... 53,721 52,556 51,398
Commitments and contingencies (note
9)....................................
------- ------- -------
$58,031 $57,135 $55,846
======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-63
<PAGE> 211
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
COMBINED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ---------------
1994 1995 1996 1996 1997
------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues..................................... $21,389 $25,656 $26,584 $5,676 $5,955
Less agency commissions and national rep fees.... 3,321 4,131 4,075 838 989
------- ------- ------- ------ ------
Net revenues............................. 18,068 21,525 22,509 4,838 4,966
------- ------- ------- ------ ------
Operating expenses:
Station operating expenses excluding depreciation
and amortization.............................. 10,398 11,445 11,362 2,528 2,738
Depreciation and amortization.................... 1,798 1,814 1,884 453 469
Corporate general and administrative............. 694 940 674 218 120
------- ------- ------- ------ ------
Operating expenses............................ 12,890 14,199 13,920 3,199 3,327
------- ------- ------- ------ ------
Earnings before income taxes.................. 5,178 7,326 8,589 1,639 1,639
Income tax expense (note 5)........................ 2,607 3,437 3,929 749 778
------- ------- ------- ------ ------
Net earnings............................. $ 2,571 $ 3,889 $ 4,660 $ 890 $ 861
======= ======= ======= ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-64
<PAGE> 212
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows provided by operating
activities:
Net earnings.......................... $ 2,571 $ 3,889 $ 4,660 $ 890 $ 861
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation....................... 289 305 375 75 93
Amortization of goodwill........... 1,509 1,509 1,509 378 376
Deferred income tax expense........ 323 302 188 -- 2
Changes in certain assets and
liabilities, net of effects of
acquisitions:
Accounts receivable, net......... 179 (1,485) (508) 1,380 1,118
Prepaid expenses and other
current assets................ 14 (121) (162) (526) (182)
Accounts payable and accrued
expenses...................... (559) 20 47 70 (133)
------- ------- ------- ------- -------
Net cash provided by operating
activities.................. 4,326 4,419 6,109 2,267 2,135
------- ------- ------- ------- -------
Cash flows used by investing
activities -- capital expenditures.... (194) (491) (284) (44) (116)
------- ------- ------- ------- -------
Cash flows used by financing
activities -- distribution to
Parent................................ (4,132) (3,928) (5,825) (2,223) (2,019)
------- ------- ------- ------- -------
Increase (decrease) in cash............. -- -- -- -- --
Cash at beginning of period............. -- -- -- -- --
------- ------- ------- ------- -------
Cash at end of period................... $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-65
<PAGE> 213
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The accompanying combined financial statements include the accounts of WMZQ
Inc. and Viacom Broadcasting East Inc. (collectively, the "Company"). The
Company owns and operates four commercial radio stations in the Washington, DC
market, WMZQ-FM, WJZW-FM, WBZS-AM and WZHF-AM, and is wholly owned by Viacom
International Inc. ("Viacom" or "Parent"), a wholly owned subsidiary of Viacom,
Inc. Significant intercompany accounts and transactions have been eliminated in
combination.
On February 16, 1997, Viacom International Inc. entered into a stock
purchase agreement to sell all the issued and outstanding shares of capital
stock of WAXQ Inc. and Riverside Broadcasting Co., Inc. in the New York City
market, KYSR Inc. and KIBB Inc. in the Los Angeles market, Viacom Broadcasting
East Inc. and WMZQ Inc. in the Washington, DC market, WLIT Inc. in the Chicago
market and WDRQ Inc. in the Detroit market (collectively the "Viacom Radio
Properties") to Evergreen Media Corporation for $1.075 billion in cash
("Proposed Transaction"). The Proposed Transaction is expected to close after
the expiration or termination of the applicable waiting periods under the HSR
Act and approval by the Federal Communications Commission ("FCC").
Contemporaneous with this transaction, Evergreen entered into a joint purchase
agreement with Chancellor Broadcasting Company ("Chancellor"), under which
Chancellor agreed to acquire the Chicago, Detroit and Los Angeles Viacom Radio
Properties referred to above for $480 million from Evergreen or from Viacom
directly.
The accompanying combined financial statements reflect the carve-out
historical results of operations and financial position of WMZQ Inc. and Viacom
Broadcasting East, Inc. These financial statements are not necessarily
indicative of the results that would have occurred if the Company had been a
separate stand-alone entity during the periods presented.
The financial statements do not include Viacom's corporate assets or
liabilities not specifically identifiable to the Company. Corporate overhead
allocations have been included in the accompanying statements of earnings in
corporate general and administrative expense and station operating expenses.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(b) Intangible Assets
Intangible assets consist primarily of broadcast licenses. The Company
amortizes such intangible assets using the straight-line method over 40 years.
The Company continually evaluates the propriety of the carrying amount of
intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists of the projection of
undiscounted operating income before depreciation, amortization, nonrecurring
charges and interest over the remaining amortization periods of the related
intangible assets. At this time, the Company believes that no significant
impairment of intangible assets has occurred and that no reduction of the
estimated useful lives is warranted.
(c) Barter Transactions
The Company trades commercial air time 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
F-66
<PAGE> 214
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
services to be received. Barter revenue is recorded and the liability relieved
when commercials are broadcast and barter expense is recorded and the asset
relieved when goods or services are received or used.
(d) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable earnings. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount more likely than not to be realized. Income
tax expense is the total of tax payable for the period and the change during the
period in deferred tax assets and liabilities.
(f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(g) Fair Value
The carrying amount of accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments.
(h) Disclosure of Certain Significant Risks and Uncertainties
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.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers in the Company's
customer base. The Company performs ongoing credit evaluations of its customers
and believes that adequate allowances for any uncollectible trade receivables
are maintained. No one customer accounted for more than 10% of net revenues in
1994, 1995, or 1996.
(i) Unaudited Interim Financial Information
In the opinion of management, the unaudited interim combined financial
statements as of and for the three months ended March 31, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring
F-67
<PAGE> 215
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
items, which are necessary for a fair presentation of the results for the
interim periods presented. The results for the interim periods ended March 31,
1996 and 1997 are not necessarily indicative of results to be expected for any
other interim period or for the full year.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
--------------- ------ ------
<S> <C> <C> <C>
Broadcast facilities................................... 8 - 20 years $2,268 $2,366
Land................................................... 440 440
Building............................................... 30 - 40 years 146 146
Office equipment and other............................. 5 - 8 years 1,866 1,808
Construction in progress............................... -- 5
------ ------
4,720 4,765
------ ------
Accumulated depreciation............................... 2,313 2,449
------ ------
$2,407 $2,316
====== ======
</TABLE>
(4) INTANGIBLE ASSETS
Intangible assets at December 31, 1995 and 1996 consist of broadcast
licenses which are being amortized over forty years and are presented net of
accumulated amortization of $10,714 and $12,223, respectively.
(5) INCOME TAXES
The Company's results of operations are included in the U.S. federal and
certain combined and separate state income tax returns of Viacom International
Inc.
The tax provisions and deferred tax liabilities presented have been
determined as if the Company were a stand-alone business filing separate tax
returns. Current tax liabilities are recorded through the equity account with
Viacom.
Income tax expense consists of:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current:
Federal................................................... $1,704 $2,434 $2,943
State and local........................................... 580 701 798
Deferred federal and state.................................. 323 302 188
------ ------ ------
$2,607 $3,437 $3,929
====== ====== ======
</TABLE>
F-68
<PAGE> 216
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the U.S. Federal statutory tax rate to the Company's
effective tax rate on earnings before income taxes is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. tax rate................. 35.0% 35.0% 35.0%
Amortization of intangibles............. 7.4 5.2 4.5
State and local taxes, net of federal
tax benefit........................... 7.9 6.7 6.2
Other, net.............................. 0.0 0.0 0.0
---- ---- ----
Effective tax rate.................... 50.3% 46.9% 45.7%
==== ==== ====
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes. These temporary differences are primarily the result
of fixed asset basis differences and bad debt expense. Deferred tax assets and
liabilities relating to state income taxes are not material.
(6) DEBT AND INTEREST COST
Viacom has not allocated any portion of its debt or related interest cost
to the Company, and no portion of Viacom's debt is specifically related to the
operations of the Company. Accordingly, the Company's financial statements
include no charges for interest.
(7) RELATED PARTY TRANSACTIONS
Intercompany balances between the Company and Viacom resulting from normal
trade activity are reflected in Equity in the accompanying combined financial
statements (see note 8).
Viacom provides services for the Company in management, accounting and
financial reporting, human resources, information systems, legal, taxes and
other corporate services. The allocation of these expenses, which is generally
based on revenue dollars, is reflected in the accompanying financial statements
as corporate general and administrative expense. Management believes that the
method of allocation of corporate overhead is reasonable.
Viacom has a noncontributory pension plan covering substantially all of its
employees, including the employees of the Company. Costs related to these plans
are allocated to the Company based on payroll dollars and are included in
station operating expenses. The Company recognized expense related to these
costs in the amounts of $77, $74 and $242 for 1994, 1995 and 1996, respectively.
The assets and the related benefit obligation of the plans will not be
transferred to the Company upon consummation of the Proposed Transaction,
therefore, such assets and obligations are not included in the notes to the
Company's financial statements.
Viacom utilizes a centralized cash management system. As a result, the
Company carries minimal cash. Disbursements are funded centrally upon demand and
cash receipts are transferred to the Parent daily.
The Company, from time to time, enters into transactions with companies
owned by or affiliated with Viacom. Generally, services received from such
related parties are charged to the Company at amounts which would be incurred in
transactions between unrelated entities.
F-69
<PAGE> 217
WMZQ INC. AND VIACOM BROADCASTING EAST INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(8) EQUITY
Equity represents Viacom's ownership interest in the recorded net assets of
the Company. All cash transactions and intercompany transactions flow through
the equity account. A summary of the activity is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of period............................ $55,321 $53,760 $53,721
Net earnings.............................................. 2,571 3,889 4,660
Net intercompany activity................................. (4,132) (3,928) (5,825)
------- ------- -------
Balance at end of period.................................. $53,760 $53,721 $52,556
======= ======= =======
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from 1 to 10
years and require the Company to pay all executory costs such as maintenance and
insurance. Rental expense for operating leases (excluding those with lease terms
of one month or less that were not renewed) was approximately $332, $356 and
$373 during 1994, 1995 and 1996, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1997........................................................ $ 506
1998........................................................ 523
1999........................................................ 310
2000........................................................ 222
2001........................................................ 200
Thereafter.................................................. 814
------
$2,575
======
</TABLE>
(10) SUBSEQUENT EVENT
On April 14, 1997, Evergreen Media Corporation and Chancellor Broadcasting
Company entered into an agreement with ABC Radio ("ABC"), a division of The Walt
Disney Company, whereby ABC will purchase from Evergreen and Chancellor two
radio stations, WDRQ-FM and WJZW-FM for a total of $105 million.
F-70
<PAGE> 218
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Brown Organization:
We have audited the accompanying balance sheets of KKSF-FM/KDFC-FM and AM
(A Division of The Brown Organization) as of December 31, 1996 and 1995, and the
related statements of earnings and division equity and cash flows for the years
then ended. These financial statements are the responsibility of the Division's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
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 financial statements referred to above present fairly,
in all material respects, the financial position of KKSF-FM/KDFC-FM and AM (A
Division of The Brown Organization) as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
Schedule 1 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly presented in all material respects in
relation to the basic financial statements taken as a whole.
KPMG Peat Marwick LLP
Dallas, Texas
April 25, 1997
F-71
<PAGE> 219
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Current assets:
Cash...................................................... $ 53 $ 131
Accounts receivable, less allowance for doubtful accounts
of $62 in 1996 and $92 in 1995......................... 1,345 3,110
Due from Evergreen Media Corporation (note 5)............. 1,323 --
Prepaid expenses and other................................ 50 77
------- -------
Total current assets.............................. 2,771 3,318
------- -------
Property and equipment, net (note 2)........................ 1,992 2,434
Intangible assets, net (note 3)............................. 12,622 14,448
Other assets................................................ 115 106
------- -------
Total assets...................................... $17,500 $20,306
======= =======
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable.......................................... $ 69 $ 57
Accrued expenses.......................................... 625 963
------- -------
Total current liabilities......................... 694 1,020
Intercompany payable to Parent (note 4)..................... 5,000 7,700
Deferred compensation (note 5).............................. 365 198
Division equity:
Advances from Parent...................................... 10,647 11,746
Accumulated equity (deficit).............................. 794 (358)
------- -------
Total division equity............................. 11,441 11,388
Commitments and contingencies (note 5)
------- -------
Total liabilities and division equity............. $17,500 $20,306
======= =======
</TABLE>
See accompanying notes to financial statements.
F-72
<PAGE> 220
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
STATEMENTS OF EARNINGS AND DIVISION EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Revenues:
Gross revenues (note 5)................................... $14,896 $13,739
Less agency commissions................................... 1,746 1,773
------- -------
Net revenues...................................... 13,150 11,966
------- -------
Operating expenses:
Station operating expenses, excluding depreciation and
amortization........................................... 6,780 7,088
Participation agreement expense (note 5).................. 2,486 1,405
Depreciation and amortization............................. 2,351 2,283
------- -------
Total operating expenses.......................... 11,617 10,776
------- -------
Operating income.................................. 1,533 1,190
Non-operating income (expenses):
Intercompany interest expense (note 4).................... (429) (796)
Other, net................................................ 48 54
------- -------
Non-operating expense, net........................ (381) (742)
------- -------
Net earnings...................................... $ 1,152 $ 448
======= =======
Pro forma information (unaudited) (note 1(h)):
Income tax expense........................................ (461) (179)
------- -------
Pro forma net earnings............................ $ 691 $ 269
======= =======
Division equity, beginning of year.......................... 11,388 8,025
Net earnings................................................ 1,152 448
Net investment by (distribution to) parent.................. (1,099) 2,915
------- -------
Division equity, end of year................................ $11,441 $11,388
======= =======
</TABLE>
See accompanying notes to financial statements.
F-73
<PAGE> 221
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $1,152 $ 448
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 2,351 2,283
Gain on sale of assets................................. (4) (38)
Deferred compensation.................................. 167 60
Accrued intercompany interest.......................... 429 796
Participation agreement expense........................ 2,486 1,405
Changes in operating assets and liabilities:
Accounts receivable, net............................. 442 (684)
Prepaid expenses and other........................... 18 16
Accounts payable and accrued expenses................ (326) 51
------ ------
Net cash provided by operating activities......... 6,715 4,337
------ ------
Cash flows used in investing activities:
Acquisition of property and equipment..................... (83) (1,239)
Proceeds from sale of equipment........................... 4 5
------ ------
Net cash used in investing activities............. (79) (1,234)
------ ------
Cash flows used in financing activities -- distributions to
parent.................................................... (6,714) (3,300)
------ ------
Decrease in cash............................................ (78) (197)
Cash at beginning of year................................... 131 328
------ ------
Cash at end of year......................................... $ 53 $ 131
====== ======
Noncash financing activities -- intercompany note payable
principal and interest payments made by the Company....... $3,129 $5,543
====== ======
</TABLE>
See accompanying notes to financial statements.
F-74
<PAGE> 222
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
KKSF-FM/KDFC-FM and AM (the "Division") is a division of The Brown
Organization (the "Company"). The Division is the operator of radio stations
KKSF-FM and KDFC-FM and AM. The accompanying financial statements reflect the
assets and liabilities related to the Division's operations and do not include
corporate management and administrative expenses.
(b) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repairs and maintenance are charged to expense when
incurred.
(c) Goodwill and Intangible Assets
The excess of the purchase price of the acquired radio stations over the
fair value of the net tangible assets acquired is reflected in the accompanying
financial statements as intangible assets. Intangible assets are amortized over
the estimated useful lives ranging from 3 to 40 years.
The Division continually evaluates the propriety of the carrying amount of
goodwill as well as the amortization period to determine whether current events
or circumstances warrant adjustments to the carrying value and/or revised
estimates of useful lives. This evaluation of goodwill consists of the
projection of undiscounted operating income before depreciation, amortization,
nonrecurring charges and interest over the remaining amortization periods of the
related intangible assets. The projections are based on a historical trend line
of actual results since the acquisitions of the respective stations adjusted for
expected changes in operating results. To the extent such projections indicate
that undiscounted operating income is not expected to be adequate to recover the
carrying amounts of the related goodwill, such carrying amounts are written down
by charges to expense. At this time, the Division believes that no significant
impairment of goodwill has occurred and that no reduction of the estimated
useful lives is warranted.
(d) Barter Transactions
The Division trades commercial air time for goods and services used
principally for promotional sales and other business activities. Barter revenue
is recognized when the commercials are broadcast. Barter expense is recognized
when goods or services are received or used. Barter revenues and expenses were
approximately $123,000 and $166,000 during the years ended December 31, 1996 and
1995, respectively.
(e) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(f) Impairment of Long-Lived Tangible and Intangible Assets
The Division adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
F-75
<PAGE> 223
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. The adoption of this Statement did not have a material impact on
the Division's financial position, results of operations or liquidity.
(g) Disclosure of Certain Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that reflect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Because of the use of estimates inherent
in the financial reporting process, actual results could differ from those
estimates.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers and the geographic
diversification of the Division's national revenue customer base. The Division
performs ongoing credit evaluations of its customers and believes that adequate
allowances for any uncollectible trade receivables are maintained. At December
31, 1996, no receivable from any customer exceeded 5% of Division equity and no
customer accounted for more than 10% of net revenues in 1996.
(h) Income Taxes
As the Company is an "S" Corporation, income taxes are the responsibility
of its individual stockholders. Accordingly, no income tax expense or deferred
income tax assets or liabilities are recognized in the accompanying financial
statements of the Division.
The pro forma information assumes the Division is subject to state and
federal income taxes computed on a separate return basis.
(i) Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and
accrued liabilities approximates fair value because of the short maturity of
these instruments. The floating interest rate on the Company's longterm bank
debt reflects current market rates and, accordingly, its carrying value
approximates fair value.
(2) PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following at December 31, 1996
and 1995 (thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C> <C>
Leasehold improvements................................. 10 years $ 718 $ 709
Broadcast equipment.................................... 5-10 years 2,315 2,299
Furniture, fixtures and office equipment............... 3-10 years 797 746
Record library......................................... 7 years 148 148
Automobiles............................................ 3 years 42 42
------ ------
4,020 3,944
Less accumulated depreciation and amortization......... 2,028 1,510
------ ------
$1,992 $2,434
====== ======
</TABLE>
F-76
<PAGE> 224
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) INTANGIBLE ASSETS
Intangible assets is comprised of the following at December 31, 1996 and
1995 (thousands of dollars):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1996 1995
----------- ------- -------
<S> <C> <C> <C>
KKSF-FM Acquisition
FCC license......................................... 40 years $ 4,500 4,500
Residual value...................................... 40 years 533 533
Lease costs......................................... 13 years 900 900
Format and music research........................... 9 years 6,320 6,320
------- -------
12,253 12,253
Less accumulated amortization............... 7,938 7,160
------- -------
4,315 5,093
------- -------
KDFC Acquisition
Covenant not to compete............................. 5 years 3,000 3,000
Goodwill and going concern value.................... 40 years 2,245 2,245
Customer list....................................... 5 years 1,226 1,226
FCC license......................................... 40 years 5,000 5,000
Contracts........................................... 3 years 72 72
------- -------
11,543 11,543
Less accumulated amortization............... 3,236 2,188
------- -------
8,307 9,355
------- -------
Net intangibles....................................... $12,622 14,448
======= =======
</TABLE>
(4) RELATED PARTY TRANSACTIONS
The Division is provided management and administrative services by
personnel at the Company's headquarter's office located in Los Angeles,
California and by the president of the Company's radio station operations. The
cost of these services has not been charged to the Division's operations.
The Division maintains an intercompany note payable with the Company that
bears interest at a rate equivalent to the Company's rate on its bank borrowings
(7.3% and 7.6% at December 31, 1996 and 1995, respectively) (see note 5).
(5) COMMITMENTS AND CONTINGENCIES
On September 19, 1996, the Company, on behalf of the Division, entered into
an agreement to sell its radio broadcasting assets to Evergreen Media
Corporation ("Evergreen"). On November 1, 1996, the Company and Evergreen
commenced a time brokerage agreement ("the TBA") whereby substantially all of
the Company's broadcast time was sold to Evergreen. The monthly fees for
November and December 1996 amounted to $1,250,000. In addition, the TBA required
that Evergreen reimburse the Company for certain expenses that the Company
incurred during the term of the TBA. The Division incurred approximately
$422,000 in nonreimbursable station operating expenses during November and
December 1996. The TBA continued until the sale to Evergreen was consummated on
January 31, 1997. Proceeds of $115,000,000 were paid by Evergreen to the Company
which included the liquidation of the intercompany note payable (see note 4).
F-77
<PAGE> 225
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1996, the amounts due from the Evergreen Media Corporation
approximating $1,323,000 primarily relates to funds collected by Evergreen for
advertising revenue generated before the effective date of the brokerage
agreement.
The Company, on behalf of the Division, entered into a time brokerage
agreement whereby substantially all of the broadcast time of radio station
KDFC-FM was sold to another broadcaster ("the broadcaster") for a monthly fee of
$41,667. The agreement is for a period of three years commencing October 5,
1995. The broadcaster may extend the agreement an additional two years. The
agreement may be terminated under certain conditions.
The Company has entered into an agreement with a key Division employee
whereby said employee participates in the Division's appreciation of net assets
through participation percentages. The key employee's percentage of
participation is greater if he is employed by the Company at the time that the
station is sold than if his employment is terminated prior to sale for reasons
other than the employee's death or disability. The balance due to this employee
is payable only upon the earlier of the termination of employment or sale of the
radio station. The Company recognized approximately $2,486,000 and $1,405,000 in
compensation expense related to this agreement during 1996 and 1995,
respectively.
During 1989 the Company adopted a deferred compensation plan for the
benefit of the radio stations' general managers. Compensation expense of
$167,000 and $60,000 was recognized in the accompanying Division financial
statements in 1996 and 1995, respectively.
The Company, on behalf of the Division, was lessee under noncancelable
operating leases for studio space and transmitter sites. Rental expense
recognized in the Division financial statements was approximately $340,000 and
$298,000 during 1996 and 1995, respectively.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 353
1998........................................................ 312
1999........................................................ 370
2000........................................................ 231
2001........................................................ 331
------
Total............................................. $1,597
======
</TABLE>
F-78
<PAGE> 226
SCHEDULE 1
KKSF-FM/KDFC-FM AND AM
(A DIVISION OF THE BROWN ORGANIZATION)
SUPPLEMENTARY SCHEDULE -- OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
KKSF-FM/
KDFC-AM KDFC-FM TOTAL
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Gross revenues.............................................. $9,759 $5,137 $14,896
Less agency commissions................................... 1,103 643 1,746
------ ------ -------
Net revenues...................................... $8,656 $4,494 $13,150
====== ====== =======
Operating expenses:
Station operating expenses excluding depreciation......... $4,480 $2,300 $ 6,780
====== ====== =======
</TABLE>
- ---------------
Note: Certain expenses included in station operating expenses excluding
depreciation -- other corporate general and administrative were allocated
between KKSF-FM/KDFC-AM and KDFC-FM based on various factors. General and
administrative expenses were allocated 66% and 34% to KKSF-FM/KDFC-AM and
KDFC-FM, respectively. Sales commission and salaries were allocated 73%
and 23% and technical and engineering expenses were allocated 60% and 40%
to KKSF-FM/KDFC-AM and KDFC-FM, respectively, based on estimated time
spent per day by Division personnel.
See accompanying independent auditors' report.
F-79
<PAGE> 227
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Beasley FM Acquisition Corp.:
We have audited the accompanying balance sheet of WDAS-AM/FM (station owned
and operated by Beasley FM Acquisition Corp.) as of December 31, 1996, and the
related statements of earnings and station 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 WDAS-AM/FM 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.
KPMG Peat Marwick LLP
St. Petersburg, Florida
March 28, 1997
F-80
<PAGE> 228
WDAS-AM/FM
(STATION OWNED AND OPERATED BY
BEASLEY FM ACQUISITION CORP.)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash...................................................... $ 2,111 $ 2,805
Accounts receivable, less allowance for doubtful accounts
of $166 and $138 in 1996 and 1997...................... 3,693 2,938
Trade sales receivable.................................... 359 29
Prepaid expense and other................................. 150 130
------- -------
Total current assets.............................. 6,313 5,902
Property and equipment, net (note 2)........................ 3,297 3,523
Notes receivable from related parties (note 5).............. 2,766 3,625
Intangibles, less accumulated amortization.................. 17,738 17,122
------- -------
$30,114 $30,172
======= =======
LIABILITIES AND STATION EQUITY
Current liabilities:
Current installments of long-term debt (note 3)........... $ 49 $ 49
Notes payable to related parties (note 5)................. 352 494
Accounts payable.......................................... 269 191
Accrued expenses.......................................... 515 313
Trade sales payable....................................... 39 12
------- -------
Total current liabilities......................... 1,224 1,059
Long-term debt, less current installments (note 3).......... 627 627
------- -------
Total liabilities................................. 1,851 1,686
Station equity.............................................. 28,263 28,486
Commitments and related party transactions (notes 4 and
5)........................................................
------- -------
$30,114 $30,172
======= =======
</TABLE>
See accompanying notes to financial statements.
F-81
<PAGE> 229
WDAS-AM/FM
(STATION OWNED AND OPERATED BY
BEASLEY FM ACQUISITION CORP.)
STATEMENTS OF EARNINGS AND STATION EQUITY
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, ------------------
1996 1996 1997
------------ ------- -------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues............................................... $14,667 $ 2,623 $ 3,000
------- ------- -------
Costs and expenses:
Program and production................................... 2,028 445 620
Technical................................................ 212 59 50
Sales and advertising.................................... 3,514 660 802
General and administrative............................... 2,005 497 459
------- ------- -------
7,759 1,661 1,931
------- ------- -------
Operating income, excluding items shown
separately
below.......................................... 6,908 962 1,069
Management fees (note 5)................................... (620) (156) (128)
Depreciation and amortization.............................. (2,763) (651) (657)
Interest income (expense), net............................. (40) (13) 7
Other...................................................... -- -- (78)
------- ------- -------
Net income....................................... 3,485 142 213
Station equity, beginning of period........................ 25,367 25,367 28,273
Forgiveness of related party note receivable (note 5)...... (589) -- --
------- ------- -------
Station equity, end of period.............................. $28,263 $25,509 $28,486
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-82
<PAGE> 230
WDAS-AM/FM
(STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, -------------------------------
1996 1996 1997
------------ --------------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 3,485 $ 142 $ 213
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 2,763 651 657
Allowance for doubtful accounts................... 8 (56) (28)
Decrease (increase) in receivables................ (398) 792 1,113
(Increase) decrease) in prepaid expense and other
assets.......................................... (96) (104) 20
Decrease in payables and accrued expenses......... (507) (331) (297)
------- ----- ------
Net cash provided by operating activities.... 5,255 1,094 1,678
------- ----- ------
Cash flows from investing activities -- capital
expenditures for property and equipment.............. (775) (572) (267)
------- ----- ------
Cash flows from financing activities:
Proceeds from issuance of indebtedness............... 676 - -
Principal payments on indebtedness................... (820) - -
Payment of loan fees................................. (6) - -
Net change in borrowings to/from affiliates.......... (2,647) (305) (717)
------- ----- ------
Net cash used in financing activities........ (2,797) (305) (717)
------- ----- ------
Net increase in cash................................... 1,683 217 694
Cash at beginning of period............................ 428 428 2,111
------- ----- ------
Cash at end of period.................................. $ 2,111 $ 645 $2,805
======= ===== ======
Noncash transactions:
Forgiveness of related note receivable
Release of WDAS-AM/FM's obligations under a note
payable which related to obtaining an easement.
WDAS-AM/FM is now directly responsible for the costs
necessary to obtain this easement and has included
these costs in accrued expenses in the accompanying
balance sheet........................................ $ 350
=======
</TABLE>
See accompanying notes to financial statements.
F-83
<PAGE> 231
WDAS-AM/FM
(STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(IN THOUSANDS)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
WDAS-AM/FM (the Station) is a radio station operating in Philadelphia,
Pennsylvania. The assets, liabilities and operations of WDAS-AM/FM are part of
Beasley FM Acquisition Corp. (BFMA). These financial statements reflect only the
assets, liabilities and operations relating to radio station WDAS-AM/FM and are
not representative of the financial statements of BFMA.
(b) Revenue Recognition
Revenue is recognized as advertising air time is broadcast and is net of
advertising agency commissions. (c) Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated lives of the assets, which range
from 5 to 31 years.
(d) Intangibles
Intangibles consist primarily of FCC licenses, which are amortized
straight-line over ten years. Other intangibles are amortized straight-line over
5 to 10 years.
(e) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
BFMA adopted the provisions of Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, on January 1, 1996. This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this Statement did not have
a material impact on the Station's financial position, results of operations, or
liquidity.
(f) Barter Transactions
Trade sales are recorded at the fair value of the products or services
received and totaled approximately $676 for the year ended December 31, 1996.
Products and services received and expensed totaled approximately $449 for the
year ended December 31, 1996.
(g) Income Taxes
BFMA has elected to be treated as an "S" Corporation under provisions of
the Internal Revenue Code. Under this corporate status, the stockholders of BFMA
are individually responsible for reporting their share of taxable income or
loss. Accordingly, no provision for federal or state income taxes has been
reflected in the accompanying financial statements.
F-84
<PAGE> 232
WDAS-AM/FM
(STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(h) Defined Contribution Plan
BFMA has a defined contribution plan which conforms with Section 401(k) of
the Internal Revenue Code. Under this plan, employees may contribute a minimum
of 1% of their compensation (no maximum) to the Plan. The Internal Revenue Code,
however, limited contributions to $9,500 in 1996. There are no employer matching
contributions.
(i) 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 amount of revenues and expenses during the
reporting period. Actual results could differ from these estimates. To the
extent management's estimates prove to be incorrect, financial results for
future periods may be adversely affected.
(j) Interim Financial Statements
In the opinion of management, the accompanying unaudited interim financial
statements contain all adjustments, consisting of normal recurring accruals,
necessary to present fairly the financial position, results of operations, and
cash flows of the Station for the three-month periods ended March 31, 1997 and
1996 and as of March 31, 1997.
(2) PROPERTY AND EQUIPMENT
Property and equipment, at cost, is comprised of the following at December
31, 1996:
<TABLE>
<S> <C>
Land, buildings, and improvements........................... $2,204
Broadcast equipment......................................... 1,200
Office equipment and other.................................. 477
Transportation equipment.................................... 79
------
3,960
Less accumulated depreciation..................... (663)
------
$3,297
======
</TABLE>
(3) LONG-TERM DEBT
BFMA and six affiliates (the Group) refinanced their $100,000 revolving
credit loan on June 24, 1996. Under terms of the new agreement, the Group was
provided a revolving credit loan with an initial maximum commitment of $115,000.
The credit agreement was subsequently amended and the maximum commitment was
increased to $120,000. The Group's borrowings under the revolving credit loan
totaled $115,784 at December 31, 1996, of which $676 was allocated to
WDAS-AM/FM. The loan bears interest at either the base rate or LIBOR plus a
margin which is determined by the Group's debt to cash flow ratio. The base rate
is equal to the higher of the prime rate or the overnight federal funds
effective rate plus 0.5%. At December 31, 1996, the revolving credit loan
carried interest at an average rate of 8.61%. Interest is generally payable
monthly. The Group has entered into interest rate hedge agreements as discussed
in note 6.
The amount available under the Group's revolving credit loan will be
reduced quarterly beginning September 30, 1997 through its maturity on December
31, 2003. The loan agreement includes restrictive covenants and requires the
Group to maintain certain financial ratios. The loans are secured by the common
stock and substantially all assets of the Group.
F-85
<PAGE> 233
WDAS-AM/FM
(STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Annual maturities on the Group's revolving credit loan for the next five
years are as follows:
<TABLE>
<CAPTION>
DEBT
MATURITIES
----------
<S> <C>
1997........................................................ $ 8,434
1998........................................................ 12,650
1999........................................................ 13,800
2000........................................................ 14,950
2001........................................................ 15,525
Thereafter.................................................. 50,425
--------
Total............................................. $115,784
========
</TABLE>
S-AM/FM paid interest of approximately $79 in 1996.
(4) COMMITMENTS
On September 19, 1996, BFMA entered into an asset purchase agreement (APA)
with Evergreen Media Corporation of Los Angeles (Evergreen) for the sale of
WDAS-AM/FM. Under the terms of the APA, BFMA will convey substantially all of
the assets used in the operation of the station to Evergreen in exchange for a
purchase price of $103,000, subject to adjustment, to be paid in cash. BFMA
expects to close on this sale before July 1, 1997.
WDAS-AM/FM leases facilities and a tower under 10-year operating leases
which expire in July 2004 and January 2007, respectively. WDAS-AM/FM also leases
certain other office equipment on a month-to-month basis. Lease expense was
approximately $215 in 1996. Future minimum lease payments by year are summarized
as follows:
<TABLE>
<S> <C>
1997........................................................ $ 236
1998........................................................ 247
1999........................................................ 258
2000........................................................ 270
2001........................................................ 283
Thereafter.................................................. 1,275
------
$2,569
======
</TABLE>
In the normal course of business, the Station is party to various legal
matters. The ultimate disposition of these matters will not, in management's
judgment, have a material adverse effect on the Station's financial position.
(5) RELATED PARTY TRANSACTIONS
The Company has a management agreement with Beasley Management Company, an
affiliate of the Company's principal stockholder. Management fee expense under
the agreement was $620 in 1996.
The notes receivable from/payable to related parties are non-interest
bearing and are due on demand. A note receivable due from a related party of
$589 was forgiven in 1996.
F-86
<PAGE> 234
WDAS-AM/FM
(STATION OWNED AND OPERATED BY BEASLEY FM ACQUISITION CORP.)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) FINANCIAL INSTRUMENTS
WDAS-AM/FM's significant financial instruments and the methods used to
estimate their fair value are as follows:
Revolving credit loan -- The fair value approximates carrying value
due to the loan being refinanced on June 24, 1996 and the interest rate
being based on current market rates.
Notes receivable from/payable to related parties -- It is not
practicable to estimate the fair value of these notes payable due to their
related party nature.
Interest rate swap, cap and collar agreements -- The Group entered
into an interest rate swap agreement with a notional amount of $15,000, an
interest rate cap agreement with a notional amount of $3,100, and an
interest rate collar agreement with a notional amount of $15,000 to act as
a hedge by reducing the potential impact of increases in interest rates on
the revolving credit loan. These agreements expire on various dates in
1999. The Group is exposed to credit loss in the event of nonperformance by
the other parties to the agreements. The Group, however, does not
anticipate nonperformance by the counterparties. The fair value of the
interest rate swap agreement is estimated using the difference between the
present value of discounted cash flows using the base rate stated in the
swap agreement (5.37%) and the present value of discounted cash flows using
the LIBOR rate at December 31, 1996. The fair values of the interest rate
cap agreement, which establishes a maximum base rate of 7.50%, and the
interest rate collar agreement, which establishes a minimum base rate of
4.93% and a maximum base rate of 6%, are estimated based on the amounts the
Group would expect to receive or pay to terminate the agreement. The
estimated fair value of each of these agreements is negligible.
F-87
<PAGE> 235
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Century Chicago Broadcasting, L.P.
In our opinion, the accompanying balance sheet and the related statements
of operations and partners' deficit and of cash flows present fairly, in all
material respects, the financial position of Century Chicago Broadcasting, L.P.
at 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.
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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Chicago, Illinois
May 2, 1997
F-88
<PAGE> 236
CENTURY CHICAGO BROADCASTING, L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, 1997 1996
-------------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 1,707,114 $ 1,832,410
Accounts receivable, net of allowance for doubtful
accounts of $286,000 and $283,000, respectively........ 2,030,226 2,504,875
Prepaid expenses and other assets......................... 227,876 217,353
------------ ------------
Total current assets.............................. 3,965,216 4,554,638
------------ ------------
Property and equipment:
Technical equipment....................................... 1,188,953 1,188,953
Office furniture and fixtures............................. 370,442 370,075
Leasehold improvements.................................... 212,814 212,814
------------ ------------
1,772,209 1,771,842
Less -- Accumulated depreciation.......................... (1,145,799) (1,101,549)
------------ ------------
Total property and equipment...................... 626,410 670,293
------------ ------------
Intangible assets, net (Note 4)............................. 1,934,838 1,946,778
------------ ------------
Deferred financing costs, net............................... 424,860 465,360
------------ ------------
Total assets...................................... $ 6,951,324 $ 7,637,069
============ ============
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Promissory note (Note 6).................................. $ 6,210,342 $ 6,036,785
Accounts payable and accrued expenses (Note 5)............ 898,072 968,424
Due to Century Broadcasting Corporation (Note 3).......... 10,298,226 11,203,224
Deferred option payment (Note 2).......................... 5,000,000 5,000,000
------------ ------------
Total current liabilities......................... 22,406,640 23,208,433
------------ ------------
Commitments and contingencies (Note 7)
------------ ------------
Partners' deficit, per accompanying statement............... (15,455,316) (15,571,364)
------------ ------------
Total liabilities and partners' deficit........... $ 6,951,324 $ 7,637,069
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-89
<PAGE> 237
CENTURY CHICAGO BROADCASTING, L.P.
STATEMENTS OF OPERATIONS AND PARTNERS' DEFICIT
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------------- DECEMBER 31,
1997 1996 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Gross revenues................................. $ 1,973,026 $ 1,454,573 $ 8,638,346
Less -- Agency commissions..................... (262,854) (198,089) (1,163,350)
------------ ------------ ------------
Net revenues........................... 1,710,172 1,256,484 7,474,996
------------ ------------ ------------
Operating expenses:
Programming.................................... 331,673 333,289 1,386,231
Selling........................................ 572,530 549,536 2,525,100
Promotion -- Television advertising............ -- 344,000 770,473
Promotion -- Other............................. 23,561 28,802 324,305
Technical...................................... 54,241 8,802 58,135
General and administrative..................... 303,947 278,093 1,148,298
Corporate overhead allocation.................. 45,000 45,000 181,000
Depreciation and amortization.................. 56,190 56,190 222,378
------------ ------------ ------------
Total operating expenses............... 1,387,142 1,643,712 6,615,920
------------ ------------ ------------
Income (loss) from operations.................... 323,030 (387,228) 859,076
Interest income.................................. 14,848 -- 63,572
Interest expense................................. (221,830) (316,010) (1,065,825)
------------ ------------ ------------
Net income (loss)................................ 116,048 (703,238) (143,177)
------------ ------------ ------------
Partners' deficit:
Beginning of period............................ (15,571,364) (15,428,187) (15,428,187)
------------ ------------ ------------
End of period.................................. $(15,455,316) $(16,131,425) $(15,571,364)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-90
<PAGE> 238
CENTURY CHICAGO BROADCASTING, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
----------------------- DECEMBER 31,
1997 1996 1996
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $ 116,048 $ (703,238) $ (143,177)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization expense................ 56,190 56,190 222,378
Corporate overhead allocation........................ 45,000 45,000 181,000
Amortization of deferred financing costs............. 40,500 39,000 161,581
Changes in assets and liabilities:
Accounts receivable, prepaid expenses and other
current assets.................................. 464,126 590,997 (400,707)
Accounts payable and accrued expenses.............. (70,352) (688,764) (1,231,606)
---------- ---------- -----------
Net cash provided by (used in) operating
activities.................................... 651,512 (660,815) (1,210,531)
---------- ---------- -----------
Cash flows from investing activities:
Additions to property and equipment..................... (367) (17,684) (36,758)
Deferred option payment................................. -- -- 5,000,000
---------- ---------- -----------
Net cash provided by (used in) investing
activities.................................... (367) (17,684) 4,963,242
---------- ---------- -----------
Cash flows from financing activities:
Repayment of promissory note............................ -- -- (4,500,000)
Deferred financing costs................................ -- (76,707) (87,421)
Increase (decrease) in due to Century Broadcasting
Corporation.......................................... (949,998) (385,001) 987,635
Proceeds from issuance of promissory note............... 173,557 1,109,219 1,646,004
---------- ---------- -----------
Net cash provided by (used in) financing
activities.................................... (776,441) 647,511 (1,953,782)
---------- ---------- -----------
Net change in cash and cash equivalents................... (125,296) (30,988) 1,798,929
Cash and cash equivalents:
Beginning of period..................................... 1,832,410 33,481 33,481
---------- ---------- -----------
End of period........................................... $1,707,114 $ 2,493 $ 1,832,410
---------- ---------- -----------
Cash paid for interest.................................... -- -- $ 100,000
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-91
<PAGE> 239
CENTURY CHICAGO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION:
Century Chicago Broadcasting, L.P. (CCBLP) is a limited partnership and the
licensee of Chicago radio station WPNT-FM (the Station). The general partner of
CCBLP is Century Broadcasting Corporation (Century) and the two limited partners
of CCBLP are directors and controlling stockholders of Century.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim financial data (unaudited)
The interim financial data as of March 31, 1997 and for each of the three
months ended March 31, 1997 and 1996 is unaudited. The accompanying unaudited
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments necessary
for a fair presentation of results of the interim periods have been made and
such adjustments were of a normal and recurring nature. The results of
operations and cash flows for the three months ended March 31, 1997 are not
necessarily indicative of the results that can be expected for the entire fiscal
year ending December 31, 1997.
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.
Cash and cash equivalents
CCBLP considers all highly liquid investments with an original maturity of
90 days or less to be cash equivalents.
Revenue recognition
Revenues for radio time sales, which are generated primarily from clients
in the greater Chicago metropolitan area, are recognized when commercials are
broadcast. Accounts receivable are unsecured.
Property and equipment
Property and equipment are stated at cost. Maintenance and repairs are
charged against operations as incurred. Improvements and renewals are
capitalized. Depreciation is computed on a straight-line basis over the
estimated useful lives of the assets, generally ten years.
Intangible assets
Intangible assets represent goodwill and a broadcasting license. Intangible
assets related to acquisitions since 1971 are being amortized on a straight-line
basis over 40 years. Intangible assets of $347,137 related to the pre-1971
license acquisition are not being amortized as CCBLP believes there has been no
diminution of value. CCBLP periodically evaluates the carrying value of
intangible assets in relation to the future undiscounted cash flows of the
Station.
F-92
<PAGE> 240
CENTURY CHICAGO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Impairment of long-lived assets
Effective January 1, 1996, CCBLP adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS No. 121).
This Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. SFAS No. 121 requires an impairment loss to be
recognized if the sum of expected future cash flows (undiscounted and without
interest charges) is less than the carrying amount of the asset. Otherwise, an
impairment loss is not recognized. This Statement requires that long-lived
assets and certain identifiable intangibles to be disposed of be reported at the
lower of carrying amount or fair value less cost to sell. The adoption of SFAS
No. 121 did not have any impact on CCBLP's financial statements.
Deferred option payment
On June 27, 1996, CCBLP granted Evergreen Media Corporation of Los Angeles
(Evergreen) an option to purchase the Station. Under the terms of the option
agreement, Evergreen paid $5,000,000 to CCBLP in exchange for CCBLP's agreement
to sell the Station to Evergreen under the terms of a July 1, 1996 letter of
intent. The option price, which is non-refundable, has been recorded as a
deferred credit in the December 31, 1996 and March 31, 1997 balance sheets. See
Note 8.
Deferred financing costs
Deferred financing costs are amortized over the term of the related
indebtedness by the interest method. Such amortization totaled $161,581 in 1996
and is included in interest expense in the accompanying statement of operations.
The original cost of deferred financing costs being amortized was $753,658 at
December 31, 1996.
Income taxes
No provision for income taxes has been provided in the accompanying
financial statements because the tax effects of CCBLP's operations accrue
directly to its partners.
Fair value of financial instruments
CCBLP's financial instruments include cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses and a promissory note.
Management believes that the fair values of these financial instruments
approximate their respective carrying values.
NOTE 3 -- RELATED PARTY TRANSACTIONS:
Cash provided by or required for CCBLP's operations is transferred between
CCBLP and Century on a periodic basis. The amount recorded as Due to Century
Broadcasting Corporation is non-interest bearing and is not subject to stated
repayment terms. Accordingly, the financial statements do not reflect any
interest costs on the Due to Century Broadcasting Corporation balance. The
average Due to Century Broadcasting balance was $11,052,000 during the year
ended December 31, 1996.
Century provides certain managerial, treasury, accounting, tax and legal
services to CCBLP. An allocation of the estimated cost of these services has
been reflected in the accompanying statements of operations based on the
estimated time spent by Century personnel providing such services. In the
opinion of management, the costs allocated to CCBLP for services provided by
Century are reasonable.
F-93
<PAGE> 241
CENTURY CHICAGO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- INTANGIBLE ASSETS:
Intangible assets as of December 31 consist of the following:
<TABLE>
<CAPTION>
1996
----------
<S> <C>
Broadcasting license........................................ $2,035,081
Goodwill.................................................... 222,137
----------
2,257,218
Less -- Accumulated amortization............................ (310,440)
----------
$1,946,778
==========
</TABLE>
Amortization expense related to these intangibles was $47,760 for the year
ended December 31, 1996.
NOTE 5 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses at December 31 consist of the
following:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Accounts payable............................................ $ 31,098
Accrued interest and loan fees.............................. 473,558
Accrued employee compensation............................... 188,520
Other accrued expenses...................................... 275,248
--------
$968,424
========
</TABLE>
NOTE 6 -- PROMISSORY NOTE:
On March 15, 1991, CCBLP entered into a Loan Agreement with a financial
institution. This Loan Agreement was amended and supplemented at various times
since its inception.
As of January 31, 1996, an amendment was executed to provide CCBLP the
ability to borrow an additional $1,000,000 ($845,000 for working capital
purposes and $155,000 for the payment of interest). Additionally, the amendment
provided that upon the consummation of Century's sale of its Denver radio
stations CCBLP would prepay $4,500,000 of the promissory note. The sale and
prepayment were completed in June 1996. Following the prepayment, the lender
made an additional $1,000,000 available to CCBLP to fund future debt service and
interest payments to the lender. During 1996, interest payments of $901,100 were
made by CCBLP of which $100,000 was paid in cash and the remaining balance was
paid through additional borrowings under the amended agreement. At December 31,
1996 and March 31, 1997, CCBLP had additional available line of credit totaling
$463,000 and $289,000, respectively, subject to the terms and conditions of the
agreement.
Interest, payable quarterly, accrues at a Formula Rate which varies based
upon certain financial measures. Such Formula Rate generally ranges from the
prime lending rate (8.25% at December 31, 1996) plus 2% to the prime lending
rate plus 3%. As of December 31, 1996, the Formula Rate in effect for CCBLP was
11.25%.
Principal payments on the promissory note are due in twelve consecutive,
quarterly installments beginning on April 1, 1997 with aggregate annual
principal payments of $450,000 in 1997, $750,000 in 1998, $950,000 in 1999 and
any remaining amounts (including principal, interest and the remaining $300,000
of Loan Fees) due on January 1, 2000.
The Loan Agreement contains various restrictive covenants that, among other
things, require CCBLP, an affiliated limited partnership and Century to
individually (and on a consolidated basis with respect to
F-94
<PAGE> 242
CENTURY CHICAGO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Century) maintain minimum levels of operating cash flow, limit distributions
from CCBLP and/or an affiliated limited partnership to their respective partners
and place restrictions on the assumption and payment of Century expenses by
CCBLP or the affiliated limited partnership.
Upon notification from the lender, a prepayment equal to 50% of the
adjusted cash flow, as defined in the Loan Agreement, may be required provided
that such payment does not reduce cash on hand to a level below $1,000,000. The
promissory note evidencing CCBLP's obligation to the lender is secured by
substantially all of the assets of CCBLP and Century (including, but not limited
to, its partnership interests in CCBLP and an affiliated limited partnership)
and is guaranteed by Century and one of CCBLP's limited partners. Additionally,
both of CCBLP's limited partners have pledged their respective interests in
CCBLP as well as an affiliated limited partnership.
As more fully discussed in Note 8, CCBLP has entered into an agreement to
sell the Station and intends to use a portion of the proceeds to prepay the
promissory note in full. Additionally, certain technical covenant violations
have not been waived and there is uncertainty as to whether CCBLP and Century
will be able to meet such covenants prospectively. As such, the amounts
outstanding under the promissory note have been classified as current
liabilities in the accompanying balance sheets.
In the event that the promissory note is not prepaid in conjunction with
the aforementioned sale of the Station, management believes that operating cash
flows together with funds obtained from the additional borrowings as well as
from the option payment discussed above will provide sufficient working capital
to fund CCBLP's current operations. Additionally, management believes that the
lender will continue to forbear and not require CCBLP to repay the obligations
under the promissory note in advance of the stated maturities. Furthermore,
management believes in the event that operating cash flows were not sufficient
to support the Station's current operations and the sale of the Station were not
to be completed that additional financing would be available either from its
current lender or from other sources.
NOTE 7 -- COMMITMENTS:
CCBLP leases certain office space and equipment under various operating
leases. Rent expense included in the accompanying statement of operations for
the year ended December 31, 1996 in connection with these various operating
leases totaled $388,000. Future minimum rentals under noncancelable operating
leases in existence at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- ---------
<S> <C>
1997........................................................ $ 375,000
1998........................................................ 370,000
1999........................................................ 339,000
2000........................................................ 248,000
2001........................................................ 288,000
Thereafter.................................................. 1,151,000
</TABLE>
CCBLP has entered into certain noncancelable agreements for ratings and
news services that require aggregate payments of approximately $358,000 in 1997,
$355,000 in 1998 and $172,000 in 1999.
F-95
<PAGE> 243
CENTURY CHICAGO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- STATION SALE:
On July 15, 1996, CCBLP entered into an Asset Purchase Agreement with
Evergreen Media Corporation of Chicago (Evergreen of Chicago) to sell
substantially all of the assets of the Station to Evergreen of Chicago for
approximately $68,750,000 in cash plus 96% of the accounts receivable balance at
the time of closing, as detailed in the Purchase Agreement, subject to certain
closing adjustments. In April 1997, the Federal Communications Commission
approved the transfer of the Station's broadcasting license to Evergreen of
Chicago. The sale of the Station is expected to close in the second quarter of
1997. On April 10, 1997, Evergreen of Chicago announced that it had entered into
an agreement with Bonneville International Corp. (Bonneville) to sell the assets
of the Station to Bonneville.
F-96
<PAGE> 244
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Secret Communications Limited Partnership:
We have audited the accompanying combined balance sheet of WJLB/WMXD,
DETROIT, as further described in Note 1, as of December 31, 1996, and the
related combined statements of operations and cash flows for the year then
ended. These financial statements are the responsibility of the Station'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 accompanying combined financial statements referred to
above present fairly, in all material respects, the financial position of
WJLB/WMXD, DETROIT 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.
Arthur Andersen LLP
Chicago, Illinois
May 8, 1997
F-97
<PAGE> 245
WJLB/WMXD, DETROIT
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1996, AND MARCH 31, 1997 (UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
UNAUDITED
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............. $ 1,194 $ 1,212
Accounts receivable (net of allowance
for doubtful accounts of $96,119).. 589,346 419,688
Trade receivables..................... 18,394 18,394
Prepaid expenses and other assets..... 3,939 3,539
----------- -----------
Total current assets.......... 612,873 442,833
----------- -----------
PROPERTY AND EQUIPMENT, net (note 3).... 1,020,324 950,086
INTANGIBLE ASSETS, net (note 4)......... 40,812,180 40,276,029
----------- -----------
TOTAL ASSETS.................. $42,445,377 $41,668,948
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable and accrued
expenses........................... $ 892,756 $ 1,320,212
Trade payables........................ 1,875 1,875
Interest payable...................... 72,732 19,652
Current maturities of long-term
debt............................... 1,252,950 1,494,617
----------- -----------
Total current liabilities..... 2,220,313 2,836,356
----------- -----------
LONG-TERM DEBT, less current maturities
(note 6).............................. 18,527,663 18,285,996
COMMITMENTS AND CONTINGENCIES (note 7)
PARTNERS' CAPITAL AND STATION EQUITY
Balance, beginning of period.......... 26,766,919 21,697,401
Net amounts transferred to central
office............................. (13,398,406) (3,296,193)
Contributed capital................... 1,526,531 2,453,168
Net income for the period............. 6,802,357 (307,780)
----------- -----------
Balance, end of period................ 21,697,401 20,546,596
----------- -----------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL.......... $42,445,377 $41,668,948
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-98
<PAGE> 246
WJLB/WMXD, DETROIT
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
AND FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
DECEMBER 31, ----------------------------
1996 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES
Advertising revenues.................. $15,408,285 $4,500,863 $ --
LMA and other income.................. 4,000,000 -- 2,421,000
----------- ---------- ----------
Gross income.......................... 19,408,285 4,500,863 2,421,000
Less: agency commissions.............. 1,880,637 523,792 --
----------- ---------- ----------
Net revenues.................. 17,527,648 3,977,071 2,421,000
----------- ---------- ----------
OPERATING EXPENSES:
Station operating expenses excluding
depreciation and amortization...... 5,720,605 2,026,514 254,278
Depreciation and amortization......... 2,414,614 600,888 606,388
Central office general and
administrative (note 8)............ 1,004,379 145,558 535,522
----------- ---------- ----------
Operating expenses............ 9,139,598 2,772,960 1,396,188
----------- ---------- ----------
OPERATING INCOME........................ 8,388,050 1,204,111 1,024,812
NONOPERATING EXPENSES:
Interest expense (note 6)............. 1,405,693 1,401,785 1,312,592
----------- ---------- ----------
Non operating expenses........ 1,405,693 1,401,785 1,312,592
----------- ---------- ----------
Income before taxes..................... 6,982,357 (197,674) (287,780)
Provision for state income taxes (note
2).................................... 180,000 41,400 20,000
----------- ---------- ----------
Net income.................... $ 6,802,357 ($ 239,074) ($ 307,780)
=========== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-99
<PAGE> 247
WJLB/WMXD, DETROIT
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
DECEMBER 31, -----------------------
1996 1996 1997
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................... $ 6,802,357 ($ 239,074) ($ 307,780)
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization...... 2,414,614 600,888 606,388
Loss on sale of equipment.......... 1,800 -- --
Changes in assets and liabilities:
Decrease in receivables, net..... 3,883,442 1,164,150 169,659
Decrease (increase) in prepaid
expenses...................... 25,952 (50,134) 400
(Decrease) increase in payables
and accrued expenses.......... (902,306) (431,298) 427,456
Increase (decrease) in interest
payable....................... 21,984 37,092 (53,080)
----------- ---------- ----------
Net cash provided by operating
activities.................. 12,247,843 1,081,624 843,043
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................. (116,092) (12,715) --
----------- ---------- ----------
Net cash (used in) investing
activities.................. (116,092) (12,715) --
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in amounts transferred to
central office..................... (13,398,406) (2,429,287) (3,296,193)
Net (payments) of long-term debt...... (261,417) (261,417) --
Capital contributions................. 1,526,531 1,813,070 2,453,168
----------- ---------- ----------
Net cash (used in) financing
activities.................. (12,133,292) (877,634) (843,025)
----------- ---------- ----------
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS........................... (1,541) 191,275 18
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 2,735 2,737 1,194
----------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 1,194 $ 194,012 $ 1,212
=========== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-100
<PAGE> 248
WJLB/WMXD, DETROIT
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) BUSINESS AND BASIS OF PRESENTATION:
Secret Communications Limited Partnership ("Secret") owns WJLB-FM and
WMXD-FM (the "Stations"). The Stations are licensed to and serve Detroit,
Michigan. The accompanying combined financial statements include the accounts of
the Stations after eliminating all significant intercompany accounts and
transactions.
Secret was formed in 1994 and on August 1, 1994, the general partners of
Secret contributed substantially all of the assets and debt of several radio
stations to Secret. The Stations were among those included in this initial
contribution.
As further described in Note 5, Secret entered into an agreement to sell
substantially all of the assets of the Stations to Evergreen Media Corporation
of Los Angeles ("Evergreen").
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Cash Equivalents
Cash equivalents include overnight repurchase agreements backed by United
States securities.
(b) Trade Agreements
The Stations have entered into trade agreements which provide for the
exchange of advertising time for merchandise or services and are recorded at the
estimated fair market value of the goods or services to be received. Trade
receivables and trade payables represent the outstanding obligations of the
parties to the trade agreements as of the end of the year. Trade revenues are
recognized as the advertisements are broadcast. Trade expenses are recognized as
the services or merchandise is used.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(d) Intangible Assets
Intangible assets are recorded at their appraised values and are amortized
using the straight-line method over estimated periods of benefit up to 40 years.
Should events or circumstances occur subsequent to the acquisition of a station
which bring into question the realizable value or impairment of the related
goodwill and intangibles, Secret will evaluate the remaining useful life and
balance of intangibles and make appropriate adjustments. Secret's principal
considerations in determining impairment include the strategic benefit to Secret
of the particular station and the current and expected future operating income
and cash flow levels of that particular station.
(e) Revenue Recognition
Advertising revenues are recognized as advertisements are broadcast.
(g) Income Taxes
The accompanying combined financial statements do not reflect provisions
for federal income taxes which are reported by the partners of Secret.
F-101
<PAGE> 249
WJLB/WMXD, DETROIT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(h) Statement of Cash Flows
Cash of $1,383,709 was paid for interest during the year ended December 31,
1996. Cash of $184,278 was paid for state income taxes during the year ended
December 31, 1996.
(i) Use of Estimates
The preparation of these combined 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 periods. Actual results could differ from those estimates.
(3) PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
1996 LIVES
----------- ----------------
<S> <C> <C>
Land.................................... $ 25,000 --
Buildings and leasehold improvements.... 526,618 5 -- 31.5 years
Broadcasting equipment.................. 554,611 5 -- 15 years
Furniture and fixtures.................. 189,678 5 years
Business equipment...................... 290,665 5 years
Vehicles................................ 50,507 5 years
-----------
1,637,079
Less: Accumulated depreciation.......... (616,755)
-----------
$ 1,020,324
===========
</TABLE>
(4) INTANGIBLE ASSETS:
Intangible assets consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
1996 LIVES
----------- ----------------
<S> <C> <C>
FCC Licenses............................ $42,195,591 25 years
Advertiser relationships................ 3,069,763 7 years
Goodwill................................ 729,704 40 years
-----------
45,995,058
Less: Accumulated amortization.......... (5,182,878)
-----------
$40,812,180
===========
</TABLE>
(5) SALE OF STATIONS:
On August 12, 1996, Secret entered into a definitive agreement to sell
substantially all of the assets of the Stations to Evergreen. The agreement
closed on April 1, 1997. The assets sold included fixed assets and intangible
assets. In addition, Secret entered into a noncompete agreement covering the
Detroit market for three years. In consideration for the assets of the Stations
and the noncompete agreement, Evergreen paid Secret $168,000,000 on the closing
date. While this transaction was pending, Secret entered into a time brokerage
agreement with respect to the Stations which allowed Evergreen to purchase
substantially all of the broadcast time on the Stations. The agreement commenced
September 1, 1996 and expired on April 1, 1997. The revenue related to this
agreement is reflected in the combined statement of operations as LMA Income.
F-102
<PAGE> 250
WJLB/WMXD, DETROIT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Stations agreed to pay bonuses to certain executives and key employees
if the individuals were employed by the Stations upon the close of the sale.
These bonuses were accrued ratably from the commitment date, October 1, 1996, to
the close date, April 1, 1997. At December 31, 1996, $400,500 is accrued for
these stay bonuses, with the related expense reflected in central office general
and administrative expenses. On April 1, 1997, the Stations paid $801,000 for
stay bonuses.
(6) LONG-TERM DEBT:
Long-term debt consisted of a senior reducing revolving credit facility at
December 31, 1996, which was used to recapitalize debt and to fund working
capital for Secret at August 1, 1994. The debt was allocated to the Stations
based on the ratio of the Stations' fair market value as compared to the total
fair market value of Secret at August 1, 1994. Additional borrowings and
repayments were allocated based on the same ratio if these borrowings and
repayments were related to the general operations of all the Secret stations.
Interest expense for the year ended December 31, 1996, was allocated to the
Stations based on the same ratio.
Borrowings under the revolving loans bear interest, at the option of Secret
at LIBOR or prime, plus a margin. The margin over LIBOR or prime varies from
time to time depending on Secret's ratio of debt to cash flow as defined in the
agreement. The interest rate on the reducing revolver at December 31, 1996,
ranged from 7.00% to 8.50%, with a weighted interest rate of 7.10%.
Amounts outstanding under the reducing revolver are payable in quarterly
installments beginning as early as June 30, 1995, and ending December 31, 2001.
The amounts payable depend on the amounts then outstanding and correspondingly
reduce the amount available to be borrowed. Based on debt outstanding, there
were no amortization payments required to be made in 1996. Amounts outstanding
under the revolving credit/term loan convert on June 30, 1997, to a term loan
payable in quarterly installments ending December 31, 2001. In addition to
scheduled amortization, Secret is required to repay revolving credit borrowings
each calendar year of up to 50% of the excess cash flow for that calendar year
as defined in the agreement, commencing with the year ending December 31, 1995.
Based on financial ratios at December 31, 1996, there is no excess cash flow
repayment due in 1997.
The senior credit facility limits indebtedness, capital expenditures, and
payment of distributions and requires certain financial ratios to be maintained
among other restrictions. At December 31, 1996, Secret was in compliance with
all provisions of its credit agreement. The senior credit facility is secured by
substantially all of the assets of Secret.
The future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1997.................................... $ 1,252,950
1998.................................... 3,532,252
1999.................................... 4,198,715
2000.................................... 4,865,178
2001.................................... 5,931,518
-----------
$19,780,613
===========
</TABLE>
The fair value of the debt is equal to its carrying value.
On April 1, 1997, Secret repaid all amounts outstanding under its senior
credit facility.
F-103
<PAGE> 251
WJLB/WMXD, DETROIT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) COMMITMENTS AND CONTINGENCIES:
The Stations have entered into operating leases with initial or remaining
non-cancelable terms in excess of one year. The future minimum rental payments
required for all such leases as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ----------------------------------------
<S> <C>
1997.................................. $221,372
1998.................................. 221,372
1999.................................. 75,237
2000.................................. 46,009
2001.................................. 46,009
Future years.......................... 251,505
--------
Total minimum payments required......... $861,504
========
</TABLE>
Rent expense was $252,013 for the year ended December 31, 1996.
(8) RELATED PARTY TRANSACTIONS:
Central office general and administrative expenses represent an allocation
of charges incurred by Secret's headquarters for various administrative and
management services, including, but not limited to, salaries, bonuses,
management fees and service fees. The charges are allocated to the Stations
based on the total number of markets in which Secret owns stations. Amounts
charged to the Stations do not necessarily represent the amounts that would have
been incurred had the Stations operated as an unaffiliated entity. However,
management believes that these charges result in a reasonable level of general
and administrative expenses for the Stations.
Included in the central office general and administrative expenses are fees
charged to Secret by the two general partners for management and consulting
services provided to Secret. In addition, Lane Industries, Inc., a related party
to the administrative general partner of Secret, provides certain tax, legal,
financial, risk management and employee benefits services for an annual fee. The
amount allocated to the Stations for all such services provided by the general
partners amounted to $180,405 for the year ended December 31, 1996.
As described in Note 6, a portion of Secret's senior debt and interest
expense has been allocated to the Stations as of December 31, 1996, and for the
year then ended.
The Partners' Capital and Station Equity section of the Balance Sheet
consists of intercompany accounts, capital contributed by the partners and
retained earnings. These accounts reflect the original acquisition of the
Stations and the activity between the Stations and Secret, such as cash
transfers and expense allocations.
(9) DEFERRED SAVINGS PLAN:
Secret maintains a 401(k) savings plan in which the employees of the
Stations participate. Employees must have reached age 21 and have completed one
year of consecutive service to participate in the plan. Employees may contribute
up to 15% of their salaries in accordance with IRS limitations. Secret matches
employee contributions at a rate of 75% (up to 6%) of the employee's salary.
Secret's contribution to the plan related to the Stations was $70,694 for the
year ended December 31, 1996.
(10) NOTE TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
The accompanying unaudited interim combined financial statements have been
prepared in accordance with generally accepted accounting practices for interim
periods. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
F-104
<PAGE> 252
WJLB/WMXD, DETROIT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
statements. It is suggested that these interim combined financial statements be
read in conjunction with the financial statements and notes thereto.
In the opinion of management, the unaudited interim combined financial
statements reflect all adjustments consisting of normal recurring adjustments
necessary to present fairly the combined financial position of the Stations as
of March 31, 1997, and the interim combined results of operations and cash flows
for all periods presented.
F-105
<PAGE> 253
INDEPENDENT AUDITORS' REPORT
---------------------------------------------
The Board of Directors
Chancellor Broadcasting Company:
We have audited the accompanying combined balance sheets of KYSR Inc. and
KIBB Inc. as of December 31, 1995 and 1996, and the related combined statements
of operations and cash flows for each of the years in the three-year period
ended December 31, 1996. These combined financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of KYSR Inc.
and KIBB Inc. as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 14, 1997
F-106
<PAGE> 254
KYSR INC. AND KIBB INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Accounts receivable, less allowance for doubtful
accounts of $218 in 1995 and $246 in 1996 and $130 in
1997................................................. $ 6,253 $ 7,283 $ 5,899
Prepaid expenses and other.............................. 412 609 1,549
Deferred income taxes (note 5).......................... 89 101 101
-------- -------- --------
Total current assets............................ 6,754 7,993 7,549
Property and equipment, net (note 3)...................... 4,172 4,082 4,104
Intangible assets, net (note 4)........................... 116,946 113,644 112,817
Other assets, net......................................... 22 22 22
-------- -------- --------
$127,894 $125,741 $124,492
======== ======== ========
LIABILITIES AND EQUITY
Current liabilities -- accounts payable and accrued
expenses................................................ $ 3,883 $ 3,624 $ 3,080
Deferred income taxes (note 5)............................ 9,683 11,027 11,027
Equity (note 8)........................................... 114,328 111,090 110,385
Commitments and contingencies (note 9)....................
-------- -------- --------
$127,894 $125,741 $124,492
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-107
<PAGE> 255
KYSR INC. AND KIBB INC.
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ---------------
1994 1995 1996 1996 1997
------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues.......................... $28,590 $30,571 $33,769 $7,039 $7,527
Less agency commissions and national
rep fees........................... 4,490 4,882 5,462 1,106 1,231
------- ------- ------- ------ ------
Net revenues.................. 24,100 25,689 28,307 5,933 6,296
------- ------- ------- ------ ------
Operating expenses:
Station operating expenses, excluding
depreciation and amortization...... 13,407 12,901 13,378 3,034 3,288
Depreciation and amortization......... 3,640 3,661 3,627 916 912
Corporate general and
administrative..................... 892 1,094 844 271 151
------- ------- ------- ------ ------
Operating expenses................. 17,939 17,656 17,849 4,221 4,351
------- ------- ------- ------ ------
Operating income................... 6,161 8,033 10,458 1,712 1,945
Interest expense (note 7)............... 6,374 6,374 6,374 1,594 1,594
------- ------- ------- ------ ------
Earnings (loss) before income taxes... (213) 1,659 4,084 118 351
Income tax expense (benefit) (note 5)... (70) 699 1,694 49 148
------- ------- ------- ------ ------
Net earnings (loss)........... $ (143) $ 960 $ 2,390 $ 69 $ 203
======= ======= ======= ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-108
<PAGE> 256
KYSR INC. AND KIBB INC.
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------ ---------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows provided by operating activities:
Net earnings (loss)............................. $ (143) $ 960 $2,390 $ 69 $ 203
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation................................. 338 359 325 91 85
Amortization of intangibles.................. 3,302 3,302 3,302 825 827
Deferred tax expense......................... 1,597 1,412 1,332 -- --
Changes in certain assets and liabilities:
Accounts receivable, net................... (1,452) (120) (1,030) 1,204 1,384
Prepaid expenses and other current
assets.................................. 372 (149) (197) (633) (940)
Accounts payable and accrued expenses...... (345) 265 (259) (583) (544)
------ ------ ------ ------ ------
Net cash provided by operating
activities............................ 3,669 6,029 5,863 973 1,015
------ ------ ------ ------ ------
Cash used by investing activities -- capital
expenditures.................................... (280) (223) (235) (43) (107)
------ ------ ------ ------ ------
Cash flows used by financing
activities -- distributions to Parent........... (3,389) (5,806) (5,628) (930) (908)
------ ------ ------ ------ ------
Increase (decrease) in cash....................... -- -- -- -- --
Cash at beginning of period....................... -- -- -- -- --
------ ------ ------ ------ ------
Cash at end of period............................. $ -- $ -- $ -- $ -- $ --
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-109
<PAGE> 257
KYSR INC. AND KIBB INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The accompanying combined financial statements include the accounts of KYSR
Inc. and KIBB Inc. (collectively, the "Company"). The Company owns and operates
two commercial radio stations in the Los Angeles market, KYSR-FM and KIBB-FM,
and is wholly owned by Viacom International Inc. ("Viacom" or "Parent"), a
wholly owned subsidiary of Viacom, Inc. Significant intercompany balances and
transactions have been eliminated in combination.
On February 16, 1997, Viacom entered into a stock purchase agreement to
sell all the issued and outstanding shares of capital stock of WAXQ Inc. and
Riverside Broadcasting Co., Inc. in the New York City market, KYSR Inc. and KIBB
Inc. in the Los Angeles market, Viacom Broadcasting East Inc. and WMZQ Inc. in
the Washington, DC market, WLIT Inc. in the Chicago market and WDRQ Inc. in the
Detroit market (collectively, the "Viacom Radio Properties") to Evergreen Media
Corporation of Los Angeles ("Evergreen"), for $1.075 billion in cash ("Proposed
Transaction"). The Proposed Transaction is expected to close after the
expiration or termination of the applicable waiting periods under the HRS Act
and approval by the Federal Communications Commission ("FCC"). Contemporaneous
with this transaction, Evergreen entered into a joint purchase agreement with
Chancellor Broadcasting Company ("Chancellor") under which Chancellor agreed to
acquire the Chicago, Detroit and Los Angeles Viacom Radio Properties referred to
above for $480 million from Evergreen or from Viacom directly.
The accompanying combined financial statements reflect the carve-out
historical results of operations and financial position of KYSR Inc. and KIBB
Inc. These financial statements are not necessarily indicative of the results
that would have occurred if the Company had been a separate stand-alone entity
during the period presented.
The combined financial statements do not include Viacom's corporate assets
or liabilities not specifically identifiable to the Company. Corporate overhead
allocations have been included in the accompanying combined statements of
earnings in corporate general and administrative expense and station operating
expenses.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(b) Intangible Assets
Intangible assets consist primarily of broadcast licenses. The Company
amortizes such intangible assets using the straight-line method over 40 years.
The Company continually evaluates the propriety of the carrying amount of
intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists of the projection of
undiscounted operating income before depreciation, amortization, nonrecurring
charges and interest over the remaining amortization periods of the related
intangible assets. At this time, the Company believes that no significant
impairment of intangible assets has occurred and that no reduction of the
estimated useful lives is warranted.
F-110
<PAGE> 258
KYSR INC. AND KIBB INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Barter Transactions
The Company trades commercial air time 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 to be
received. Barter revenue is recorded and the liability relieved when commercials
are broadcast and barter expense is recorded and the asset relieved when goods
or services are received or used.
(d) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable earnings. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount more likely than not to be realized. Income
tax expense is the total of tax payable for the period and the change during the
period in deferred tax assets and liabilities.
(f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(g) Fair Value
The carrying amount of accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments.
(h) Disclosure of Certain Significant Risks and Uncertainties
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.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers in the Company's
customer base. The Company performs ongoing credit evaluations of its customers
and believes that adequate allowances for any uncollectible trade receivables
are maintained. No one advertiser accounted for more than 10% of net revenues in
1994, 1995, or 1996. Certain
F-111
<PAGE> 259
KYSR INC. AND KIBB INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
advertisers purchase the advertising of the stations through a third party
buying service. Approximately 22%, 20% and 19% of total revenue was derived
through the use of this service in 1994, 1995 and 1996, respectively.
(i) Unaudited Interim Financial Information
In the opinion of management, the unaudited interim combined financial
statements as of and for the three months ended March 31, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring items, which are
necessary for a fair presentation of the results for the interim periods
presented. The results for the interim periods ended March 31, 1996 and 1997 are
not necessarily indicative of results to be expected for any other interim
period or for the full year.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ------ ------
<S> <C> <C> <C>
Land.................................................. $2,875 $2,875
Building.............................................. 40 years 474 474
Broadcast facilities.................................. 8-20 years 1,501 1,572
Office equipment and other............................ 5-8 years 725 902
Construction in progress.............................. 36 24
------ ------
5,611 5,847
Accumulated depreciation.............................. 1,439 1,765
------ ------
$4,172 $4,082
====== ======
</TABLE>
(4) INTANGIBLE ASSETS
Intangible assets at December 31, 1995 and 1996 consist of broadcast
licenses which are being amortized over forty years and are presented net of
accumulated amortization of $15,148 and $18,450, respectively.
(5) INCOME TAXES
The Company's results of operations are included in the combined U.S.
federal and certain combined and separate state income tax returns of Viacom
International Inc.
The tax provisions and deferred tax liabilities presented have been
determined as if the Company were a stand-alone business filing separate tax
returns. Current tax liabilities are recorded through the equity account with
Viacom.
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
1994 1995 1996
------- ----- ------
<S> <C> <C> <C>
Current:
Federal................................................ $(1,289) $(551) $ 278
State and local........................................ (378) (162) 84
Deferred federal......................................... 1,597 1,412 1,332
------- ----- ------
$ (70) $ 699 $1,694
======= ===== ======
</TABLE>
F-112
<PAGE> 260
KYSR INC. AND KIBB INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the U.S. Federal statutory tax rate to the Company's
effective tax rate on earnings (loss) before income taxes is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----- ---- ----
<S> <C> <C> <C>
Statutory U.S. tax rate..................................... (35.0)% 35.0% 35.0%
State and local taxes, net of federal tax benefit........... 6.2 6.2 6.1
Other, net.................................................. (8.3) 0.9 0.4
----- ---- ----
Effective tax rate.......................................... (32.9)% 42.1% 41.5%
===== ==== ====
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes. These temporary differences are primarily the result
of fixed asset basis differences and bad debt expense. Deferred tax assets and
liabilities relating to state income taxes are not material.
(6) DEBT AND INTEREST COST
Viacom has not allocated any portion of its debt or related interest cost
to the Company, and no portion of Viacom's debt is specifically related to the
operations of the Company.
(7) RELATED PARTY TRANSACTIONS
Intercompany balances between the Company and Viacom resulting from normal
trade activity are reflected in Equity in the accompanying combined financial
statements (see note 8).
On January 25, 1990, KYSR, Inc., formerly KXEZ, Inc., issued an
intercompany demand note to Viacom in the amount of $66,400. The note bears
interest at 9.6% per year payable on the last day of each calendar year. The
principal and final interest payment are payable on January 25, 2000. However,
immediately prior to closing of the Proposed Transaction, all debts between the
Company and Viacom will be canceled. As such, the promissory note issued to
Viacom is reflected as an increase to equity and included in intercompany
activity in the amount of $66,400 at December 31, 1995 and 1996 (see note 8).
Viacom provides services for the Company in management, accounting and
financial reporting, human resources, information systems, legal, taxes and
other corporate services. The allocation of these expenses, which is generally
based on revenue dollars, is reflected in the accompanying combined financial
statements as corporate general and administrative expense. Management believes
that the method of allocation of overhead is reasonable.
Viacom has a noncontributory pension plan covering substantially all of its
employees, including the employees of the Company. Costs related to this plan
are allocated to the Company based on payroll dollars and are included in
station operating expenses. The Company recognized expense related to this plan
in the amounts of $70, $56 and $191 for 1994, 1995 and 1996, respectively. The
assets and the related benefit obligation of the plan will not be transferred to
the Company upon consummation of the Proposed Transaction, therefore, such
assets and obligations are not included in the notes to the Company's combined
financial statements.
Viacom utilizes a centralized cash management system. As a result, the
Company carries minimal cash. Disbursements are funded by the Parent upon demand
and cash receipts are transferred to the Parent daily.
The Company, from time to time, enters into transactions with companies
owned by or affiliated with Viacom. Generally, services rendered from such
related parties are charged to the Company at amounts which would be incurred in
transactions between unrelated entities.
F-113
<PAGE> 261
KYSR INC. AND KIBB INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(8) EQUITY
Equity represents Viacom's ownership interest in the recorded net assets of
the Company. All cash transactions and intercompany transactions flow through
the equity account. A summary of the activity is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of period..................... $122,706 $119,174 $114,328
Net earnings (loss)................................ (143) 960 2,390
Net intercompany activity.......................... (3,389) (5,806) (5,628)
-------- -------- --------
Balance at end of period........................... $119,174 $114,328 $111,090
======== ======== ========
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from one to
ten years and require the Company to pay all executory costs such as maintenance
and insurance. Rental expense for operating leases (excluding those with lease
terms of one month or less that were not renewed) was approximately $377, $365
and $405 during 1994, 1995 and 1996, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C> <C>
1997............................................................... $ 365
1998............................................................... 366
1999............................................................... 312
2000............................................................... 19
Thereafter......................................................... --
------
$1,062
======
</TABLE>
F-114
<PAGE> 262
INDEPENDENT AUDITORS' REPORT
---------------------------------------------
The Board of Directors
Chancellor Broadcasting Company:
We have audited the accompanying balance sheets of WLIT Inc. as of December
31, 1995 and 1996, and the related statements of earnings and cash flows for
each of the years in the three-year period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WLIT Inc. as of December 31,
1995 and 1996, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 14, 1997
F-115
<PAGE> 263
WLIT INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Accounts receivable, less allowance for doubtful accounts
of $79 in 1995 and $87 in 1996 and $99 in 1997......... $ 3,110 $ 3,627 $ 3,007
Prepaid expenses and other current assets................. 592 490 957
Deferred income taxes (note 5)............................ 37 44 33
------- ------- -------
Total current assets.............................. 3,739 4,161 3,997
Property and equipment, net (note 3)........................ 461 457 432
Intangible assets, net (note 4)............................. 16,958 16,415 16,280
------- ------- -------
$21,158 $21,033 $20,709
======= ======= =======
LIABILITIES AND EQUITY
Current liabilities -- accounts payable and accrued
expenses.................................................. $ 1,442 $ 1,195 $ 1,105
Deferred income taxes (note 5).............................. 58 53 53
Equity (note 8)............................................. 19,658 19,785 19,551
Commitment and contingencies (note 9).......................
------- ------- -------
$21,158 $21,033 $20,709
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-116
<PAGE> 264
WLIT INC.
STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ---------------
1994 1995 1996 1996 1997
------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues................................. $14,367 $16,720 $18,294 $3,409 $4,340
Less agency commissions and national rep
fees...................................... 2,523 2,848 3,071 555 729
------- ------- ------- ------ ------
Net revenues......................... 11,844 13,872 15,223 2,854 3,611
------- ------- ------- ------ ------
Operating expenses:
Station operating expenses excluding
depreciation and amortization............. 6,555 6,977 7,508 1,756 1,823
Depreciation and amortization................ 655 653 659 162 166
Corporate general and administrative......... 478 630 479 137 88
------- ------- ------- ------ ------
Operating expenses........................ 7,688 8,260 8,646 2,055 2,077
------- ------- ------- ------ ------
Earnings before income taxes.............. 4,156 5,612 6,577 799 1,534
Income tax expense (note 5).................... 1,804 2,359 2,728 331 640
------- ------- ------- ------ ------
Net earnings......................... $ 2,352 $ 3,253 $ 3,849 468 894
======= ======= ======= ====== ======
</TABLE>
See accompanying notes to financial statements.
F-117
<PAGE> 265
WLIT INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- ------ --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows provided by operating
activities:
Net earnings.......................... $ 2,352 $ 3,253 $ 3,849 $ 468 $ 894
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation....................... 114 114 116 27 31
Amortization of intangibles........ 541 539 543 135 135
Deferred income taxes.............. (13) 5 (8) -- 11
Changes in certain assets and
liabilities:
Accounts receivable, net......... (73) (460) (517) 662 620
Prepaid expenses and other
current assets................ (101) (181) 98 (669) (467)
Accounts payable and accrued
expenses...................... (384) 173 (247) (380) (90)
------- ------- ------- ----- -------
Net cash provided by operating
activities.................. 2,436 3,443 3,834 243 1,134
------- ------- ------- ----- -------
Cash flows used by investing
activities -- capital expenditures.... (180) (110) (112) (3) (6)
------- ------- ------- ----- -------
Cash flows used by financing
activities -- distributions to
Parent................................ (2,256) (3,333) (3,722) (240) (1,128)
------- ------- ------- ----- -------
Increase (decrease) in cash............. -- -- -- -- --
Cash at beginning of period............. -- -- -- -- --
------- ------- ------- ----- -------
Cash at end of period................... $ -- $ -- $ -- $ -- $ --
======= ======= ======= ===== =======
</TABLE>
See accompanying notes to financial statements.
F-118
<PAGE> 266
WLIT INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The accompanying financial statements include the accounts of WLIT Inc.
(the "Company"). The Company owns and operates a commercial radio station in the
Chicago market, WLIT-FM, and is wholly owned by Viacom International Inc.
("Viacom" or "Parent"), a wholly owned subsidiary of Viacom, Inc.
On February 16, 1997, Viacom International Inc. entered into a stock
purchase agreement to sell all the issued and outstanding shares of capital
stock of WAXQ Inc. and Riverside Broadcasting Co., Inc. in the New York City
market, KYSR Inc. and KIBB Inc. in the Los Angeles market, Viacom Broadcasting
East Inc. and WMZQ Inc. in the Washington, DC market, WLIT Inc. in the Chicago
market and WDRQ Inc. in the Detroit market (collectively, the "Viacom Radio
Properties") to Evergreen Media Corporation ("Evergreen") for $1.075 billion in
cash ("Proposed Transaction"). The Proposed Transaction is expected to close
after the expiration or termination of the applicable waiting periods under the
HSR Act and approval by the Federal Communications Commission ("FCC").
Contemporaneous with this transaction, Evergreen entered into a joint purchase
agreement with Chancellor Broadcasting Company ("Chancellor"), under which
Chancellor agreed to acquire the Chicago, Detroit and Los Angeles Viacom Radio
Properties referred to above for $480 million from Evergreen or from Viacom
directly.
The accompanying financial statements reflect the carve-out historical
results of operations and financial position of WLIT Inc. These financial
statements are not necessarily indicative of the results that would have
occurred if the Company had been a separate stand-alone entity during the
periods presented.
The financial statements do not include Viacom's corporate assets or
liabilities not specifically identifiable to the Company. Corporate overhead
allocations have been included in the accompanying statements of earnings in
corporate general and administrative expense and station operating expenses.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(b) Intangible Assets
Intangible assets consist primarily of broadcast licenses. The Company
amortizes such intangible assets using the straight-line method over 40 years.
The Company continually evaluates the propriety of the carrying amount of
intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists of the projection of
undiscounted operating income before depreciation, amortization, nonrecurring
charges and interest over the remaining amortization periods of the related
intangible assets. At this time, the Company believes that no significant
impairment of intangible assets has occurred and that no reduction of the
estimated useful lives is warranted.
(c) Barter Transactions
The Company trades commercial air time 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 to be
received. Barter revenue is recorded and the liability relieved when commercials
are broadcast and barter expense is recorded and the asset relieved when goods
or services are received or used.
F-119
<PAGE> 267
WLIT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(d) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable earnings. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount more likely than not to be realized. Income
tax expense is the total of tax payable for the period and the change during the
period in deferred tax assets and liabilities.
(f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(g) Fair Value
The carrying amount of accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments.
(h) Disclosure of Certain Significant Risks and Uncertainties
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.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers in the Company's
customer base. The Company performs ongoing credit evaluations of its customers
and believes that adequate allowances for any uncollectible trade receivables
are maintained. No one customer accounted for more than 10% of net revenues in
1994, 1995, or 1996.
(i) Unaudited Interim Financial Information
In the opinion of management, the unaudited interim combined financial
statements as of and for the three months ended March 31, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring items, which are
necessary for a fair presentation of the results for the interim periods
presented. The results for the interim periods ended March 31, 1996 and 1997 are
not necessarily indicative of results to be expected for any other interim
period or for the full year.
F-120
<PAGE> 268
WLIT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ------ ------
<S> <C> <C> <C>
Broadcast facilities.................................. 8-20 years $1,116 $1,141
Office equipment and other............................ 5-8 years 791 868
Construction in progress.............................. 13 13
------ ------
1,920 2,022
Accumulated depreciation.............................. 1,459 1,565
------ ------
$ 461 $ 457
====== ======
</TABLE>
(4) INTANGIBLE ASSETS
Intangible assets at December 31, 1995 and 1996 consist of broadcast
licenses which are being amortized over forty years and are presented net of
accumulated amortization of $5,585 and $6,128, respectively.
(5) INCOME TAXES
The Company's results of operations are included in the U.S. federal and
certain combined and separate state income tax returns of Viacom International
Inc.
The tax provisions and deferred tax liabilities presented have been
determined as if the Company were a stand-alone business filing separate tax
returns. Current tax liabilities are recorded through the equity account with
Viacom.
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current:
Federal................................................ $1,588 $2,058 $2,391
State and local........................................ 229 296 345
Deferred federal......................................... (13) 5 (8)
------ ------ ------
$1,804 $2,359 $2,728
====== ====== ======
</TABLE>
A reconciliation of the U.S. Federal Statutory tax rate to the Company's
effective tax rate on earnings before income taxes is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. tax rate..................................... 35.0% 35.0% 35.0%
Amortization of intangibles................................. 4.7 3.4 2.9
State and local taxes, net of federal tax benefit........... 3.6 3.4 3.4
Other, net.................................................. 0.2 0.2 0.2
---- ---- ----
Effective tax rate................................ 43.5% 42.0% 41.5%
==== ==== ====
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes. These temporary differences are primarily the result
of fixed asset basis differences and bad debt expense. Deferred tax assets and
liabilities relating to state income taxes are not material.
F-121
<PAGE> 269
WLIT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) DEBT AND INTEREST COST
Viacom has not allocated any portion of its debt or related interest cost
to the Company, and no portion of Viacom's debt is specifically related to the
operations of the Company. Accordingly, the Company's financial statements
include no charges for interest.
(7) RELATED PARTY TRANSACTIONS
Intercompany balances between the Company and Viacom resulting from normal
trade activity are reflected in Equity in the accompanying financial statements
(see note 8).
Viacom provides services for the Company in management, accounting and
financial reporting, human resources, information systems, legal, tax and other
corporate services. The allocation of these expenses, which is generally based
on revenue dollars, is reflected in the accompanying financial statements as
corporate general and administrative expense. Management believes that the
method of allocation of corporate overhead is reasonable.
Viacom has a noncontributory pension plan covering substantially all of its
employees, including the employees of the Company. Costs related to this plan
are allocated to the Company based on payroll dollars. The Company recognized
expense related to this plan in the amounts of $67, $46 and $126 for 1994, 1995
and 1996, respectively. The assets and the related benefit obligation of the
plan will not be transferred to the Company upon consummation of the Proposed
Transaction, therefore, such assets and obligations are not included in the
notes to the Company's financial statements.
Viacom utilizes a centralized cash management system. As a result, the
Company carries minimal cash. Disbursements are funded by the Parent upon demand
and cash receipts are transferred to the Parent daily.
The Company, from time to time, enters into transactions with companies
owned by or affiliated with Viacom. Generally, services received from such
related parties are charged to the Company at amounts which would be incurred in
transactions between unrelated entities.
(8) EQUITY
Equity represents Viacom's ownership interest in the recorded net assets of
the Company. All cash transactions and intercompany transactions flow through
the equity account. A summary of the activity is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of period........................ $19,642 $19,738 $19,658
Net earnings.......................................... 2,352 3,253 3,849
Net intercompany activity............................. (2,256) (3,333) (3,722)
------- ------- -------
Balance at end of period.............................. $19,738 $19,658 $19,785
======= ======= =======
</TABLE>
F-122
<PAGE> 270
WLIT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(9) COMMITMENTS AND CONTINGENCIES
The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from 1 to 10
years and require the Company to pay all executory costs such as maintenance and
insurance. Rental expense for operating leases (excluding those with lease terms
of one month or less that were not renewed) was approximately $319, $337 and
$327 during 1994, 1995 and 1996, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C> <C>
1997............................................................... $ 266
1998............................................................... 291
1999............................................................... 298
2000............................................................... 287
2001............................................................... 296
Thereafter......................................................... 103
------
$1,541
======
</TABLE>
F-123
<PAGE> 271
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Evergreen Media Corporation:
We have audited the accompanying balance sheets of WDRQ Inc. as of December
31, 1995 and 1996, and the related statements of earnings and cash flows for
each of the years in the three-year period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WDRQ Inc. as of December 31,
1995 and 1996, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
March 14, 1997, except for note 10,
which is as of April 14, 1997
F-124
<PAGE> 272
WDRQ INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1995 1996 1997
------- ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Accounts receivable, less allowance
for doubtful accounts of $82 in
1995, $72 in 1996 and $26 in
1997............................... $ 1,541 $ 809 $ 548
Prepaid expenses and other current
assets............................. 80 90 515
Deferred income taxes (note 5)........ 30 26 26
------- ------ ------
Total current assets.......... 1,651 925 1,089
Property and equipment, net (note 3).... 489 500 488
Intangible assets, net (note 4)......... 8,430 8,174 8,110
------- ------ ------
$10,570 $9,599 $9,687
======= ====== ======
LIABILITIES AND EQUITY
Current liabilities -- accounts payable
and accrued expenses.................. $ 766 $ 792 $ 743
Deferred income taxes (note 5).......... 98 80 80
Equity (note 8)......................... 9,706 8,727 8,864
Commitments and contingencies (note
9)....................................
------- ------ ------
$10,570 $9,599 $9,687
======= ====== ======
</TABLE>
See accompanying notes to financial statements.
F-125
<PAGE> 273
WDRQ INC.
STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
YEARS ENDED DECEMBER 31, ---------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues........................................ $7,461 $8,081 $6,743 $1,721 $1,016
Less agency commissions and national rep fees....... 1,227 1,273 1,055 261 112
------ ------ ------ ------ ------
Net revenues................................ 6,234 6,808 5,688 1,460 904
------ ------ ------ ------ ------
Operating expenses:
Station operating expenses excluding depreciation
and amortization................................. 4,362 4,412 4,530 1,015 886
Depreciation and amortization....................... 300 336 354 85 90
Corporate general and administrative................ 249 308 178 71 21
------ ------ ------ ------ ------
Operating expenses.......................... 4,911 5,056 5,062 1,171 997
------ ------ ------ ------ ------
Earnings (loss) before income taxes......... 1,323 1,752 626 289 (93)
Income tax expense (benefit) (note 5)................. 582 737 326 151 (9)
------ ------ ------ ------ ------
Net earnings (loss)......................... $ 741 $1,015 $ 300 $ 138 $ (84)
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-126
<PAGE> 274
WDRQ INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1994 1995 1996
----- ------- -------
<S> <C> <C> <C>
Cash flows provided by operating
activities:
Net earnings.......................... $ 741 $ 1,015 $ 300
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation....................... 44 80 98
Amortization of intangibles........ 256 256 256
Deferred income tax (benefit)
expense.......................... (4) 3 (14)
Changes in certain assets and
liabilities:
Accounts receivable, net......... (122) (140) 732
Prepaid expenses and other
current assets................ 1 9 (10)
Accounts payable and accrued
expenses...................... (217) 73 26
----- ------- -------
Net cash provided by operating
activities.................. 699 1,296 1,388
----- ------- -------
Cash flows used by investing
activities -- capital expenditures.... (38) (138) (109)
----- ------- -------
Cash flows provided by (used in)
financing activities -- contribution
by (distribution to) parent........... (661) (1,158) (1,279)
----- ------- -------
Increase (decrease) in cash............. -- -- --
Cash at beginning of period............. -- -- --
----- ------- -------
Cash at end of period................... $ -- $ -- $ --
===== ======= =======
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------
1996 1997
------- ------
(UNAUDITED)
<S> <C> <C>
Cash flows provided by operating
activities:
Net earnings.......................... $ 138 $ (84)
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation....................... 21 26
Amortization of intangibles........ 64 64
Deferred income tax (benefit)
expense.......................... -- --
Changes in certain assets and
liabilities:
Accounts receivable, net......... 492 261
Prepaid expenses and other
current assets................ (108) (425)
Accounts payable and accrued
expenses...................... (8) (49)
------ -----
Net cash provided by operating
activities.................. 599 (207)
------ -----
Cash flows used by investing
activities -- capital expenditures.... (35) (14)
------ -----
Cash flows provided by (used in)
financing activities -- contribution
by (distribution to) parent........... (564) 221
------ -----
Increase (decrease) in cash............. -- --
Cash at beginning of period............. -- --
------ -----
Cash at end of period................... $ -- $ --
====== =====
</TABLE>
See accompanying notes to financial statements.
F-127
<PAGE> 275
WDRQ INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The accompanying financial statements include the accounts of WDRQ Inc.
(the "Company"). The Company owns and operates a commercial radio station in
Detroit, WDRQ-FM, and is wholly owned by Viacom International Inc. ("Viacom" or
"Parent"), a wholly owned subsidiary of Viacom, Inc.
On February 16, 1997, Viacom entered into a stock purchase agreement to
sell all the issued and outstanding shares of capital stock of WAXQ Inc. and
Riverside Broadcasting Co., Inc. in the New York City market, KYSR Inc. and KIBB
Inc. in the Los Angeles market, Viacom Broadcasting East Inc. and WMZQ Inc. in
the Washington, DC market, WLIT Inc. in the Chicago market and WDRQ Inc. in the
Detroit market (collectively the "Viacom Radio Properties") to Evergreen Media
Corporation of Los Angeles ("Evergreen") for $1.075 billion in cash ("Proposed
Transaction"). The Proposed Transaction is expected to close after the
expiration or termination of the applicable waiting periods under the HSR Act
and approval by the Federal Communications Commission ("FCC"). Contemporaneous
with this transaction, Evergreen entered into a joint purchase agreement with
Chancellor Broadcasting Company ("Chancellor") under which Chancellor agreed to
acquire the Chicago, Detroit and Los Angeles Viacom Radio Properties referred to
above for $480.0 million from Evergreen or from Viacom directly.
The accompanying combined financial statements reflect the carve-out
historical results of operations and financial position of WDRQ Inc. These
financial statements are not necessarily indicative of the results that would
have occurred if the Company had been a separate stand-alone entity during the
periods presented.
The financial statements do not include Viacom's corporate assets or
liabilities not specifically identifiable to the Company. Corporate overhead
allocations have been included in the accompanying statements of earnings in
corporate general and administrative expense and station operating expenses.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(b) Intangible Assets
Intangible assets consist primarily of broadcast licenses. The Company
amortizes such intangible assets using the straight-line method over 40 years.
The Company continually evaluates the propriety of the carrying amount of
intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists of the projection of
undiscounted operating income before depreciation, amortization, nonrecurring
charges and interest over the remaining amortization periods of the related
intangible assets. At this time, the Company believes that no significant
impairment of intangible assets has occurred and that no reduction of the
estimated useful lives is warranted.
(c) Barter Transactions
The Company trades commercial air time 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 to be
received. Barter revenue is recorded and the liability relieved when commercials
are broadcast and barter expense is recorded and the asset relieved when goods
or services are received or used.
F-128
<PAGE> 276
WDRQ INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(d) Revenue Recognition
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
(e) Income Taxes
Income taxes are accounted for under the asset and liabilities method.
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable earnings. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount more likely than not to be realized. Income
tax expense is the total of tax payable for the period and the change during the
period in deferred tax assets and liabilities.
(f) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. The adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
(g) Fair Value
The carrying amount of accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments.
(h) Disclosure of Certain Significant Risks and Uncertainties
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.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers in the Company's
customer base. The Company performs ongoing credit evaluations of its customers
and believes that adequate allowances for any uncollectible trade receivables
are maintained. No one customer accounted for more than 10% of net revenues in
1994, 1995, or 1996.
(i) Unaudited Interim Financial Information
In the opinion of management, the unaudited interim combined financial
statements as of and for the three months ended March 31, 1996 and 1997, reflect
all adjustments, consisting of only normal and recurring items, which are
necessary for a fair presentation of the results for the interim periods
presented. The results for the interim periods ended March 31, 1996 and 1997 are
not necessarily indicative of results to be expected for any other interim
period or for the full year.
F-129
<PAGE> 277
WDRQ INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1995 1996
----------- ------ ------
<S> <C> <C> <C>
Broadcast facilities.................... 8-20 years $ 754 $ 787
Office equipment and other.............. 5-8 years 333 496
Construction in progress................ 110 23
------ ------
1,197 1,306
Accumulated depreciation................ 708 806
------ ------
$ 489 $ 500
====== ======
</TABLE>
(4) INTANGIBLE ASSETS
Intangible assets at December 31, 1995 and 1996 consist of broadcast
licenses which are being amortized over forty years and are presented net of
accumulated amortization of $1,814 and $2,070, respectively.
(5) INCOME TAXES
The Company's results of operations are included in the U.S. federal and
certain combined and separate state income tax returns of Viacom International
Inc.
The tax provisions and deferred tax liabilities presented have been
determined as if the Company were a stand-alone business filing separate tax
returns. Current tax liabilities are recorded through the equity account with
Viacom.
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal................................. $549 $689 $319
State and local......................... 37 45 21
Deferred.................................. (4) 3 (14)
---- ---- ----
$582 $737 $326
==== ==== ====
</TABLE>
A reconciliation of the U.S. Federal statutory tax rate to the Company's
effective tax rate on earnings before income taxes is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. tax rate..................................... 35.0% 35.0% 35.0%
Amortization of intangibles................................. 6.8 5.1 14.3
State and local taxes, net of federal tax benefit........... 1.8 1.7 2.1
Other, net.................................................. 0.4 0.3 0.7
---- ---- ----
Effective tax rate........................................ 44.0% 42.1% 52.1%
==== ==== ====
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes. These temporary differences are primarily the result
of fixed asset basis differences and bad debt expense. Deferred tax assets and
liabilities relating to state income taxes are not material.
F-130
<PAGE> 278
WDRQ INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) DEBT AND INTEREST COST
Viacom has not allocated any portion of its debt or related interest cost
to the Company, and no portion of Viacom's debt is specifically related to the
operations of the Company. Accordingly, the Company's financial statements
include no charges for interest.
(7) RELATED PARTY TRANSACTIONS
Intercompany balances between the Company and Viacom resulting from normal
trade activity are reflected in equity in the accompanying financial statements
(see note 8).
Viacom provides services for the Company in management, accounting and
financial reporting, human resources, information systems, legal, taxes and
other corporate services. The allocation of these expenses, which is generally
based on revenue dollars, is reflected in the accompanying financial statements
as corporate general and administrative expense. Management believes that the
method of allocation of corporate overhead is reasonable.
Viacom has a noncontributory pension plan covering substantially all of its
employees, including the employees of the Company. Costs related to these plans
are allocated to the Company based on payroll dollars and are included in
station operating expenses. The Company recognized expense related to these
costs in the amounts of $31, $33 and $82 for 1994, 1995 and 1996, respectively.
The assets and the related benefit obligation of the plans will not be
transferred to the Company upon consummation of the Proposed Transaction,
therefore, such assets and obligations are not included in the notes to the
Company's financial statements.
Viacom utilizes a centralized cash management system. As a result, the
Company carries minimal cash. Disbursements are funded by the Parent upon demand
and cash receipts are transferred to the Parent daily.
The Company, from time to time, enters into transactions with companies
owned by or affiliated with Viacom. Generally, services received from such
related parties are charged to the Company at amounts which would be incurred in
transactions between unrelated entities.
(8) EQUITY
Equity represents Viacom's ownership interest in the recorded net assets of
the Company. All cash transactions and intercompany transactions flow through
the Equity account. A summary of the activity is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------- -------
<S> <C> <C> <C>
Balance at beginning of period.......... $9,769 $ 9,849 $ 9,706
Net earnings............................ 741 1,015 300
Net intercompany activity............... (661) (1,158) (1,279)
------ ------- -------
Balance at end of period................ $9,849 $ 9,706 $ 8,727
====== ======= =======
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from one to
ten years and require the Company to pay all executory costs such as maintenance
and insurance. Rental expense for operating leases (excluding those with lease
terms of one month or less that were not renewed) was approximately $335, $338
and $347 during 1994, 1995 and 1996, respectively.
F-131
<PAGE> 279
WDRQ INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1997.................................... $ 336
1998.................................... 346
1999.................................... 355
2000.................................... 364
2001.................................... 323
Thereafter.............................. 183
------
$1,907
======
</TABLE>
The Company is involved with certain claims and lawsuits which are
generally incidental to its business. Management believes that any ultimate
liability resulting from those actions or claims will not have a material
adverse effect on the Company's results of operations, financial position or
cash flows.
(10) SUBSEQUENT EVENT
On April 14, 1997, Evergreen Media Corporation and Chancellor Broadcasting
Company entered into an agreement with ABC Radio ("ABC"), a division of The Walt
Disney Company, whereby ABC will purchase from Evergreen and Chancellor two
radio stations, WDRQ-FM and WJZW-FM for a total of $105 million.
F-132
<PAGE> 280
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Trefoil Communications, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows, present fairly, in all material respects, the financial position of
Trefoil Communications, Inc. and its subsidiaries at December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the two
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 16 to the financial statements, the Company was sold
to Chancellor Radio Broadcasting Company, formerly Chancellor Broadcasting
Company, on February 14, 1996.
PRICE WATERHOUSE LLP
Los Angeles, California
February 14, 1996
F-133
<PAGE> 281
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Chancellor Broadcasting Company:
We have audited the accompanying consolidated statements of operations,
changes in common stockholders' equity, and cash flows of Trefoil
Communications, Inc. and Subsidiaries for the period January 1, 1996 through
February 13, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of their
operations and their cash flows for the period January 1, 1996 through February
13, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 16 to the financial statements, the Company was sold
to Chancellor Radio Broadcasting Company on February 14, 1996.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
March 24, 1997
F-134
<PAGE> 282
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
-------- --------
<S> <C> <C>
Current assets:
Cash.................................. $ 9,639 $ 4,857
Receivables, net of allowance for
doubtful accounts of $1,535 and
$1,630, respectively............... 22,468 22,397
Prepaid expenses and other current
assets............................. 1,312 917
-------- --------
Total current assets.......... 33,419 28,171
Property and equipment, at cost, net of
accumulated depreciation and
amortization (Note 4)................. 18,308 17,204
Intangible assets, net of accumulated
amortization of $16,705 and $22,071,
respectively.......................... 184,470 184,197
Other assets............................ 9,751 7,918
-------- --------
$245,948 $237,490
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt..... $ 7,000 $ 6,500
Accounts payable...................... 2,771 2,233
Accrued expenses (Note 4)............. 6,066 5,715
Income taxes payable.................. 298 96
-------- --------
Total current liabilities..... 16,135 14,544
Long-term debt (Note 6)................. 98,000 92,500
Convertible senior notes (Note 8)....... 30,000 30,000
Payable to affiliates (Note 14)......... 16,241 20,613
Deferred income taxes (Note 10)......... 18,877 19,218
Other long-term liabilities (Note 4).... 14,747 19,129
-------- --------
194,000 196,004
Mandatorily redeemable preferred stock
(Note 9):
7.5% Series A cumulative convertible
preferred stock $.10 par value;
authorized, issued and outstanding
70,000 shares...................... 70,000 70,000
Stockholders' equity:
Preferred stock $.10 par value;
authorized 30,000 shares; none
issued and outstanding
Common stock $.10 par value; authorized
50,000 shares; issued and outstanding
10,364 shares......................... 1 1
Additional paid-in capital............ 41,656 41,656
Accumulated deficit................... (59,709) (70,171)
-------- --------
(18,052) (28,514)
Commitments and contingencies (Notes 12
and 15)...............................
-------- --------
$245,948 $237,490
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-135
<PAGE> 283
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD ENDED
YEAR ENDED DECEMBER 31, FEBRUARY 13,
------------------------ ------------
1994 1995 1996
---------- ---------- ------------
<S> <C> <C> <C>
Gross broadcasting revenues.............................. $109,219 $108,849 $ 9,698
Less agency commissions.................................. 14,332 14,244 1,234
-------- -------- -------
Net revenues................................... 94,887 94,605 8,464
-------- -------- -------
Costs and expenses:
Station operating expenses............................. 75,427 73,720 7,762
Corporate expenses..................................... 3,355 3,139 2,215
Depreciation and amortization.......................... 3,038 2,992 349
Amortization of intangibles............................ 5,961 5,759 672
-------- -------- -------
87,781 85,610 10,998
-------- -------- -------
Operating income (loss)................................ 7,106 8,995 (2,534)
-------- -------- -------
Other income (expenses):
Interest expense....................................... (12,923) (14,703) (1,651)
Gain (loss) on sale of broadcast assets (Note 11)...... 5,462 -- --
Miscellaneous, net..................................... (4) 78 (49)
-------- -------- -------
(7,465) (14,625) (1,700)
-------- -------- -------
Loss before income taxes and extraordinary loss.......... (359) (5,630) (4,234)
Income tax benefit (expense) (Note 10)................... (1,355) 1,287 1,694
-------- -------- -------
Loss before extraordinary loss......................... (1,714) (4,343) (2,540)
Extraordinary loss on early extinguishment of debt....... -- -- (4,451)
-------- -------- -------
Net loss................................................. (1,714) (4,343) (6,991)
Dividends on mandatorily redeemable preferred stock...... (5,619) (6,119) (809)
-------- -------- -------
Loss applicable to common stock.......................... $ (7,333) $(10,462) $(7,800)
======== ======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-136
<PAGE> 284
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
$0.10 PAR VALUE ADDITIONAL
---------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993.................... 10,364 $ 1 $ 41,656 $(52,376) $(10,719)
Net loss.................................... (1,714) (1,714)
Mandatorily redeemable preferred dividend... (5,619) (5,619)
------- ----- -------- -------- --------
Balance, December 31, 1994.................... 10,364 1 41,656 (59,709) (18,052)
Net loss.................................... (4,343) (4,343)
Mandatorily redeemable preferred dividend... (6,119) (6,119)
------- ----- -------- -------- --------
Balance, December 31, 1995.................... 10,364 1 41,656 (70,171) (28,514)
Additional capital contributions............ 156,326 156,326
Net loss.................................... (6,991) (6,991)
Mandatorily redeemable preferred dividend... (809) (809)
------- ----- -------- -------- --------
Balance, February 13, 1996.................... 10,364 $ 1 $197,982 $(77,971) $120,012
======= ===== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-137
<PAGE> 285
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------- FEBRUARY 13,
1994 1995 1996
---------- --------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (1,714) $(4,343) $ (6,991)
Adjustments to reconcile net loss to cash provided by
operating activities:
Depreciation of property and equipment............... 3,038 2,992 349
Amortization of intangible and other assets.......... 6,736 6,569 672
(Gain) loss on disposal of assets.................... (5,462) -- --
Deferred income taxes................................ (279) (168) 1,694
Non-cash interest expense............................ 3,180 4,479 81
Non-cash extraordinary loss.......................... -- -- 4,451
Changes in assets and liabilities which increase
(decrease) cash:
Receivables........................................ 263 71 3,379
Prepaid expenses and other current assets.......... (8) 395 (342)
Accounts payable, accrued expenses and income taxes
payable......................................... (2,356) (1,078) 1,568
Other net.......................................... 358 (529) --
-------- ------- ---------
Cash from operating activities.................. 3,756 8,388 4,861
-------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Station acquisitions.................................... -- (5,528) --
Purchase of property and equipment...................... (3,341) (1,642) --
Proceeds from disposal of broadcast assets.............. 22,802 -- --
-------- ------- ---------
Cash from (used in) investing activities........ 19,461 (7,170) --
-------- ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from affiliate borrowings...................... 6,000 -- --
Additional capital contributions........................ -- -- 156,326
Principal payments of long-term debt.................... (24,000) (6,000) (151,252)
Dividends paid.......................................... -- -- (14,753)
-------- ------- ---------
Cash used in financing activities............... (18,000) (6,000) (9,679)
-------- ------- ---------
Net increase (decrease) in cash........................... 5,217 (4,782) (4,818)
Cash beginning of period.................................. 4,422 9,639 4,857
-------- ------- ---------
Cash end of period........................................ $ 9,639 $ 4,857 $ 39
======== ======= =========
</TABLE>
SEE NOTE 5 FOR NON-CASH DISCLOSURE.
The accompanying notes are an integral part of the financial statements.
F-138
<PAGE> 286
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY
The accompanying consolidated financial statements of Trefoil
Communications, Inc. (the "Company", formerly Shamrock Holdings, Inc.) include
the accounts of the Company and its subsidiaries. All significant intercompany
transactions and balances have been eliminated. As of December 31, 1995, the
Company's broadcasting subsidiary ("Broadcasting") owned and operated ten radio
properties in major markets across the United States. In August 1995, the
Company's shareholders entered into an agreement to sell their interest in the
Company, see Note 16.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition
Broadcasting revenues are derived primarily from the sale of program time
and commercial announcements to local, regional and national advertisers.
Revenue is recognized when programs and commercial announcements are broadcast.
Barter transactions
The Company trades certain advertising time for various goods and services.
These transactions are recorded at the estimated fair value of the goods or
services received. The related revenue is recognized when commercials are
broadcast; goods or services received are recorded as assets or expenses when
received or used, respectively.
Use of estimates in preparation of financial statements
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
Expenditures for additions, renewals and betterments are capitalized.
Expenditures for maintenance and repairs are charged to expense as incurred.
Depreciation is computed on the straight-line method based on the estimated
useful lives of the assets.
Intangible assets
Intangible assets represent the purchase price of broadcasting properties
in excess of the fair value of net tangible assets acquired and include value
allocated to FCC broadcasting licenses and goodwill. Intangible assets are
amortized on the straight-line basis over forty years.
The Company evaluates intangible assets for potential impairment by
analyzing the operating results, trends and prospects of the Company's stations,
as well as by comparing them to their competitors. The Company also takes into
consideration recent acquisition patterns within the broadcast industry, the
impact of recently enacted or potential FCC rules and regulations and any other
events or circumstances which might indicate potential impairment.
Income taxes
The Company files a consolidated federal income tax return and combined
California franchise tax return with its subsidiaries. Effective January 1,
1993, the Company prospectively adopted Statement of Financial
F-139
<PAGE> 287
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." The
adoption of SFAS 109 changed the Company's method of accounting for income taxes
from the deferred method (APB 11) to an asset and liability approach. The asset
and liability approach requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities.
NOTE 3 -- ACQUISITION
In February 1995, the Company acquired for $5.5 million cash (including
acquisition costs) the broadcast license and assets of a second FM radio station
in Denver, Colorado. The acquisition has been accounted for as a purchase and
resulted in an excess of acquisition costs over fair value of the net assets
acquired of $5 million which has been allocated to intangible assets, primarily
FCC broadcasting licenses and goodwill. Pro forma results for the acquisition of
the Denver station are not presented as they are not materially different from
historical results.
NOTE 4 -- COMPOSITION OF CERTAIN BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIFE ---------------------------
IN YEARS 1994 1995
----------- ------------ ------------
<S> <C> <C> <C>
PROPERTY AND EQUIPMENT
Land and land improvements............ $ 2,874,000 $ 2,828,000
Buildings and leasehold
improvements....................... 10-40 6,183,000 6,274,000
Transmittal and technical equipment... 4-20 17,872,000 18,703,000
Furniture and fixtures................ 5-10 4,167,000 4,811,000
Automotive............................ 2-5 622,000 645,000
Construction in progress.............. 175,000 138,000
------------ ------------
31,893,000 33,399,000
Less: Accumulated depreciation and
amortization.......................... (13,585,000) (16,195,000)
------------ ------------
$ 18,308,000 $ 17,204,000
============ ============
ACCRUED EXPENSES
Salaries and other employee
compensation....................... $ 3,300,000 $ 2,794,000
Interest.............................. 461,000 383,000
Payable to affiliate.................. 802,000 1,346,000
Other................................. 1,503,000 1,192,000
------------ ------------
$ 6,066,000 $ 5,715,000
============ ============
OTHER LONG-TERM LIABILITIES
Deferred compensation................. $ 3,689,000 $ 3,547,000
Dividends payable on mandatorily
redeemable preferred stock......... 7,825,000 13,944,000
Interest.............................. 1,034,000 1,140,000
Other................................. 2,199,000 498,000
------------ ------------
$ 14,747,000 $ 19,129,000
============ ============
</TABLE>
F-140
<PAGE> 288
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31, PERIOD ENDED
------------------------ FEBRUARY 13,
1994 1995 1996
---------- ---------- ------------
<S> <C> <C> <C>
Cash paid (received) during the period
for:
Interest.............................. $9,763,000 $9,562,000 $2,034,000
Income taxes.......................... 1,397,000 217,000 --
Station acquisitions:
Property and equipment................ -- 434,000 --
FCC licenses and goodwill............. -- 5,094,000 --
Other assets.......................... -- -- --
Net working capital................... -- -- --
Common stock issued................... -- -- --
</TABLE>
NOTE 6 -- LONG-TERM DEBT
Long-term debt comprises the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
------------ -----------
<S> <C> <C>
Revolving bank credit at varying
interest rates; payable quarterly.
Principal payments in varying amounts
quarterly; final installment due
2003.................................. -- $99,000,000
Bank term loans at varying interest
rates; payable quarterly. Principal
payments in varying amounts quarterly;
final installment due 2000............ $ 95,500,000 --
Revolving bank credit at varying
interest rates; payable quarterly.
Principal payments in varying amounts
quarterly; final installment due
2001.................................. 9,500,000 --
------------ -----------
105,000,000 99,000,000
Less: Current portion................... (7,000,000) (6,500,000)
------------ -----------
$ 98,000,000 $92,500,000
============ ===========
</TABLE>
In August 1995, the Company restructured and amended its existing bank
credit agreement by entering into an eight year, $105 million revolving credit
agreement which extended the final maturity to 2003 and modified quarterly
principal repayments. Costs of $954,000 related to the amended credit agreement
and of $4.8 million incurred when the credit agreement was entered into were
capitalized and are being amortized over 8 years. These costs are included in
other assets in the balance sheet.
Borrowings under the credit agreement are secured by substantially all of
the Company's assets. Interest is charged at varying rates according to
alternatives selected by the Company at the time funds are borrowed. Currently,
interest accrues at floating rates (8.31% and 9.13% at December 31, 1995 and
1994, respectively). As borrowings under the credit agreement are at market
interest rates, the carrying value of the Company's long-term debt reflects its
fair value.
The credit agreement imposes restrictive covenants on the Company with
respect to, among other things, the maintenance of certain financial ratios and
limits on capital expenditures, new indebtedness, investments, disposition of
assets and declaration of cash dividends.
F-141
<PAGE> 289
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1995, aggregate scheduled mandatory principal reductions of
the Company's bank debt and borrowings from affiliates (Note 14) are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNTS
---- ------------
<S> <C>
1996.................................... $ 6,500,000
1997.................................... 10,000,000
1998.................................... 10,000,000
1999.................................... 15,000,000
2000.................................... 15,000,000
After 2000.............................. 63,113,000
------------
$119,613,000
============
</TABLE>
NOTE 7 -- STOCKHOLDERS' EQUITY
During 1993, the number of authorized shares of common stock was increased
to 50,000 shares, 10,364 of which were outstanding at December 31, 1995. The
Company has reserved 3,658 and 8,535 shares of common stock for issuance upon
the conversion of the convertible senior notes ("Senior Notes", Note 8) and
Series A cumulative convertible preferred stock ("Series A Preferred Stock",
Note 9), respectively.
NOTE 8 -- CONVERTIBLE SENIOR NOTES
On July 30, 1993, the Company issued $30 million in ten-year Senior Notes
to Trefoil Capital Investors, L.P. ("Trefoil"). The notes are convertible into
shares of the Company's common stock at a conversion rate of $8,201 per share,
subject to certain anti-dilution adjustments, and are redeemable by the Company
at any time on or after July 30, 1996, initially at a specified premium to par,
declining to par for redemptions on or after July 30, 2001. Mandatory
redemptions of $7.5 million and $11.25 million are due July 30, 2001 and 2002,
respectively, and any remaining unpaid principal is due in 2003.
Interest accrues at the rate of 7.5% per annum and is payable semi-annually
on January 31 and July 31. Interest is payable in cash, however, through January
31, 1998, the Company may elect to pay interest by issuing additional
paid-in-kind notes ("PIK Notes"). PIK Notes are not convertible and must be
redeemed on a pro rata basis in accordance with the redemption schedule of the
Senior Notes. Interest on the PIK Notes accrues at 10% per annum, which payment
terms are identical to the Senior Notes, including the option to issue
additional PIK Notes for interest obligations.
PIK Notes of $4.9 million were outstanding as of December 31, 1995. Accrued
interest on the Senior Notes as of December 31, 1995 and 1994 has been included
in payable to affiliates and classified as a long-term liability.
Based on the transaction described in Note 16, management considers the
fair market value of the Senior Notes to approximate their carrying value.
NOTE 9 -- MANDATORILY REDEEMABLE PREFERRED STOCK
Concurrent with the sale of the Senior Notes, the Company issued 70,000
shares of Series A Preferred Stock to Trefoil for $70 million.
With respect to dividend rights and rights on liquidation, dissolution and
winding up, Series A Preferred Stock ranks senior to the common stock and senior
to any other series or class of preferred stock which may be issued by the
Company (collectively, "Junior Securities").
F-142
<PAGE> 290
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In the event of any liquidation, dissolution or winding up of the Company,
holders of Series A Preferred Stock will be entitled to receive in preference to
holders of Junior Securities an amount equal to $1,000 per share plus all
accrued but unpaid dividends.
As long as shares of Series A Preferred Stock remain outstanding, the
holders of such shares are entitled to receive, when, as and if declared by the
Board of Directors, out of assets of the Company legally available therefore,
cumulative cash dividends at an annual rate of 7.5% (if in arrears, compounded
quarterly at a rate of 8.625% per annum with respect to dividends in arrears,
through the date of payment of such arrearages), payable quarterly in arrears on
the last business day of each calendar quarter.
Each share of Series A Preferred Stock is convertible at the option of the
holder into one share of common stock at $8,201 per common share, subject to
certain antidilution adjustments (the "Conversion Price").
The Series A Preferred Stock may be redeemed by the Company any time after
the third anniversary of the issuance date (in integral multiples having an
aggregate stated value of at least $7 million) if (i) all quarterly dividends on
the Series A Preferred Stock have been paid in full, (ii) the Company has
consummated an initial public offering for its common stock and (iii) the market
price of the common stock is equal to at least 165% of the Conversion Price for
at least twenty out of thirty consecutive trading days preceding the notice of
redemption. In any such event, the redemption price per share will be equal to
$1,000, plus accrued and unpaid dividends to the redemption date.
The Company is required to redeem 14,000 shares of the original issue on
July 30, 2003, 28,000 shares on July 30, 2004 and any remaining outstanding
shares in 2005. The number of shares to be redeemed by the Company on any
mandatory redemption date shall be reduced by the number of shares optionally
redeemed by the Company prior to such date, to the extent such shares have not
previously been credited against the Company's mandatory redemption obligations.
If the Company shall fail to redeem shares of Series A Preferred Stock when
required, the annual dividend rate on the outstanding shares of Series A
Preferred Stock will be increased to 9.375% (compounded quarterly with respect
to dividends in arrears at a rate of 10.780% per annum) of the stated value of
such shares plus accrued and unpaid dividends from the date of failure to redeem
through the date of redemption. If less than all of the outstanding shares of
Series A Preferred Stock are to be redeemed, the shares of Series A Preferred
Stock to be redeemed shall be selected pro rata.
Although not declared by the Company's Board of Directors, dividends on the
Series A Preferred Stock have been accrued in the accompanying financial
statements. Based on management intentions, including restrictions on the
payment of dividends imposed by the Company's bank credit agreement, accrued
dividends have been classified as a long-term liability.
Based on the transaction described in Note 16, management considers the
fair market value of the Series A Preferred Stock to approximate their carrying
value.
F-143
<PAGE> 291
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- INCOME TAXES
All of the Company's revenues were generated in the United States. The
income tax benefit (expense) on income from continuing operations is comprised
of the following:
<TABLE>
<CAPTION>
DECEMBER 31, PERIOD ENDED
------------------------- FEBRUARY 13,
1994 1995 1996
----------- ---------- ------------
<S> <C> <C> <C>
Current:
Federal............................... $ (578,000) $1,025,000 $ 321,000
State................................. (1,056,000) 94,000 29,000
----------- ---------- ----------
(1,634,000) 1,119,000 350,000
Deferred:
Federal............................... (501,000) 168,000 1,150,200
State................................. 780,000 -- 193,800
----------- ---------- ----------
279,000 168,000 1,344,000
----------- ---------- ----------
$(1,355,000) $1,287,000 $1,694,000
=========== ========== ==========
</TABLE>
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
Deferred gain........................... $15,549,000 $15,358,000
Amortization of FCC licenses and other
intangibles........................... 5,519,000 5,687,000
Depreciation............................ 3,194,000 2,741,000
Other................................... 519,000 560,000
----------- -----------
Gross deferred tax liabilities........ 24,781,000 24,346,000
----------- -----------
Net operating loss carryforward......... (878,000) (584,000)
AMT and other credit carryforward....... (3,316,000) (2,943,000)
Deferred compensation and other
deductions............................ (2,586,000) (2,627,000)
----------- -----------
Gross deferred tax assets............. (6,780,000) (6,154,000)
Valuation allowance................... 876,000 1,026,000
----------- -----------
Net deferred tax assets............... (5,904,000) (5,128,000)
----------- -----------
$18,877,000 $19,218,000
=========== ===========
</TABLE>
The Company has a federal net operating loss (NOL) carryover of $1.7
million, subject to various limitations on its utilization. The Company also has
AMT Credit and Investment Tax Credit carryforwards for tax purposes of $2.2
million and $734,000, respectively. The above carryovers expire in the years
2000 through 2003, except the AMT credit which has no expiration. Under SFAS
109, the Company has recorded valuation allowances against the realization of
the federal tax benefits from net operating losses and investment tax credits in
the amounts of $292,000 and $734,000, respectively. The valuation allowances are
based on management's estimates and analysis, which include the impact of tax
laws which may limit the Company's ability to utilize such loss carryforwards
and tax credits.
F-144
<PAGE> 292
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The principal items causing an effective rate which differs from the
Federal statutory rate are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------- PERIOD ENDED
1994 1995 FEBRUARY 13, 1996
----------- ----------- -----------------
<S> <C> <C> <C>
Federal statutory rate....................... $ 125,000 $ 1,971,000 $1,440,000
Amortization of intangibles.................. (1,703,000) (1,627,000) (190,000)
State taxes, net of federal benefit.......... (180,000) 61,000 214,000
Reduction of tax reserve..................... -- 1,109,000 --
SFAS 109 rate adjustment..................... -- -- --
Recognition of net operating loss
carryover.................................. 504,000 -- --
Other, net................................... (101,000) (227,000) 230,000
----------- ----------- ----------
$(1,355,000) $ 1,287,000 $1,694,000
=========== =========== ==========
</TABLE>
NOTE 11 -- RADIO BROADCASTING DISPOSITIONS
In April 1994, the Company sold the broadcast license and assets of its
radio stations in Cleveland, Ohio for $12.1 million (excluding disposal costs).
This sale resulted in a gain of $670,000, before related income taxes. A portion
of the sale proceeds was utilized to reduce bank debt by $11 million.
In June 1994, the Company sold the broadcast license and assets of its
radio station in Seattle, Washington for $12.0 million (excluding disposal
costs). This sale resulted in a gain of $4.8 million, before related income
taxes. A portion of the sale proceeds was utilized to reduce bank debt by $11
million.
NOTE 12 -- COMMITMENTS
The following are the future minimum rental payments under operating leases
(net of minimum rentals under noncancelable subleases) that have initial or
remaining lease terms in excess of one year:
<TABLE>
<CAPTION>
YEAR AMOUNTS
---- -----------
<S> <C>
1996.................................................... $ 3,290,000
1997.................................................... 3,029,000
1998.................................................... 2,422,000
1999.................................................... 1,701,000
2000.................................................... 1,314,000
After 2000.............................................. 5,604,000
-----------
$17,360,000
===========
</TABLE>
Certain leases contain renewal options with the same lease terms, except
that rentals may be adjusted to current market rates at the time of renewal.
Rental expense under operating leases for the period ended February 13, 1996 and
the years ended December 31, 1995 and 1994 aggregated $0.3 million, $2.9 million
and $3.3 million, respectively.
NOTE 13 -- EMPLOYEE BENEFIT PLANS
The Company maintains an elective Employees' Savings Plan for all employees
not covered by a collective bargaining agreement and who have one or more years
of continuous employment. The Company contributes 50% of the annual
contributions made by employees up to a maximum of 3% of each participating
employee's compensation. Participants are at all times fully vested in their
contributions, and the Company's contribution becomes fully vested to the
participant after seven years of continuous employment. The
F-145
<PAGE> 293
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's contributions for the period ended February 13, 1996 and the years
ended December 31, 1995 and 1994 aggregated $0, $453,000 and $568,000,
respectively.
The Company also maintains a non-qualified, unfunded incentive compensation
plan for certain key employees providing for payments upon separation of
employment, death or disability. As of December 31, 1995 the liability recorded
for the value of amounts awarded to participants under the plan was
approximately $3.5 million.
NOTE 14 -- AFFILIATE TRANSACTIONS
Both Shamrock Holdings of California ("SHOC") and Trefoil are related
parties of the Company through commonality of certain officers and directors. In
addition to the financing transactions described at Notes 8 and 9, the Company
made payments to SHOC for interest on cash advances, office space rent and an
executive management fee in the aggregate of $20,000, $175,000 and $174,000 for
the period ended February 13, 1996 and the years ended December 31, 1995 and
1994, respectively. In July 1993, the Company entered into an executive
management agreement with Trefoil in consideration for a fee based on the
Company's broadcasting revenues. For the period ended February 13, 1996 and the
years ended December 31, 1995 and 1994, the statement of operations includes in
corporate expenses a charge of $63,000, $544,000 and $544,000, respectively, for
fees payable to Trefoil. In connection with the issuance of the Senior Notes and
the Series A Preferred Stock, the Company paid Trefoil $3 million for financial
advisory services. These costs were capitalized and are being amortized over the
term of the Senior Notes and Series A Preferred Stock. These costs are included
in other assets in the balance sheet.
Payable to affiliates comprises the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
Note payable to affiliate at varying interest rates;
payable quarterly. No stated maturity................... $ 7,898,000 $ 9,007,000
Note payable to affiliate at varying interest rates;
payable quarterly. No stated maturity................... 6,030,000 6,750,000
PIK notes (Note 8)........................................ 2,313,000 4,856,000
----------- -----------
$16,241,000 $20,613,000
=========== ===========
</TABLE>
On December 16, 1994, the Company issued a $6 million promissory note to
Trefoil, $5.75 million of which was used in 1995 for the acquisition of a radio
station in Denver. The note bears interest at LIBOR plus 7% (12.938% at December
31, 1995) and has no stated maturity. Accrued interest is added to the principal
of the note at the end of each calendar quarter and, accordingly, the
outstanding balances at December 31, 1995 and December 31, 1994 include $720,000
and $30,000 of interest expensed in 1995 and 1994, respectively.
On September 29, 1993, the Company issued a $7 million promissory note to
SHOC and used the proceeds to reduce Broadcasting's bank debt. The note bears
interest at LIBOR plus 7% (12.938% at December 31, 1995) and has no stated
maturity. Accrued interest is added to the principal of the note at the end of
each calendar quarter and, accordingly is included in the outstanding balance at
December 31, 1995 and 1994. Interest expense includes for the period ended
February 13, 1996 and the years ended December 31, 1995 and 1994 $129,000,
$1,109,000 and $747,000, respectively.
Based on the transaction described in Note 16, management considers the
fair market value of these notes to approximate their carrying value.
F-146
<PAGE> 294
TREFOIL COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15 -- LITIGATION
The Company is a plaintiff or defendant in several legal actions, the
probable outcome of which are not considered material, either individually or in
the aggregate.
NOTE 16 -- SUBSEQUENT EVENT -- SALE OF THE COMPANY
On February 14, 1996, the Company's shareholders completed the sale of all
issued and outstanding shares of the Company to Chancellor Radio Broadcasting
Company, formerly Chancellor Broadcasting Company, ("Chancellor") for $395
million in cash. A portion of the proceeds was utilized to pay-off bank debt,
convertible senior notes, payable to affiliates and redeem outstanding preferred
stock and pay dividends payable thereon. As of the closing date, the Company,
along with Broadcasting, became wholly-owned subsidiaries of Chancellor. No
accounts in the accompanying financials have been adjusted for the effects of
this transaction; however, the statement of operations for the period ended
February 13, 1996 includes an extraordinary loss on the early extinguishment of
debt of $2.5 million, net of tax of $1.7 million, resulting from the early
extinguishment of bank debt and convertible senior notes discussed above.
F-147
<PAGE> 295
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Colfax Communications, Inc. Radio Group:
We have audited the accompanying combined balance sheets of the Colfax
Communications, Inc. Radio Group (the "Company") as of December 31, 1996, 1995,
and 1994, and the related combined statements of income (loss), changes in
partners' equity and cash flows for each of the three years in the period ended
December 31, 1996. 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 an 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 January 1997, substantially all of the assets and liabilities of the
Company were sold.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Colfax
Communications, Inc. Radio Group as of December 31, 1996, 1995, and 1994, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Washington, D.C.
March 31, 1997
F-148
<PAGE> 296
COLFAX COMMUNICATIONS, INC. RADIO GROUP
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Current assets:
Cash............................................. $ 1,718,589 $ 682,672 $ 216,414
Accounts receivable, net of allowance for
doubtful accounts of $710,813, $441,889, and
$238,801, respectively........................ 15,514,187 7,626,579 8,978,881
Prepaid expenses and other current assets........ 520,358 286,774 343,441
------------ ----------- -----------
Total current assets..................... 17,753,134 8,596,025 9,538,736
Property and equipment at cost, net of
depreciation..................................... 14,508,097 8,675,724 9,608,603
Intangibles and other noncurrent assets at cost,
net of amortization.............................. 147,579,599 32,383,587 37,653,803
------------ ----------- -----------
Total assets............................. $179,840,830 $49,655,336 $56,801,142
============ =========== ===========
Liabilities:
Accounts payable and accrued expenses............ $ 5,116,890 $ 3,224,139 $ 3,883,242
Current maturities of long-term debt............. -- -- 900,000
------------ ----------- -----------
Total current liabilities................ 5,116,890 3,224,139 4,783,242
Long-term debt................................... 55,650,000 39,225,000 7,100,000
------------ ----------- -----------
Total liabilities........................ 60,766,890 42,449,139 11,883,242
------------ ----------- -----------
Commitments (Note 8):
Partners' equity:
Radio Acquisition Associates..................... (1,141,558) (2,783,226) (3,121,671)
Equity Group Holdings............................ 119,013,080 9,888,902 47,558,478
Colfax Communications, Inc....................... 1,202,418 100,521 481,093
Class B Limited Partners......................... -- -- --
------------ ----------- -----------
Total partners' equity................... 119,073,940 7,206,197 44,917,900
------------ ----------- -----------
Total liabilities and partners' equity... $179,840,830 $49,655,336 $56,801,142
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-149
<PAGE> 297
COLFAX COMMUNICATIONS, INC. RADIO GROUP
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Advertising revenues:
Local sponsors.................................... $37,496,454 $23,425,588 $24,147,363
National sponsors................................. 12,885,713 9,151,724 8,221,228
Other............................................. 2,518,200 1,910,483 2,090,737
----------- ----------- -----------
Gross advertising revenues................ 52,900,367 34,487,795 34,459,328
Less -- Commissions............................... (6,785,322) (4,345,062) (4,283,386)
----------- ----------- -----------
Net advertising revenues.................. 46,115,045 30,142,733 30,175,942
----------- ----------- -----------
Operating expenses:
Programming....................................... 7,675,793 5,461,691 9,604,067
Sales and advertising............................. 14,507,662 11,360,597 10,885,717
General and administrative........................ 5,793,377 4,332,286 3,651,832
Engineering....................................... 1,260,447 1,014,375 1,084,282
Depreciation and amortization..................... 4,617,958 6,505,492 7,599,901
----------- ----------- -----------
Total operating expenses.................. 33,855,237 28,674,441 32,825,799
----------- ----------- -----------
Income (loss) from operations............. 12,259,808 1,468,292 (2,649,857)
Interest expense.................................... 4,368,669 655,795 531,387
Loss on sale of fixed assets........................ -- 770,689 --
Other expense (income).............................. (184,289) -- 75,364
----------- ----------- -----------
Net income (loss)......................... $ 8,075,428 $ 41,808 $(3,256,608)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-150
<PAGE> 298
COLFAX COMMUNICATIONS, INC. RADIO GROUP
COMBINED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
RADIO EQUITY CLASS B
ACQUISITION COLFAX GROUP LIMITED
ASSOCIATES COMM., INC. HOLDINGS PARTNERS TOTAL
----------- ----------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1993..................... $(2,464,398) $ 528,938 $ 52,305,936 $-- $ 50,370,476
Capital contributions
from partners......... 368,281 60,023 5,949,744 -- 6,378,048
Capital distributions to
partners.............. (1,678,638) (68,618) (6,826,760) -- (8,574,016)
Net income (loss)........ 653,084 (39,250) (3,870,442) -- (3,256,608)
----------- ---------- ------------ --- ------------
Balance, December 31,
1994..................... (3,121,671) 481,093 47,558,478 -- 44,917,900
Capital contributions
from partners......... -- 5,735 567,746 -- 573,481
Capital distributions to
partners.............. (1,031,464) (372,709) (36,922,819) -- (38,326,992)
Net income (loss)........ 1,369,909 (13,598) (1,314,503) -- 41,808
----------- ---------- ------------ --- ------------
Balance, December 31,
1995..................... (2,783,226) 100,521 9,888,902 -- 7,206,197
Capital contributions
from partners......... 5,104 1,130,725 111,941,654 -- 113,077,483
Capital distributions to
partners.............. (981,106) (82,845) (8,221,217) -- (9,285,168)
Net income (loss)........ 2,617,670 54,017 5,403,741 -- 8,075,428
----------- ---------- ------------ --- ------------
Balance, December 31,
1996..................... $(1,141,558) $1,202,418 $119,013,080 $-- $119,073,940
=========== ========== ============ === ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-151
<PAGE> 299
COLFAX COMMUNICATIONS, INC. RADIO GROUP
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ 8,075,428 $ 41,808 $(3,256,608)
Adjustments to reconcile net loss to net cash
used in operating activities --
Depreciation and amortization............... 4,617,958 6,505,492 7,599,901
Loss on asset disposal...................... -- 770,689 57,398
Restructuring charge........................ -- 737,729 --
Change in assets and liabilities:
(Increase) decrease in accounts
receivable............................. (7,888,416) 1,352,302 (1,664,323)
(Increase) decrease in prepaid expenses
and other current assets............... (233,584) 56,667 170,619
Increase (decrease) in accounts payable
and accrued expenses................... 1,892,751 (1,396,832) 708,448
------------- ------------ -----------
Net cash provided by operating
activities........................... 6,464,137 8,067,855 3,615,435
------------- ------------ -----------
Cash flows from investing activities:
Cash paid for acquisition of intangibles and
other noncurrent assets..................... (126,017,951) (363,174) (12,944)
Payments for additions to property and
equipment................................... (5,907,584) (823,737) (968,929)
Disposal of intangible assets.................. 6,280,000 -- --
Disposal of fixed assets....................... -- 113,825 --
------------- ------------ -----------
Net cash used in investing
activities........................... (125,645,535) (1,073,086) (981,873)
------------- ------------ -----------
Cash flows from financing activities:
Repayment of note payable...................... (5,800,000) (8,000,000) (800,000)
Loan proceeds.................................. 22,225,000 39,225,000 --
Capital contributions from partners............ 113,077,483 573,481 6,378,048
Capital distributions to partners.............. (9,285,168) (38,326,992) (8,190,101)
------------- ------------ -----------
Net cash provided by (used in)
financing activities................. 120,217,315 (6,528,511) (2,612,053)
------------- ------------ -----------
Net increase (decrease) in cash.................. 1,035,917 466,258 21,509
Cash, beginning of period........................ 682,672 216,414 194,905
------------- ------------ -----------
Cash, end of period.............................. $ 1,718,589 $ 682,672 $ 216,414
============= ============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest......... $ 4,391,300 $ 615,900 $ 514,213
============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-152
<PAGE> 300
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996, 1995, AND 1994
1. BASIS OF PRESENTATION:
The accompanying combined financial statements include the radio station
holdings of Colfax Communications, Inc. ("Colfax"), a Maryland Corporation.
Three of the stations serve the Washington, D.C., market: WGMS-FM (classical
format), WBIG-FM (oldies format), and WTEM(AM) (all-sports format). Two
stations, WBOB-FM (country format) and KQQL(FM) (oldies format), serve the
Minneapolis-St. Paul market. Five of the stations serve the Phoenix market:
KOOL-FM (oldies format), KOY(AM) (nostalgia format), KZON-FM (alternative
format), KISO(AM) (urban adult contemporary format), and KYOT-FM (new adult
contemporary format). Two stations serve the Milwaukee market: WMIL-FM (country
format) and WOKY(AM) (adult standard format). Three stations serve the Boise
market: KIDO(AM) (news/talk format), KLTB(FM) (oldies format), and KARO(FM)
(class rock format). All stations are owned by entities under the common control
of Colfax and its affiliates.
2. DESCRIPTION OF COLFAX COMMUNICATIONS, INC., RADIO GROUP:
Classical Acquisition Limited Partnership
Classical Acquisition Limited Partnership ("CALP") is a Maryland limited
partnership formed to acquire and operate radio stations WGMS(AM) (currently
WTEM(AM)) and WGMS-FM. Radio Acquisition Associates Limited Partnership, a
Maryland limited partnership, had a 98.04 percent general partner interest and
Equity Group Holdings, a District of Columbia general partnership, had a 1.96
percent limited partner interest in CALP prior to the admission of the Class B
Limited Partners as discussed below. Radio Acquisition Associates Limited
Partnership has Colfax as a 1 percent general partner and Equity Group Holdings
as a 99 percent limited partner.
Certain Class B Limited Partners were admitted to the partnership on
January 1, 1993 and on January 1, 1995. The Class B Limited Partners have a
13.25 percent interest in CALP and Equity Group Holdings' limited partnership
interest in CALP was reduced to 1.813 percent effective January 1, 1993. Radio
Acquisition Associates' Limited Partnership general partnership interest was
reduced to 90.687 percent and 84.937 percent effective January 1, 1993 and
January 1, 1995, respectively.
Radio 570 Limited Partnership
Radio 570 Limited Partnership ("Radio 570") is a Maryland limited
partnership formed on December 10, 1991, to operate radio station WTEM-AM
(formerly WGMS-AM). Radio 570 was formed by Colfax as the 1 percent general
partner and Equity Group Holdings as the 99 percent limited partner. WTEM began
broadcasting on May 24, 1992.
Effective January 1, 1993, certain Class B Limited Partners were admitted
to the partnership. On September 15, 1995, a Class B Limited Partner was
redeemed of his partnership interest. As of December 31, 1996 and 1995, the
Class B Limited Partners had a 9.25 percent interest and Equity Group Holdings
had an 89.75 percent Class A Limited Partnership interest.
Radio 100 Limited Partnership
Radio 100 Limited Partnership ("Radio 100") was formed on August 11, 1992,
to acquire and operate radio stations. Radio 100 was formed by Colfax as the 1
percent general partner and Equity Group Holdings as the 99 percent limited
partner.
In 1993, Radio 100 completed its acquisition of two radio stations in
Minnesota for $25,500,000. WBOB-FM (formerly WCTS-FM) and KQQL(FM) began on-air
operations under Radio 100 ownership on May 7, 1993, and February 18, 1993,
respectively.
F-153
<PAGE> 301
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Effective January 1, 1993, certain Class B Limited Partners were admitted
to the partnership. The Class B Limited Partners have a 10.25 percent interest
and the Equity Group Holdings Class A Limited Partnership interest was reduced
to 88.75 percent.
Radio 100 of Maryland Limited Partnership
Radio 100 of Maryland Limited Partnership ("Radio 100 of Maryland") was
formed on December 2, 1992 to acquire and operate radio stations. Radio 100 of
Maryland was formed by Colfax as the 1 percent general partner and Equity Group
Holdings as the 99 percent limited partner.
On June 3, 1993, Radio 100 of Maryland acquired WBIG-FM (formerly WJZE-FM)
in Washington, D.C. for $19,500,000.
Effective January 1, 1993, certain Class B Limited Partners were admitted
to the partnership. On September 15, 1995, a Class B Limited Partner was
redeemed of his partnership interest. On October 1, 1995, a Class B Limited
Partner was admitted to the partnership. As of December 31, 1996 and 1995, the
Class B Limited Partners had an 11.25 percent interest and Equity Group Holdings
had an 87.75 percent Class A Limited Partnership interest.
Radio 94 of Phoenix Limited Partnership
Radio 94 of Phoenix Limited Partnership ("Radio 94") was formed on January
3, 1996, to acquire and operate radio stations. Radio 94 was formed by Colfax as
the 1 percent general partner and Equity Group Holdings as the 99 percent
limited partner. On April 1, 1996, Radio 94 acquired KOOL(AM) and KOOL-FM in
Phoenix, Arizona for $35,000,000. Effective April 5, 1996, certain Class B
Limited Partners were admitted to the partnership. The Class B Limited Partners
have an 8.25 percent interest and the Equity Group Holdings Class A Limited
Partnership interest was reduced to 90.75 percent. On October 4, 1996, Radio 94
sold KOOL(AM) to Salem Media of Arizona, Inc.
Radio 95 of Phoenix Limited Partnership
Radio 95 of Phoenix Limited Partnership ("Radio 95") was formed on May 3,
1996, to acquire and operate radio stations. Radio 95 was formed by Colfax as
the 1 percent general partner and Equity Group Holdings as the 99 percent
limited partner. On September 12, 1996, Radio 95 acquired KYOT-FM, KZON-FM,
KOY(AM), and KISO(AM), each in Phoenix, Arizona; KIDO(AM) and KLTB(FM), each in
Boise, Idaho; KARO(FM) in Caldwell, Idaho; WMIL-FM in Waukesha, Wisconsin; and
WOKY(AM) in Milwaukee, Wisconsin, for $95,000,000.
F-154
<PAGE> 302
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Sale of Stations
On August 24, 1996, Chancellor Radio Broadcasting Company ("Chancellor"), a
Delaware Corporation, agreed to purchase substantially all of the assets of
CALP, Radio 570, Radio 100, Radio 100 of Maryland, Radio 94 (with the exception
of KOOL(AM)), and Radio 95 (with the exception of KIDO(AM), KLTB(FM), and
KARO(FM)) for total consideration of $365,000,000 plus the net working capital
of the stations. The transaction closed on January 23, 1997. The agreement
stipulates that the purchase price for the assets be allocated among the limited
partnerships as follows:
<TABLE>
<CAPTION>
<S> <C>
CALP........................................................ $ 50,000,000
Radio 570................................................... 21,000,000
Radio 100................................................... 85,000,000
Radio 100 of Maryland....................................... 90,000,000
Radio 94.................................................... 30,000,000
Radio 95.................................................... 89,000,000
------------
$365,000,000
============
</TABLE>
On October 28, 1996, Jacor Broadcasting of Idaho, Inc., an Ohio
corporation, entered into an agreement to purchase substantially all of the
assets of radio stations KIDO(AM), KLTB(FM), and KARO(FM) for $11,000,000. The
transaction closed on January 31, 1997.
Partnership Allocations
The partnerships distribute cash from operations and allocate net profits
or losses to the partners, in general, in accordance with their stated interests
except that no partner shall receive any distribution from a partnership until
such time as the net invested capital of the general partner and Class A Limited
Partner have been distributed, along with a cumulative priority return on the
average net invested capital at an annual rate equal to the prime rate plus one
quarter of one percent compounded monthly.
In accordance with the Company's debt agreement (described below)
distributions to partners may be permitted on a quarterly basis if certain
requirements are met.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The accompanying financial statements are prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
Barter Transactions
The partnerships enter into barter transactions in which they provide
on-air advertising in exchange for goods and services. Revenues and expenses
from barter transactions are presented in the accompanying statement of revenues
and expenses based on the estimated fair market value of the goods or services
received. Barter revenue approximated $1,925,000, $1,590,000, and $1,870,000 for
the years ended December 31, 1996, 1995, and 1994, respectively; while barter
expense approximated $1,763,000, $1,486,000, and $1,520,000 for the years ended
December 31, 1996, 1995, and 1994, respectively.
Income Taxes
Provision for Federal and state income taxes has not been made in the
accompanying financial statements since the partnerships do not pay Federal and
state income taxes but rather allocate profits and losses to the partners for
inclusion in their respective income tax returns.
F-155
<PAGE> 303
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Buildings and Leasehold Improvements
Buildings and leasehold improvements are recorded at cost or appraised
value at acquisition. Depreciation is recorded using the straight-line method
over 31.5 or 40 years as prescribed by the Internal Revenue Code.
Furniture, Fixtures and Equipment
Furniture, fixtures and equipment are recorded at cost or appraised value
at acquisition. Depreciation is recorded using the straight-line method over the
estimated useful life of the assets, which is typically 5 to 7 years.
Intangible Assets
Intangible assets are recorded at cost or appraised value at acquisition.
Amortization is recorded over their useful lives. The estimated useful lives of
intangible assets as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
USEFUL LIFE
-----------
<S> <C>
FCC Licenses................................................ 7-25 years
Covenants Not to Compete.................................... 3 years
Employment Agreements....................................... 2 years
Organizational Costs........................................ 5 years
Start-up Costs.............................................. 5 years
</TABLE>
Land
Certain partners have contributed to Radio 570 a parcel of land in
Germantown, Maryland which is being used as the site for a new array of
broadcasting towers. The land has been recorded at its original purchase price
plus costs related to preparing the land for its intended use.
Radio 100 of Maryland acquired a parcel of land and property in Washington,
D.C., in connection with the acquisition of WJZE-FM. This parcel of land was
recorded at its appraised value at acquisition. This land was sold in February
1995.
Radio 100 acquired a parcel of land in Nowthen, Minnesota, through the
purchase of KQQL-FM. This parcel of land was recorded at its appraised value at
acquisition.
Radio 95 acquired various parcels of land located in Phoenix, Milwaukee,
and Boise in connection with its purchase of nine stations during 1996. These
parcels of land were recorded at their estimated market value at acquisition.
Estimates
The preparation of financial statements 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.
Fair Value of Financial Instruments
In 1995 the Company adopted Statement of Financial Accounting Standard
("SFAS") No. 107, "Disclosure about Fair Value of Financial Instruments," which
requires disclosures of fair value information about financial instruments,
whether or not recognized in the balance sheet.
F-156
<PAGE> 304
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amount reported in the balance sheets for cash, accounts
receivable, accounts payable and accrued liabilities, approximate their fair
value due to the immediate or short-term maturity of such instruments. The
carrying amount reported for long-term debt approximates fair value due to the
debt being priced at floating rates (see Note 7 for additional information).
4. PROPERTY AND EQUIPMENT:
The components of property and equipment at December 31, 1996 and 1995, are
summarized below:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Land.................................... $ 3,719,572 $ 1,901,663 $ 2,233,341
Buildings............................... 1,372,161 26,453 604,927
Construction in progress................ 27,660 27,232 201,404
Furniture, fixtures and equipment....... 11,323,175 8,520,853 7,690,841
Leasehold improvements.................. 835,407 816,031 522,806
----------- ----------- -----------
17,277,975 11,292,232 11,253,319
Less -- Accumulated depreciation........ (2,769,878) (2,616,508) (1,644,716)
----------- ----------- -----------
$14,508,097 $ 8,675,724 $ 9,608,603
=========== =========== ===========
</TABLE>
5. FCC LICENSES AND OTHER NONCURRENT ASSETS:
The components of FCC licenses and other noncurrent assets at December 31,
1996 and 1995, are summarized below:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
FCC licenses............................ $163,988,330 $ 39,505,773 $ 39,505,773
Covenants not to compete................ 1,931,834 8,493,147 8,493,147
Start-up and organization costs......... 2,489,973 2,132,587 2,153,036
Other................................... 1,376,763 958,245 1,891,395
------------ ------------ ------------
169,786,900 51,089,752 52,043,351
Less -- Accumulated amortization........ (22,207,301) (18,706,165) (14,389,548)
------------ ------------ ------------
$147,579,599 $ 32,383,587 $ 37,653,803
============ ============ ============
</TABLE>
6. RELATED-PARTY TRANSACTIONS:
Each partnership is involved in certain transactions with other
partnerships in the radio group related to sharing of services and purchasing.
These transactions are settled on a current basis through adjustments to
partners' equity accounts.
On January 18, 1995, CALP and Radio 100 of Maryland each entered into a 10
year agreement to lease tower space from Colfax Towers, Inc. The annual rental
payment for CALP equaled $31,200 and $30,000 for the years ended December 31,
1996 and 1995, respectively. The annual rental payment for Radio 100 of Maryland
equaled $37,200 and $36,000 for the years ended December 31, 1996 and 1995,
respectively. Colfax Towers, Inc., is owned by the shareholders of Colfax
Communications, Inc.
Employees of Colfax perform activities on behalf of and oversee the
operations of the radio stations included in the radio group. Colfax does not
charge any fees to the radio stations for the performance of such services.
Corporate expenses of $1,240,253, $1,354,296, and $1,144,082 related to those
services are not included in the financial statements of the radio group for the
years ending December 31, 1996, 1995, and 1994, respectively. These corporate
expenses were funded directly by the owners of Colfax Communications, Inc.
F-157
<PAGE> 305
COLFAX COMMUNICATIONS, INC. RADIO GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT:
On December 27, 1995, CALP, Radio 570, Radio 100, and Radio 100 of Maryland
entered into a $40 million revolving loan agreement. On April 2, 1996, under an
amendment to the loan agreement, CALP, Radio 570, Radio 100, Radio 100 of
Maryland, and Radio 94 (collectively, the "Borrowers") increased the amount
available under the revolving loan agreement to $60 million. At December 31,
1996, $55,650,000 was outstanding under this agreement. The proceeds were
allocated to each borrower on the basis of each station's capital account as
follows:
<TABLE>
<S> <C>
CALP........................................................ $ 5,702,360
Radio 570................................................... 4,156,587
Radio 100................................................... 16,423,860
Radio 100 of Maryland....................................... 9,214,544
Radio 94.................................................... 20,152,649
-----------
$55,650,000
===========
</TABLE>
The initial proceeds were used to repay the indebtedness of CALP to make
certain permitted distributions to partners of the Borrowers, and for working
capital purposes in the operations of the Borrowers. Borrowings under this
agreement bear interest at floating rates equal to prime and/or LIBOR (as
defined in the loan agreement) plus an applicable margin determined by a
leverage ratio. The expiration date of the loan agreement is December 31, 2002.
Under the loan agreement, the Borrowers are required to maintain a specific
leverage ratio and certain ratios pertaining to cash flow coverage.
In connection with the sale of the stations (discussed in Note 2), the debt
was repaid in full in January 1997.
8. COMMITMENTS:
The Radio Group has entered into various contracts for exclusive radio
broadcasting rights and other programming. In addition, the partnerships lease
office space and have entered into various service contracts, including certain
personal service contracts. These broadcasting rights, leases and service
contracts expire over periods ranging from 1997 to 2012. The minimum future
commitments under these agreements, leases and service contracts are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 3,766,028
1998........................................................ 2,826,433
1999........................................................ 1,178,594
2000........................................................ 1,140,345
2001........................................................ 646,234
Thereafter.................................................. 2,077,616
-----------
$11,635,250
===========
</TABLE>
9. RESTRUCTURING CHARGES:
During 1995, the Radio Group recorded restructuring costs of $737,729 at
certain radio stations. These costs included severance and salary payments to
terminated employees of $357,563, costs related to hiring a new general manager
at one of the radio stations of $135,519 and costs related to a loss on space
vacated by one of the radio stations of $244,647.
F-158
<PAGE> 306
ANNEX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
CHANCELLOR BROADCASTING COMPANY,
CHANCELLOR RADIO BROADCASTING COMPANY,
EVERGREEN MEDIA CORPORATION,
EVERGREEN MEZZANINE HOLDINGS CORPORATION
AND
EVERGREEN MEDIA CORPORATION OF LOS ANGELES
DATED AS OF FEBRUARY 19, 1997
AMENDED AND RESTATED AS OF JULY 31, 1997
<PAGE> 307
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
ARTICLE I
THE MERGER AND SUBSIDIARY MERGER
1.1 THE MERGER AND SUBSIDIARY MERGER................................. A-1
1.2 CLOSING.......................................................... A-2
1.3 EFFECTIVE TIME................................................... A-2
1.4 CERTIFICATES OF INCORPORATION.................................... A-2
1.5 CERTIFICATES OF DESIGNATIONS..................................... A-2
1.6 BYLAWS........................................................... A-3
1.7 DIRECTORS........................................................ A-3
1.8 OFFICERS......................................................... A-4
1.9 EFFECT ON EVERGREEN CAPITAL STOCK................................ A-4
(a) Outstanding Evergreen Common Stock.......................... A-4
(b) Exchange of Certificates.................................... A-4
(c) Outstanding Evergreen Convertible Exchangeable Preferred
Stock..................................................... A-4
1.10 EFFECT ON COMPANY CAPITAL STOCK.................................. A-4
(a) Outstanding Shares.......................................... A-4
(b) Treasury Shares............................................. A-5
(c) Outstanding Company Convertible Preferred Stock............. A-5
(d) Impact of Stock Splits, etc................................. A-5
1.11 EFFECT ON RADIO BROADCASTING CAPITAL STOCK....................... A-5
(a) Outstanding Common Stock of Radio Broadcasting.............. A-5
(b) Outstanding 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock........................................... A-5
(c) Outstanding 12% Exchangeable Preferred Stock................ A-5
1.12 EFFECT ON EMHC CAPITAL STOCK..................................... A-5
1.13 EFFECT ON EMCLA COMMON STOCK..................................... A-5
1.14 EXCHANGE OF CERTIFICATES......................................... A-5
(a) Paying Agent................................................ A-5
(b) Exchange Procedures......................................... A-6
(c) Letter of Transmittal....................................... A-6
(d) Distributions with Respect to Unexchanged Shares............ A-6
(e) No Further Ownership Rights in Shares, Company Convertible
Preferred Stock and Radio Broadcasting Preferred Stock.... A-7
(f) No Fractional Shares........................................ A-7
(g) Termination of Payment Fund................................. A-7
(h) No Liability................................................ A-7
1.15 DISSENTING SHARES................................................ A-8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EVERGREEN
2.1 ORGANIZATION, STANDING AND CORPORATE POWER....................... A-8
2.2 EVERGREEN CAPITAL STRUCTURE...................................... A-9
2.3 AUTHORITY; NONCONTRAVENTION...................................... A-9
2.4 SEC DOCUMENTS.................................................... A-11
2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS............................. A-11
2.6 NO EXTRAORDINARY PAYMENTS OR CHANGE IN BENEFITS.................. A-11
</TABLE>
A-i
<PAGE> 308
2.7 VOTING REQUIREMENTS.............................................. A-12
2.8 STATE TAKEOVER STATUTES.......................................... A-12
2.9 EVERGREEN FCC LICENSES; OPERATIONS OF EVERGREEN LICENSED
FACILITIES..................................................... A-12
2.10 BROKERS.......................................................... A-13
2.11 OPINION OF FINANCIAL ADVISOR..................................... A-13
2.12 FCC QUALIFICATION................................................ A-13
2.13 COMPLIANCE WITH APPLICABLE LAWS.................................. A-13
2.14 ABSENCE OF UNDISCLOSED LIABILITIES............................... A-13
2.15 LITIGATION....................................................... A-13
2.16 TRANSACTIONS WITH AFFILIATES..................................... A-13
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES OF EMHC AND EMCLA
2A.1 ORGANIZATION, STANDING AND CORPORATE POWER....................... A-14
2A.2 EMHC AND EMCLA CAPITAL STRUCTURE................................. A-14
2A.3 AUTHORITY; NONCONTRAVENTION...................................... A-14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND RADIO BROADCASTING
3.1 ORGANIZATION, STANDING AND CORPORATE POWER....................... A-15
3.2 COMPANY AND RADIO BROADCASTING CAPITAL STRUCTURE................. A-16
3.3 AUTHORITY; NONCONTRAVENTION...................................... A-17
3.4 SEC DOCUMENTS.................................................... A-18
3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS............................. A-18
3.6 NO EXTRAORDINARY PAYMENTS OR CHANGE IN BENEFITS.................. A-18
3.7 VOTING REQUIREMENTS.............................................. A-19
3.8 STATE TAKEOVER STATUTES.......................................... A-19
3.9 COMPANY FCC LICENSES; OPERATIONS OF COMPANY LICENSED
FACILITIES..................................................... A-19
3.10 BROKERS.......................................................... A-19
3.11 OPINION OF FINANCIAL ADVISOR..................................... A-20
3.12 FCC QUALIFICATION................................................ A-20
3.13 COMPLIANCE WITH APPLICABLE LAWS.................................. A-20
3.14 ABSENCE OF UNDISCLOSED LIABILITIES............................... A-20
3.15 LITIGATION....................................................... A-20
3.16 TRANSACTIONS WITH AFFILIATES..................................... A-20
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 PREPARATION OF FORM S-4S AND THE JOINT PROXY STATEMENT;
INFORMATION SUPPLIED........................................... A-21
4.2 MEETINGS OF COMPANY STOCKHOLDERS AND EVERGREEN STOCKHOLDERS...... A-22
A-ii
<PAGE> 309
4.3 ACCESS TO INFORMATION; CONFIDENTIALITY........................... A-22
4.4 PUBLIC ANNOUNCEMENTS............................................. A-22
4.5 ACQUISITION PROPOSALS............................................ A-23
4.6 CONSENTS, APPROVALS AND FILINGS.................................. A-23
4.7 AFFILIATES LETTERS............................................... A-24
4.8 NASDAQ LISTING................................................... A-24
4.9 STOCKHOLDER LITIGATION........................................... A-24
4.10 INDEMNIFICATION.................................................. A-24
4.11 LETTER OF THE COMPANY'S ACCOUNTANTS.............................. A-24
4.12 LETTER OF EVERGREEN'S ACCOUNTANTS................................ A-24
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
5.1 CONDUCT OF BUSINESS.............................................. A-25
5.2 COMPANY STOCK OPTIONS............................................ A-26
5.3 OTHER ACTIONS.................................................... A-27
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER....... A-27
(a) Stockholder Approval........................................ A-27
(b) FCC Order................................................... A-27
(c) Governmental and Regulatory Consents........................ A-27
(d) HSR Act..................................................... A-28
(e) No Injunctions or Restraints................................ A-28
(f) Nasdaq Listing.............................................. A-28
(g) Form S-4s................................................... A-28
6.2 CONDITIONS TO OBLIGATIONS OF EVERGREEN, EMCLA AND EMHC........... A-28
(a) Representations and Warranties.............................. A-28
(b) Performance of Obligations of the Company and Radio
Broadcasting.............................................. A-28
(c) Tax Opinion................................................. A-28
6.3 CONDITIONS TO OBLIGATION OF THE COMPANY AND RADIO
BROADCASTING..................................................... A-28
(a) Representations and Warranties.............................. A-28
(b) Performance of Obligations of Evergreen, EMCLA and EMHC..... A-29
(c) Tax Opinion................................................. A-29
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION...................................................... A-29
7.2 EFFECT OF TERMINATION............................................ A-29
7.3 AMENDMENT........................................................ A-30
7.4 EXTENSION; WAIVER................................................ A-30
7.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER........ A-30
A-iii
<PAGE> 310
ARTICLE VIII
SURVIVAL OF PROVISIONS
8.1 SURVIVAL......................................................... A-30
ARTICLE IX
NOTICES
9.1 NOTICES.......................................................... A-30
ARTICLE X
MISCELLANEOUS
10.1 ENTIRE AGREEMENT................................................. A-32
10.2 EXPENSES......................................................... A-32
10.3 COUNTERPARTS..................................................... A-32
10.4 NO THIRD PARTY BENEFICIARY....................................... A-32
10.5 GOVERNING LAW.................................................... A-32
10.6 ASSIGNMENT; BINDING EFFECT....................................... A-32
10.7 HEADINGS, GENDER, ETC............................................ A-32
10.8 INVALID PROVISIONS............................................... A-32
10.9 VIACOM TRANSACTION............................................... A-32
Annex I Form of Amendment to EMHC Certificate of Incorporation
Annex II Form of Amendment to EMCLA Certificate of Incorporation
Annex III Form of Amended and Restated Certificate of Incorporation of Parent
Annex IV Form of Amended and Restated Bylaws of Parent
Exhibit A Form of Affiliate Letter
Exhibit B Form of Certificate of Chancellor Broadcasting Company
Exhibit C Form of Certificate of Chancellor Radio Broadcasting Company
Exhibit D Form of Certificate of 5% Stockholder of Chancellor Broadcasting
Company
Exhibit E Form of Certificate of Evergreen Media Corporation
Exhibit F Form of Certificate of Evergreen Mezzanine Holdings Corporation
Exhibit G Form of Certificate of Evergreen Media Corporation of Los Angeles
Exhibit H Form of Tax Opinion of Latham & Watkins
Exhibit I Form of Tax Opinion of Weil, Gotshal & Manges LLP
A-iv
<PAGE> 311
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement"),
dated as of February 19, 1997 and amended and restated as of July 31, 1997, by
and among CHANCELLOR BROADCASTING COMPANY, a Delaware corporation (the
"Company"), CHANCELLOR RADIO BROADCASTING COMPANY, a Delaware corporation and a
direct subsidiary of the Company ("Radio Broadcasting"), EVERGREEN MEDIA
CORPORATION, a Delaware corporation ("Evergreen"), EVERGREEN MEDIA CORPORATION
OF LOS ANGELES, a Delaware corporation and a direct subsidiary of Evergreen
("EMCLA"), and EVERGREEN MEZZANINE HOLDINGS CORPORATION, a Delaware corporation
and a direct subsidiary of Evergreen ("EMHC").
RECITALS
WHEREAS, the Company, Radio Broadcasting and Evergreen are parties to that
certain Agreement and Plan of Merger, dated as of February 19, 1997 (the "Old
Agreement");
WHEREAS, Chancellor, Radio Broadcasting and Evergreen desire hereby to
amend and restate the Old Agreement in its entirety and to add EMCLA and EMHC as
parties to the Agreement;
WHEREAS, prior to the Merger and the Subsidiary Merger (each as hereinafter
defined), Evergreen will contribute all of the capital stock of EMCLA to EMHC as
a capital contribution, such that EMCLA shall become a wholly-owned subsidiary
of EMHC;
WHEREAS, in connection with the execution and delivery of the Old
Agreement, the Company and Evergreen entered into that certain Stockholders
Agreement, dated as of February 19, 1997 (the "Stockholders Agreement"), with
(i) certain beneficial and record holders (the "Principal Company Stockholders")
of the Class A Common Stock, $0.01 par value ("Company Class A Common Stock")
and Class B Common Stock, $0.01 par value ("Company Class B Common Stock" and,
collectively with the Company Class A Common Stock, the "Shares"), of the
Company, and (ii) Scott K. Ginsburg, the beneficial and record holder (the
"Principal Evergreen Stockholder") of substantially all of the outstanding Class
B Common Stock, $0.01 par value ("Evergreen Class B Common Stock"), of
Evergreen, which Stockholders Agreement provides for certain matters with
respect to their respective Shares and Evergreen Class B Common Stock, including
among other things, voting such Shares and Evergreen Class B Common Stock in
favor of the adoption of this Agreement; and
WHEREAS, Evergreen, the Company, Radio Broadcasting, EMCLA and EMHC desire
to make certain representations, warranties, covenants and agreements in
connection with such mergers and also to prescribe various conditions to such
mergers;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER AND SUBSIDIARY MERGER
1.1 The Merger and Subsidiary Merger. Subject to the terms and conditions
of this Agreement, (i) at the Effective Time (as defined in Section 1.3), the
Company shall be merged with and into EMHC (the "Merger"), and thereafter (ii)
at the Subsidiary Merger Effective Time (as defined in Section 1.3) Radio
Broadcasting will be merged with and into EMCLA (the "Subsidiary Merger"), each
in a transaction intended to qualify as a tax-free reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), in
accordance with the Delaware General Corporation Law (the "Delaware Code"), and
the separate corporate existences of each of the Company and Radio Broadcasting
shall cease and EMHC shall continue as the surviving corporation of the Merger
under the name Chancellor Mezzanine
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Holdings Corporation (as such, the "Surviving Corporation") and EMCLA shall
continue as the surviving corporation of the Subsidiary Merger under the name
Chancellor Media Corporation of Los Angeles (as such, the "Subsidiary Surviving
Corporation"), each under the laws of the State of Delaware with all the rights,
privileges, immunities and powers, and subject to all the duties and
liabilities, of a corporation organized under the Delaware Code. The Merger and
Subsidiary Merger shall have the effects set forth in the Delaware Code.
1.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1, and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the closing of the Merger (the "Closing") will take place at 10:00
a.m., Dallas, Texas time, on the second business day following the date on which
the last to be fulfilled or waived of the conditions set forth in Article VI
shall be fulfilled or waived in accordance with this Agreement (the "Closing
Date"), at the offices of Weil, Gotshal & Manges LLP, 100 Crescent Court, Suite
1300, Dallas, Texas 75201, unless another date, time or place is agreed to in
writing by the parties hereto. Subject to the consummation of the Merger, the
closing of the Subsidiary Merger (the "Subsidiary Closing") shall take place
(the "Subsidiary Closing Date") at the same location as the Closing but at a
date and time agreed to in writing by the parties hereto.
1.3 Effective Time. The parties hereto will file with the Secretary of
State of the State of Delaware (the "Delaware Secretary of State") on the date
of the Closing and on the date of the Subsidiary Closing (or on such other date
or dates as the parties may agree) certificates of merger or other appropriate
documents, executed in accordance with the relevant provisions of the Delaware
Code, and make all other filings or recordings required under the Delaware Code
in connection with the Merger and the Subsidiary Merger. The Merger and the
Subsidiary Merger shall each become effective upon the filing of the respective
certificate of merger with the Delaware Secretary of State, or at such later
time specified in such certificate of merger (the "Effective Time" and the
"Subsidiary Merger Effective Time" respectively). The Subsidiary Merger shall
not become effective until after the Effective Time.
1.4 Certificates of Incorporation.
(a) The Certificate of Incorporation of EMHC, as amended as set forth in
Annex I hereto, shall be the Certificate of Incorporation of the Surviving
Corporation, and the Certificate of Incorporation of EMCLA, as amended as set
forth in Annex II hereto, shall be the Certificate of Incorporation of the
Subsidiary Surviving Corporation, each until thereafter amended in accordance
with their respective terms and as provided by applicable law. From and after
the Effective Time, the name of the Surviving Corporation shall be Chancellor
Mezzanine Holdings Corporation and after the Subsidiary Merger Effective Time
the name of the Subsidiary Surviving Corporation shall be Chancellor Media
Corporation of Los Angeles.
(b) Concurrently with the execution and delivery of this Agreement, the
Board of Directors of Evergreen has adopted a resolution setting forth and
approving the Amended and Restated Certificate of Incorporation in the form set
forth as Annex III hereto (the "Parent Charter"), and directing that the Parent
Charter be considered by the stockholders of Evergreen at the Evergreen
Stockholders Meeting (as hereinafter defined), all in accordance with the
provisions of the Delaware Code. Prior to the Effective Time of the Merger,
Evergreen shall file with the Delaware Secretary of State a certificate of
amendment to its certificate of incorporation setting forth the Parent Charter,
and from and after the effectiveness of the Parent Charter, the name of
Evergreen shall be changed to Chancellor Media Corporation (as such, the
"Parent").
1.5 Certificates of Designations. At the Subsidiary Merger Effective Time,
the Board of Directors of the Surviving Subsidiary Corporation shall authorize
the designation of two series of preferred stock, $0.01 par value (collectively,
the "Merger Preferred Stock"), of the Subsidiary Surviving Corporation, and at
the Effective Time, the Board of Directors of Parent shall authorize the
designation of a series of preferred stock, $0.01 par value (the "Parent
Convertible Preferred Stock"), so as to permit the Subsidiary Surviving
Corporation and Parent to issue the shares of Merger Preferred Stock and Parent
Convertible Preferred Stock pursuant to Sections 1.10 and 1.11 hereof, and the
Subsidiary Surviving Corporation shall file with the Delaware Secretary of State
immediately following the Subsidiary Merger Effective Time a certificate of
designations with respect to each series of Merger Preferred Stock, and the
Parent shall file with the Delaware
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Secretary of State immediately following the Effective Time a certificate of
designations with respect to the Parent Convertible Preferred Stock, each
pursuant to the Delaware Code.
1.6 Bylaws.
(a) The Bylaws of EMHC in effect immediately prior to the Merger shall be
the Bylaws of the Surviving Corporation, and the Bylaws of EMCLA in effect
immediately prior to the Subsidiary Merger shall be the Bylaws of the Subsidiary
Surviving Corporation, each until thereafter amended in accordance with their
terms and as provided by applicable law.
(b) Concurrently with the execution and delivery of this Agreement, the
Board of Directors of Evergreen has adopted the Amended and Restated Bylaws set
forth in Annex IV, to be effective as of the Effective Time, and such Bylaws
shall be the Bylaws of Parent until thereafter amended in accordance with their
terms and as provided by applicable law.
1.7 Directors. The directors of Parent at the Effective Time shall be as
set forth below:
Class I Directors
Eric C. Neuman
Perry J. Lewis
Class II Directors
Lawrence D. Stuart, Jr.
Steven Dinetz
Jeffrey A. Marcus
James E. de Castro
Class III Directors
Thomas O. Hicks
Scott K. Ginsburg
John H. Massey
Thomas J. Hodson
The directors of the Surviving Corporation and the Subsidiary Surviving
Corporation immediately following the Effective Time and Subsidiary Merger
Effective Time, respectively, shall be the same as the directors of the Parent
set forth in this Section 1.7, except that such directors will not be classified
as to term.
In addition, prior to the Effective Time, the Board of Directors of the
Company shall be entitled to nominate one additional individual reasonably
satisfactory to Evergreen, and such nominee, if any, shall become a Class I
director of Parent at the Effective Time, and a director of the Surviving
Corporation and Subsidiary Surviving Corporation at the Effective Time and
Subsidiary Merger Effective Time, respectively. At or prior to the Effective
Time, the Board of Directors of Evergreen and EMHC shall deliver or cause to be
delivered to the Company (i) the resignations of each of the then current
directors of Evergreen that is not designated to be a director of the Parent and
the Surviving Corporation as set forth in this Section 1.7, to be effective as
of the Effective Time (the "Board Resignations"), and (ii) certified copies of
the resolutions of the remaining members of the Board of Directors of Evergreen
and the sole director of EMHC appointing the Board of Directors of Parent and
EMHC, respectively, as set forth in this Section 1.7, to be effective as of the
Effective Time (the "Parent and EMHC Board Appointments"). In addition, at or
prior to the Subsidiary Merger Effective Time, the sole director of EMCLA shall
deliver or cause to be delivered to the Company certified copies of the
resolutions of the remaining members of the Board of Directors of EMCLA
appointing the Board of Directors of EMCLA as set forth in this Section 1.7, to
be effective as of the Subsidiary Merger Effective Time (the "EMCLA Board
Appointments" and, collectively with the Parent and EMHC Board Appointments, the
"Board Appointments"). Each Class I director, Class II director and Class III
director of Parent will hold office from the Effective Time until the 1998, 1999
and 2000 annual meetings of Parent, respectively, and in all cases, until his or
her respective successor is duly elected or appointed and qualified in
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the manner provided in the Certificate of Incorporation or Bylaws of Parent, or
as otherwise provided by applicable law. Each director of the Surviving
Corporation and the Subsidiary Surviving Corporation will hold office from the
Effective Time and Subsidiary Merger Effective Time, respectively, and until his
or her respective successor is duly elected or appointed and qualified in the
manner provided in the Surviving Corporation's and Subsidiary Surviving
Corporation's respective Certificate of Incorporation and Bylaws or as otherwise
provided by applicable law.
1.8 Officers. The initial senior executive officers of Parent and the
Surviving Corporation at the Effective Time and of the Subsidiary Surviving
Corporation at the Subsidiary Merger Effective Time shall be as set forth below:
<TABLE>
<S> <C>
Thomas O. Hicks.......................... Chairman of the Board
Scott K. Ginsburg........................ President and Chief Executive Officer
Steven Dinetz............................ Co-Chief Operating Officer
James E. de Castro....................... Co-Chief Operating Officer
Matthew E. Devine........................ Chief Financial Officer
</TABLE>
Each such officer of Parent and the Surviving Corporation will hold office
from the Effective Time and each such officer of the Subsidiary Surviving
Corporation will hold office from the Subsidiary Merger Effective Time, and in
each case, until his respective successor is duly elected or appointed and
qualified in the manner provided in the respective Certificate of Incorporation
and Bylaws of each of Parent, the Surviving Corporation and Subsidiary Surviving
Corporation, or as otherwise provided by applicable law. The names, titles and
responsibilities of the other individuals who initially will hold officerships
with Parent, the Surviving Corporation and Subsidiary Surviving Corporation
shall be determined by Evergreen and the Company prior to the Effective Time,
and the election of these persons shall be considered by the Board of Directors
of each of Parent and the Surviving Corporation following the Effective Time and
by the Board of Directors of the Subsidiary Surviving Corporation following the
Subsidiary Merger Effective Time.
1.9 Effect On Evergreen Capital Stock. (a) Outstanding Evergreen Common
Stock. Each of the shares of Evergreen Class B Common Stock and Class A Common
Stock, $0.01 par value, of Evergreen ("Evergreen Class A Common Stock" and
collectively with the Evergreen Class B Common Stock, the "Evergreen Common
Stock") issued and outstanding immediately prior to the Effective Time (other
than shares of Evergreen Common Stock held as treasury shares by Evergreen)
shall, by virtue of the effectiveness of the Parent Charter and without any
action on the part of the holder thereof, be reclassified, changed and converted
into one validly issued, fully paid and nonassessable share of the common stock,
$0.01 par value ("Parent Common Stock"), of Parent.
(b) Exchange of Certificates. Evergreen shall instruct its transfer agent
that from and after the Effective Time, upon the presentation for transfer of
any shares of Evergreen Common Stock or at the request of any holder thereof,
the transfer agent shall issue to the transferee or holder thereof certificates
representing that number of shares of Parent Common Stock into which such shares
of Evergreen Common Stock were reclassified, changed and converted pursuant to
the effectiveness of the Parent Charter.
(c) Outstanding Evergreen Convertible Exchangeable Preferred Stock. Each
share of $3.00 Convertible Exchangeable Preferred Stock, $0.01 par value (the
"Evergreen Convertible Exchangeable Preferred Stock"), of Evergreen outstanding
upon the effectiveness of the Parent Charter shall remain outstanding and shall
become shares of preferred stock of Parent having the powers, preferences and
relative rights set forth in the certificate of designation creating the
Evergreen Convertible Exchangeable Preferred Stock.
1.10 Effect On Company Capital Stock. (a) Outstanding Shares. Each of the
Shares of the Company issued and outstanding immediately prior to the Effective
Time (other than Shares held as treasury shares by the Company) shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into a right to receive 0.9091 validly issued, fully paid and
nonassessable shares of Parent Common Stock (the "Exchange Ratio"). The shares
of Parent Common Stock to be issued to holders of Shares in accordance with this
Section 1.10(a), any cash to be paid in accordance with Section 1.14(f) in lieu
of fractional shares of Parent Common Stock, and the shares of Merger Preferred
Stock and Parent Convertible
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Preferred Stock to be issued to holders of Company Convertible Preferred Stock
(as hereinafter defined) and Radio Broadcasting Preferred Stock (as hereinafter
defined) are referred to collectively as the "Merger Consideration."
(b) Treasury Shares. Each Share issued and outstanding immediately prior to
the Effective Time which is then held as a treasury share by the Company shall,
by virtue of the Merger and without any action on the part of the Company, be
cancelled and retired and cease to exist, without any conversion thereof.
(c) Outstanding Company Convertible Preferred Stock. Each share (other than
a Dissenting Share, as defined in Section 1.15 below) of 7% Convertible
Preferred Stock, par value $0.01 per share ("Company Convertible Preferred
Stock"), of the Company outstanding immediately prior to the Effective Time
shall be converted into a right to receive one share of Parent Convertible
Preferred Stock having substantially identical powers, preferences and relative
rights as the Company Convertible Preferred Stock.
(d) Impact of Stock Splits, etc. In the event of any change in Evergreen
Common Stock and/or Shares between the date of this Agreement and the Effective
Time of the Merger by reason of any stock split, stock dividend, subdivision,
reclassification, recapitalization, combination, exchange of shares or the like,
the number and class of shares of Parent Common Stock to be issued and delivered
in the Merger in exchange for each outstanding Share as provided in this
Agreement shall be proportionately adjusted.
1.11 Effect On Radio Broadcasting Capital Stock. (a) Outstanding Common
Stock of Radio Broadcasting. Each of the shares of common stock, $0.01 par
value, of Radio Broadcasting issued and outstanding immediately prior to the
Subsidiary Merger Effective Time shall, by virtue of the Subsidiary Merger, be
cancelled, and no consideration shall be delivered in exchange therefor.
(b) Outstanding 12 1/4% Series A Senior Cumulative Exchangeable Preferred
Stock. Each share (other than a Dissenting Share) of 12 1/4% Series A Senior
Cumulative Exchangeable Preferred Stock, par value $0.01 per share ("Radio
Broadcasting 12 1/4% Preferred Stock"), of Radio Broadcasting outstanding
immediately prior to the Subsidiary Merger Effective Time shall be converted
into a right to receive one share of preferred stock of the Subsidiary Surviving
Corporation having substantially identical powers, preferences and relative
rights as the Radio Broadcasting 12 1/4% Preferred Stock.
(c) Outstanding 12% Exchangeable Preferred Stock. Each share (other than a
Dissenting Share) of 12% Exchangeable Preferred Stock, par value $0.01 per share
("Radio Broadcasting 12% Preferred Stock" and, collectively with the Radio
Broadcasting 12 1/4% Preferred Stock, the "Radio Broadcasting Preferred Stock"),
of Radio Broadcasting outstanding immediately prior to the Subsidiary Merger
Effective Time shall be converted into a right to receive one share of preferred
stock of the Subsidiary Surviving Corporation having substantially identical
powers, preferences and relative rights as the Radio Broadcasting 12% Preferred
Stock.
1.12 Effect On EMHC Capital Stock. Each of the shares of common stock,
$0.01 par value ("EMHC Common Stock"), of EMHC issued and outstanding
immediately prior to the Effective Time shall remain outstanding and, following
the Merger, shall represent all of the issued and outstanding capital stock of
the Surviving Corporation.
1.13 Effect On EMCLA Common Stock. Each of the shares of common stock,
$0.01 par value ("EMCLA Common Stock"), of EMCLA issued and outstanding
immediately prior to the Subsidiary Merger Effective Time shall remain
outstanding and, following the Subsidiary Merger, shall represent all of the
issued and outstanding common stock of the Subsidiary Surviving Corporation.
1.14 Exchange Of Certificates. (a) Paying Agent. As of the Effective Time,
Parent shall deposit with its transfer agent and registrar (the "Paying Agent"),
for the benefit of the holders of Shares and Company Convertible Preferred Stock
(other than holders of Dissenting Shares), and as of the Subsidiary Merger
Effective Time, the Subsidiary Surviving Corporation shall deposit with the
Paying Agent, for the benefit of the holders of Radio Broadcasting Preferred
Stock (other than holders of Dissenting Shares), certificates representing the
shares of Parent Common Stock, Parent Convertible Preferred Stock and Merger
Preferred Stock to be issued to such holders pursuant to Sections 1.10 and 1.11
(such certificates, together with any
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dividends or distributions with respect to such certificates and any cash paid
in lieu of fractional shares pursuant to Section 1.14(f), being hereinafter
referred to as the "Payment Fund").
(b) Exchange Procedures. As soon as practicable after the Effective Time
and the Subsidiary Merger Effective Time, as applicable, each holder of an
outstanding certificate or certificates which prior thereto represented Shares,
shares of Company Convertible Preferred Stock or shares of Radio Broadcasting
Preferred Stock shall, upon surrender to the Paying Agent of such certificate or
certificates and acceptance thereof by the Paying Agent, be entitled to a
certificate representing that number of whole shares of Parent Common Stock,
Parent Convertible Preferred Stock or Merger Preferred Stock which the aggregate
number of Shares, shares of Company Convertible Preferred Stock or shares of
Radio Broadcasting Preferred Stock previously represented by such certificate or
certificates surrendered shall have been converted into the right to receive
pursuant to Sections 1.10 and 1.11 of this Agreement (with respect to the Parent
Common Stock, including any cash to be received in lieu of fractional shares, as
provided in Section 1.14(f) below). The Paying Agent shall accept such
certificates upon compliance with such reasonable terms and conditions as the
Paying Agent may impose to effect an orderly exchange thereof in accordance with
its normal exchange practices. If the Merger Consideration (or any portion
thereof) is to be delivered to any person other than the person in whose name
the certificate or certificates representing Shares, shares of Company
Convertible Preferred Stock or shares of Radio Broadcasting Preferred Stock
surrendered in exchange therefor is registered, it shall be a condition to such
exchange that the certificate or certificates so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the person
requesting such exchange shall pay to the Paying Agent any transfer or other
taxes required by reason of the payment of such consideration to a person other
than the registered holder of the certificate(s) surrendered, or shall establish
to the satisfaction of the Paying Agent that such tax has been paid or is not
applicable. After the Effective Time, there shall be no further transfer on the
records of the Company, and after the Subsidiary Merger Effective Time, there
shall be no further transfer on the records of Radio Broadcasting or, in each
case, their respective transfer agents, of certificates representing Shares,
shares of Company Convertible Preferred Stock or shares of Radio Broadcasting
Preferred Stock and if such certificates are presented to the Surviving
Corporation or Subsidiary Surviving Corporation for transfer, they shall be
cancelled against delivery of the appropriate Merger Consideration as
hereinabove provided. Until surrendered as contemplated by this Section 1.14(b),
each certificate representing Shares, shares of Company Convertible Preferred
Stock and shares of Radio Broadcasting Preferred Stock (other than certificates
representing treasury Shares to be cancelled in accordance with Section
1.10(b)), shall be deemed at any time after the Effective Time and Subsidiary
Merger Effective Time, as applicable, to represent only the right to receive
upon such surrender the appropriate Merger Consideration, without any interest
thereon, as contemplated by Sections 1.10 and 1.11.
(c) Letter of Transmittal. Promptly after the Effective Time and the
Subsidiary Merger Effective Time, as applicable (but in no event more than five
business days thereafter), Parent and the Subsidiary Surviving Corporation, as
appropriate, shall require the Paying Agent to mail to each record holder of
certificates that immediately prior to the Effective Time represented Shares,
shares of Company Convertible Preferred Stock or shares of Radio Broadcasting
Preferred Stock which have been converted pursuant to Sections 1.10 and 1.11, a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
certificates representing Shares, shares of Company Convertible Preferred Stock
or shares of Radio Broadcasting Preferred Stock to the Paying Agent, and which
shall be in such form and have such provisions as Parent and the Subsidiary
Surviving Corporation reasonably may specify) and instructions for use in
surrendering such certificates and receiving the consideration to which such
holder shall be entitled therefor pursuant to Sections 1.10 and 1.11.
(d) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Stock or Parent Convertible
Preferred Stock with a record date after the Effective Time, or with respect to
Merger Preferred Stock with a record date after the Subsidiary Merger Effective
Time, shall be paid to the holder of any certificate that immediately prior to
the Effective Time represented Shares or shares of Company Convertible Preferred
Stock or immediately prior to the Subsidiary Merger Effective Time represented
shares of Radio Broadcasting Preferred Stock which have been converted pursuant
to Sections 1.10 or 1.11, until the surrender for exchange of such certificate
in accordance with this Article I.
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Following surrender for exchange of any such certificate, there shall be paid to
the holder of such certificate, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time or Subsidiary Merger Effective Time, as applicable,
theretofore paid with respect to the number of whole shares of Parent Common
Stock, Parent Convertible Preferred Stock or Merger Preferred Stock into which
the Shares, shares of Company Convertible Preferred Stock or shares of Radio
Broadcasting Preferred Stock represented by such certificate immediately prior
to the Effective Time and the Subsidiary Merger Effective Time, as applicable,
were converted pursuant to Sections 1.10 or 1.11, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time or Subsidiary Merger Effective Time, as applicable, but
prior to such surrender, and with a payment date subsequent to such surrender,
payable with respect to such whole shares of Parent Common Stock, Parent
Convertible Preferred Stock or Merger Preferred Stock.
(e) No Further Ownership Rights in Shares, Company Convertible Preferred
Stock and Radio Broadcasting Preferred Stock. The Merger Consideration (or, in
respect of Dissenting Shares, the cash payment therefor) paid upon the surrender
for exchange of certificates representing Shares, shares of Company Convertible
Preferred Stock or shares of Radio Broadcasting Preferred Stock in accordance
with the terms of this Article I shall be deemed to have been issued and paid in
full satisfaction of all rights pertaining to the Shares, shares of Company
Convertible Preferred Stock or shares of Radio Broadcasting Preferred Stock
theretofore represented by such certificates, subject, however, to Parent's or
the Subsidiary Surviving Corporation's obligation (if any) to pay any dividends
or make any other distributions with a record date prior to the Effective Time
or Subsidiary Merger Effective Time, as applicable, which may have been declared
by the Company or Radio Broadcasting, as appropriate, on the Shares, shares of
Company Convertible Preferred Stock, or shares of Radio Broadcasting Preferred
Stock in accordance with the terms of this Agreement (or, with respect to the
Company Convertible Preferred Stock and Radio Broadcasting Preferred Stock, in
accordance with their respective terms) or prior to the date of this Agreement
and which remain unpaid at the Effective Time or Subsidiary Merger Effective
Time.
(f) No Fractional Shares. No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for exchange of
certificates that immediately prior to the Effective Time represented Shares
which have been converted pursuant to Section 1.10, and each holder of Shares
who would otherwise have been entitled to receive a fraction of a share of
Parent Common Stock (after taking into account all certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Parent Common Stock
multiplied by the closing price per share of Evergreen Class A Common Stock on
the Nasdaq National Market on the trading day immediately prior to the Effective
Time.
(g) Termination of Payment Fund. Any portion of the Payment Fund which
remains undistributed to the holders of the certificates representing Shares,
shares of Company Convertible Preferred Stock or shares of Radio Broadcasting
Preferred Stock for 120 days after the Effective Time and Subsidiary Merger
Effective Time, as applicable, shall be delivered to Parent or the Subsidiary
Surviving Corporation, as applicable, upon demand, and any holders of Shares,
shares of Company Convertible Preferred Stock or shares of Radio Broadcasting
Preferred Stock who have not theretofore complied with this Article I shall
thereafter look only to Parent or the Subsidiary Surviving Corporation, as
appropriate, and only as general creditors thereof for payment of their claims
for any Merger Consideration and any dividends or distributions with respect to
Parent Common Stock, Parent Convertible Preferred Stock or Merger Preferred
Stock.
(h) No Liability. None of Evergreen, the Company, Radio Broadcasting, EMHC,
EMCLA or the Paying Agent shall be liable to any person in respect of any cash,
shares, dividends or distributions payable from the Payment Fund delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any certificates representing Shares, shares of Company
Convertible Preferred Stock or shares of Radio Broadcasting Preferred Stock
shall not have been surrendered prior to five years after the Effective Time or
Subsidiary Merger Effective Time, as applicable (or immediately prior to such
earlier date on which any Merger Consideration in respect of such certificate
would otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 2.3)), any such cash, shares, dividends or distributions
payable in respect of such certificate shall, to the extent permitted by
applicable law, become the
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property of Parent or the Subsidiary Surviving Corporation, as appropriate, free
and clear of all claims or interest of any person previously entitled thereto.
1.15 Dissenting Shares. Notwithstanding anything herein to the contrary in
this Agreement, shares of Company Convertible Preferred Stock or Radio
Broadcasting Preferred Stock, as applicable, outstanding immediately prior to
the Effective Time and held by a holder who has not voted in favor of the Merger
or Subsidiary Merger, as applicable, or consented thereto and who properly
demands in writing appraisal of such shares of Company Convertible Preferred
Stock or Radio Broadcasting Preferred Stock in accordance with Section 262 of
the Delaware Code and who shall not have withdrawn such demand or otherwise have
forfeited appraisal rights, shall not be converted into or represent the right
to receive the appropriate Merger Consideration therefor ("Dissenting Shares").
Such stockholders shall be entitled to receive payment of the appraised value of
such shares of Company Convertible Preferred Stock or Radio Broadcasting
Preferred Stock, as the case may be, held by them in accordance with the
provisions of Section 262 of the Delaware Code, except that all Dissenting
Shares held by stockholders who shall have failed to perfect or who effectively
shall have withdrawn or lost their rights to appraisal of such securities under
Section 262 shall thereupon be deemed to have been converted into, as of the
Effective Time or Subsidiary Merger Effective Time, as applicable, the right to
receive, without any interest thereon, the applicable Merger Consideration, upon
surrender, in the manner provided in this Article I, of the certificate or
certificates that formerly represented such securities. The Company shall take
all actions required to be taken by it in accordance with Section 262(d)(1) of
the Delaware Code with respect to the holders of Company Convertible Preferred
Stock as of the record date for the Stockholders Meeting (as defined in Section
4.2(a)) and shall otherwise comply with the provisions of Section 262 of the
Delaware Code. Radio Broadcasting and EMCLA or the Subsidiary Surviving
Corporation, as applicable, shall, prior to or within ten days after the
Subsidiary Merger Effective Time, take all actions required to be taken by it
pursuant to Section 262(d)(2) of the Delaware Code with respect to all holders
of record, as of the Subsidiary Merger Effective Time or such earlier record
date as may be declared by the Board of Directors of Radio Broadcasting, of the
Radio Broadcasting Preferred Stock. The Company and Radio Broadcasting shall
give Evergreen and EMCLA prompt written notice of any demands for appraisal
received by the Company or Radio Broadcasting with respect to the Company
Convertible Preferred Stock or the Radio Broadcasting Preferred Stock,
withdrawals of such demands, and any other instruments served pursuant to
Delaware law and received by the Company or Radio Broadcasting, and Evergreen or
EMCLA shall have the right to participate in all negotiations and proceedings
with respect to such demands. Prior to the Effective Time or the Subsidiary
Merger Effective Time, as applicable, the Company and Radio Broadcasting shall
not, except with the prior written consent of Evergreen or EMCLA, make any
payments with respect to any demands for appraisal, or settle or offer to
settle, any such demands.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EVERGREEN
Evergreen represents and warrants to the Company and Radio Broadcasting, as
of February 19, 1997 (except to the extent specifically made as of an earlier
date or the date hereof), as follows:
2.1 Organization, Standing and Corporate Power. Evergreen and each of its
Significant Subsidiaries (as defined below) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite corporate power and authority to
carry on its business as now being conducted. Evergreen and each of its
Significant Subsidiaries is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so qualified could not reasonably be expected to
have a material adverse effect on the business, properties, results of
operations, or condition (financial or otherwise) of Evergreen and its
subsidiaries, considered as a whole (an "Evergreen Material Adverse Effect");
provided, however, that for purposes of Sections 2.13, 2.14, 2.15 and 2.16, no
fact, event or circumstance shall be deemed to constitute an Evergreen Material
Adverse Effect unless, in addition to otherwise satisfying the elements of the
definition given above, the relevant fact, event or circumstance not disclosed
pursuant to such representations would be material facts or circumstances, the
omission of which in
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a document filed with the SEC (as hereinafter defined) pursuant to the Exchange
Act would be such as to cause the statements contained in such filings to be
misleading within the meaning of Rule 10b-5 under the Exchange Act. Evergreen
has delivered to the Company and Radio Broadcasting complete and correct copies
of its Certificate of Incorporation and Bylaws, as amended to the date of the
Old Agreement. For purposes of this Agreement, a "Significant Subsidiary" of any
person means any subsidiary of such person that would constitute a "significant
subsidiary" within the meaning of Rule 1-02 of Regulation S-X of the Securities
and Exchange Commission (the "SEC").
2.2 Evergreen Capital Structure. The authorized capital stock of Evergreen
consists of (i) 75,000,000 shares of Evergreen Class A Common Stock, (ii)
4,500,000 shares of Evergreen Class B Common Stock and (iii) 6,000,000 shares of
preferred stock, $0.01 par value (the "Preferred Stock"). At the close of
business on February 18, 1997: (i) 39,100,750 shares of Evergreen Class A Common
Stock were issued and outstanding, 1,720,091 shares of Evergreen Class A Common
Stock were reserved for issuance pursuant to outstanding options or warrants to
purchase Evergreen Class A Common Stock which have been granted to directors,
officers or employees of Evergreen or others ("Evergreen Stock Options"); (ii)
3,114,066 shares of Evergreen Class B Common Stock were issued and outstanding
and no shares of Evergreen Class B Common Stock were reserved for issuance for
any purpose; and (iii) no shares of Preferred Stock were issued and outstanding.
Except as set forth above, at the close of business on February 18, 1997, no
shares of capital stock or other equity securities of Evergreen were authorized,
issued, reserved for issuance or outstanding. All outstanding shares of capital
stock of Evergreen are, and all shares which may be issued pursuant to
Evergreen's stock option plans, as amended to the date hereof (the "Evergreen
Stock Option Plans"), or any outstanding Evergreen Stock Options will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. No bonds, debentures, notes or other indebtedness
of Evergreen or any subsidiary of Evergreen having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which the stockholders of Evergreen or any subsidiary of
Evergreen may vote are issued or outstanding. All the outstanding shares of
capital stock of each subsidiary of Evergreen have been validly issued and are
fully paid and nonassessable and are owned by Evergreen, by one or more
wholly-owned subsidiaries of Evergreen or by Evergreen and one or more such
wholly-owned subsidiaries, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"), except for Liens arising out of EMCLA's senior credit
facility and senior notes and those that, individually or in the aggregate,
could not reasonably be expected to have an Evergreen Material Adverse Effect.
Except as set forth above and except for certain provisions of the Certificate
of Incorporation of Evergreen relating to transfers of Evergreen Class B Common
Stock and to "alien ownership", neither Evergreen nor any subsidiary of
Evergreen has any outstanding option, warrant, subscription or other right,
agreement or commitment that either (i) obligates Evergreen or any subsidiary of
Evergreen to issue, sell or transfer, repurchase, redeem or otherwise acquire or
vote any shares of the capital stock of Evergreen or any Significant Subsidiary
of Evergreen or (ii) restricts the transfer of Evergreen Common Stock. No shares
of capital stock of Evergreen are owned of record or beneficially by any
subsidiary of Evergreen. Since the close of business on February 18, 1997 to the
date of the Old Agreement, neither Evergreen nor any subsidiary of Evergreen
issued any capital stock or securities or other rights convertible into or
exercisable or exchangeable for shares of such capital stock other than
securities issued upon the exercise of Evergreen Stock Options outstanding on
February 18, 1997 or other convertible securities outstanding on February 18,
1997.
2.3 Authority; Noncontravention. Evergreen has the requisite corporate
power and authority to enter into this Agreement and, subject to the approval of
its stockholders as set forth in Section 6.1(a) with respect to the consummation
of the Merger and Subsidiary Merger, adoption of the Parent Charter, and the
issuance of shares of Parent Common Stock and assumption of Company Stock
Options (as defined in Section 3.2) in the Merger (the "Evergreen Stockholder
Approval"), to consummate the transactions contemplated by this Agreement. As of
the date hereof, the execution and delivery of this Agreement by Evergreen and
the consummation by Evergreen of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Evergreen,
subject, in the case of the Merger, adoption of the Parent Charter, and the
issuance of Parent Common Stock and assumption of Company Stock Options in the
Merger, to the Evergreen Stockholder Approval. As of the date hereof, this
Agreement has been duly executed and delivered by Evergreen and, assuming this
Agreement constitutes the valid and binding
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agreement of EMHC, EMCLA, the Company and Radio Broadcasting, constitutes a
valid and binding obligation of Evergreen, enforceable against Evergreen in
accordance with its terms except that the enforcement thereof may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditor's rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions hereof will not, (i) conflict with any of the
provisions of the Certificate of Incorporation or Bylaws of Evergreen or the
comparable documents of any subsidiary of Evergreen, (ii) subject to the
governmental filings and other matters referred to in the following sentence,
conflict with, result in a breach of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or require
the consent of any person under, any indenture or other agreement, permit,
concession, franchise, license or similar instrument or undertaking to which
Evergreen or any of its subsidiaries is a party or by which Evergreen or any of
its subsidiaries or any of their assets is bound or affected, (iii) result in an
obligation by Evergreen, Parent or any of their respective subsidiaries to
redeem, repurchase or retire (or offer to redeem, repurchase or retire) any
outstanding debt (other than EMCLA's senior credit facility and senior notes) or
equity security of Evergreen, Parent or any of their respective subsidiaries, or
(iv) subject to the governmental filings and other matters referred to in the
following sentence, contravene any law, rule or regulation of any state or of
the United States or any political subdivision thereof or therein, or any order,
writ, judgment, injunction, decree, determination or award currently in effect,
except for (x) conflicts, breaches, defaults or other consequences
(collectively, "breaches") referred to above with respect to EMCLA's senior
credit facility and senior notes, (y) breaches resulting from Parent's ownership
of radio stations in certain markets where such ownership may be in excess of
the numerical limits imposed on local multiple radio station ownership under the
Telecommunications Act of 1996, together with the rules and regulations
thereunder (collectively, the "1996 Telecom Act") or where such ownership
otherwise may be subject to challenge by any Governmental Entity under any
antitrust or similar law, rule or regulation, or (z) breaches that, individually
or in the aggregate, could not reasonably be expected to have an Evergreen
Material Adverse Effect or to materially hinder Evergreen's ability to
consummate the transactions contemplated by this Agreement. No consent, approval
or authorization of, or declaration or filing with, or notice to, any
governmental agency or regulatory authority (a "Governmental Entity") which has
not been received or made, is required by or with respect to Evergreen or any of
its subsidiaries in connection with the execution and delivery of this Agreement
by Evergreen or the consummation by Evergreen of the transactions contemplated
hereby, except for (i) the filing of premerger notification and report forms
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), with respect to the Merger and the Subsidiary Merger and the
termination or earlier expiration of the applicable waiting periods thereunder,
(ii) such filings with and approvals required by the Federal Communications
Commission or any successor entity (the "FCC") under the Communications Act of
1934, as amended, and the rules, regulations and policies of the FCC promulgated
thereunder (collectively, the "Communications Act") including those required in
connection with the transfer of control of FCC Licenses (as defined in Section
3.9) for the operation of the Company Licensed Facilities (as defined in Section
3.9) and the transfer of control of the Evergreen FCC Licenses (as defined in
Section 2.9), (iii) the filing of (x) the registration statements on Form S-4 to
be filed with the SEC by Evergreen and EMCLA in connection with the issuance of
Parent Common Stock and the Convertible Preferred Stock in the Merger (the
"Evergreen Form S-4"), and the issuance of Merger Preferred Stock in the
Subsidiary Merger (the "EMCLA Form S-4" and, collectively with the Evergreen
Form S-4, the "Form S-4s") and the declaration of effectiveness of each of the
Form S-4s by the SEC, (y) a proxy statement to be filed with the SEC by
Evergreen relating to the Evergreen Stockholder Approval (such proxy statement,
together with the proxy statement relating to the approval of this Agreement and
the Merger by the holders of Shares (the "Company Stockholder Approval"), in
each case as amended or supplemented from time to time, the "Joint Proxy
Statement"), and (z) such reports under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, and (iv) the
filing of the certificates of merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company and Radio Broadcasting are qualified to do business.
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2.4 SEC Documents. (i) Evergreen has filed all required reports, schedules,
forms, statements and other documents with the SEC since January 1, 1995 (such
reports, schedules, forms, statements and other documents are hereinafter
referred to as the "SEC Documents"); (ii) as of their respective dates, the SEC
Documents complied with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents as of such dates contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; and (iii) the
consolidated financial statements of Evergreen included in the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of unaudited statements,
as permitted by Rule 10-01 of Regulation S-X) and fairly present, in all
material respects, the consolidated financial position of Evergreen and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (on the basis
stated therein and subject, in the case of unaudited quarterly statements, to
normal year-end audit adjustments).
2.5 Absence of Certain Changes or Events. Except as disclosed in the SEC
Documents filed and publicly available prior to the date of this Agreement (the
"Filed SEC Documents") and except as disclosed in writing by Evergreen to the
Company prior to the execution and delivery of the Old Agreement, or as it
relates to the Viacom Transaction (as defined in Section 10.9), since the date
of the most recent audited financial statements included in the Filed SEC
Documents, Evergreen and its subsidiaries have conducted their business only in
the ordinary course, and there has not been (i) any change which could
reasonably be expected to have an Evergreen Material Adverse Effect (including
as a result of the consummation of the transactions contemplated by this
Agreement), (ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
Evergreen's currently outstanding capital stock, (iii) any split, combination or
reclassification of any of its outstanding capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its outstanding capital stock, (iv) (x) any
granting by Evergreen or any of its subsidiaries to any director, officer or
other employee or independent contractor of Evergreen or any of its subsidiaries
of any increase in compensation or acceleration of benefits, except in the
ordinary course of business consistent with prior practice or as was required
under employment agreements in effect as of the date of the most recent audited
financial statements included in the Filed SEC Documents, (y) any granting by
Evergreen or any of its subsidiaries to any director, officer or other employee
or independent contractor of any increase in, or acceleration of benefits in
respect of, severance or termination pay, or pay in connection with any change
of control of Evergreen, except in the ordinary course of business consistent
with prior practice or as was required under any employment, severance or
termination agreements in effect as of the date of the most recent audited
financial statements included in the Filed SEC Documents or (z) any entry by
Evergreen or any of its subsidiaries into any employment, severance, change of
control, or termination or similar agreement with any director, executive
officer or other employee or independent contractor, or (v) any change in
accounting methods, principles or practices by Evergreen or any of its
subsidiaries materially affecting its assets, liability or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
2.6 No Extraordinary Payments or Change in Benefits. Except as disclosed in
writing by Evergreen to the Company prior to the execution and delivery of the
Agreement, no current or former director, officer, employee or independent
contractor of Evergreen or any of its subsidiaries is entitled to receive any
payment under any agreement, arrangement or policy (written or oral) relating to
employment, severance, change of control, termination, stock options, stock
purchases, compensation, deferred compensation, fringe benefits or other
employee benefits currently in effect (collectively, the "Evergreen Benefit
Plans"), nor will any benefit received or to be received by any current or
former director, officer, employee or independent contractor of Evergreen or any
of its subsidiaries under any Evergreen Benefit Plan be accelerated or modified,
as a result of
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or in connection with the execution and delivery of, or the consummation of the
transactions contemplated by, this Agreement.
2.7 Voting Requirements. The affirmative vote of the holders of at least a
majority of the votes entitled to be cast by the holders of the outstanding
Evergreen Common Stock, voting as a single class, entitled to vote thereon at
the Evergreen Stockholders Meeting with respect to the approval of this
Agreement, the Merger, the issuance of shares of Parent Common Stock and the
assumption of Company Stock Options in the Merger, and the Parent Charter, and
the affirmative vote of the holders of at least a majority of the votes entitled
to be cast by the holders of the outstanding Evergreen Class B Common Stock,
voting as a separate class, with respect to the adoption of the Parent Charter,
are the only votes of the holders of any class or series of Evergreen's capital
stock necessary to approve this Agreement, the issuance of shares of Parent
Common Stock and the assumption of Company Stock Options in the Merger, the
Parent Charter and the transactions contemplated by this Agreement.
2.8 State Takeover Statutes. The Board of Directors of Evergreen has
approved the terms of this Agreement and the Stockholders Agreement and the
consummation of the transactions contemplated by this Agreement and by the
Stockholders Agreement, and such approval is sufficient to render inapplicable
to the Merger, the Subsidiary Merger and the other transactions contemplated by
this Agreement and by the Stockholders Agreement the provisions of Section 203
of the Delaware Code. To Evergreen's knowledge, no other state takeover statute
or similar statute or regulation applies or purports to apply to the Merger, the
Subsidiary Merger, this Agreement, the Stockholders Agreement or any of the
transactions contemplated by this Agreement or the Stockholders Agreement and no
provision of the Certificate of Incorporation, Bylaws or other governing
instrument of Evergreen or any of its subsidiaries would, directly or
indirectly, restrict or impair the ability of Evergreen or any of its
subsidiaries to consummate the transactions contemplated by this Agreement or
the Stockholders Agreement.
2.9 Evergreen FCC Licenses; Operations of Evergreen Licensed
Facilities. Evergreen and its subsidiaries have operated the radio stations for
which Evergreen and any of its subsidiaries holds licenses from the FCC, in each
case which are owned or operated by Evergreen and its subsidiaries (the
"Evergreen Licensed Facilities",) in material compliance with the terms of the
licenses issued by the FCC to Evergreen and its subsidiaries (the "Evergreen FCC
Licenses") (complete and correct copies of each of which have been made
available to the Company and Radio Broadcasting), and in material compliance
with the Communications Act, except where the failure to do so could not,
individually or in the aggregate, reasonably be expected to have an Evergreen
Material Adverse Effect. Evergreen and its subsidiaries have, since acquired by
Evergreen, timely filed or made all applications, reports and other disclosures
required by the FCC to be made with respect to the Evergreen Licensed Facilities
and have timely paid all FCC regulatory fees with respect thereto, except where
the failure to do so could not, individually or in the aggregate, reasonably be
expected to have an Evergreen Material Adverse Effect. Evergreen and each of its
subsidiaries have, and are the authorized legal holders of, all the Evergreen
FCC Licenses necessary or used in the operation of the businesses of the
Evergreen Licensed Facilities as presently operated. All such Evergreen FCC
Licenses are validly held and are in full force and effect, unimpaired by any
act or omission of Evergreen, each of its subsidiaries (or, to Evergreen's
knowledge, their respective predecessors) or their respective officers,
employees or agents, except where such impairments could not, individually or in
the aggregate, reasonably be expected to have an Evergreen Material Adverse
Effect. As of the date hereof, except as disclosed in writing by Evergreen to
the Company prior to the execution and delivery of this Agreement, no
application, action or proceeding is pending for the renewal or material
modification of any of the Evergreen FCC Licenses and, to Evergreen's knowledge,
there is not now before the FCC any material investigation, proceeding, notice
of violation, order of forfeiture or complaint relating to any Evergreen
Licensed Facility that, if adversely determined, could reasonably be expected to
have an Evergreen Material Adverse Effect, and Evergreen is not aware of any
basis that would cause the FCC not to renew any of the Evergreen FCC Licenses.
There is not now pending and, to Evergreen's knowledge, there is not threatened,
any action by or before the FCC to revoke, suspend, cancel, rescind or modify in
any material respect any of the Evergreen FCC Licenses that, if adversely
determined, could reasonably be expected to have an Evergreen Material Adverse
Effect (other than proceedings to amend FCC rules or the Communications Act of
general applicability to the radio industry).
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2.10 Brokers. Except with respect to Wasserstein, Perella & Co.
("Wasserstein"), all negotiations relating to this Agreement and the
transactions contemplated hereby have been carried out by Evergreen directly
with the Company and Radio Broadcasting, without the intervention of any person
on behalf of Evergreen in such a manner as to give rise to any valid claim by
any person against Evergreen, the Company, the Surviving Corporation or any
subsidiary of any of them for a finder's fee, brokerage commission, or similar
payment. Evergreen has provided the Company with a written summary of the terms
of its agreement with Wasserstein, and Evergreen has no other agreements or
understandings (written or oral) with respect to such services.
2.11 Opinion of Financial Advisor. Evergreen has received the opinion of
Wasserstein, dated the date of the Old Agreement, to the effect that, as of such
date, the Exchange Ratio is fair, from a financial point of view, to Evergreen.
2.12 FCC Qualification. Evergreen and its subsidiaries are fully qualified
under the Communication Act to be the transferees of control of the Company FCC
Licenses (as hereinafter defined); provided, however, that the parties recognize
that the consummation of the Merger could cause the Surviving Corporation to
exceed in certain cases the numerical limits on local multiple radio station
ownership imposed by Section 202(b) of the 1996 Telecom Act and that a waiver of
these limits may be required prior to the grant of such transfer of control of
the Evergreen FCC Licenses and Company FCC Licenses. Each individual or entity
that is an officer, director or attributable stockholder of Evergreen that is
proposed to be an officer, director or attributable stockholder of the Surviving
Corporation is fully qualified under the Communications Act to be an officer,
director or attributable stockholder of the Surviving Corporation.
2.13 Compliance With Applicable Laws. Each of Evergreen and its
subsidiaries has in effect all Federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights ("Permits") necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted other than
such Permits the absence of which would not, individually or in the aggregate,
have an Evergreen Material Adverse Effect, and there has occurred no default
under any such Permit other than such defaults which, individually or in the
aggregate, would not have an Evergreen Material Adverse Effect. Except as
disclosed in the Filed Evergreen SEC Documents, Evergreen and its subsidiaries
are in compliance with all applicable statutes, laws, ordinances, rules orders
and regulations of any Governmental Entity, except for such noncompliance which
individually or in the aggregate would not have a Evergreen Material Adverse
Effect.
2.14 Absence of Undisclosed Liabilities. Except as disclosed in the Filed
Evergreen SEC Documents, and except for (A) liabilities contemplated by this
Agreement or disclosed in writing by Evergreen to the Company prior to the
execution and delivery of the Old Agreement, and (B) EMCLA's obligations with
respect to the Viacom Transaction, Evergreen and its subsidiaries do not have
any material indebtedness, obligations or liabilities of any kind (whether
accrued, absolute, contingent or otherwise) (i) required by GAAP to be reflected
on a consolidated balance sheet of Evergreen and its consolidated subsidiaries
or in the notes, exhibits or schedules thereto or (ii) which reasonably could be
expected to have an Evergreen Material Adverse Effect.
2.15 Litigation. Except as disclosed in the Filed Evergreen SEC Documents,
there is no litigation, administrative action, arbitration or other proceeding
pending against Evergreen or any of its subsidiaries or, to the knowledge of
Evergreen, threatened that, individually or in the aggregate, could reasonably
be expected to (i) have an Evergreen Material Adverse Effect or (ii) prevent, or
significantly delay the consummation of the transactions contemplated by this
Agreement. Except as set forth in the Filed Evergreen SEC Documents, there is no
judgment, order, injunction or decree of any Governmental Entity outstanding
against Evergreen or any of its subsidiaries that, individually or in the
aggregate, could reasonably be expected to have any effect referred to in the
foregoing clauses (i) and (ii) of this Section 2.15.
2.16 Transactions With Affiliates. Other than the transactions contemplated
by this Agreement, the Viacom Transaction and except to the extent disclosed in
the Filed Evergreen SEC Documents or disclosed in writing to the Company by
Evergreen prior to the execution and delivery of the Old Agreement, there have
been no transactions, agreements, arrangements or understandings between
Evergreen or its subsidiaries, on
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the one hand, and Evergreen's affiliates (other than subsidiaries of Evergreen)
or any other person, on the other hand, that would be required to be disclosed
under Item 404 of Regulation S-K under the Securities Act.
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES OF EMHC AND EMCLA
EMHC and EMCLA hereby, jointly and severally, represent and warrant to the
Company and Radio Broadcasting, as of the date hereof, as follows:
2A.1 Organization, Standing and Corporate Power. Each of EMHC and EMCLA is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated and has the requisite
corporate power and authority to carry on its business as now being conducted.
Each of EMHC and EMCLA is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so qualified could not reasonably be expected to have an Evergreen
Material Adverse Effect. Each of EMHC and EMCLA has delivered to the Company
complete and correct copies of its Certificate of Incorporation and Bylaws, as
amended to the date of this Agreement.
2A.2 EMHC and EMCLA Capital Structure. The authorized capital stock of EMHC
consists of 1,000 shares of EMHC Common Stock. The authorized capital stock of
EMCLA consists of 1,000 shares of EMCLA Common Stock. At the close of business
on July 30, 1997, 1,000 shares of EMCLA Common Stock were issued and outstanding
and owned of record and beneficially by Evergreen. At the close of business on
July 30, 1997, 1,000 shares of EMHC Common Stock were issued and outstanding and
owned of record and beneficially by Evergreen. Except as set forth above, at the
close of business on July 30, 1997, no shares of capital stock or other equity
securities of EMHC and EMCLA were authorized, issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of EMHC and EMCLA are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. No bonds, debentures, notes or other indebtedness of EMHC or
EMCLA having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which the stockholders of
EMHC or EMCLA may vote are issued or outstanding. Neither EMHC nor EMCLA has any
outstanding option, warrant, subscription or other right, agreement or
commitment that obligates EMHC or EMCLA to issue, sell or transfer, repurchase,
redeem or otherwise acquire or vote any shares of the capital stock of EMHC or
EMCLA or any of their respective Significant Subsidiaries. Since the close of
business on July 30, 1997 to the date hereof, neither EMHC nor EMCLA has issued
any capital stock or securities or other rights convertible into or exercisable
or exchangeable for capital stock.
2A.3 Authority; Noncontravention. Each of EMHC and EMCLA has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by each of EMHC and EMCLA and the consummation by each of them of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of EMHC and EMCLA. Evergreen has executed
a written consent as sole stockholder of EMCLA and EMHC approving the Merger and
the Subsidiary Merger and this Agreement, and such written consent is the only
vote of any stockholders of EMCLA and EMHC required in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by EMHC and EMCLA and, assuming this Agreement constitutes the valid
and binding agreement of Evergreen, the Company and Radio Broadcasting,
constitutes a valid and binding obligation of each of EMHC and EMCLA,
enforceable against each of them in accordance with its terms except that the
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditor's rights generally and (b) general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity).
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not (i) conflict with any of the provisions of the
Certificate of Incorporation or Bylaws of EMHC or EMCLA, (ii) subject to
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the governmental filings and other matters referred to in the following
sentence, conflict with, result in a breach of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under, or require the consent of any person under, any indenture, or other
agreement, permit, concession, franchise, license or similar instrument or
undertaking to which EMHC or EMCLA is a party or by which EMHC or EMCLA or any
of their assets is bound or affected, (iii) result in an obligation by EMHC,
EMCLA, the Surviving Corporation, the Subsidiary Surviving Corporation or any of
their respective subsidiaries to redeem, repurchase or retire (or offer to
redeem, repurchase or retire) any outstanding debt (other than EMCLA's senior
credit facility) or equity security of EMHC, EMCLA, the Surviving Corporation,
the Subsidiary Surviving Corporation or any of their respective subsidiaries, or
(iv) subject to the governmental filings and other matters referred to in the
following sentence, contravene any law, rule or regulation of any state or of
the United States or any political subdivision thereof or therein, or any order,
writ, judgment, injunction, decree, determination or award currently in effect,
except for (x) breaches with respect to EMCLA's senior credit facility, (y)
breaches resulting from the Surviving Corporation's or Subsidiary Surviving
Corporation's ownership of radio stations in certain markets where such
ownership may be in excess of the numerical limits imposed on local multiple
radio station ownership under the 1996 Telecom Act or where such ownership
otherwise may be subject to challenge by any Governmental Entity under any
antitrust or similar law, rule or regulation, or (z) breaches that, individually
or in the aggregate, could not reasonably be expected to have an Evergreen
Material Adverse Effect or to materially hinder EMHC's or EMCLA's ability to
consummate the transactions contemplated by this Agreement. No consent, approval
or authorization of, or declaration or filing with, or notice to, any
Governmental Entity which has not been received or made is required by or with
respect to EMHC and EMCLA in connection with the execution and delivery of this
Agreement by the EMHC and EMCLA or the consummation by EMHC and EMCLA of any of
the transactions contemplated by this Agreement, except for (i) the filing of
premerger notification and report forms under the HSR Act with respect to the
Merger and Subsidiary Merger, (ii) such filings with and approvals required by
the FCC under the Communications Act including those required in connection with
the transfer of the Evergreen FCC Licenses for the operation of the Evergreen
Licensed Facilities, (iii) the EMCLA Form S-4 relating to the issuance of the
Merger Preferred Stock, and (iv) the filing of the certificates of merger with
the Delaware Secretary of State, and appropriate documents with the relevant
authorities of the other states in which EMHC and EMCLA are qualified to do
business.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND RADIO BROADCASTING
The Company and Radio Broadcasting hereby, jointly and severally, represent
and warrant to Evergreen, EMCLA and EMHC, as of February 19, 1997 (except to the
extent specifically made as of an earlier date or the date hereof), as follows:
3.1 Organization, Standing and Corporate Power. The Company and each of
its Significant Subsidiaries (including Radio Broadcasting) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted. The Company and
each of its Significant Subsidiaries is duly qualified to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so qualified could not reasonably be expected to
have a material adverse effect on the business, properties, results of
operations or condition (financial or otherwise) of the Company and its
subsidiaries, considered as a whole (a "Company Material Adverse Effect");
provided, however, that for purposes of Sections 3.13, 3.14, 3.15 and 3.16, no
fact, event or circumstance shall be deemed to constitute a Company Material
Adverse Effect unless in addition to otherwise specifying the elements of the
definition given above, the relevant event, fact or circumstance not disclosed
pursuant to such representations would be a material fact, event or
circumstance, the omission of which in a document filed with the SEC pursuant to
the Exchange Act would be such as to cause the statements contained in such
filing to be misleading within the meaning of Rule 10b-5 under the
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Exchange Act. Each of the Company and Radio Broadcasting have delivered to
Evergreen complete and correct copies of its Certificate of Incorporation and
Bylaws, as amended to the date of this Agreement.
3.2 Company and Radio Broadcasting Capital Structure. The authorized
capital stock of the Company consists of (i) 40,000,000 shares of Company Class
A Common Stock, (ii) 10,000,000 shares of Company Class B Common Stock, (iii)
10,000,000 shares of Class C Common Stock, $0.01 par value ("Company Class C
Common Stock"), of the Company, and (iv) 10,000,000 shares of preferred stock,
$0.01 par value, of which 2,300,000 have been designated as Company Convertible
Preferred Stock. The authorized capital stock of Radio Broadcasting consists of
1,000 shares of common stock, $0.01 par value ("Radio Broadcasting Common
Stock"), and 10,000,000 shares of preferred stock, $0.01 par value, of which
1,000,000 have been designated as Radio Broadcasting 12 1/4% Preferred Stock and
3,600,000 have been designated as Radio Broadcasting 12% Preferred Stock. At the
close of business on February 18, 1997: (i) 10,437,212 shares of Company Class A
Common Stock were issued and outstanding, 1,926,152 shares of Company Class A
Common Stock were reserved for issuance pursuant to outstanding options or
warrants to purchase shares of Company Class A Common Stock which have been
granted to directors, officers or employees of the Company or others ("Company
Stock Options"), 3,343,465 shares of Company Class A Common Stock were reserved
for issuance upon conversion of the Company Convertible Preferred Stock, and
8,547,910 shares of Company Class A Common Stock were reserved for issuance upon
the conversion of the Company Class B Common Stock; (ii) 8,547,910 shares of
Company Class B Common Stock were issued and outstanding and no shares of
Company Class B Common Stock were reserved for issuance for any purpose; (iii)
no shares of Company Class C Common Stock were issued and outstanding and none
may be issued in the future; and (iv) 2,200,000 shares of Company Convertible
Preferred Stock were issued and outstanding, no shares of Company Convertible
Preferred Stock were held in the treasury of the Company and no shares of
Company Convertible Preferred Stock were reserved for issuance for any purpose.
At the close of business on February 18, 1997: (i) 1,000 shares of Radio
Broadcasting Common Stock were issued and outstanding and no shares of Radio
Broadcasting Common Stock were reserved for issuance for any purpose; (ii)
1,000,000 shares of Radio Broadcasting 12 1/4% Preferred Stock were issued and
outstanding, no shares of Radio Broadcasting 12 1/4% Preferred Stock were held
in treasury by Radio Broadcasting and no shares of Radio Broadcasting 12 1/4%
Preferred Stock were reserved for issuance for any purpose; and (iii) 2,000,000
shares of Radio Broadcasting 12% Preferred Stock were issued and outstanding, no
shares of Radio Broadcasting 12% Preferred Stock were held in treasury by Radio
Broadcasting and 1,600,000 shares of Radio Broadcasting 12% Preferred Stock were
reserved for issuance in lieu of cash dividends. Except as set forth above, at
the close of business on February 18, 1997, no shares of capital stock or other
equity securities of the Company and Radio Broadcasting were authorized, issued,
reserved for issuance or outstanding. All outstanding shares of capital stock of
the Company and Radio Broadcasting, and all shares which may be issued pursuant
to the Company's stock option plans, as amended to the date of the Old Agreement
(the "Company Stock Option Plans") or any outstanding Company Stock Options will
be, when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. No bonds, debentures, notes or other
indebtedness of the Company or any subsidiary of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which the stockholders of the Company or any subsidiary
of the Company may vote are issued or outstanding. All the outstanding shares of
capital stock of each subsidiary of the Company have been validly issued and are
fully paid and nonassessable and, except for the Radio Broadcasting Preferred
Stock, are owned by the Company or its subsidiaries, free and clear of all
Liens, except for Liens arising out of the Radio Broadcasting's senior credit
facility and those that, individually or in the aggregate, could not reasonably
be expected to have a Company Material Adverse Effect. Except as set forth above
and except (i) for certain provisions of the Certificate of Incorporation and
Bylaws of the Company relating to transfers of the Company Class B Common Stock
and "alien ownership", and (ii) as provided in the Exchange and Registration
Rights Agreement entered into by Radio Broadcasting in connection with the sale
of the Radio Broadcasting 12% Preferred Stock, neither the Company nor any
subsidiary of the Company has any outstanding option, warrant, subscription or
other right, agreement or commitment that either (i) obligates the Company or
any subsidiary of the Company to issue, sell or transfer, repurchase, redeem or
otherwise acquire or vote any shares of the capital stock of the Company or any
Significant Subsidiary of the Company or (ii) restricts the transfer of Shares.
No shares of capital stock of the
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Company are owned of record or beneficially by any subsidiary of the Company.
Since the close of business on February 18, 1997 to the date of the Old
Agreement, neither the Company nor any subsidiary of the Company has issued any
capital stock or securities or other rights convertible into or exercisable or
exchangeable for capital stock other than securities issued upon the exercise of
Company Stock Options outstanding on February 18, 1997 or other convertible
securities outstanding on February 18, 1997.
3.3 Authority; Noncontravention. Each of the Company and Radio
Broadcasting has all requisite corporate power and authority to enter into this
Agreement and, subject to the Company Stockholder Approval, to consummate the
transactions contemplated by this Agreement. As of the date hereof, the
execution and delivery of this Agreement by each of the Company and Radio
Broadcasting and the consummation by each of them of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company and Radio Broadcasting, subject, in
the case of the consummation of the Merger, to the Company Stockholder Approval.
The Company has executed a written consent as stockholder of Radio Broadcasting
approving the Subsidiary Merger and this Agreement, and such written consent is
the only vote of any stockholders of Radio Broadcasting required in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. As of the date hereof, this Agreement has been
duly executed and delivered by the Company and Radio Broadcasting and, assuming
this Agreement constitutes the valid and binding agreement of Evergreen, EMCLA
and EMHC, constitutes a valid and binding obligation of each of the Company and
Radio Broadcasting, enforceable against each of them in accordance with its
terms except that the enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditor's rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity). The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not (i) conflict with any of the
provisions of the Certificate of Incorporation or Bylaws of the Company or the
comparable documents of any subsidiary of the Company, (ii) subject to the
governmental filings and other matters referred to in the following sentence,
conflict with, result in a breach of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or require
the consent of any person under, any indenture, or other agreement, permit,
concession, franchise, license or similar instrument or undertaking to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or any of their assets is bound or affected, (iii) except as
may be the case with respect to Dissenting Shares, result in an obligation by
the Company, the Surviving Corporation or any of their respective subsidiaries
to redeem, repurchase or retire (or offer to redeem, repurchase or retire) any
outstanding debt (other than Radio Broadcasting's senior credit facility) or
equity security of the Company, the Surviving Corporation or any of their
respective subsidiaries, or (iv) subject to the governmental filings and other
matters referred to in the following sentence, contravene any law, rule or
regulation of any state or of the United States or any political subdivision
thereof or therein, or any order, writ, judgment, injunction, decree,
determination or award currently in effect, except for (x) breaches with respect
to the Radio Broadcasting's senior credit facility, (y) breaches resulting from
the Surviving Corporation's ownership of radio stations in certain markets where
such ownership may be in excess of the numerical limits imposed on local
multiple radio station ownership under the 1996 Telecom Act or where such
ownership otherwise may be subject to challenge by any Governmental Entity under
any antitrust or similar law, rule or regulation, or (z) breaches that,
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect or to materially hinder the Company's and Radio
Broadcasting's ability to consummate the transactions contemplated by this
Agreement. No consent, approval or authorization of, or declaration or filing
with, or notice to, any Governmental Entity which has not been received or made
is required by or with respect to the Company or Radio Broadcasting in
connection with the execution and delivery of this Agreement by the Company and
Radio Broadcasting or the consummation by the Company and Radio Broadcasting of
any of the transactions contemplated by this Agreement, except for (i) the
filing of premerger notification and report forms under the HSR Act with respect
to the Merger, (ii) such filings with and approvals required by the FCC under
the Communications Act including those required in connection with the transfer
of the Company FCC Licenses (as defined in Section 3.9) for the operation of the
Company
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Licensed Facilities (as defined in Section 3.9), (iii) the Joint Proxy Statement
relating to the Company Stockholder Approval and such reports under the Exchange
Act as may be required in connection with this Agreement and the transactions
contemplated by this Agreement, and (iv) the filing of the certificates of
merger with the Delaware Secretary of State, and appropriate documents with the
relevant authorities of the other states in which the Company and Radio
Broadcasting are qualified to do business.
3.4 SEC Documents. The Company and its subsidiaries have filed all
required reports, schedules, forms, statements and other documents with the SEC
since January 1, 1995 (the "Company SEC Documents"). As of their respective
dates, the Company SEC Documents complied with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Documents, and none of the Company SEC Documents as of such dates contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the Company SEC Documents comply
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited statements, as permitted by Rule
10-01 of Regulation S-X) and fairly present, in all material respects, the
consolidated or combined financial position of the Company and its subsidiaries
as of the dates thereof and the consolidated or combined results of their
operations and cash flows for the periods then ended (on the basis stated
therein and subject, in the case of unaudited statements, to normal year-end
audit adjustments).
3.5 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed and publicly available prior to the date of this
Agreement (the "Filed Company SEC Documents") and except as it relates to the
Viacom Transaction or as otherwise disclosed in writing by the Company to
Evergreen prior to the execution and delivery of this Agreement, since the date
of the most recent audited financial statements included in the Filed Company
SEC Documents, the Company and its subsidiaries have conducted their business
only in the ordinary course, and there has not been (i) any change which could
reasonably be expected to have a Company Material Adverse Effect (including as a
result of the consummation of the transactions contemplated by this Agreement),
(ii) any declaration, setting aside or payment of any dividend or distribution
(whether in cash, stock or property) with respect to any of the Company's
outstanding capital stock (other than the payment of regular cash dividends on
the Company Convertible Preferred Stock in accordance with usual record and
payment dates), (iii) any split, combination or reclassification of any of its
outstanding capital stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock, (iv) (x) any granting by the Company or any of its
subsidiaries to any director, officer or other employee or independent
contractor of the Company or any of its subsidiaries of any increase in
compensation or acceleration of benefits, except in the ordinary course of
business consistent with prior practice or as was required under employment
agreements in effect as of the date of the most recent audited financial
statements included in the Filed Company SEC Documents, (y) any granting by the
Company or any of its subsidiaries to any director, officer or other employee or
independent contractor of any increase in, or acceleration of benefits in
respect of, severance or termination pay, or pay in connection with any change
of control of the Company, except in the ordinary course of business consistent
with prior practice or as was required under any employment, severance or
termination agreements in effect as of the date of the most recent audited
financial statements included in the Filed Company SEC Documents or (z) any
entry by the Company or any of its subsidiaries into any employment, severance,
change of control, or termination or similar agreement with any such director,
officer or other employee or independent contractor, or (v) any change in
accounting methods, principles or practices by the Company or any of its
subsidiaries materially affecting its assets, liability or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
3.6 No Extraordinary Payments or Change in Benefits. No current or former
director, officer, employee or independent contractor of the Company or any of
its subsidiaries is entitled to receive any payment under any agreement,
arrangement or policy (written or oral) relating to employment, severance,
change of control,
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termination, stock options, stock purchases, compensation, fringe benefits or
other employee benefits currently in effect (collectively, the "Company Benefit
Plans"), nor will any benefit received or to be received by any current or
former director, officer, employee or independent contractor of the Company or
any of its subsidiaries under any Company Benefit Plan be accelerated or
modified, as a result of or in connection with the execution and delivery of, or
the consummation of the transactions contemplated by, this Agreement.
3.7 Voting Requirements. The affirmative vote of the Principal Company
Stockholders with respect to the approval of this Agreement and the Merger are
the only votes of the holders of any class or series of the Company's capital
stock necessary to approve this Agreement and the transactions contemplated by
this Agreement.
3.8 State Takeover Statutes. The Board of Directors of the Company has
approved the terms of this Agreement and the Stockholders Agreement and the
consummation of the transactions contemplated by this Agreement and by the
Stockholders Agreement, and such approval is sufficient to render inapplicable
to the Merger and the other transactions contemplated by this Agreement and by
the Stockholders Agreement the provisions of Section 203 of the Delaware Code.
To the Company's knowledge, no other state takeover statute or similar statute
or regulation applies or purports to apply to the Merger, this Agreement, the
Stockholders Agreement or any of the transactions contemplated by this Agreement
or the Stockholders Agreement and no provision of the Certificate of
Incorporation, Bylaws or other governing instrument of the Company or any of its
subsidiaries would, directly or indirectly, restrict or impair the ability of
the Company or Evergreen to consummate the transactions contemplated by this
Agreement or the Stockholders Agreement.
3.9 Company FCC Licenses; Operations of Company Licensed Facilities. The
Company and its subsidiaries have operated the radio stations for which the
Company and any of its subsidiaries holds licenses from the FCC, in each case
which are owned or operated by the Company and its subsidiaries (the "Company
Licensed Facilities") in material compliance with the terms of the licenses
issued by the FCC to the Company and its subsidiaries (the "Company FCC
Licenses") (complete and correct copies of each of which have been made
available to Evergreen), and in material compliance with the Communications Act,
except where the failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. The Company
and its subsidiaries have, since acquired by the Company, timely filed or made
all applications, reports and other disclosures required by the FCC to be made
with respect to the Company Licensed Facilities and have timely paid all FCC
regulatory fees with respect thereto, except where the failure to do so could
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. The Company and each of its subsidiaries have, and are
the authorized legal holders of, all the Company FCC Licenses necessary or used
in the operation of the businesses of the Company Licensed Facilities as
presently operated. All such Company FCC Licenses are validly held and are in
full force and effect, unimpaired by any act or omission of the Company, each of
its subsidiaries (or to the Company's and Radio Broadcasting's knowledge, their
respective predecessors) or their respective officers, employees or agents,
except where such impairments could not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. As of the date
hereof, except as disclosed in writing by the Company to Evergreen prior to the
execution and delivery of this Agreement, no application, action or proceeding
is pending for the renewal or material modification of any of the Company FCC
Licenses and, to the best of the Company's knowledge, there is not now before
the FCC any material investigation, proceeding, notice of violation, order of
forfeiture or complaint against the Company or any of its subsidiaries relating
to the Company Licensed Facilities that, if adversely determined, would have a
Company Material Adverse Effect, and the Company is not aware of any basis that
would cause the FCC not to renew any of the Company FCC Licenses. There is not
now pending and, to the Company's knowledge, there is not threatened, any action
by or before the FCC to revoke, suspend, cancel rescind or modify in any
material respect any of the Company FCC Licenses that, if adversely determined,
would have a Company Material Adverse Effect (other than proceedings to amend
FCC rules or the Communications Act of general applicability to the radio
industry).
3.10 Brokers. Except with respect to HM2/Management Partners, L.P. ("Hicks
Muse") Star Media, Inc. ("Star Media"), Greenhill & Co., LLC ("Greenhill") and
Goldman Sachs & Co. ("Goldman Sachs"), all negotiations relating to this
Agreement, the transactions contemplated hereby and by the Viacom
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Transaction have been carried out by the Company directly with Evergreen,
without the intervention of any person on behalf of the Company in such a manner
as to give rise to any valid claim by any person against the Company, Evergreen,
the Surviving Corporation or any subsidiary of any of them for a finder's fee,
brokerage commission, or similar payment. The Company has provided Evergreen
with a written summary of the terms of its agreements with Hicks Muse, Star
Media, Greenhill and Goldman Sachs, and the Company has no other agreements or
understandings (written or oral) with respect to such services.
3.11 Opinion of Financial Advisor. The Company has received the opinion of
Greenhill, dated the date of the Old Agreement, to the effect that, as of such
date, the Exchange Ratio is fair, from a financial point of view, to the
Company's stockholders.
3.12 FCC Qualification. The Company and its subsidiaries are fully
qualified under the Communications Act to be the transferors of control of the
Company FCC Licenses; provided, however, that the parties recognize that the
consummation of the Merger could cause the Surviving Corporation and Thomas O.
Hicks to exceed in certain cases the numerical limits on local multiple radio
station ownership imposed by Section 202(b) of the 1996 Telecom Act and that a
waiver of these limits may be required prior to the grant of such transfer of
control of the Evergreen FCC Licenses and Company FCC Licenses. Each individual
or entity that is an officer, director or attributable stockholder of the
Company that is proposed to be an officer, director or attributable stockholder
of the Surviving Corporation is fully qualified under the Communications Act to
be an officer, director or attributable stockholder of the Surviving Corporation
other than with respect to the numerical limits on multiple ownership described
in the preceding sentence.
3.13 Compliance with Applicable Laws. Each of the Company and its
subsidiaries has in effect all Federal, state, local and foreign governmental
Permits necessary for it to own, lease or operate its properties and assets and
to carry on its business as now conducted other than such Permits the absence of
which would not, individually or in the aggregate, have a Company Material
Adverse Effect, and there has occurred no default under any such Permit other
than such defaults which, individually or in the aggregate, would not have a
Company Material Adverse Effect. Except as disclosed in the Filed Company SEC
Documents, the Company and its subsidiaries are in compliance with all
applicable statutes, laws, ordinances, rules orders and regulations of any
Governmental Entity, except for such noncompliance which individually or in the
aggregate would not have a Company Material Adverse Effect.
3.14 Absence of Undisclosed Liabilities. Except as disclosed in the Filed
Company SEC Documents, and except for (A) liabilities contemplated by this
Agreement or disclosed in writing by the Company to Evergreen prior to the
execution and delivery of the Old Agreement, and (B) the Company's and Radio
Broadcasting's obligations with respect to the Viacom Transaction, the Company
and its subsidiaries do not have any material indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise) (i)
required by GAAP to be reflected on a consolidated balance sheet of the Company
and its consolidated subsidiaries or in the notes, exhibits or schedules thereto
or (ii) which reasonably could be expected to have a Company Material Adverse
Effect.
3.15 Litigation. Except as disclosed in the Filed Company SEC Documents,
there is no litigation, administrative action, arbitration or other proceeding
pending against the Company or any of its subsidiaries or, to the knowledge of
the Company, threatened that, individually or in the aggregate, could reasonably
be expected to (i) have a Company Material Adverse Effect or (ii) prevent, or
significantly delay the consummation of the transactions contemplated by this
Agreement. Except as set forth in the Filed Company SEC Documents, there is no
judgment, order, injunction or decree of any Governmental Entity outstanding
against the Company or any of its subsidiaries that, individually or in the
aggregate, could reasonably be expected to have any effect referred to in the
foregoing clauses (i) and (ii) of this Section 3.15.
3.16 Transactions With Affiliates. Other than the transactions contemplated
by this Agreement, the Viacom Transaction and except to the extent disclosed in
the Filed Company SEC Documents or disclosed in writing by Chancellor to
Evergreen prior to the execution and delivery of the Old Agreement, there have
been no transactions, agreements, arrangements or understandings between the
Company or its subsidiaries, on the one hand, and the Company's affiliates
(other than subsidiaries of the Company) or any other person, on the
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other hand, that would be required to be disclosed under Item 404 of Regulation
S-K under the Securities Act.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Preparation of Form S-4S and the Joint Proxy Statement; Information
Supplied. (a) As soon as practicable following the date of this Agreement, (i)
the Company and Evergreen shall prepare and file with the SEC the Joint Proxy
Statement and Evergreen shall prepare and file with the SEC the Evergreen Form
S-4, in which the Joint Proxy Statement will be included as a prospectus, and
(ii) EMCLA shall prepare and file with the SEC the EMCLA Form S-4. Each of the
Company, Evergreen and EMCLA shall use its best efforts to have the Form S-4s
declared effective under the Securities Act as promptly as practicable after
such filing. The Company will use its best efforts to cause the Joint Proxy
Statement to be mailed to the Company's stockholders, and Evergreen will use its
best efforts to cause the Joint Proxy Statement to be mailed to Evergreen's
stockholders, in each case as promptly as practicable after the Evergreen Form
S-4 is declared effective under the Securities Act. Each of Evergreen and EMCLA
shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or take any action that would
subject it to the service of process in suits, other than as to matters and
transactions relating to the Form S-4s, in any jurisdiction where it is not so
subject) required to be taken under any applicable state securities laws in
connection with the issuance of Parent Common Stock and Parent Convertible
Preferred Stock in the Merger and the issuance of Merger Preferred Stock in the
Subsidiary Merger, and the Company and Radio Broadcasting shall furnish all
information concerning the Company, Radio Broadcasting and the holders of the
Shares, Company Convertible Preferred Stock and Radio Broadcasting Preferred
Stock as may be reasonably requested in connection with any such action.
(b) The Company and Radio Broadcasting each agrees that none of the
information supplied or to be supplied by the Company or Radio Broadcasting
specifically for inclusion or incorporation by reference in (i) the Form S-4s
will not, at the time each Form S-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, or (ii) the Joint Proxy Statement will not, at the date it is first
mailed to the Company's stockholders or at the time of the Stockholders Meeting
(as defined in Section 4.2), contain any statement which, at the time and in
light of the circumstances under which it is made, is false or misleading with
respect to any material fact, or omits to state any material fact necessary in
order to make the statements therein not false or misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of a proxy for the same meeting or subject matter thereof which has
become false or misleading. The Company agrees that the Joint Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except with respect to
statements made or incorporated by reference therein based on information
supplied by Evergreen specifically for inclusion or incorporated by reference in
the Joint Proxy Statement.
(c) Evergreen and EMCLA each agrees that none of the information supplied
or to be supplied by Evergreen or EMCLA specifically for inclusion or
incorporation by reference in (i) the Form S-4s will not, at the time each Form
S-4 is filed with the SEC, at any time it is amended or supplemented or at the
time it becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, or (ii) the Joint Proxy
Statement will not, at the date the Joint Proxy Statement is first mailed to
Evergreen's stockholders, contain any statement which, at the time and in light
of the circumstances under which it is made, is false or misleading with respect
to any material fact, or omits to state any material fact necessary in order to
make the statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of a
proxy for the same meeting or subject matter thereof which has become false or
misleading. Evergreen
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and EMCLA each agrees that the Form S-4s will comply as to form in all material
respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder and Evergreen agrees that the Joint Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations promulgated thereunder, except
in each case with respect to statements made or incorporated by reference in
either the Form S-4s or the Joint Proxy Statement based on information supplied
by the Company or Radio Broadcasting specifically for inclusion or incorporation
by reference therein.
4.2 Meetings of Company Stockholders and Evergreen Stockholders. (a) The
Company will take all action necessary in accordance with applicable law and its
Certificate of Incorporation and Bylaws to convene a meeting of its stockholders
(the "Stockholders Meeting") to submit this Agreement, together with the
affirmative recommendation of the Company's Board of Directors, to the Company's
stockholders so that they may consider and vote upon the approval of this
Agreement. The Company will use its best efforts to hold the Stockholders
Meeting as soon as practicable after the date hereof and to obtain the favorable
votes of its stockholders. Pursuant to the Stockholders Agreement, the Principal
Company Stockholders have agreed to vote all Shares owned by them or for which
they have the right to vote in favor of the approval of this Agreement and the
Merger, which vote the Company represents and warrants shall be sufficient to
obtain the Company Stockholder Approval.
(b) Evergreen will take all action necessary in accordance with applicable
law and its Certificate of Incorporation and Bylaws to convene a meeting of its
stockholders (the "Evergreen Stockholders Meeting") to submit this Agreement and
the Parent Charter, together with the affirmative recommendation of Evergreen's
Board of Directors, to Evergreen's stockholders so that they may consider and
vote upon the approval of this Agreement, the issuance of Parent Common Stock
and the assumption of Company Stock Options in the Merger, and the Parent
Charter. Evergreen will use its best efforts to hold the Evergreen Stockholders
Meeting as soon as practicable after the date hereof and to obtain the favorable
votes of its stockholders. Pursuant to the Stockholders Agreement, the Principal
Evergreen Stockholder has agreed to vote all shares of Evergreen Common Stock
owned by him or for which he has the right to vote in favor of the approval of
this Agreement, the issuance of Parent Common Stock and the assumption of
Company Stock Options in the Merger, the adoption of the Parent Charter, and the
Merger.
(c) Each of Evergreen and the Company agrees to cooperate and use its
respective best efforts to hold the Evergreen Stockholders Meeting and the
Stockholders Meeting on the same day.
4.3 Access to Information; Confidentiality. Upon reasonable notice, each of
the Company and Evergreen shall, and shall cause each of its respective
subsidiaries to, afford to the other party and to the officers, employees,
counsel, financial advisors and other representatives of such other party
reasonable access during normal business hours during the period prior to the
Effective Time to all its properties, books, contracts, commitments, personnel
and records and, during such period, each of the Company and Evergreen shall,
and shall cause each of its respective subsidiaries to, furnish as promptly as
practicable to the other party such information concerning its business,
properties, financial condition, operations and personnel as such other party
may from time to time reasonably request. Except as required by law, each of the
Company and Evergreen will hold, and will cause its respective directors,
officers, partners, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any nonpublic information obtained
from Evergreen or the Company, respectively, in confidence to the extent
required by and in accordance with the provisions of the letters dated January
27, 1997, each between Evergreen and the Company (collectively, the
"Confidentiality Agreements"), and each of the Company and Evergreen agrees that
prior to the Effective Time neither party will use any of such nonpublic
information to directly or indirectly divert or attempt to divert any business,
customer or employee of the other.
4.4 Public Announcements. Evergreen, on the one hand, and the Company, on
the other hand, will consult with each other before issuing, and provide each
other the opportunity to review and comment upon, any press release or other
public statements with respect to the transactions contemplated by this
Agreement, including the Merger and the Subsidiary Merger, and shall not issue
any such press release or make any such
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public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to rules of The Nasdaq
Stock Market.
4.5 Acquisition Proposals. (a) The Company shall not, nor shall it permit
any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as hereinafter defined) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal. The Company will notify Evergreen immediately of any
inquiries or proposals with respect to any Acquisition Proposal that is received
by, or any such negotiations or discussions that are sought to be initiated
with, the Company. For purposes of this Agreement, "Acquisition Proposal" means
any proposal with respect to a merger, consolidation, share exchange or similar
transaction involving the Company or Evergreen or any Significant Subsidiary of
the Company or Evergreen, or any purchase of all or any significant portion of
the assets of the Company or Evergreen or any Significant Subsidiary of the
Company or Evergreen, or any equity interest in the Company or Evergreen or any
Significant Subsidiary of the Company or Evergreen, other than the transactions
contemplated hereby; provided, however, that an Acquisition Proposal shall not
include a currently planned acquisition or disposition of broadcast properties
disclosed in writing prior to execution and delivery of this Agreement by either
the Company or Evergreen to the other.
(b) Evergreen shall not, nor shall it permit any of its subsidiaries to,
nor shall it authorize or permit any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, Evergreen or
any of its subsidiaries to, directly or indirectly, (i) solicit, initiate or
encourage the submission of any Acquisition Proposal or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may be reasonably be expected to
lead to, any Acquisition Proposal. Evergreen will notify the Company immediately
of any inquiries or proposals with respect to any Acquisition Proposal that is
received by, or any negotiations or discussions that are sought to be initiated
with, Evergreen.
(c) Nothing contained in this Section 4.5 shall prohibit the respective
Board of Directors of the Company or Evergreen from taking and disclosing to its
stockholders a position in accordance with Rules 14d-9 and 14e-2 under the
Exchange Act with respect to a tender offer or any exchange offer commenced by a
third party.
4.6 Consents, Approvals and Filings. The Company and Evergreen will make
and cause their respective subsidiaries and, to the extent necessary, their
other affiliates to make all necessary filings, as soon as practicable,
including, without limitation, those required under the HSR Act, the Securities
Act, the Exchange Act, and the Communications Act (including filing an
application with the FCC for the transfer of control of the Company FCC Licenses
and the Evergreen FCC Licenses, which the parties shall file as soon as
practicable (and in any event not more than 30 days) after the date of this
Agreement), in order to facilitate prompt consummation of the Merger and the
other transactions contemplated by this Agreement. In addition, the Company and
Evergreen will each use its best efforts, and will cooperate fully and in good
faith with each other, (i) to comply as promptly as practicable with all
governmental requirements applicable to the Merger and the other transactions
contemplated by this Agreement and the Viacom Transaction, and (ii) to obtain as
promptly as practicable all necessary permits, orders or other consents of
Governmental Entities and consents of all third parties necessary for the
consummation of the Merger and the other transactions contemplated by this
Agreement and the Viacom Transaction, including without limitation, the consent
of the FCC to the transfer of control of the Company FCC Licenses and the
Evergreen FCC Licenses, and the transfer of any FCC licenses in connection with
the Viacom Transaction. Each of the Company and Evergreen shall use its best
efforts to promptly provide such information and communications to Governmental
Entities as such Governmental Entities may reasonably request. Each of the
parties shall provide to the other party copies of all applications in advance
of filing or submission of such applications to Governmental Entities in
connection with this Agreement and shall make such revisions thereto as
reasonably requested by such other party. Each
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party shall provide to the other party the opportunity to participate in all
meetings and material conversations with Governmental Entities.
4.7 Affiliates Letters. Prior to the Closing Date, the Company shall
deliver to Evergreen a letter identifying all persons who may be, at the time
the Merger is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its best efforts to cause each such person to deliver to
Evergreen on or prior to the Closing Date a written agreement substantially in
the form attached as Exhibit A hereto.
4.8 Nasdaq Listing. Evergreen shall use its best efforts to cause the
shares of Parent Common Stock to be issued in the Merger to be approved for
quotation on the Nasdaq National Market, subject to official notice of issuance,
prior to the Closing Date.
4.9 Stockholder Litigation. Each of the Company and Evergreen shall give
the other party the opportunity to participate in the defense or settlement of
any stockholder litigation against it and its directors relating to the
transactions contemplated by this Agreement; provided, however, that no such
settlement shall be agreed to by the Company or Evergreen without the other
party's consent, which consent shall not be unreasonably withheld.
4.10 Indemnification. The Certificate of Incorporation and Bylaws of
Parent, the Surviving Corporation and the Subsidiary Surviving Corporation shall
contain, respectively, the provisions with respect to indemnification set forth
in the Parent Charter and the Bylaws to be adopted by Parent attached hereto as
Annex IV, and such provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at any time
prior to the Effective Time were directors or officers of the Company or
Evergreen or any of their respective subsidiaries (the "Indemnified Parties") in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), unless such modification is required by law. Parent will cause to be
maintained for a period of not less than six years from the Effective Time the
Company's current directors' and officers' insurance and indemnification
policies to the extent that they provide coverage for events occurring prior to
the Effective Time (the "D&O Insurance") for all persons who are directors and
executive officers of the Company or Evergreen on the date of this Agreement, so
long as the annual premium therefor would not be in excess of 250% of the last
annual premium paid prior to the date of this Agreement; provided, however, that
Parent may, in lieu of maintaining such existing D&O Insurance as provided
above, cause coverage to be provided under any policy maintained for the benefit
of Evergreen or any of its subsidiaries so long as the terms thereof are not
less advantageous to the beneficiaries thereof than the existing D&O Insurance.
The provisions of this Section 4.10 are intended to be for the benefit of, and
shall be enforceable by, each Indemnified Party, his heirs and his personal
representatives and shall be binding on all successors and assigns of Evergreen,
the Company and Parent.
4.11 Letter of the Company's Accountants. The Company and Radio
Broadcasting shall each use its reasonable best efforts to cause to be delivered
to Evergreen and EMCLA, as applicable, a letter of Coopers & Lybrand LLP, the
Company's and Radio Broadcasting's independent public accountants, and any other
independent public accountants whose report would be required to be included in
the Form S-4s pursuant to the rules and regulations under the Securities Act,
each dated a date within two business days before the date on which the
Evergreen Form S-4 or EMCLA Form S-4, as the case may be, shall become effective
and an additional letter from each of them dated a date within two business days
before the Closing Date and the Subsidiary Closing Date, as the case may be,
each addressed to Evergreen and EMCLA, as applicable, in form and substance
reasonably satisfactory to Evergreen and EMCLA and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4s.
4.12 Letter of Evergreen's Accountants. Evergreen and EMCLA shall use its
reasonable best efforts to cause to be delivered to the Company and Radio
Broadcasting, as applicable, a letter of KPMG Peat Marwick LLP, Evergreen's and
EMCLA's independent public accountants, and any other independent public
accountants whose report would be required to be included in the Form S-4s
pursuant to the rules and regulations under the Securities Act, each dated a
date within two business days before the date on which the
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Evergreen Form S-4 or EMCLA Form S-4, as the case may be, shall become effective
and an additional letter from each of them dated a date within two business days
before the Closing Date or the Subsidiary Closing Date, as the case may be, each
addressed to the Company or Radio Broadcasting, as applicable, in form and
substance reasonably satisfactory to the Company and Radio Broadcasting and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4s.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
5.1 Conduct of Business. Except as contemplated by this Agreement, during
the period from the date of this Agreement to the Effective Time, the Company
and Evergreen shall, and shall cause their respective subsidiaries to, act and
carry on their respective businesses in the ordinary course of business and, to
the extent consistent therewith, use reasonable efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve the goodwill of those engaged in material
business relationships with them. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time and except as set forth in the Filed Company SEC Documents or the Filed
Evergreen SEC Documents (including any pending station acquisitions,
dispositions and/or swaps and the financing thereof described therein), as
applicable, or in connection with the Viacom Transaction or as otherwise
disclosed in writing by one party hereto to the other parties hereto prior to
the execution and delivery of this Agreement, the Company and Evergreen shall
not, and shall not permit any of their respective subsidiaries to, without the
prior consent of the other party hereto:
(i) (w) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of the
Company's or Evergreen's or any of their respective subsidiaries' outstanding
capital stock (other than, with respect to the Company and its subsidiaries, the
payment of regular cash dividends by the Company on the Company Convertible
Preferred Stock and the payment by Radio Broadcasting of dividends on the Radio
Broadcasting 12% Preferred Stock in additional shares of such preferred stock,
in each case in accordance with usual record and payment dates), (x) split,
combine or reclassify any of its outstanding capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its outstanding capital stock, (y) purchase, redeem
or otherwise acquire any shares of outstanding capital stock or any rights,
warrants or options to acquire any such shares (other than, with respect to the
Company and its subsidiaries, in connection with Radio Broadcasting's offer to
exchange its 12% Series A Exchangeable Preferred Stock for the Radio
Broadcasting 12% Preferred Stock (the "Exchange Offer")), or (z) issue, sell,
grant, pledge or otherwise encumber any shares of its capital stock, any other
equity securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, equity securities or convertible securities
other than (1) upon the exercise of Company Stock Options and Evergreen Stock
Options outstanding on the date of this Agreement, (2) pursuant to employment
agreements or other contractual arrangements in effect on the date of this
Agreement, or (3) with respect to the Company and its subsidiaries, in
connection with the Exchange Offer or upon the conversion of the Company
Convertible Preferred Stock;
(ii) amend its Certificate of Incorporation, Bylaws or other comparable
charter or organizational documents (other than, in the case of Radio
Broadcasting, as necessary to consummate the Exchange Offer);
(iii) acquire any business (including the assets thereof) or any
corporation, partnership, joint venture, association or other business
organization or division thereof;
(iv) sell, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets that are material to the
Company or Evergreen and their respective subsidiaries taken as a whole;
(v) (x) other than working capital borrowings in the ordinary course of
business and consistent with past practices incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, other than
indebtedness owing to or guarantees of indebtedness owing to the Company or
Evergreen or any of
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their respective direct or indirect wholly-owned subsidiaries or (y) make any
material loans or advances to any other person, other than to the Company or
Evergreen, or to any of their respective direct or indirect wholly-owned
subsidiaries and other than routine advances to employees;
(vi) make any tax election or settle or compromise any income tax liability
that could reasonably be expected to be material to the Company or Evergreen and
their respective subsidiaries taken as a whole;
(vii) pay, discharge, settle or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) of the
Company or Evergreen included in the Filed Company SEC Documents or the Filed
Evergreen SEC Documents, respectively, or incurred since the date of such
financial statements in the ordinary course of business consistent with past
practice;
(viii) make any material commitments or agreements for capital expenditures
or capital additions or betterments except as materially consistent with the
budget for capital expenditures as of the date of this Agreement and consistent
with past practices;
(ix) except as may be required by law,
(1) other than in the ordinary course of business and consistent with
past practices, make any representation or promise, oral or written, to any
employee or former director, officer or employee of the Company or
Evergreen or any of their respective subsidiaries which is inconsistent
with the terms of any Company Benefit Plan or Evergreen Benefit Plan,
respectively;
(2) other than in the ordinary course of business and consistent with
past practices, make any change to, or amend in any way, the contracts,
salaries, wages, or other compensation of any director, employee or any
agent or consultant of the Company or Evergreen or any of their respective
subsidiaries other than routine changes or amendments that are required
under existing contracts;
(3) adopt, enter into, amend, alter or terminate, partially or
completely, any Company Benefit Plan or Evergreen Benefit Plan or any
election made pursuant to the provisions of any Company Benefit Plan or
Evergreen Benefit Plan, to accelerate any payments, obligations or vesting
schedules under any Company Benefit Plan or Evergreen Benefit Plan; or
(4) other than in the ordinary course of business consistent with past
practices, approve any general or company-wide pay increases for employees;
(x) except in the ordinary course of business, modify, amend or terminate
any material agreement, permit, concession, franchise, license or similar
instrument to which the Company or Evergreen or any of their respective
subsidiaries is a party or waive, release or assign any material rights or
claims thereunder; or
(xi) authorize any of, or commit or agree to take any of, the foregoing
actions.
Notwithstanding the foregoing, nothing herein shall prevent Evergreen or
the Company from selling or acquiring (or agreeing to sell or acquire) all or
substantially all of the assets (by purchase, stock purchase, merger or
otherwise) of one or more radio broadcast stations and entering into financing
transactions in connection therewith, provided that the value of the
consideration (as determined in good faith by the Board of Directors of the
Company or Evergreen, as the case may be) to be paid or received (as
appropriate) in such transactions does not exceed $100,000,000 in the aggregate
for all such radio stations acquired since the date of the Old Agreement. Each
of Evergreen, on the one hand, and the Company and Radio Broadcasting, on the
other hand, represent and warrant to the other party or parties that no actions
have been taken since February 19, 1997 in violation of the terms of the Old
Agreement.
5.2 Company Stock Options. At the Effective Time, each Company Stock Option
shall be deemed to have been assumed by Evergreen, without further action by
Evergreen, and shall thereafter be deemed an option to acquire, on the same
terms and conditions as were applicable under such Company Stock Option, that
number of shares of Parent Common Stock that would have been received in respect
of such Company
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Stock Option if it had been exercised immediately prior to the Effective Time
(such Company Stock Options assumed by Evergreen, the "Assumed Chancellor Stock
Options"); provided, however, that, for each optionholder, (i) the aggregate
fair market value of Parent Common Stock subject to Assumed Chancellor Stock
Options immediately after the Effective Time shall not exceed the aggregate
exercise price thereof by more than the excess of the aggregate fair market
value of Company Common Stock subject to Company Stock Options immediately
before the Effective Time over the aggregate exercise price thereof and (ii) on
a share-by-share comparison, the ratio of the exercise price of the Assumed
Chancellor Stock Option to the fair market value of the Parent Common Stock
immediately after the Effective Time is no more favorable to the optionholder
than the ratio of the exercise price of the Company Stock Option to the fair
market value of the Company Common Stock immediately before the Effective Time;
and provided, further, that no fractional shares shall be issued on the exercise
of such Assumed Chancellor Stock Option and, in lieu thereof, the holder of such
Assumed Chancellor Stock Option shall only be entitled to a cash payment in the
amount of such fraction multiplied by the closing price per share of Parent
Common Stock on the Nasdaq National Market on the business day immediately prior
to the date of such exercise.
5.3 Other Actions. The Company and Evergreen shall not, and shall not
permit any of their respective subsidiaries to, take any action that would, or
that could reasonably be expected to, result in any of the conditions of the
Merger set forth in Article VI not being satisfied.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger and the Subsidiary
Merger is subject to the satisfaction or waiver on or prior to the Closing Date
and Subsidiary Closing Date, as applicable, of the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval and the
Evergreen Stockholder Approval shall have been obtained.
(b) FCC Order. The FCC shall have issued an order (the "FCC Order")
approving the transfer of the Company FCC Licenses for the operation of the
Company Licensed Facilities and the Evergreen FCC Licenses for the operation of
the Evergreen Licensed Facilities to the public stockholders of Parent pursuant
to the Merger without the imposition of any conditions or restrictions that
would have a material adverse effect on the business, properties, results of
operations, or condition (financial or otherwise) of Parent and its
subsidiaries, considered as a whole (a "Parent Material Adverse Effect"), and
which FCC Order has not been reversed, stayed, enjoined, set aside or suspended
and with respect to which no timely request for stay, petition for
reconsideration or appeal has been filed and as to which the time period for
filing of any such appeal or request for reconsideration or for any sua sponte
action by the FCC with respect to the FCC Order has expired, or, in the event
that such a filing or review sua sponte has occurred, as to which such filing or
review shall have been disposed of favorably to the grant of the FCC Order and
the time period for seeking further relief with respect thereto shall have
expired without any request for such further relief having been filed or review
initiated; provided, however, that notwithstanding anything in this Agreement to
the contrary, that reasonable conditions of divestiture of certain Company
Licensed Facilities or Evergreen Licensed Facilities to comply with the multiple
ownership requirements under the Telecom Act shall not be deemed to result in a
Parent Material Adverse Effect.
(c) Governmental and Regulatory Consents. All required consents, approvals,
permits and authorizations to the consummation of the transactions contemplated
hereby by the Company, Radio Broadcasting, Evergreen, EMHC and EMCLA shall be
obtained from any Governmental Entity (other than the FCC) whose consent,
approval, permission or authorization is required by reason of a change in law
after the date of this Agreement, unless the failure to obtain such consent,
approval, permission or authorization could not reasonably be expected to have a
Parent Material Adverse Effect, or to materially and adversely affect the
validity or enforceability of this Agreement or the Merger.
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(d) HSR Act. The waiting period (and any extension thereof) applicable to
the Merger and the Subsidiary Merger under the HSR Act shall have been
terminated or shall have otherwise expired.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger and the Subsidiary Merger shall be in effect;
provided, however, that the party invoking this condition shall use best
reasonable efforts to have any such order or injunction vacated.
(f) Nasdaq Listing. The shares of Parent Common Stock issuable to the
Company's stockholders pursuant to this Agreement shall have been approved for
quotation on the Nasdaq National Market, subject to official notice of issuance.
(g) Form S-4s. The Evergreen Form S-4 and EMCLA Form S-4 shall each have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order.
6.2 Conditions to Obligations of Evergreen, EMCLA and EMHC. The obligation
of Evergreen, EMCLA and EMHC to effect the Merger and the Subsidiary Merger are
further subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company and Radio Broadcasting contained in this Agreement shall have been
true and correct on the date of the Old Agreement (except to the extent that
they expressly relate only to a different time, in which case they shall have
been true and correct as of such different time), other than such breaches of
representations and warranties which in the aggregate could not reasonably be
expected to have a Company Material Adverse Effect. The Company and Radio
Broadcasting shall have delivered to Evergreen a certificate dated as of the
Closing Date, signed by a senior executive officer of the Company and Radio
Broadcasting, to the effect set forth in this Section 6.2(a).
(b) Performance of Obligations of the Company and Radio Broadcasting. The
Company and Radio Broadcasting shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and Evergreen shall have received a certificate signed on
behalf of the Company and Radio Broadcasting by a senior executive officer of
the Company and Radio Broadcasting to such effect.
(c) Tax Opinion. Evergreen shall have received an opinion of Latham &
Watkins, dated the Closing Date, substantially in the form of Exhibit H, to the
effect that (i) the Merger and the Subsidiary Merger will each be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code; (ii) each of Evergreen, EMHC, and the Company will be a
party to the Merger within the meaning of Section 368(b) of the Code; (iii) each
of EMCLA and Radio Broadcasting will be a party to the Subsidiary Merger within
the meaning of Section 368(b) of the Code; (iv) no gain or loss will be
recognized by the Company, Evergreen or EMHC as a result of the Merger; (v) no
gain or loss will be recognized by EMCLA or Radio Broadcasting as a result of
the Subsidiary Merger; (vi) no gain or loss will be recognized by any holder of
Evergreen Class A Common Stock or Evergreen Class B Common Stock on the exchange
of such stock for shares of Parent Common Stock pursuant to this Agreement; and
(vii) no gain or loss will be recognized by any holder of Evergreen Convertible
Exchangeable Preferred Stock as a result of the Merger. In rendering such
opinion, Latham & Watkins shall receive and may rely upon representations
contained in certificates of Evergreen, EMCLA, EMHC, the Company, Radio
Broadcasting, and certain stockholders of the Company and Radio Broadcasting,
substantially in the form of Exhibits B through G.
6.3 Conditions to Obligation of the Company and Radio Broadcasting. The
obligation of the Company and Radio Broadcasting to effect the Merger and the
Subsidiary Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of
Evergreen contained in this Agreement shall have been true and correct on the
date of the Old Agreement (except to the extent that they expressly relate only
to a different time, in which case they shall have been true and correct as of
such different time), and the representations and warranties of EMCLA and EMHC
contained in this Agreement shall have been true and correct on the date of this
Agreement (except to the extent that they expressly relate only to an earlier
time, in which case they shall have been true and correct as of such earlier
time), in each case other
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than such breaches of representations and warranties which in the aggregate
could not reasonably be expected to have an Evergreen Material Adverse Effect.
Evergreen, EMCLA and EMHC shall have delivered to the Company and Radio
Broadcasting a certificate dated as of the Closing Date, signed by a senior
executive officer of Evergreen, EMCLA and EMHC, to the effect set forth in this
Section 6.3(a).
(b) Performance of Obligations of Evergreen, EMCLA and EMHC. Evergreen,
EMCLA and EMHC shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date, including without limitation, the filing of the Parent Charter with the
Delaware Secretary of State and delivery of the Board Resignations and the Board
Appointments, and the Company shall have received a certificate signed on behalf
of Evergreen, EMCLA and EMHC by a senior executive officer of Evergreen, EMCLA
and EMHC to such effect.
(c) Tax Opinion. The Company and Radio Broadcasting shall have received an
opinion of Weil, Gotshal & Manges LLP, dated as of the Closing Date and
substantially in the form of Exhibit I, to the effect that the Merger and the
Subsidiary Merger will each be treated as a reorganization under Section 368(a)
of the Code and that no gain or loss will be recognized by the stockholders of
the Company and of Radio Broadcasting on the receipt pursuant to the Merger and
the Subsidiary Merger of shares of Parent Common Stock, Parent Convertible
Preferred Stock or Merger Preferred Stock in exchange for Shares, shares of
Company Convertible Preferred Stock and/or shares of Radio Broadcasting
Preferred Stock, except with respect to cash received by dissenters or in lieu
of fractional shares of Parent Common Stock. In rendering such opinion, Weil,
Gotshal & Manges LLP shall receive and may rely upon representations contained
in certificates of Evergreen, EMCLA, EMHC, the Company, Radio Broadcasting, and
certain stockholders of the Company and Radio Broadcasting, substantially in the
form of Exhibits B through G.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated and abandoned at any time
prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the stockholders of the Company or
Evergreen:
(a) by mutual written consent of Evergreen and the Company;
(b) by either Evergreen or the Company:
(i) if, upon a vote at a duly held Stockholders Meeting or Evergreen
Stockholders Meeting or any adjournment thereof, any required approval of the
stockholders of the Company or Evergreen, as the case may be, shall not have
been obtained;
(ii) if the Merger and the Subsidiary Merger shall not have been
consummated on or before February 19, 1998, unless the failure to consummate the
Merger or the Subsidiary Merger is the result of a willful and material breach
of this Agreement by the party seeking to terminate this Agreement;
(iii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger or Subsidiary Merger and such order, decree, ruling or
other action shall have become final and nonappealable; or
(iv) if the other party hereto shall have breached the requirements of
Sections 4.2 or 4.5 hereof, unless the party seeking to invoke this clause (iv)
shall at such time be in material breach of this Agreement.
7.2 Effect of Termination. In the event of termination of this Agreement by
either the Company or Evergreen as provided in Section 7.1, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Evergreen or the Company, other than the last sentence of Section
4.3 and Sections 2.10, 3.10, 7.2 and 10.2. Nothing contained in this Section 7.2
shall relieve any party from any liability resulting from any material breach of
the representations, warranties, covenants or agreements set forth in this
Agreement.
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7.3 Amendment. Subject to the applicable provisions of the Delaware Code,
at any time prior to the Effective Time, the parties hereto may modify or amend
this Agreement, by written agreement executed and delivered by duly authorized
officers of the respective parties; provided, however, that after the Company
Stockholder Approval and Evergreen Stockholder Approval has been obtained, no
amendment shall be made which reduces the consideration payable in the Merger or
Subsidiary Merger or adversely affects the rights of the Company's, Radio
Broadcasting's or Evergreen's stockholders hereunder without the approval of
their respective stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
7.4 Extension; Waiver. At any time prior to the Effective Time, the parties
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to Section 7.3, waive
compliance with any of the agreements or conditions of the other parties
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
7.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of Evergreen or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
ARTICLE VIII
SURVIVAL OF PROVISIONS
8.1 Survival. The representations and warranties respectively required to
be made by the Company and Evergreen in this Agreement, or in any certificate,
respectively, delivered by the Company or Evergreen pursuant to Section 6.2 or
Section 6.3 hereof will not survive the Closing.
ARTICLE IX
NOTICES
9.1 Notices. All notices and other communications under this Agreement must
be in writing and will be deemed to have been duly given if delivered,
telecopied or mailed, by certified mail, return receipt requested, first-class
postage prepaid, to the parties at the following addresses:
If to Evergreen, EMCLA or EMHC, to:
Evergreen Media Corporation
433 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Attention: Scott K. Ginsburg
Telephone: (972) 869-9020
Telecopy: (972) 869-3671
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with copies to:
Latham & Watkins
1001 Pennsylvania Ave., N.W.
Suite 1300
Washington, D.C. 20004
Attention: Eric L. Bernthal, Esq.
Daniel T. Lennon, Esq.
Telephone: (202) 637-2200
Telecopy: (202) 637-2201
If to the Company or Radio Broadcasting, to:
Chancellor Broadcasting Company
12655 N. Central Expressway
Suite 405
Dallas, Texas 75243
Attention: Steven Dinetz
Telephone: (972) 239-6220
Telecopy: (972) 239-0220
With copies to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Thomas O. Hicks
Lawrence D. Stuart, Jr.
Telephone: (214) 740-7300
Telecopy: (214) 740-7313
and
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Jeremy W. Dickens, Esq.
Telephone: (214) 746-7720
Telecopy: (214) 746-7777
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Article IX will, if delivered personally,
be deemed given upon delivery, will, if delivered by telecopy, be deemed
delivered when confirmed and will, if delivered by mail in the manner described
above, be deemed given on the third business day after the day it is deposited
in a regular depository of the United States mail. Any party from time to time
may change its address for the purpose of notices to that party by giving a
similar notice specifying a new address, but no such notice will be deemed to
have been given until it is actually received by the party sought to be charged
with the contents thereof.
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ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement. Except for documents executed by the Company and
Evergreen pursuant hereto, this Agreement supersedes all prior discussions and
agreements between the parties with respect to the subject matter of this
Agreement, and this Agreement (including the exhibits hereto and other documents
delivered in connection herewith), the Stockholders Agreement and the
Confidentiality Agreements contain the sole and entire agreement between the
parties hereto with respect to the subject matter hereof.
10.2 Expenses. Whether or not the Merger and the Subsidiary Merger are
consummated, each of the Company and Evergreen will pay its own costs and
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby; provided
that the fees and expenses incurred in connection with (i) the filings and
registrations with the Department of Justice and Federal Trade Commission
pursuant to the HSR Act, (ii) the filings with the FCC under the Communications
Act, and (iii) the printing, mailing and distribution of the Joint Proxy
Statement and the preparation and filing of the Form S-4s, shall be borne
equally by Evergreen and the Company.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
10.4 No Third Party Beneficiary. Except as otherwise provided herein, the
terms and provisions of this Agreement are intended solely for the benefit of
the parties hereto, and their respective successors or assigns, and it is not
the intention of the parties to confer third-party beneficiary rights upon any
other person.
10.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
10.6 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment that is
not consented to shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties and their respective successors and assigns.
10.7 Headings, Gender, Etc. The headings used in this Agreement have been
inserted for convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (a) words of any gender are deemed to include each
other gender; (b) words using the singular or plural number also include the
plural or singular number, respectively; (c) the terms "hereof," "herein,"
"hereby," "hereto," and derivative or similar words refer to this entire
Agreement; (d) the terms "Article" or "Section" refer to the specified Article
or Section of this Agreement; (e) all references to "dollars" or "$" refer to
currency of the United States of America; and (f) the term "person" shall
include any natural person, corporation, limited liability company, general
partnership, limited partnership, or other entity, enterprise, authority or
business organization.
10.8 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future law, and if the
rights or obligations of the Company or Evergreen under this Agreement will not
be materially and adversely affected thereby, (a) such provision will be fully
severable; (b) this Agreement will be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part hereof; and (c)
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid, or unenforceable provision or
by its severance herefrom.
10.9 Viacom Transaction. On February 16, 1997, EMCLA and Viacom
International Inc. ("Viacom") entered into a Stock Purchase Agreement (the
"Viacom Purchase Agreement") whereby EMCLA agreed to purchase all the
outstanding shares of stock of certain subsidiaries of Viacom that own and
operate the radio broadcast stations described in the Viacom Purchase Agreement.
Concurrently with the execution and
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delivery of the Old Agreement, Evergreen, EMCLA, the Company and Radio
Broadcasting entered into an agreement (the "Joint Purchase Agreement") whereby,
as between Evergreen and the Company, the Company agreed to assume certain
obligations under the Viacom Purchase Agreement and Evergreen agreed to grant to
the Company certain rights under the Viacom Purchase Agreement. Notwithstanding
any provision hereof to the contrary, no provision of the Old Agreement or this
Agreement shall be deemed to prohibit any transaction contemplated by the Joint
Purchase Agreement or the Viacom Purchase Agreement. The transactions
contemplated by the Viacom Purchase Agreement and the Joint Purchase Agreement
are referred to collectively as the "Viacom Transaction."
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the Company, Radio Broadcasting, Evergreen,
EMCLA and EMHC effective as of the date first written above.
CHANCELLOR BROADCASTING
COMPANY
By: /s/ THOMAS O. HICKS
----------------------------------
Name: Thomas O. Hicks
Title: Chairman of the Board
CHANCELLOR RADIO BROADCASTING
COMPANY
By: /s/ THOMAS O. HICKS
----------------------------------
Name: Thomas O. Hicks
Title: Chairman of the Board
EVERGREEN MEDIA CORPORATION
By: /s/ SCOTT K. GINSBURG
----------------------------------
Name: Scott K. Ginsburg
Title: Chairman and Chief Executive
Officer
EVERGREEN MEDIA CORPORATION OF LOS
ANGELES
By: /s/ SCOTT K. GINSBURG
----------------------------------
Name: Scott K. Ginsburg
Title: Chairman and Chief Executive
Officer
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EVERGREEN MEZZANINE HOLDINGS
CORPORATION
By: /s/ SCOTT K. GINSBURG
----------------------------------
Name: Scott K. Ginsburg
Title: Chairman and Chief Executive
Officer
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ANNEX I
AMENDMENTS TO CERTIFICATE OF INCORPORATION OF EVERGREEN MEZZANINE HOLDINGS
CORPORATION:
ARTICLE FOURTH SHALL BE AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS FOLLOWS:
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 10,001,000 shares consisting of
(a) 10,000,000 shares of preferred stock, par value $.01 per share (the
"Preferred Stock") and (b) 1,000 shares of Common Stock, par value $.01 per
share (the "Common Stock").
The designations, powers, preferences, rights, qualifications, limitations,
and restrictions of the Preferred Stock and the Common Stock are as follows:
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time in one or more
classes or series, the shares of each class or series to have such designations,
powers, preferences and rights and such qualifications, limitations and
restrictions thereof as are stated and expressed herein and in the resolution or
resolutions providing for the issue of such class or series adopted by the Board
of Directors of the Corporation (the "Board of Directors") as hereafter
prescribed.
(b) Authority is hereby expressly granted to and vested in the Board of
Directors to authorize the issuance of the Preferred Stock from time to time in
one or more classes or series, and with respect to each class or series of the
Preferred Stock, to fix and state by the resolution or resolutions from time to
time adopted providing for the issuance thereof the following:
(i) whether or not the class or series is to have voting rights, full,
special or limited, or is to be without voting rights, and whether or not such
class or series is to be entitled to vote as a separate class either alone or
together with the holders of one or more other classes or series of stock;
(ii) the number of shares to constitute the class or series and the
designations thereof;
(iii) the preferences and relative, participating, optional or other
special rights, if any, and the qualifications, limitations or restrictions
thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series shall be redeemable
at the option of the Corporation or the holders thereof or upon the happening of
any specified event, and, if redeemable, the redemption price or prices (which
may be payable in the form of cash, notes, securities or other property) and the
time or times at which, and the terms and conditions upon which, such shares
shall be redeemable and the manner of redemption;
(v) whether or not the shares of a class or series shall be subject to the
operation of retirement or sinking funds to be applied to the purchase or
redemption of such shares for retirement, and, if such retirement or sinking
fund or funds are to be established, the annual amount thereof and the terms and
provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in cash, securities
of the Corporation or other property, the conditions upon which and the times
when such dividends are payable, the preference to or the relation to the
payment of dividends payable on any other class or classes or series of stock,
whether or not such dividends shall be cumulative or noncumulative and, if
cumulative, the date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which the holders of
any class or series thereof shall be entitled to receive upon the voluntary or
involuntary dissolution of, or upon any distribution of the assets of, the
Corporation;
(viii) whether or not the shares of any class or series, at the option of
the Corporation or the holder thereof or upon the happening of any specified
event, shall be convertible into or exchangeable for the shares of any other
class or classes or of any other series of the same or any other class or
classes of stock, securities,
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or other property of the Corporation and the conversion price or prices or ratio
or ratios or the rate or rates at which such exchange may be made, with such
adjustments, if any, as shall be stated and expressed or provided for in such
resolution or resolutions; and
(ix) such other special rights and protective provisions with respect to
any class or series as may to the Board of Directors seem advisable.
(c) The shares of each class or series of the Preferred Stock may vary from
the shares of any other class or series thereof in any or all of the foregoing
respects. The Board of Directors may increase the number of shares of the
Preferred Stock designated for any existing class or series by a resolution
adding to such class or series authorized and unissued shares of the Preferred
Stock not designated for any other class or series. The Board of Directors may
decrease the number of shares of the Preferred Stock designated for any existing
class or series by a resolution subtracting from such class or series authorized
and unissued shares of the Preferred Stock designated for such existing class or
series, and the shares so subtracted shall become authorized, unissued and
undesignated shares of the Preferred Stock.
(d) The number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the Common Stock, without a
vote of a majority of the holders of the Preferred Stock, or of any class or
series thereof, unless a vote of any such holders is required pursuant to the
certificate or certificates establishing such class or series of Preferred
Stock.
2. Provisions Relating to the Common Stock.
(a) Each share of Common Stock of the Corporation shall have identical
rights and privileges in every respect. The holders of shares of Common Stock
shall be entitled to vote upon all matters submitted to a vote of the
stockholders of the Corporation and shall be entitled to one vote for each share
of Common Stock held.
(b) Subject to the prior rights and preferences, if any, applicable to
shares of the Preferred Stock or any series thereof, the holders of shares of
the Common Stock shall be entitled to receive such dividends (payable in cash,
stock, or otherwise) as may be declared thereon by the board of directors at any
time and from time to time out of any funds of the Corporation legally available
therefor.
(c) In the event of any voluntary or involuntary liquidation, dissolution,
or winding-up of the Corporation, after distribution in full of the preferential
amounts, if any, to be distributed to the holders of shares of the Preferred
Stock or any series thereof, the holders of shares of the Common Stock shall be
entitled to receive all of the remaining assets of the Corporation available for
distribution to its stockholders, ratably in proportion to the number of shares
of the Common Stock held by them. A liquidation, dissolution, or winding-up of
the Corporation, as such terms are used in this Paragraph (c), shall not be
deemed to be occasioned by or to include any consolidation or merger of the
Corporation with or into any other corporation or corporations or other entity
or a sale, lease, exchange, or conveyance of all or a part of the assets of the
Corporation.
3. General.
(a) Subject to the foregoing provisions of this Certificate of
Incorporation, the Corporation may issue shares of its Common Stock from time to
time for such consideration (not less than the par value thereof) as may be
fixed by the Board of Directors, which is expressly authorized to fix the same
in its absolute and uncontrolled discretion subject to the foregoing conditions.
Shares so issued for which the consideration shall have been paid or delivered
to the Corporation shall be deemed fully paid stock and shall not be liable to
any further call or assessment thereon, and the holders of such shares shall not
be liable for any further payments in respect of such shares.
(b) The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase shares of the Corporation's capital
stock of any class or series or other securities of the Corporation, and such
rights and options shall be evidenced by instrument(s) approved by the Board of
Directors. The Board of Directors shall be empowered to set the exercise price,
duration, times for exercise, and other terms of such options or rights;
provided, however, that the consideration to be received for any shares of
capital stock subject thereto shall not be less than the par value thereof.
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ARTICLE SEVENTH SHALL BE AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS
FOLLOWS:
SEVENTH: The Corporation shall indemnify any Person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by reason
of the fact that he or she (i) is or was a director, officer, employee or agent
of the Corporation, or (ii) is or was serving at the request of the Corporation
as a director, officer, partner, venturer, proprietor, trustee, employee, agent,
or similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, to the fullest extent permitted under the General Corporation Law of
the State of Delaware, as the same exists or may hereafter be amended. Such
right shall be a contract right and as such shall run to the benefit of any
director or officer who is elected and accepts the position of director or
officer of the Corporation or elects to continue to serve as a director or
officer of the Corporation while this Article Seventh is in effect. Any repeal
or amendment of this Article Seventh shall be prospective only and shall not
limit the rights of any such director or officer or the obligations of the
Corporation with respect to any claim arising from or related to the services of
such director or officer in any of the foregoing capacities prior to any such
repeal or amendment to this Article Seventh. Such right shall include the right
to be paid by the Corporation expenses incurred in investigating or defending
any such proceeding in advance of its final disposition to the maximum extent
permitted under the General Corporation Law of the State of Delaware, as the
same exists or may hereafter be amended. To the extent that a director, officer,
employee or agent of the corporation shall be successful on the merits or
otherwise in defense of any proceeding, or in defense of any claim, issue, or
matter therein, he or she shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith. If a claim for indemnification or advancement of expenses hereunder
is not paid in full by the Corporation within sixty (60) days after a written
claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, the claimant shall also be
entitled to be paid the expenses of prosecuting such claim. It shall be a
defense to any such action that such indemnification or advancement of costs of
defense is not permitted under the General Corporation Law of the State of
Delaware, but the burden of proving such defense shall be on the Corporation.
None of (i) the failure of the Corporation (including its board of directors or
any committee thereof, independent legal counsel, or stockholders) to have made
its determination prior to the commencement of such action that indemnification
of, or advancement of costs of defense to, the claimant is permissible in the
circumstances, (ii) an actual determination by the Corporation (including its
board of directors or any committee thereof, independent legal counsel, or
stockholders) that such indemnification or advancement is not permissible, or
(iii) the termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall be a
defense to the action or create a presumption that such indemnification or
advancement is not permissible. In the event of the death of any Person having a
right of indemnification under the foregoing provisions, such right shall inure
to the benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any Person may have or hereafter acquire under any statute, bylaw,
resolution of stockholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
Without limiting the generality of the foregoing, to the extent permitted
by then applicable law, the grant of mandatory indemnification pursuant to this
Article Seventh shall extend to proceedings involving the negligence of such
Person.
The Board of Directors may authorize, by a vote of a majority of a quorum
of the Board of Directors, the Corporation to purchase and maintain insurance on
behalf of any person who 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, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of this Article Seventh.
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As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding. "Person" as used herein means any corporation, partnership,
association, firm, trust, joint venture, political subdivision or
instrumentality.
A NEW ARTICLE SHALL BE ADDED AS ARTICLE TENTH TO READ AS FOLLOWS:
TENTH: The following provisions are included for the purpose of ensuring
that control and management of the Corporation remains with loyal citizens of
the United States and/or corporations formed under the laws of the United States
or any of the states of the United States, as required by the Communications Act
of 1934, as the same may be amended from time to time:
(a) The Corporation shall not issue to (i) a person who is a citizen of a
country other than the United States; (ii) any entity organized under the laws
of a government other than the government of the United States or any state,
territory, or possession of the United States; (iii) a government other than the
government of the United States or of any state, territory, or possession of the
United States; or (iv) a representative of, or an individual or entity
controlled by, any of the foregoing (individually, an "Alien"; collectively,
"Aliens") in excess of 25% of the total number of shares of capital stock of the
Corporation outstanding at any time and shall not permit the transfer on the
books of the corporation of any capital stock to any Alien that would result in
the total number of shares of such capital stock held by Aliens exceeding such
25% limit.
(b) No Alien or Aliens shall be entitled to vote or direct or control the
vote of more than 25% of (i) the total number of shares of capital stock of the
Corporation outstanding and entitled to vote at any time and from time to time,
or (ii) the total voting power of all shares of capital stock of the Corporation
outstanding and entitled to vote at any time and from time to time.
(c) No Alien shall be qualified to act as an officer of the Corporation,
and no more than one-fourth of the total number of directors of the Corporation
at any time and from time to time may be Aliens.
(d) The Board of Directors of the Corporation shall have all powers
necessary to implement the provisions of this Article Tenth.
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ANNEX II
AMENDMENTS TO CERTIFICATE OF INCORPORATION OF EVERGREEN MEDIA CORPORATION OF LOS
ANGELES:
ARTICLE FOURTH SHALL BE AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS FOLLOWS:
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 10,001,000 shares consisting of
(a) 10,000,000 shares of preferred stock, par value $.01 per share (the
"Preferred Stock") and (b) 1,000 shares of Common Stock, par value $.01 per
share (the "Common Stock").
The designations, powers, preferences, rights, qualifications, limitations,
and restrictions of the Preferred Stock and the Common Stock are as follows:
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time in one or more
classes or series, the shares of each class or series to have such designations,
powers, preferences and rights and such qualifications, limitations and
restrictions thereof as are stated and expressed herein and in the resolution or
resolutions providing for the issue of such class or series adopted by the Board
of Directors of the Corporation (the "Board of Directors") as hereafter
prescribed.
(b) Authority is hereby expressly granted to and vested in the Board of
Directors to authorize the issuance of the Preferred Stock from time to time in
one or more classes or series, and with respect to each class or series of the
Preferred Stock, to fix and state by the resolution or resolutions from time to
time adopted providing for the issuance thereof the following:
(i) whether or not the class or series is to have voting rights, full,
special or limited, or is to be without voting rights, and whether or not such
class or series is to be entitled to vote as a separate class either alone or
together with the holders of one or more other classes or series of stock;
(ii) the number of shares to constitute the class or series and the
designations thereof;
(iii) the preferences and relative, participating, optional or other
special rights, if any, and the qualifications, limitations or restrictions
thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series shall be redeemable
at the option of the Corporation or the holders thereof or upon the happening of
any specified event, and, if redeemable, the redemption price or prices (which
may be payable in the form of cash, notes, securities or other property) and the
time or times at which, and the terms and conditions upon which, such shares
shall be redeemable and the manner of redemption;
(v) whether or not the shares of a class or series shall be subject to the
operation of retirement or sinking funds to be applied to the purchase or
redemption of such shares for retirement, and, if such retirement or sinking
fund or funds are to be established, the annual amount thereof and the terms and
provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in cash, securities
of the Corporation or other property, the conditions upon which and the times
when such dividends are payable, the preference to or the relation to the
payment of dividends payable on any other class or classes or series of stock,
whether or not such dividends shall be cumulative or noncumulative and, if
cumulative, the date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which the holders of
any class or series thereof shall be entitled to receive upon the voluntary or
involuntary dissolution of, or upon any distribution of the assets of, the
Corporation;
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(viii) whether or not the shares of any class or series, at the option of
the Corporation or the holder thereof or upon the happening of any specified
event, shall be convertible into or exchangeable for the shares of any other
class or classes or of any other series of the same or any other class or
classes of stock, securities, or other property of the Corporation and the
conversion price or prices or ratio or ratios or the rate or rates at which such
exchange may be made, with such adjustments, if any, as shall be stated and
expressed or provided for in such resolution or resolutions; and
(ix) such other special rights and protective provisions with respect to
any class or series as may to the Board of Directors seem advisable.
(c) The shares of each class or series of the Preferred Stock may vary from
the shares of any other class or series thereof in any or all of the foregoing
respects. The Board of Directors may increase the number of shares of the
Preferred Stock designated for any existing class or series by a resolution
adding to such class or series authorized and unissued shares of the Preferred
Stock not designated for any other class or series. The Board of Directors may
decrease the number of shares of the Preferred Stock designated for any existing
class or series by a resolution subtracting from such class or series authorized
and unissued shares of the Preferred Stock designated for such existing class or
series, and the shares so subtracted shall become authorized, unissued and
undesignated shares of the Preferred Stock.
(d) The number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the Common Stock, without a
vote of a majority of the holders of the Preferred Stock, or of any class or
series thereof, unless a vote of any such holders is required pursuant to the
certificate or certificates establishing such class or series of Preferred
Stock.
2. Provisions Relating to the Common Stock.
(a) Each share of Common Stock of the Corporation shall have identical
rights and privileges in every respect. The holders of shares of Common Stock
shall be entitled to vote upon all matters submitted to a vote of the
stockholders of the Corporation and shall be entitled to one vote for each share
of Common Stock held.
(b) Subject to the prior rights and preferences, if any, applicable to
shares of the Preferred Stock or any series thereof, the holders of shares of
the Common Stock shall be entitled to receive such dividends (payable in cash,
stock, or otherwise) as may be declared thereon by the board of directors at any
time and from time to time out of any funds of the Corporation legally available
therefor.
(c) In the event of any voluntary or involuntary liquidation, dissolution,
or winding-up of the Corporation, after distribution in full of the preferential
amounts, if any, to be distributed to the holders of shares of the Preferred
Stock or any series thereof, the holders of shares of the Common Stock shall be
entitled to receive all of the remaining assets of the Corporation available for
distribution to its stockholders, ratably in proportion to the number of shares
of the Common Stock held by them. A liquidation, dissolution, or winding-up of
the Corporation, as such terms are used in this Paragraph (c), shall not be
deemed to be occasioned by or to include any consolidation or merger of the
Corporation with or into any other corporation or corporations or other entity
or a sale, lease, exchange, or conveyance of all or a part of the assets of the
Corporation.
3. General.
(a) Subject to the foregoing provisions of this Certificate of
Incorporation, the Corporation may issue shares of its Common Stock from time to
time for such consideration (not less than the par value thereof) as may be
fixed by the Board of Directors, which is expressly authorized to fix the same
in its absolute and uncontrolled discretion subject to the foregoing conditions.
Shares so issued for which the consideration shall have been paid or delivered
to the Corporation shall be deemed fully paid stock and shall not be liable to
any further call or assessment thereon, and the holders of such shares shall not
be liable for any further payments in respect of such shares.
(b) The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase shares of the Corporation's capital
stock of any class or series or other securities of the Corporation, and such
rights and options shall be evidenced by instrument(s) approved by the Board of
Directors. The
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Board of Directors shall be empowered to set the exercise price, duration, times
for exercise, and other terms of such options or rights; provided, however, that
the consideration to be received for any shares of capital stock subject thereto
shall not be less than the par value thereof.
ARTICLE SEVENTH SHALL BE AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS
FOLLOWS:
SEVENTH: The Corporation shall indemnify any Person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by reason
of the fact that he or she (i) is or was a director, officer, employee or agent
of the Corporation, or (ii) is or was serving at the request of the Corporation
as a director, officer, partner, venturer, proprietor, trustee, employee, agent,
or similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, to the fullest extent permitted under the General Corporation Law of
the State of Delaware, as the same exists or may hereafter be amended. Such
right shall be a contract right and as such shall run to the benefit of any
director or officer who is elected and accepts the position of director or
officer of the Corporation or elects to continue to serve as a director or
officer of the Corporation while this Article Seventh is in effect. Any repeal
or amendment of this Article Seventh shall be prospective only and shall not
limit the rights of any such director or officer or the obligations of the
Corporation with respect to any claim arising from or related to the services of
such director or officer in any of the foregoing capacities prior to any such
repeal or amendment to this Article Seventh. Such right shall include the right
to be paid by the Corporation expenses incurred in investigating or defending
any such proceeding in advance of its final disposition to the maximum extent
permitted under the General Corporation Law of the State of Delaware, as the
same exists or may hereafter be amended. To the extent that a director, officer,
employee or agent of the corporation shall be successful on the merits or
otherwise in defense of any proceeding, or in defense of any claim, issue, or
matter therein, he or she shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith. If a claim for indemnification or advancement of expenses hereunder
is not paid in full by the Corporation within sixty (60) days after a written
claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, the claimant shall also be
entitled to be paid the expenses of prosecuting such claim. It shall be a
defense to any such action that such indemnification or advancement of costs of
defense is not permitted under the General Corporation Law of the State of
Delaware, but the burden of proving such defense shall be on the Corporation.
None of (i) the failure of the Corporation (including its board of directors or
any committee thereof, independent legal counsel, or stockholders) to have made
its determination prior to the commencement of such action that indemnification
of, or advancement of costs of defense to, the claimant is permissible in the
circumstances, (ii) an actual determination by the Corporation (including its
board of directors or any committee thereof, independent legal counsel, or
stockholders) that such indemnification or advancement is not permissible, or
(iii) the termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall be a
defense to the action or create a presumption that such indemnification or
advancement is not permissible. In the event of the death of any Person having a
right of indemnification under the foregoing provisions, such right shall inure
to the benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any Person may have or hereafter acquire under any statute, bylaw,
resolution of stockholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
Without limiting the generality of the foregoing, to the extent permitted
by then applicable law, the grant of mandatory indemnification pursuant to this
Article Seventh shall extend to proceedings involving the negligence of such
Person.
The Board of Directors may authorize, by a vote of a majority of a quorum
of the Board of Directors, the Corporation to purchase and maintain insurance on
behalf of any person who 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, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or
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domestic corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise against any liability asserted
against him or her and incurred by him or her in any such capacity, or arising
out of his or her status as such, whether or not the Corporation would have the
power to indemnify him or her against such liability under the provisions of
this Article Seventh.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding. "Person" as used herein means any corporation, partnership,
association, firm, trust, joint venture, political subdivision or
instrumentality.
A NEW ARTICLE SHALL BE ADDED AS ARTICLE TENTH TO READ AS FOLLOWS:
TENTH: The following provisions are included for the purpose of ensuring
that control and management of the Corporation remains with loyal citizens of
the United States and/or corporations formed under the laws of the United States
or any of the states of the United States, as required by the Communications Act
of 1934, as the same may be amended from time to time:
(a) The Corporation shall not issue to (i) a person who is a citizen of a
country other than the United States; (ii) any entity organized under the laws
of a government other than the government of the United States or any state,
territory, or possession of the United States; (iii) a government other than the
government of the United States or of any state, territory, or possession of the
United States; or (iv) a representative of, or an individual or entity
controlled by, any of the foregoing (individually, an "Alien"; collectively,
"Aliens") in excess of 25% of the total number of shares of capital stock of the
Corporation outstanding at any time and shall not permit the transfer on the
books of the corporation of any capital stock to any Alien that would result in
the total number of shares of such capital stock held by Aliens exceeding such
25% limit.
(b) No Alien or Aliens shall be entitled to vote or direct or control the
vote of more than 25% of (i) the total number of shares of capital stock of the
Corporation outstanding and entitled to vote at any time and from time to time,
or (ii) the total voting power of all shares of capital stock of the Corporation
outstanding and entitled to vote at any time and from time to time.
(c) No Alien shall be qualified to act as an officer of the Corporation,
and no more than one-fourth of the total number of directors of the Corporation
at any time and from time to time may be Aliens.
(d) The Board of Directors of the Corporation shall have all powers
necessary to implement the provisions of this Article Tenth.
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ANNEX III
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CHANCELLOR MEDIA CORPORATION
FIRST: The name of the corporation is Chancellor Media Corporation (the
"Corporation").
SECOND: The registered office of the Corporation in the State of Delaware
is located at Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to engage in
any and all lawful acts and activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 325,000,000 shares consisting
of (a) 50,000,000 shares of preferred stock, par value $.01 per share (the
"Preferred Stock"), (b) 200,000,000 shares of Common Stock, par value $.01 per
share (the "Common Stock") and (c) 75,000,000 shares of Class A Common Stock,
par value $.01 per share (the "Class A Common Stock").
The designations, powers, preferences, rights, qualifications, limitations,
and restrictions of the Preferred Stock, the Common Stock and the Class A Common
Stock are as follows:
1. Reclassification of Existing Class A and Class B Common Stock.
(a) Upon the filing of this Amended and Restated Certificate of
Incorporation, each share of Class A Common Stock, par value $.01 per share, of
the Corporation outstanding shall be reclassified, changed and converted into
one share of the Common Stock, and each share of Class B Common Stock, par value
$.01 per share, of the Corporation outstanding shall be reclassified into one
share of Common Stock (such reclassifications collectively being the
"Reclassification").
(b) After the Reclassification, each holder of the shares of capital stock
of the Corporation being reclassified, changed and converted as provided herein
shall be entitled to receive, upon surrender at the office of the Corporation or
the transfer agent for the Common Stock of such holder's certificate or
certificates representing the shares being reclassified, duly endorsed in blank
or accompanied by duly executed proper instruments of transfer, as promptly as
practicable after such surrender one or more certificates evidencing the Common
Stock issuable to such holder in respect of the Reclassification. After the
Reclassification, pending the issuance and delivery of such certificates in
accordance herewith, the certificate or certificates evidencing the shares of
previously outstanding class A and class B common stock being reclassified shall
be deemed to evidence the shares of Common Stock issuable upon the
Reclassification.
2. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time in one or more
classes or series, the shares of each class or series to have such designations,
powers, preferences and rights and such qualifications, limitations and
restrictions thereof as are stated and expressed herein and in the resolution or
resolutions providing for the issue of such class or series adopted by the Board
of Directors of the Corporation (the "Board of Directors") as hereafter
prescribed.
(b) Authority is hereby expressly granted to and vested in the Board of
Directors to authorize the issuance of the Preferred Stock from time to time in
one or more classes or series, and with respect to each class or series of the
Preferred Stock, to fix and state by the resolution or resolutions from time to
time adopted providing for the issuance thereof the following:
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(i) whether or not the class or series is to have voting rights, full,
special or limited, or is to be without voting rights, and whether or not such
class or series is to be entitled to vote as a separate class either alone or
together with the holders of one or more other classes or series of stock;
(ii) the number of shares to constitute the class or series and the
designations thereof;
(iii) the preferences and relative, participating, optional or other
special rights, if any, and the qualifications, limitations or restrictions
thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series shall be redeemable
at the option of the Corporation or the holders thereof or upon the happening of
any specified event, and, if redeemable, the redemption price or prices (which
may be payable in the form of cash, notes, securities or other property) and the
time or times at which, and the terms and conditions upon which, such shares
shall be redeemable and the manner of redemption;
(v) whether or not the shares of a class or series shall be subject to the
operation of retirement or sinking funds to be applied to the purchase or
redemption of such shares for retirement, and, if such retirement or sinking
fund or funds are to be established, the annual amount thereof and the terms and
provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in cash, securities
of the Corporation or other property, the conditions upon which and the times
when such dividends are payable, the preference to or the relation to the
payment of dividends payable on any other class or classes or series of stock,
whether or not such dividends shall be cumulative or noncumulative and, if
cumulative, the date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which the holders of
any class or series thereof shall be entitled to receive upon the voluntary or
involuntary dissolution of, or upon any distribution of the assets of, the
Corporation;
(viii) whether or not the shares of any class or series, at the option of
the Corporation or the holder thereof or upon the happening of any specified
event, shall be convertible into or exchangeable for the shares of any other
class or classes or of any other series of the same or any other class or
classes of stock, securities, or other property of the Corporation and the
conversion price or prices or ratio or ratios or the rate or rates at which such
exchange may be made, with such adjustments, if any, as shall be stated and
expressed or provided for in such resolution or resolutions; and
(ix) such other special rights and protective provisions with respect to
any class or series as may to the Board of Directors seem advisable.
(c) The shares of each class or series of the Preferred Stock may vary from
the shares of any other class or series thereof in any or all of the foregoing
respects. The Board of Directors may increase the number of shares of the
Preferred Stock designated for any existing class or series by a resolution
adding to such class or series authorized and unissued shares of the Preferred
Stock not designated for any other class or series. The Board of Directors may
decrease the number of shares of the Preferred Stock designated for any existing
class or series by a resolution subtracting from such class or series authorized
and unissued shares of the Preferred Stock designated for such existing class or
series, and the shares so subtracted shall become authorized, unissued and
undesignated shares of the Preferred Stock.
(d) The number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the Common Stock and Class A
Common Stock, each voting as a separate class, without a vote of a majority of
the holders of the Preferred Stock, or of any class or series thereof, unless a
vote of any such holders is required pursuant to the certificate or certificates
establishing such class or series of Preferred Stock.
3. Provisions Relating to the Common Stock and Class A Common Stock.
(a) Except as otherwise set forth in this Paragraph 3, each share of Common
Stock and Class A Common Stock of the Corporation shall have identical rights
and privileges in every respect. The holders of
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shares of Common Stock shall be entitled to vote as a class upon all matters
submitted to a vote of the stockholders of the Corporation and shall be entitled
to one vote for each share of Common Stock held, and the holders of shares of
Class A Common Stock shall be entitled to vote upon all matters submitted to a
vote of the stockholders of the Corporation as a separate class and shall be
entitled to one vote for each share of Class A Common Stock held.
(b) Subject to the prior rights and preferences, if any, applicable to
shares of the Preferred Stock or any series thereof, the holders of shares of
the Common Stock and Class A Common Stock shall be entitled to receive and
participate ratably in such dividends (payable in cash, stock, or otherwise) as
may be declared thereon by the board of directors at any time and from time to
time out of any funds of the Corporation legally available therefor.
(c) In the event of any voluntary or involuntary liquidation, dissolution,
or winding-up of the Corporation, after distribution in full of the preferential
amounts, if any, to be distributed to the holders of shares of the Preferred
Stock or any series thereof, the holders of shares of the Common Stock and Class
A Common Stock shall be entitled to receive all of the remaining assets of the
Corporation available for distribution to its stockholders, ratably in
proportion to the number of shares of the Common Stock or Class A Common Stock
held by them.
(d) With respect to any Going Private Transaction (as defined below)
between the Corporation and Scott K. Ginsburg or Affiliates of Scott K. Ginsburg
(as defined below), the holders of the Common Stock and the Class A Common Stock
shall each vote separately as a class. For purposes of this Paragraph 3(d), the
term "Going Private Transaction" shall mean any transaction that is a "Rule
13e-3 Transaction," as such term is defined in Rule 13e-3(a)(3), 17 C.F.R.
sec. 240.13e-3, as amended from time to time, promulgated under the Securities
Exchange Act of 1934, as amended. The term "Affiliate of Scott K. Ginsburg"
shall mean (x) any corporation of which Scott K. Ginsburg is the beneficial
owner of 50% or more of the combined voting power of all classes of equity
securities, (y) any trust or other estate in which Scott K. Ginsburg serves as
trustee or in a similar capacity, or (z) any partnership, joint venture, or
unincorporated organization that is under the direct or indirect control of
Scott K. Ginsburg, such that Scott K. Ginsburg possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such entity whether through the ownership of voting securities, by
contract, or otherwise.
4. General.
(a) Subject to the foregoing provisions of this Certificate of
Incorporation, the Corporation may issue shares of its Common Stock and Class A
Common Stock from time to time for such consideration (not less than the par
value thereof) as may be fixed by the Board of Directors, which is expressly
authorized to fix the same in its absolute and uncontrolled discretion subject
to the foregoing conditions; provided, however, that notwithstanding the
foregoing, the Corporation may not issue shares of Class A Common Stock without
the unanimous vote or written consent of the Board of Directors of the
Corporation. Shares so issued for which the consideration shall have been paid
or delivered to the Corporation shall be deemed fully paid stock and shall not
be liable to any further call or assessment thereon, and the holders of such
shares shall not be liable for any further payments in respect of such shares.
(b) The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase shares of the Corporation's capital
stock of any class or series or other securities of the Corporation, and such
rights and options shall be evidenced by instrument(s) approved by the Board of
Directors. The Board of Directors shall be empowered to set the exercise price,
duration, times for exercise, and other terms of such options or rights;
provided, however, that the consideration to be received for any shares of
capital stock subject thereto shall not be less than the par value thereof.
FIFTH: The number of directors constituting the Board of Directors shall be
no less than five and no more than thirteen, plus such number of directors as
may be elected from time to time by the holders of any class or series of
Preferred Stock. Commencing on the date on which this Amended and Restated
Certificate of Incorporation shall become effective pursuant to the General
Corporation Law of the State of Delaware, the directors of the Corporation shall
be divided into three classes (the "Classified Directors") with the first class
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("Class I"), second class ("Class II") and the third class ("Class III") each to
consist as nearly as practicable of an equal number of directors. The term of
office of the Class I directors shall expire at the 1998 annual meeting of
stockholders, the term of office of the Class II directors shall expire at the
1999 annual meeting of stockholders and the term of office of the Class III
directors shall expire at the 2000 annual meeting of stockholders, with each
director to hold office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders, commencing with the 1998
annual meeting, Classified Directors elected to succeed those Classified
Directors whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election.
SIXTH: The directors of the Corporation need not be elected by written
ballot unless the bylaws of the Corporation otherwise provide.
SEVENTH: The following provisions are included for the purpose of ensuring
that control and management of the Corporation remains with loyal citizens of
the United States and/or corporations formed under the laws of the United States
or any of the states of the United States, as required by the Communications Act
of 1934, as the same may be amended from time to time:
(a) The Corporation shall not issue to (i) a person who is a citizen of a
country other than the United States; (ii) any entity organized under the laws
of a government other than the government of the United States or any state,
territory, or possession of the United States; (iii) a government other than the
government of the United States or of any state, territory, or possession of the
United States; or (iv) a representative of, or an individual or entity
controlled by, any of the foregoing (individually, an "Alien"; collectively,
"Aliens") in excess of 25% of the total number of shares of capital stock of the
Corporation outstanding at any time and shall not permit the transfer on the
books of the corporation of any capital stock to any Alien that would result in
the total number of shares of such capital stock held by Aliens exceeding such
25% limit.
(b) No Alien or Aliens shall be entitled to vote or direct or control the
vote of more than 25% of (i) the total number of shares of capital stock of the
Corporation outstanding and entitled to vote at any time and from time to time,
or (ii) the total voting power of all shares of capital stock of the Corporation
outstanding and entitled to vote at any time and from time to time.
(c) No Alien shall be qualified to act as an officer of the Corporation,
and no more than one-fourth of the total number of directors of the Corporation
at any time and from time to time may be Aliens.
(d) The Board of Directors of the Corporation shall have all powers
necessary to implement the provisions of this Article Seventh.
EIGHTH: No contract or transaction between the Corporation and one or more
of its directors, officers, or stockholders or between the Corporation and any
Person (as hereinafter defined) in which one or more of its directors, officers,
or stockholders are directors, officers, or stockholders, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
board or committee which authorizes the contract or transaction, or solely
because his, her, or their votes are counted for such purpose, if: (i) the
material facts as to his or her relationship or interest and as to the contract
or transaction are disclosed or are known to the board of directors or the
committee, and the board of directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (iii) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved, or ratified by the board of directors, a committee thereof, or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction. "Person" as used herein means any
corporation, partnership, association, firm, trust, joint venture, political
subdivision or instrumentality.
NINTH: The Corporation shall indemnify any Person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by reason
of the fact that he or she (i) is or was a director, officer,
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employee or agent of the Corporation, or (ii) is or was serving at the request
of the Corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, to the fullest extent permitted under the
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended. Such right shall be a contract right and as such shall run
to the benefit of any director or officer who is elected and accepts the
position of director or officer of the Corporation or elects to continue to
serve as a director or officer of the Corporation while this Article Ninth is in
effect. Any repeal or amendment of this Article Ninth shall be prospective only
and shall not limit the rights of any such director or officer or the
obligations of the Corporation with respect to any claim arising from or related
to the services of such director or officer in any of the foregoing capacities
prior to any such repeal or amendment to this Article Ninth. Such right shall
include the right to be paid by the Corporation expenses incurred in
investigating or defending any such proceeding in advance of its final
disposition to the maximum extent permitted under the General Corporation Law of
the State of Delaware, as the same exists or may hereafter be amended. To the
extent that a director, officer, employee or agent of the corporation shall be
successful on the merits or otherwise in defense of any proceeding, or in
defense of any claim, issue, or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith. If a claim for indemnification or advancement of
expenses hereunder is not paid in full by the Corporation within sixty (60) days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim, and if successful in whole or in part, the claimant shall
also be entitled to be paid the expenses of prosecuting such claim. It shall be
a defense to any such action that such indemnification or advancement of costs
of defense is not permitted under the General Corporation Law of the State of
Delaware, but the burden of proving such defense shall be on the Corporation.
None of (i) the failure of the Corporation (including its board of directors or
any committee thereof, independent legal counsel, or stockholders) to have made
its determination prior to the commencement of such action that indemnification
of, or advancement of costs of defense to, the claimant is permissible in the
circumstances, (ii) an actual determination by the Corporation (including its
board of directors or any committee thereof, independent legal counsel, or
stockholders) that such indemnification or advancement is not permissible, or
(iii) the termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall be a
defense to the action or create a presumption that such indemnification or
advancement is not permissible. In the event of the death of any Person having a
right of indemnification under the foregoing provisions, such right shall inure
to the benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any Person may have or hereafter acquire under any statute, bylaw,
resolution of stockholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
Without limiting the generality of the foregoing, to the extent permitted
by then applicable law, the grant of mandatory indemnification pursuant to this
Article Ninth shall extend to proceedings involving the negligence of such
Person.
The Board of Directors may authorize, by a vote of a majority of a quorum
of the Board of Directors, the Corporation to purchase and maintain insurance on
behalf of any person who 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, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of this Article Ninth.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
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TENTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. Any repeal or amendment of this Article Tenth by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation arising from an act or omission occurring prior to the time of such
repeal or amendment. In addition to the circumstances in which a director of the
Corporation is not personally liable as set forth in the foregoing provisions of
this Article Tenth, a director shall not be liable to the Corporation or its
stockholders to such further extent as permitted by any law hereafter enacted,
including without limitation any subsequent amendment to the General Corporation
Law of the State of Delaware.
A-III-6
<PAGE> 359
ANNEX IV
AMENDED AND RESTATED
BYLAWS
OF
CHANCELLOR MEDIA CORPORATION
A DELAWARE CORPORATION
<PAGE> 360
<TABLE>
<S> <S> <C>
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent................................. A-IV-1
1.2 Other Offices............................................... A-IV-1
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting.............................................. A-IV-1
2.2 Special Meeting............................................. A-IV-1
2.3 Place of Meetings........................................... A-IV-1
2.4 Notice...................................................... A-IV-1
2.5 Voting List................................................. A-IV-2
2.6 Quorum...................................................... A-IV-2
2.7 Required Vote; Withdrawal of Quorum......................... A-IV-2
2.8 Method of Voting; Proxies................................... A-IV-2
2.9 Record Date................................................. A-IV-2
2.10 Conduct of Meeting.......................................... A-IV-3
2.11 Inspectors.................................................. A-IV-3
ARTICLE THREE: DIRECTORS
3.1 Management.................................................. A-IV-4
3.2 Number; Qualification; Election; Term....................... A-IV-4
3.3 Change in Number............................................ A-IV-4
3.4 Removal..................................................... A-IV-4
3.5 Vacancies................................................... A-IV-4
3.6 Meetings of Directors....................................... A-IV-4
3.7 First Meeting............................................... A-IV-5
3.8 Election of Officers........................................ A-IV-5
3.9 Regular Meetings............................................ A-IV-5
3.10 Special Meetings............................................ A-IV-5
3.11 Notice...................................................... A-IV-5
3.12 Quorum; Majority Vote....................................... A-IV-5
3.13 Procedure................................................... A-IV-5
3.14 Presumption of Assent....................................... A-IV-5
3.15 Compensation................................................ A-IV-5
ARTICLE FOUR: COMMITTEES
4.1 Designation................................................. A-IV-6
4.2 Number; Qualification; Term................................. A-IV-6
4.3 Authority................................................... A-IV-6
4.4 Committee Changes........................................... A-IV-6
4.5 Alternate Members of Committees............................. A-IV-6
4.6 Regular Meetings............................................ A-IV-6
4.7 Special Meetings............................................ A-IV-6
4.8 Quorum; Majority Vote....................................... A-IV-6
4.9 Minutes..................................................... A-IV-6
4.10 Compensation................................................ A-IV-6
4.11 Responsibility.............................................. A-IV-6
ARTICLE FIVE: NOTICE
5.1 Method...................................................... A-IV-7
5.2 Waiver...................................................... A-IV-7
</TABLE>
A-IV-i
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ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office.............................. A-IV-7
6.2 Removal..................................................... A-IV-7
6.3 Vacancies................................................... A-IV-7
6.4 Authority................................................... A-IV-7
6.5 Compensation................................................ A-IV-7
6.6 Chairman of the Board....................................... A-IV-7
6.7 President................................................... A-IV-8
6.8 Chief Operating Officer..................................... A-IV-8
6.9 Vice Presidents............................................. A-IV-8
6.10 Treasurer................................................... A-IV-8
6.11 Assistant Treasurers........................................ A-IV-8
6.12 Secretary................................................... A-IV-8
6.13 Assistant Secretaries....................................... A-IV-8
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 Certificates for Shares..................................... A-IV-8
7.2 Replacement of Lost or Destroyed Certificates............... A-IV-9
7.3 Transfer of Shares.......................................... A-IV-9
7.4 Registered Stockholders..................................... A-IV-9
7.5 Regulations................................................. A-IV-9
7.6 Legends..................................................... A-IV-9
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends................................................... A-IV-9
8.2 Reserves.................................................... A-IV-9
8.3 Books and Records........................................... A-IV-9
8.4 Fiscal Year................................................. A-IV-10
8.5 Seal........................................................ A-IV-10
8.6 Resignations................................................ A-IV-10
8.7 Securities of Other Corporations............................ A-IV-10
8.8 Telephone Meetings.......................................... A-IV-10
8.9 Action Without a Meeting.................................... A-IV-10
8.10 Invalid Provisions.......................................... A-IV-11
8.11 Mortgages, etc.............................................. A-IV-11
8.12 Headings.................................................... A-IV-11
8.13 References.................................................. A-IV-11
8.14 Amendments.................................................. A-IV-11
A-IV-ii
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AMENDED AND RESTATED
BYLAWS
OF
CHANCELLOR MEDIA CORPORATION
A DELAWARE CORPORATION
PREAMBLE
These bylaws are subject to, and governed by, the General Corporation Law
of the State of Delaware (the "Delaware General Corporation Law") and the
certificate of incorporation of Chancellor Media Corporation, a Delaware
corporation (the "Corporation"). In the event of a direct conflict between the
provisions of these bylaws and the mandatory provisions of the Delaware General
Corporation Law or the provisions of the certificate of incorporation of the
Corporation, such provisions of the Delaware General Corporation Law or the
certificate of incorporation of the Corporation, as the case may be, will be
controlling.
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent. The registered office and registered
agent of the Corporation shall be as designated from time to time by the
appropriate filing by the Corporation in the office of the Secretary of State of
the State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such other
places, both within and without the State of Delaware, as the board of directors
may from time to time determine or as the business of the Corporation may
require.
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting. An annual meeting of stockholders of the Corporation
shall be held each calendar year on such date and at such time as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting or in a duly executed waiver of notice of such meeting. At such
meeting, the stockholders shall elect directors and transact such other business
as may properly be brought before the meeting.
2.2 Special Meeting. A special meeting of the stockholders may be called
at any time by the Chairman of the Board, the President, the board of directors,
and shall be called by the President or the Secretary at the request in writing
of the stockholders of record of not less than ten percent of all shares
entitled to vote at such meeting or as otherwise provided by the certificate of
incorporation of the Corporation. A special meeting shall be held on such date
and at such time as shall be designated by the person(s) calling the meeting and
stated in the notice of the meeting or in a duly executed waiver of notice of
such meeting. Only such business shall be transacted at a special meeting as may
be stated or indicated in the notice of such meeting or in a duly executed
waiver of notice of such meeting.
2.3 Place of Meetings. An annual meeting of stockholders may be held at
any place within or without the State of Delaware designated by the board of
directors. A special meeting of stockholders may be held at any place within or
without the State of Delaware designated in the notice of the meeting or a duly
executed waiver of notice of such meeting. Meetings of stockholders shall be
held at the principal executive office of the Corporation unless another place
is designated for meetings in the manner provided herein.
2.4 Notice. Written or printed notice stating the place, day, and time of
each meeting of the stockholders and, in case of a special meeting, the purpose
or purposes for which the meeting is called shall be delivered not less than ten
nor more than 60 days before the date of the meeting, either personally or by
mail, by or at the direction of the President, the Secretary, or the officer or
person(s) calling the meeting, to each stockholder of record entitled to vote at
such meeting. If such notice is to be sent by mail, it shall be directed
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to such stockholder at his address as it appears on the records of the
Corporation, unless he shall have filed with the Secretary of the Corporation a
written request that notices to him be mailed to some other address, in which
case it shall be directed to him at such other address. Notice of any meeting of
stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy and shall not, at the beginning of
such meeting, object to the transaction of any business because the meeting is
not lawfully called or convened, or who shall, either before or after the
meeting, submit a signed waiver of notice, in person or by proxy.
2.5 Voting List. At least ten days before each meeting of stockholders,
the Secretary or other officer of the Corporation who has charge of the
Corporation's stock ledger, either directly or through another officer appointed
by him or through a transfer agent appointed by the board of directors, shall
prepare a complete list of stockholders entitled to vote thereat, arranged in
alphabetical order and showing the address of each stockholder and number of
shares registered in the name of each stockholder. For a period of ten days
prior to such meeting, such list shall be kept on file at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of meeting or a duly executed waiver of notice of such meeting or, if not
so specified, at the place where the meeting is to be held and shall be open to
examination by any stockholder during ordinary business hours. Such list shall
be produced at such meeting and kept at the meeting at all times during such
meeting and may be inspected by any stockholder who is present.
2.6 Quorum. The holders of a majority of the outstanding shares entitled
to vote on a matter, present in person or by proxy, shall constitute a quorum at
any meeting of stockholders, except as otherwise provided by law, the
certificate of incorporation of the Corporation, or these by-laws. If a quorum
shall not be present, in person or by proxy, at any meeting of stockholders, the
stockholders entitled to vote thereat who are present, in person or by proxy,
or, if no stockholder entitled to vote is present, any officer of the
Corporation may adjourn the meeting from time to time, without notice other than
announcement at the meeting (unless the board of directors, after such
adjournment, fixes a new record date for the adjourned meeting), until a quorum
shall be present, in person or by proxy. At any adjourned meeting at which a
quorum shall be present, in person or by proxy, any business may be transacted
which may have been transacted at the original meeting had a quorum been
present; provided that, if the adjournment is for more than 30 days or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the adjourned meeting.
2.7 Required Vote; Withdrawal of Quorum. When a quorum is present at any
meeting, the vote of the holders of at least a majority of the outstanding
shares entitled to vote who are present, in person or by proxy, shall decide any
question brought before such meeting, unless the question is one on which, by
express provision of statute, the certificate of incorporation of the
Corporation, or these bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question. The
stockholders present at a duly constituted meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
2.8 Method of Voting; Proxies. Except as otherwise provided in the
certificate of incorporation of the Corporation or by law, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. Elections of directors need
not be by written ballot. At any meeting of stockholders, every stockholder
having the right to vote may vote either in person or by a proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact. Each such
proxy shall be filed with the Secretary of the Corporation before or at the time
of the meeting. No proxy shall be valid after three years from the date of its
execution, unless otherwise provided in the proxy. If no date is stated in a
proxy, such proxy shall be presumed to have been executed on the date of the
meeting at which it is to be voted. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power or unless otherwise made
irrevocable by law.
2.9 Record Date. (a) For the purpose of determining stockholders entitled
to notice of or to vote at any meeting of stockholders, or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion, or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix a record date,
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which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the board of directors, for any such determination
of stockholders, such date in any case to be not more than 60 days and not less
than ten days prior to such meeting nor more than 60 days prior to any other
action. If no record date is fixed:
(i) The record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(ii) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
(iii) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the board of
directors. If no record date has been fixed by the board of directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by law or these bylaws, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
in the State of Delaware, principal place of business, or such officer or agent
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the board of directors and prior action by
the board of directors is required by law or these bylaws, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
board of directors adopts the resolution taking such prior action.
2.10 Conduct of Meeting. The Chairman of the Board, if such office has been
filled, and, if not or if the Chairman of the Board is absent or otherwise
unable to act, the President shall preside at all meetings of stockholders. The
Secretary shall keep the records of each meeting of stockholders. In the absence
or inability to act of any such officer, such officer's duties shall be
performed by the officer given the authority to act for such absent or
non-acting officer under these bylaws or by some person appointed by the
meeting.
2.11 Inspectors. The board of directors may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If any of the inspectors so appointed shall fail to appear
or act, the chairman of the meeting shall, or if inspectors shall not have been
appointed, the chairman of the meeting may, appoint one or more inspectors. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares of capital stock of the Corporation
outstanding and the voting power of each, the number of shares represented at
the meeting, the existence of a quorum, and the validity and effect of proxies
and shall receive votes, ballots, or consents, hear and determine all challenges
and questions arising in connection with the right to vote, count and tabulate
all votes, ballots, or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request, or matter determined by them and shall
execute a certificate of any fact found by them. No director or candidate for
the office of director shall act as an inspector of an election of directors.
Inspectors need not be stockholders.
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ARTICLE THREE: DIRECTORS
3.1 Management. The business and property of the Corporation shall be
managed by the board of directors. Subject to the restrictions imposed by law,
the certificate of incorporation of the Corporation, or these bylaws, the board
of directors may exercise all the powers of the Corporation.
3.2 Number; Qualification; Election; Term. The number of directors which
shall constitute the entire board of directors shall be not less than five nor
more than thirteen, plus such number of directors as may be elected from time to
time by the holders of any class or series of preferred stock of the
Corporation. The first board of directors shall consist of the number of
directors named in the certificate of incorporation of the Corporation or, if no
directors are so named, shall consist of the number of directors elected by the
incorporator(s) at an organizational meeting or by unanimous written consent in
lieu thereof. Thereafter, within the limits above specified, the number of
directors which shall constitute the entire board of directors shall be
determined by resolution of the board of directors or by resolution of the
stockholders at the annual meeting thereof or at a special meeting thereof
called for that purpose. Except as otherwise required by law, the certificate of
incorporation of the Corporation, or these bylaws, the directors shall be
elected at an annual meeting of stockholders at which a quorum is present.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy and entitled to vote on the election of
directors. Except as otherwise required by law, the certificate of incorporation
of the Corporation, or these bylaws, each director so chosen shall hold office
until the first annual meeting of stockholders held after his election and until
his successor is elected and qualified or, if earlier, until his death,
resignation, or removal from office. None of the directors need be a stockholder
of the Corporation or a resident of the State of Delaware. Each director must
have attained the age of majority.
3.3 Change in Number. No decrease in the number of directors constituting
the entire board of directors shall have the effect of shortening the term of
any incumbent director.
3.4 Removal. Except as otherwise provided by law or in the certificate of
incorporation of the Corporation or these by-laws, at any meeting of
stockholders called expressly for that purpose, any director or the entire board
of directors may be removed, with or without cause, by a vote of the holders of
a majority of the shares then entitled to vote on the election of directors.
3.5 Vacancies. Vacancies and newly-created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by the sole
remaining director, provided, however, that if pursuant to a provision of the
certificate of incorporation a class of capital stock of the Corporation shall
have the right to vote as a class to elect a director, then the vacancy as to a
director so elected shall be filled by a vote of the holders of such class. Each
director so chosen shall hold office until the first annual meeting of
stockholders held after his election and until his successor is elected and
qualified or, if earlier, until his death, resignation, or removal from office.
If there are no directors in office, an election of directors may be held in the
manner provided by statute. If, at the time of filling any vacancy or any
newly-created directorship, the directors then in office shall constitute less
than a majority of the whole board of directors (as constituted immediately
prior to any such increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least 10% of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or
newly-created directorships or to replace the directors chosen by the directors
then in office. Except as otherwise provided in these bylaws, when one or more
directors shall resign from the board of directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have the power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in these
bylaws with respect to the filling of other vacancies.
3.6 Meetings of Directors. The directors may hold their meetings and may
have an office and keep the books of the Corporation, except as otherwise
provided by statute, in such place or places within or without the State of
Delaware as the board of directors may from time to time determine or as shall
be specified in the notice of such meeting or duly executed waiver of notice of
such meeting.
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3.7 First Meeting. Each newly elected board of directors may hold its
first meeting for the purpose of organization and the transaction of business,
if a quorum is present, immediately after and at the same place as the annual
meeting of stockholders, and no notice of such meeting shall be necessary.
3.8 Election of Officers. At the first meeting of the board of directors
after each annual meeting of stockholders at which a quorum shall be present,
the board of directors shall elect the officers of the Corporation.
3.9 Regular Meetings. Regular meetings of the board of directors shall be
held at such times and places as shall be designated from time to time by
resolution of the board of directors. Notice of such regular meetings shall not
be required.
3.10 Special Meetings. Special meetings of the board of directors shall be
held whenever called by the Chairman of the Board, the President, or any
director.
3.11 Notice. The Secretary shall give notice of each special meeting to
each director at least 24 hours before the meeting. Notice of any such meeting
need not be given to any director who shall, either before or after the meeting,
submit a signed waiver of notice or who shall attend such meeting without
protesting, prior to or at its commencement, the lack of notice to him. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the board of directors need be specified in the notice or waiver of
notice of such meeting.
3.12 Quorum; Majority Vote. At all meetings of the board of directors, a
majority of the directors fixed in the manner provided in these bylaws shall
constitute a quorum for the transaction of business. If at any meeting of the
board of directors there be less than a quorum present, a majority of those
present or any director solely present may adjourn the meeting from time to time
without further notice. Unless the act of a greater number is required by law,
the certificate of incorporation of the Corporation, or these bylaws, the act of
a majority of the directors present at a meeting at which a quorum is in
attendance shall be the act of the board of directors. At any time that the
certificate of incorporation of the Corporation provides that directors elected
by the holders of a class or series of stock shall have more or less than one
vote per director on any matter, every reference in these bylaws to a majority
or other proportion of directors shall refer to a majority or other proportion
of the votes of such directors.
3.13 Procedure. At meetings of the board of directors, business shall be
transacted in such order as from time to time the board of directors may
determine. The Chairman of the Board, if such office has been filled, and, if
not or if the Chairman of the Board is absent or otherwise unable to act, the
President shall preside at all meetings of the board of directors. In the
absence or inability to act of either such officer, a chairman shall be chosen
by the board of directors from among the directors present. The Secretary of the
Corporation shall act as the secretary of each meeting of the board of directors
unless the board of directors appoints another person to act as secretary of the
meeting. The board of directors shall keep regular minutes of its proceedings
which shall be placed in the minute book of the Corporation.
3.14 Presumption of Assent. A director of the Corporation who is present
at the meeting of the board of directors at which action on any corporate matter
is taken shall be presumed to have assented to the action unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward any dissent by certified
or registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
3.15 Compensation. The board of directors shall have the authority to fix
the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, that nothing contained herein
shall be construed to preclude any director from serving the Corporation in any
other capacity or receiving compensation therefor.
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ARTICLE FOUR: COMMITTEES
4.1 Designation. The board of directors may, by resolution adopted by a
majority of the entire board of directors, designate one or more committees.
4.2 Number; Qualification; Term. Each committee shall consist of one or
more directors appointed by resolution adopted by a majority of the entire board
of directors. The number of committee members may be increased or decreased from
time to time by resolution adopted by a majority of the entire board of
directors. Each committee member shall serve as such until the earliest of (i)
the expiration of his term as director, (ii) his resignation as a committee
member or as a director, or (iii) his removal as a committee member or as a
director.
4.3 Authority. Each committee, to the extent expressly provided in the
resolution establishing such committee, shall have and may exercise all of the
authority of the board of directors in the management of the business and
property of the Corporation except to the extent expressly restricted by law,
the certificate of incorporation of the Corporation, or these bylaws.
4.4 Committee Changes. The board of directors shall have the power at any
time to fill vacancies in, to change the membership of, and to discharge any
committee.
4.5 Alternate Members of Committees. The board of directors may designate
one or more directors as alternate members of any committee. Any such alternate
member may replace any absent or disqualified member at any meeting of the
committee. If no alternate committee members have been so appointed to a
committee or each such alternate committee member is absent or disqualified, the
member or members of such committee present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member.
4.6 Regular Meetings. Regular meetings of any committee may be held
without notice at such time and place as may be designated from time to time by
the committee and communicated to all members thereof.
4.7 Special Meetings. Special meetings of any committee may be held
whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee member
at least two days before such special meeting. Neither the business to be
transacted at, nor the purpose of, any special meeting of any committee need be
specified in the notice or waiver of notice of any special meeting.
4.8 Quorum; Majority Vote. At meetings of any committee, a majority of the
number of members designated by the board of directors shall constitute a quorum
for the transaction of business. If a quorum is not present at a meeting of any
committee, a majority of the members present may adjourn the meeting from time
to time, without notice other than an announcement at the meeting, until a
quorum is present. The act of a majority of the members present at any meeting
at which a quorum is in attendance shall be the act of a committee, unless the
act of a greater number is required by law, the certificate of incorporation of
the Corporation, or these bylaws.
4.9 Minutes. Each committee shall cause minutes of its proceedings to be
prepared and shall report the same to the board of directors upon the request of
the board of directors. The minutes of the proceedings of each committee shall
be delivered to the Secretary of the Corporation for placement in the minute
books of the Corporation.
4.10 Compensation. Committee members may, by resolution of the board of
directors, be allowed a fixed sum and expenses of attendance, if any, for
attending any committee meetings or a stated salary.
4.11 Responsibility. The designation of any committee and the delegation
of authority to it shall not operate to relieve the board of directors or any
director of any responsibility imposed upon it or such director by law.
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ARTICLE FIVE: NOTICE
5.1 Method. Whenever by statute, the certificate of incorporation of the
Corporation, or these bylaws, notice is required to be given to any committee
member, director, or stockholder and no provision is made as to how such notice
shall be given, personal notice shall not be required and any such notice may be
given (a) in writing, by mail, postage prepaid, addressed to such committee
member, director, or stockholder at his address as it appears on the books or
(in the case of a stockholder) the stock transfer records of the Corporation, or
(b) by any other method permitted by law (including but not limited to overnight
courier service, telegram, telex, or telefax). Any notice required or permitted
to be given by mail shall be deemed to be delivered and given at the time when
the same is deposited in the United States mail as aforesaid. Any notice
required or permitted to be given by overnight courier service shall be deemed
to be delivered and given at the time delivered to such service with all charges
prepaid and addressed as aforesaid. Any notice required or permitted to be given
by telegram, telex, or telefax shall be deemed to be delivered and given at the
time transmitted with all charges prepaid and addressed as aforesaid.
5.2 Waiver. Whenever any notice is required to be given to any
stockholder, director, or committee member of the Corporation by statute, the
certificate of incorporation of the Corporation, or these bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a stockholder, director, or committee
member at a meeting shall constitute a waiver of notice of such meeting, except
where such person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office. The officers of the Corporation shall
be a President, one or more Chief Operating Officers, a Secretary, and such
other officers as the board of directors may from time to time elect or appoint,
including a Chairman of the Board, one or more Vice Presidents (with each Vice
President to have such descriptive title, if any, as the board of directors
shall determine), and a Treasurer. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified, until his
death, or until he shall resign or shall have been removed in the manner
hereinafter provided. Any two or more offices may be held by the same person.
None of the officers need be a stockholder or a director of the Corporation or a
resident of the State of Delaware.
6.2 Removal. Any officer or agent elected or appointed by the board of
directors may be removed by the board of directors whenever in its judgment the
best interest of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
6.3 Vacancies. Any vacancy occurring in any office of the Corporation (by
death, resignation, removal, or otherwise) may be filled by the board of
directors.
6.4 Authority. Officers shall have such authority and perform such duties
in the management of the Corporation as are provided in these bylaws or as may
be determined by resolution of the board of directors not inconsistent with
these bylaws.
6.5 Compensation. The compensation, if any, of officers and agents shall
be fixed from time to time by the board of directors; provided, however, that
the board of directors may delegate the power to determine the compensation of
any officer and agent (other than the officer to whom such power is delegated)
to the Chairman of the Board or the President.
6.6 Chairman of the Board. The Chairman of the Board, if elected by the
board of directors, shall have such powers and duties as may be prescribed by
the board of directors. Such officer shall preside at all meetings of the
stockholders and of the board of directors. Such officer may sign all
certificates for shares of stock of the Corporation.
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6.7 President. The President shall be the chief executive officer of the
Corporation and, subject to the board of directors, he shall have general
executive charge, management, and control of the properties and operations of
the Corporation in the ordinary course of its business, with all such powers
with respect to such properties and operations as may be reasonably incident to
such responsibilities. If the board of directors has not elected a Chairman of
the Board or in the absence or inability to act of the Chairman of the Board,
the President shall exercise all of the powers and discharge all of the duties
of the Chairman of the Board. As between the Corporation and third parties, any
action taken by the President in the performance of the duties of the Chairman
of the Board shall be conclusive evidence that there is no Chairman of the Board
or that the Chairman of the Board is absent or unable to act.
6.8 Chief Operating Officer. The Chief Operating Officer(s) shall have the
day to day responsibility for the business operations of the Corporation,
reporting to the President and subject to the control of the board of directors.
6.9 Vice Presidents. Each Vice President shall have such powers and duties
as may be assigned to him by the board of directors, the Chairman of the Board,
or the President, and (in order of their seniority as determined by the board of
directors or, in the absence of such determination, as determined by the length
of time they have held the office of Vice President) shall exercise the powers
of the President during that officer's absence or inability to act. As between
the Corporation and third parties, any action taken by a Vice President in the
performance of the duties of the President shall be conclusive evidence of the
absence or inability to act of the President at the time such action was taken.
6.10 Treasurer. The Treasurer shall have custody of the Corporation's
funds and securities, shall keep full and accurate account of receipts and
disbursements, shall deposit all monies and valuable effects in the name and to
the credit of the Corporation in such depository or depositories as may be
designated by the board of directors, and shall perform such other duties as may
be prescribed by the board of directors, the Chairman of the Board, or the
President.
6.11 Assistant Treasurers. Each Assistant Treasurer shall have such powers
and duties as may be assigned to him by the board of directors, the Chairman of
the Board, or the President. The Assistant Treasurers (in the order of their
seniority as determined by the board of directors or, in the absence of such a
determination, as determined by the length of time they have held the office of
Assistant Treasurer) shall exercise the powers of the Treasurer during that
officer's absence or inability to act.
6.12 Secretary. Except as otherwise provided in these bylaws, the
Secretary shall keep the minutes of all meetings of the board of directors and
of the stockholders in books provided for that purpose, and he shall attend to
the giving and service of all notices. He may sign with the Chairman of the
Board or the President, in the name of the Corporation, all contracts of the
Corporation and affix the seal of the Corporation thereto. He may sign with the
Chairman of the Board or the President all certificates for shares of stock of
the Corporation, and he shall have charge of the certificate books, transfer
books, and stock papers as the board of directors may direct, all of which shall
at all reasonable times be open to inspection by any director upon application
at the office of the Corporation during business hours. He shall in general
perform all duties incident to the office of the Secretary, subject to the
control of the board of directors, the Chairman of the Board, and the President.
6.13 Assistant Secretaries. Each Assistant Secretary shall have such
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Secretaries (in the order
of their seniority as determined by the board of directors or, in the absence of
such a determination, as determined by the length of time they have held the
office of Assistant Secretary) shall exercise the powers of the Secretary during
that officer's absence or inability to act.
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 Certificates for Shares. Certificates for shares of stock of the
Corporation shall be in such form as shall be approved by the board of
directors. The certificates shall be signed by the Chairman of the Board or the
President or a Vice President and also by the Secretary or an Assistant
Secretary or by the Treasurer or an
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Assistant Treasurer. Any and all signatures on the certificate may be a
facsimile and may be sealed with the seal of the Corporation or a facsimile
thereof. If any officer, transfer agent, or registrar who has signed, or whose
facsimile signature has been placed upon, a certificate has ceased to be such
officer, transfer agent, or registrar before such certificate is issued, such
certificate may be issued by the Corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue. The
certificates shall be consecutively numbered and shall be entered in the books
of the Corporation as they are issued and shall exhibit the holder's name and
the number of shares.
7.2 Replacement of Lost or Destroyed Certificates. The board of directors
may direct a new certificate or certificates to be issued in place of a
certificate or certificates theretofore issued by the Corporation and alleged to
have been lost or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate or certificates representing shares to be lost
or destroyed. When authorizing such issue of a new certificate or certificates
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond with a surety or
sureties satisfactory to the Corporation in such sum as it may direct as
indemnity against any claim, or expense resulting from a claim, that may be made
against the Corporation with respect to the certificate or certificates alleged
to have been lost or destroyed.
7.3 Transfer of Shares. Shares of stock of the Corporation shall be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.
7.4 Registered Stockholders. The Corporation shall be entitled to treat
the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
7.5 Regulations. The board of directors shall have the power and authority
to make all such rules and regulations as they may deem expedient concerning the
issue, transfer, and registration or the replacement of certificates for shares
of stock of the Corporation.
7.6 Legends. The board of directors shall have the power and authority to
provide that certificates representing shares of stock bear such legends as the
board of directors deems appropriate to assure that the Corporation does not
become liable for violations of federal or state securities laws or other
applicable law.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends. Subject to provisions of law and the certificate of
incorporation of the Corporation, dividends may be declared by the board of
directors at any regular or special meeting and may be paid in cash, in
property, or in shares of stock of the Corporation. Such declaration and payment
shall be at the discretion of the board of directors.
8.2 Reserves. There may be created by the board of directors out of funds
of the Corporation legally available therefor such reserve or reserves as the
directors from time to time, in their discretion, consider proper to provide for
contingencies, to equalize dividends, or to repair or maintain any property of
the Corporation, or for such other purpose as the board of directors shall
consider beneficial to the Corporation, and the board of directors may modify or
abolish any such reserve in the manner in which it was created.
8.3 Books and Records. The Corporation shall keep correct and complete
books and records of account, shall keep minutes of the proceedings of its
stockholders and board of directors and shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
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8.4 Fiscal Year. The fiscal year of the Corporation shall be fixed by the
board of directors; provided, that if such fiscal year is not fixed by the board
of directors and the selection of the fiscal year is not expressly deferred by
the board of directors, the fiscal year shall be the calendar year.
8.5 Seal. The seal of the Corporation shall be such as from time to time
may be approved by the board of directors.
8.6 Resignations. Any director, committee member, or officer may resign by
so stating at any meeting of the board of directors or by giving written notice
to the board of directors, the Chairman of the Board, the President, or the
Secretary. Such resignation shall take effect at the time specified therein or,
if no time is specified therein, immediately upon its receipt. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
8.7 Securities of Other Corporations. The Chairman of the Board, the
President, or any Vice President of the Corporation shall have the power and
authority to transfer, endorse for transfer, vote, consent, or take any other
action with respect to any securities of another issuer which may be held or
owned by the Corporation and to make, execute, and deliver any waiver, proxy, or
consent with respect to any such securities.
8.8 Telephone Meetings. Stockholders (acting for themselves or through a
proxy), members of the board of directors, and members of a committee of the
board of directors may participate in and hold a meeting of such stockholders,
board of directors, or committee by means of a conference telephone or similar
communications equipment by means of which persons participating in the meeting
can hear each other, and participation in a meeting pursuant to this section
shall constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
8.9 Action Without a Meeting. (a) Unless otherwise provided in the
certificate of incorporation of the Corporation, any action required by the
Delaware General Corporation Law to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders (acting for themselves or
through a proxy) of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which the holders of all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Every written consent of stockholders
shall bear the date of signature of each stockholder who signs the consent and
no written consent shall be effective to take the corporate action referred to
therein unless, within sixty days of the earliest dated consent delivered in the
manner required by this Section 8.9(a) to the Corporation, written consents
signed by a sufficient number of holders to take action are delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office, principal place
of business, or such officer or agent shall be by hand or by certified or
registered mail, return receipt requested.
(b) Unless otherwise restricted by the certificate of incorporation of the
Corporation or by these bylaws, any action required or permitted to be taken at
a meeting of the board of directors, or of any committee of the board of
directors, may be taken without a meeting if a consent or consents in writing,
setting forth the action so taken, shall be signed by all the directors or all
the committee members, as the case may be, entitled to vote with respect to the
subject matter thereof, and such consent shall have the same force and effect as
a vote of such directors or committee members, as the case may be, and may be
stated as such in any certificate or document filed with the Secretary of State
of the State of Delaware or in any certificate delivered to any person. Such
consent or consents shall be filed with the minutes of proceedings of the board
or committee, as the case may be.
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8.10 Invalid Provisions. If any part of these bylaws shall be held invalid
or inoperative for any reason, the remaining parts, so far as it is possible and
reasonable, shall remain valid and operative.
8.11 Mortgages, etc. With respect to any deed, deed of trust, mortgage, or
other instrument executed by the Corporation through its duly authorized officer
or officers, the attestation to such execution by the Secretary of the
Corporation shall not be necessary to constitute such deed, deed of trust,
mortgage, or other instrument a valid and binding obligation against the
Corporation unless the resolutions, if any, of the board of directors
authorizing such execution expressly state that such attestation is necessary.
8.12 Headings. The headings used in these bylaws have been inserted for
administrative convenience only and do not constitute matter to be construed in
interpretation.
8.13 References. Whenever herein the singular number is used, the same
shall include the plural where appropriate, and words of any gender should
include each other gender where appropriate.
8.14 Amendments. These bylaws may be altered, amended, or repealed or new
bylaws may be adopted by the stockholders or by the board of directors at any
regular meeting of the stockholders or the board of directors or at any special
meeting of the stockholders or the board of directors if notice of such
alteration, amendment, repeal, or adoption of new bylaws be contained in the
notice of such special meeting.
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EXHIBIT A
, 1997
Evergreen Media Corporation
433 East Las Colinas Boulevard, Suite 1130
Irving, Texas 75039
Ladies and Gentlemen:
I have been advised that I have been identified as a possible "affiliate"
of Chancellor Broadcasting Company, a Delaware corporation (the "Company"), as
that term is defined for purposes of paragraphs (c) and (d) of Rule 145 of the
General Rules and Regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933 (the
"Securities Act"), although nothing contained herein should be construed as an
admission of such fact.
Pursuant to the terms of an Agreement and Plan of Merger dated as of
February 19, 1997, as Amended and Restated as of July 31, 1997 (the "Merger
Agreement"), by and among the Company, Chancellor Radio Broadcasting Company, a
Delaware corporation ("Radio Broadcasting"), Evergreen Media Corporation, a
Delaware corporation ("Evergreen"), Evergreen Mezzanine Holdings Corporation, a
Delaware corporation ("EMHC") and Evergreen Media Corporation of Los Angeles, a
Delaware corporation ("EMCLA"), the Company will be merged with and into EMHC
(the "Parent Merger"), with EMHC continuing as the surviving corporation in the
Parent Merger, and thereafter Radio Broadcasting will be merged with and into
EMCLA (the "Subsidiary Merger" and, collectively with the Parent Merger, the
"Merger"), with EMCLA continuing as the surviving corporation in the Subsidiary
Merger. In addition, in connection with the Merger, Evergreen will file an
amendment to its certificate of incorporation (the "Charter Amendment") whereby
the Class A Common Stock, $0.01 par value, and Class B Common Stock of Evergreen
outstanding immediately prior to the effectiveness of the Charter Amendment will
be reclassified into shares of Common Stock, $0.01 par value ("Parent Common
Stock"), and the name of the corporation will be changed to Chancellor Media
Corporation (as such, the "Parent"). As a result of the Merger, I will receive
Merger Consideration (as defined in the Merger Agreement), including shares of
Parent Common Stock in exchange for shares of Class A Common Stock, $.01 par
value, and/or shares of Class B Common Stock, $0.01 par value, of the Company
(collectively, the "Shares") owned by me at the effective time of the Merger as
determined pursuant to the Merger Agreement.
A. In connection therewith, I represent, warrant and agree that:
1. I shall not make any sale, transfer or other disposition of the Parent
Common Stock I receive as a result of the Merger in violation of the Securities
Act or the Rules and Regulations.
2. I have been advised that the issuance of Parent Common Stock to me as a
result of the Merger has been registered with the Commission under the
Securities Act on a Registration Statement on Form S-4. However, I have also
been advised that, if at the time the Merger was submitted for a vote of the
stockholders of the Company I am determined to have been an "affiliate" of the
Company, any sale by me of the shares of Parent Common Stock I receive as a
result of the Merger must be (i) registered under the Securities Act, (ii) made
in conformity with the provisions of Rule 145 promulgated by the Commission
under the Securities Act or (iii) made pursuant to a transaction which, in the
opinion of counsel reasonably satisfactory to Parent or as described in a "no
action" or interpretive letter from the staff of the Commission, is not required
to be registered under the Securities Act.
3. I have carefully read this letter and the Merger Agreement and have
discussed the requirements of the Merger Agreement and other limitations upon
the sale, transfer or other disposition of the shares of Parent Common Stock to
be received by me, to the extent I have felt necessary, with my counsel or with
counsel for the Company.
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B. Furthermore, in connection with the matters set forth herein, I
understand and agree that:
1. I understand that Parent will give stop transfer instructions to its
transfer agents with respect to the Parent Common Stock and that the
certificates for the Parent Common Stock issued to the undersigned, or any
substitutions therefor, will bear a legend substantially to the following
effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, MAY APPLY. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT, DATED
1997, BETWEEN THE REGISTERED HOLDER HEREOF AND CHANCELLOR MEDIA
CORPORATION (FORMERLY KNOWN AS EVERGREEN MEDIA CORPORATION), A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF CHANCELLOR MEDIA
CORPORATION."
2. I also understand that unless the transfer by the undersigned of any
Parent Common Stock has been registered under the Securities Act or is a sale
made in conformity with the provisions of Rule 145, Parent reserves the right to
place the following legend on the certificates issued to any transferee:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SECURITIES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, MAY APPLY. THE SECURITIES
HAVE NOT BEEN ACQUIRED BY THE HOLDER WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF SUCH ACT
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
It is understood and agreed that the legends set forth in paragraphs (B) 1
and 2 above shall be removed by delivery of new certificates without such legend
if Parent receives an opinion of counsel reasonably satisfactory to Parent to
the effect that such legend is not required for purposes of the Securities Act.
It is understood and agreed that such legends and the stop orders referred to
above will be removed if (i) one year shall have elapsed from the date the
undersigned acquired Parent Common Stock received in the Merger and the
provisions of Rule 145(d)(2) under the Securities Act are then available to the
undersigned, (ii) two years shall have elapsed from the date the undersigned
acquired Parent Common Stock received in the Merger and the provisions of Rule
145(d)(3) under the Securities Act are then available to the undersigned, or
(iii) Parent has received under the Securities Act an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to Parent, to the effect
that the restrictions imposed by Rule 145 under the Securities Act no longer
apply to the undersigned.
Parent shall be under no further obligation to register the sale, transfer
or other disposition of the shares of Parent Common Stock received by me as a
result of the Merger or to take any other action necessary in order to make
compliance with an exemption from registration available.
Very truly yours,
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EXHIBIT B
CHANCELLOR BROADCASTING COMPANY
CERTIFICATE
In connection with your tax opinion dated , 1997 regarding
certain federal income tax consequences of the merger (the "Merger") of
Chancellor Broadcasting Company, a Delaware corporation ("the Company"), with
and into Evergreen Mezzanine Holdings Corporation, a Delaware corporation
("EMHC") and a direct wholly-owned subsidiary of Evergreen Media Corporation, a
Delaware corporation ("Evergreen"), pursuant to the Amended and Restated
Agreement and Plan of Merger dated as of July 31, 1997 (the "Merger Agreement"),
and recognizing that you will rely on this Certificate in delivering said
opinion, the Company hereby represents that the facts relating to the Merger, as
such facts are described in the Registration Statement of Evergreen filed with
the Securities and Exchange Commission (the "Commission") on , 1997
(and all amendments thereto), are, insofar as such facts pertain to the Company,
true, correct, and complete in all material respects in accordance with
applicable rules of the Commission.
The Company further represents the following:
1. The fair market value of the Evergreen stock, cash (if any) and any
cash in lieu of fractional shares to be received by each Company
shareholder will be approximately equal to the fair market value of the
Company stock surrendered in the exchange.
2. There is no plan or intention by the shareholders of the Company
who own 5 percent or more of the Company stock as of the date hereof, and
to the best of the knowledge of the management of the Company, there is no
plan or intention on the part of the remaining shareholders of the Company,
to sell, exchange, or otherwise dispose of a number of shares of Evergreen
stock to be received in the transaction that would reduce the Company
shareholders' ownership of Evergreen stock to a number of shares having a
value on the date of the Merger of less than 50 percent of the value of all
of the formerly outstanding stock of the Company as of the same date. For
purposes of this representation, shares of the Company stock surrendered by
dissenters or exchanged for cash in lieu of fractional shares of Evergreen
stock will be treated as outstanding Company stock on the date of the
Merger. Moreover, shares of the Company stock and shares of Evergreen stock
held by the Company shareholders and otherwise sold, redeemed, or disposed
of prior or subsequent to the Merger will be considered in making this
representation.
3. The liabilities of the Company to be assumed by EMHC or Evergreen,
if any, and the liabilities to which the transferred assets of the Company
are subject were incurred by the Company in the ordinary course of its
business.
4. The fair market value of the assets of the Company to be
transferred to EMHC in the Merger will equal or exceed the sum of the
liabilities to be assumed by EMHC or Evergreen plus the amount of
liabilities, if any, to which the transferred assets are subject.
5. Evergreen, EMHC, the Company and the shareholders of the Company
will pay their respective expenses, if any, incurred in connection with the
Merger.
6. There is no intercorporate indebtedness existing between the
Company and EMHC or Evergreen that was issued, acquired, or will be settled
at a discount.
7. The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended
(the "Code").
8. The Company is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
9. None of the compensation to be received by any shareholder-employee
of the Company will be separate consideration for, or allocable to, any of
their shares of the Company stock; none of the shares of Evergreen stock to
be received by any such shareholder-employee will be separate consideration
for, or
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allocable to, any employment agreement; and the compensation to be paid to
any such shareholder-employee will be for services actually rendered and
will be commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
10. No EMHC stock will be issued pursuant to the Merger.
11. At least 90 percent of the fair market value of the net assets and
at least 70 percent of the fair market value of the gross assets held by
the Company immediately prior to the Merger will be acquired by EMHC in the
Merger. For purposes of determining the percentage of the Company's net and
gross assets to be acquired by EMHC pursuant to the Merger, the following
assets will be treated as held by the Company immediately prior to, but not
acquired by EMHC pursuant to, the Merger: (i) assets disposed of by the
Company prior to the Merger and in contemplation thereof (including,
without limitation, any asset disposed of by the Company, other than in the
ordinary course of business, pursuant to a plan or intention existing
during the period ending on the date of the Merger and beginning with the
commencement of negotiations (whether formal or informal) with Evergreen
regarding the Merger), (ii) assets used by the Company to pay Company
shareholders, if any, who perfect dissenters' rights, (iii) assets used by
the Company to pay reorganization expenses or other liabilities incurred in
connection with the Merger, (iv) assets used to make distributions,
redemptions or other payments (except for regular, normal distributions) in
respect of the Company's Class A or Class B common stock or the Company's
convertible preferred stock (including payments treated as such for tax
purposes) that are made prior to the Merger and are part of the plan of the
Merger, and (v) any direct or indirect stock interest in Katz Acquisition
Corp. or any successor held by the Company and distributed by EMHC to
Evergreen immediately following the Merger.
12. The Merger Agreement represents the full and complete agreement
between Evergreen, EMHC and the Company regarding the Merger, and there are
no other written or oral agreements regarding the Merger other than those
expressly referred to in the Merger Agreement.
IN WITNESS WHEREOF, the Company has executed this Certificate on this
day of , 1997.
CHANCELLOR BROADCASTING COMPANY
By:
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EXHIBIT C
CHANCELLOR RADIO BROADCASTING COMPANY
CERTIFICATE
In connection with your tax opinion dated , 1997 regarding
certain federal income tax consequences of the merger (the "Subsidiary Merger")
of Chancellor Radio Broadcasting Company, a Delaware corporation ("Radio
Broadcasting"), with and into Evergreen Media Corporation of Los Angeles, a
Delaware corporation ("EMCLA"), pursuant to the Amended and Restated Agreement
and Plan of Merger dated as of July 31, 1997( the "Merger Agreement"), and
recognizing that you will rely on this Certificate in delivering said opinion,
Radio Broadcasting hereby represents that the facts relating to the Subsidiary
Merger, as such facts are described in the Registration Statement of Evergreen
filed with the Securities and Exchange Commission (the "Commission") on
, 1997 (and all amendments thereto), are, insofar as such facts
pertain to Radio Broadcasting, true, correct, and complete in all material
respects in accordance with applicable rules of the Commission.
Radio Broadcasting further represents the following:
1. The fair market value of the EMCLA stock, cash (if any) and any
cash in lieu of fractional shares to be received (actually or
constructively) by each Radio Broadcasting shareholder will be
approximately equal to the fair market value of the Radio
Broadcasting stock surrendered in the exchange.
2. The common stock of Radio Broadcasting on the date of the
Subsidiary Merger will have a fair market value in excess of 50
percent of the fair market value of all of the outstanding stock
of Radio Broadcasting as of the same date.
3. To the best of the knowledge of the management of Radio
Broadcasting, there is no plan or intention on the part of the
holders of Radio Broadcasting preferred stock, to sell, exchange,
or otherwise dispose of the shares of EMCLA preferred stock to be
received in the Subsidiary Merger.
4. The liabilities of Radio Broadcasting to be assumed by EMCLA and
the liabilities to which the transferred assets of Radio
Broadcasting are subject were incurred by Radio Broadcasting in
the ordinary course of its business.
5. The fair market value of the assets of Radio Broadcasting to be
transferred to EMCLA in the Subsidiary Merger will equal or exceed
the sum of the liabilities to be assumed by EMCLA plus the amount
of liabilities, if any, to which the transferred assets are
subject.
6. The total adjusted basis of the assets of Radio Broadcasting to be
transferred to EMCLA will equal or exceed the sum of the
liabilities to be assumed by EMCLA, plus the amount of
liabilities, if any, to which the transferred assets are subject.
7. EMCLA, Radio Broadcasting and the shareholders of Radio
Broadcasting will pay their respective expenses, if any, incurred
in connection with the Subsidiary Merger.
8. There is no intercorporate indebtedness existing between Radio
Broadcasting and EMCLA that was issued, acquired, or will be
settled at a discount.
9. Radio Broadcasting is not an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of
1986, as amended (the "Code").
10. Radio Broadcasting is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
11. None of the compensation to be received by any
shareholder-employee of Radio Broadcasting will be separate
consideration for, or allocable to, any of their shares of Radio
Broadcasting
A-C-1
<PAGE> 378
stock; none of the shares of Evergreen stock to be received by any
such shareholder-employee will be separate consideration for, or
allocable to, any employment agreement; and the compensation to be
paid to any such shareholder-employees will be for services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services.
12. The Merger Agreement represents the full and complete agreement
between EMCLA and Radio Broadcasting regarding the Subsidiary
Merger, and there are no other written or oral agreements
regarding the Subsidiary Merger other than those expressly
referred to in the Merger Agreement.
IN WITNESS WHEREOF, Radio Broadcasting has executed this Certificate on
this day of , 1997.
CHANCELLOR RADIO BROADCASTING
COMPANY
By:
------------------------------------
A-C-2
<PAGE> 379
EXHIBIT D
CERTIFICATE
In connection with the merger (the "Merger") of Chancellor Broadcasting
Company, a Delaware corporation, with and into Evergreen Mezzanine Holdings
Corporation, a Delaware corporation ("EMHC"), and a direct wholly-owned
subsidiary of Evergreen Media Corporation, a Delaware corporation ("Evergreen"),
pursuant to the Amended and Restated Agreement and Plan of Merger dated as of
July 31, 1997 (the "Merger Agreement"), the undersigned hereby represents that
he (it) has no plan or intention to sell, exchange, or otherwise dispose of,
reduce the risk of loss by short sale or otherwise, enter into any contract or
arrangement with respect to, or consent to the sale, exchange or other
disposition of any interest in any stock received in the Merger by him (it).
IN WITNESS WHEREOF, I have signed this Certificate on this day of
, 1997.
[Name of 5% shareholder of
Chancellor Broadcasting Company]
------------------------------------
A-D-1
<PAGE> 380
EXHIBIT E
EVERGREEN MEDIA CORPORATION
CERTIFICATE
In connection with your tax opinion dated , 1997, regarding
certain federal income tax consequences of: (i) the merger (the "Merger") of
Chancellor Broadcasting Company, a Delaware corporation ("the Company"), with
and into Evergreen Mezzanine Holdings Corporation, a Delaware corporation
("EMHC") and a direct wholly-owned subsidiary of Evergreen Media Corporation, a
Delaware corporation ("Evergreen"); and (ii) the merger (the "Subsidiary
Merger") of Chancellor Radio Broadcasting Company, a Delaware corporation
("Radio Broadcasting"), with and into Evergreen Media Corporation of Los
Angeles, a Delaware corporation ("EMCLA") and a direct wholly-owned subsidiary
of EMHC, each pursuant to the Amended and Restated Agreement and Plan of Merger
dated as of July 31, 1997 (the "Merger Agreement"), and recognizing that you
will rely on this Certificate in delivering said opinion, Evergreen hereby
represents that the facts relating to the Merger and the Subsidiary Merger, as
such facts are described in the Registration Statement of Evergreen filed with
the Securities and Exchange Commission (the "Commission") on , 1997
(and all amendments thereto) are, insofar as such facts pertain to Evergreen,
true, correct, and complete in all material respects in accordance with
applicable rules of the Commission.
Evergreen further represents the following:
1. The fair market value of the Evergreen stock, cash (if any) and any
cash in lieu of fractional shares to be received by each Company
shareholder will be approximately equal to the fair market value of the
Company stock surrendered in the exchange.
2. Evergreen has no plan or intention to redeem or otherwise reacquire
any Evergreen stock issued in the Merger.
3. Evergreen has no plan or intention to cause EMHC to sell or
otherwise dispose of any of the assets to be acquired from the Company in
the Merger, except for EMHC's interest in Katz Acquisition Corp. which will
be distributed to Evergreen or dispositions made in the ordinary course of
business.(1)
4. Evergreen has no plan or intention to cause EMCLA to sell or
otherwise dispose of any of the assets to be acquired from Radio
Broadcasting in the Subsidiary Merger, except for dispositions made in the
ordinary course of business or transfers to a direct wholly-owned
subsidiary of EMCLA.(2)
5. Following the Merger and the Subsidiary Merger, each of EMHC and
EMCLA will continue the historic business of each of the Company and Radio
Broadcasting, respectively, or use a significant portion of the Company's
and Radio Broadcasting's historic business assets, respectively, in their
business.
6. Evergreen, EMHC, the Company and the shareholders of the Company
will pay their respective expenses, if any, incurred in connection with the
Merger.
7. There is no intercorporate indebtedness existing between the
Company and EMHC or Evergreen that was issued, acquired, or will be settled
at a discount.
- ---------------
1 May be modified on delivery of certificate to exclude any asset disposition
not in the ordinary course, provided, however, that any such disposition does
not prevent counsel for Evergreen, EMHC and the Company from delivering the
opinions required by Sections 6.2(c) and 6.3(c) of the Merger Agreement.
2 May be modified on delivery of certificate to exclude any asset disposition
not in the ordinary course, provided, however, that any such disposition does
not prevent counsel for EMCLA and Radio Broadcasting from delivering the
opinions required by Sections 6.2(c) and 6.3(c) of the Merger Agreement.
A-E-1
<PAGE> 381
8. None of the compensation to be received by any
shareholder-employee of the Company will be separate consideration for, or
allocable to, any of their shares of the Company stock; none of the shares
of Evergreen stock to be received by any such shareholder-employee will be
separate consideration for, or allocable to, any employment agreement; and
the compensation to be paid to any such shareholder-employee will be for
services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services.
9. Evergreen does not own, nor has Evergreen owned during the past
five years, more than a de minimis number of shares of stock of the
Company.
10. Evergreen is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended
(the "Code").
11. Evergreen is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
12. The payment of cash in lieu of fractional shares of Evergreen
stock merely represents a mechanical rounding-off of fractional share
interests as a result of the Merger and does not represent separately
bargained for consideration. The total cash consideration that will be paid
in the Merger in lieu of fractional shares of Evergreen stock to the
Company stockholders will not exceed one percent of the total consideration
that will be issued in the Merger to the Company stockholders.
13. The fair market value of the assets of the Company to be
transferred to EMHC in the Merger will equal or exceed the sum of the
liabilities assumed by EMHC and Evergreen, if any, plus the amount of
liabilities, if any, to which the transferred assets are subject.
14. Evergreen will be in Control (as defined below) of EMHC
immediately prior to the Merger, and Evergreen has no plan or intention to
cause EMHC to issue additional shares of capital stock after the Merger
that would result in Evergreen losing Control of EMHC. As used herein,
"Control" means the ownership of stock possessing at least 80 percent of
the total combined voting power of all classes of stock entitled to vote of
EMHC and at least 80 percent of the total number of shares of all other
classes of stock of EMHC. For purposes of determining Control, a person
shall not be considered to own voting stock if rights to vote such stock
(or to restrict or otherwise control the voting of such stock) are held by
a third party (including a voting trust) other than an agent of such
person.
15. At the time of the Merger, EMHC will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in EMHC that, if exercised
or converted, would affect Evergreen's retention of Control of EMHC.
16. Evergreen has no plan or intention: (i) to liquidate EMHC; (ii) to
merge EMHC with and into another corporation (including Evergreen) or (iii)
to sell or otherwise dispose of the stock of EMHC.
17. Evergreen will not cause EMHC to issue any stock pursuant to the
Merger.
18. Evergreen will issue the Evergreen stock that is to be received by
each Company shareholder in the Merger.
19. The Merger Agreement represents the full and complete agreement
among Evergreen, EMHC, EMCLA, the Company and Radio Broadcasting regarding
the Merger and the Subsidiary Merger, and there are no other written or
oral agreements regarding the Merger or the Subsidiary Merger other than
those expressly referred to in the Merger Agreement.
IN WITNESS WHEREOF, Evergreen has executed this Certificate on this
day of , 1997.
EVERGREEN MEDIA CORPORATION
By:
------------------------------------
A-E-2
<PAGE> 382
EXHIBIT F
EVERGREEN MEZZANINE HOLDINGS CORPORATION
CERTIFICATE
In connection with your tax opinion dated , 1997, regarding
certain federal income tax consequences of: (i) the merger (the "Merger") of
Chancellor Broadcasting Company, a Delaware corporation ("the Company"), with
and into Evergreen Mezzanine Holdings Corporation, a Delaware corporation
("EMHC") and a direct wholly-owned subsidiary of Evergreen Media Corporation, a
Delaware corporation ("Evergreen"); and (ii) the merger (the "Subsidiary
Merger") of Chancellor Radio Broadcasting Company, a Delaware corporation
("Radio Broadcasting"), with and into Evergreen Media Corporation of Los
Angeles, a Delaware corporation ("EMCLA") and a direct wholly-owned subsidiary
of EMHC, each pursuant to the Amended and Restated Agreement and Plan of Merger
dated as of July 31, 1997 (the "Merger Agreement"), and recognizing that you
will rely on this Certificate in delivering said opinion, EMHC hereby represents
that the facts relating to the Merger and the Subsidiary Merger, as such facts
are described in the Registration Statement of Evergreen filed with the
Securities and Exchange Commission (the "Commission") on , 1997 (and
all amendments thereto), are, insofar as such facts pertain to EMHC, true,
correct, and complete in all material respects in accordance with applicable
rules of the Commission.
EMHC further represents the following:
1. EMHC has no plan or intention to sell or otherwise dispose of any
of the assets to be acquired from the Company in the Merger, except for the
transfer of the stock of Katz Acquisition Corp. which will be distributed
to Evergreen and dispositions made in the ordinary course of business.(1)
2. EMHC has no plan or intention to cause EMCLA to sell or otherwise
dispose of any of the assets to be acquired from Radio Broadcasting in the
Subsidiary Merger, except for dispositions made in the ordinary course of
business or to a direct wholly-owned subsidiary of EMCLA.(2)
3. Evergreen, EMHC, the Company and the shareholders of the Company
will pay their respective expenses, if any, incurred in connection with the
Merger.
4. Following the Merger, EMHC will continue the historic business of
the Company or use a significant portion of the Company's historic business
assets in EMHC's business.
5. There is no intercorporate indebtedness existing between the
Company and EMHC that was issued, acquired, or will be settled at a
discount.
6. EMHC does not own, nor has EMHC owned during the past five years,
more than a de minimis number of shares of stock of the Company.
7. EMHC is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended
(the "Code").
8. EMHC is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
- ---------------
(1) May be modified on delivery of certificate to exclude any asset disposition
not in the ordinary course, provided, however, that any such disposition
does not prevent counsel for Evergreen, EMHC and the Company from delivering
the opinions required by Sections 6.2(c) and 6.3(c) of the Merger Agreement.
(2) May be modified on delivery of certificate to exclude any asset disposition
not in the ordinary course, provided, however, that any such disposition
does not prevent counsel for EMCLA and Radio Broadcasting from delivering
the opinions required by Sections 6.2(c) and 6.3(c) of the Merger Agreement.
A-F-1
<PAGE> 383
9. The fair market value of the assets of the Company to be
transferred to EMHC in the Merger will equal or exceed the sum of the
liabilities to be assumed by EMHC and Evergreen, if any, plus the amount of
liabilities, if any, to which the transferred assets are subject.
10. Evergreen will be in Control (as defined below) of EMHC
immediately prior to the Merger, and EMHC has no plan or intention to issue
additional shares of capital stock after the Merger that would result in
Evergreen losing Control of EMHC. As used herein, "Control" means the
ownership of stock possessing at least 80 percent of the total combined
voting power of all classes of stock entitled to vote of EMHC and at least
80 percent of the total number of shares of all other classes of stock of
EMHC. For purposes of determining Control, a person shall not be considered
to own voting stock if rights to vote such stock (or to restrict or
otherwise control the voting of such stock) are held by a third party
(including a voting trust) other than an agent of such person.
11. At the time of the Merger, EMHC will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in EMHC that, if exercised
or converted, would affect Evergreen's Control of EMHC.
12. EMHC has no plan or intention to liquidate or to merge with and
into another corporation after the Merger.
13. EMHC will not issue any stock pursuant to the Merger.
14. EMHC has no plan or intention: (i) to liquidate EMCLA; (ii) to
merge EMCLA with and into another corporation (including EMHC) after the
Subsidiary Merger; (iii) to cause EMCLA to redeem or otherwise acquire any
EMCLA stock issued in the Subsidiary Merger or (iv) to sell or otherwise
dispose of the stock of EMCLA.
15. Evergreen will issue the Evergreen stock that is to be received by
each Company shareholder in the Merger.
16. The Merger Agreement represents the full and complete agreement
among Evergreen, EMHC, EMCLA, the Company and Radio Broadcasting regarding
the Merger and the Subsidiary Merger, and there are no other written or
oral agreements regarding the Merger or the Subsidiary Merger other than
those expressly referred to in the Merger Agreement.
IN WITNESS WHEREOF, EMHC has executed this Certificate on this day of
, 1997.
EVERGREEN MEZZANINE HOLDINGS
CORPORATION
By:
------------------------------------
A-F-2
<PAGE> 384
EXHIBIT G
EVERGREEN MEDIA CORPORATION OF LOS ANGELES
CERTIFICATE
In connection with your tax opinion dated , 1997, regarding
certain federal income tax consequences of the merger (the "Subsidiary Merger")
of Chancellor Radio Broadcasting Company, a Delaware corporation ("Radio
Broadcasting"), with and into Evergreen Media Corporation of Los Angeles, a
Delaware corporation ("EMCLA"), pursuant to the Amended and Restated Agreement
and Plan of Merger dated as of July 31, 1997 (the "Merger Agreement"), and
recognizing that you will rely on this Certificate in delivering said opinion,
EMCLA hereby represents that the facts relating to the Subsidiary Merger, as
such facts are described in the Registration Statement of Evergreen filed with
the Securities and Exchange Commission (the "Commission") on , 1997
(and all amendments thereto), are, insofar as such facts pertain to EMCLA, true,
correct, and complete in all material respects in accordance with applicable
rules of the Commission.
EMCLA further represents the following:
1. The fair market value of the EMCLA stock and cash, if any, to be
received (actually or constructively) by each Radio Broadcasting
shareholder will be approximately equal to the fair market value of the
Radio Broadcasting stock surrendered in the exchange.
2. EMCLA has no plan or intention to redeem or otherwise reacquire any
EMCLA stock issued in the Merger.
3. EMCLA has no plan or intention to sell or otherwise dispose of any
of the assets of Radio Broadcasting to be acquired in the Subsidiary
Merger, except for dispositions made in the ordinary course of business or
transfers to a direct wholly-owned subsidiary of EMCLA.(1)
4. Following the Subsidiary Merger, EMCLA will continue the historic
business of Radio Broadcasting or use a significant portion of Radio
Broadcasting's historic business assets in EMCLA's business.
5. EMCLA, Radio Broadcasting and the shareholders of Radio
Broadcasting will pay their respective expenses, if any, incurred in
connection with the Subsidiary Merger.
6. There is no intercorporate indebtedness existing between Radio
Broadcasting and EMCLA that was issued, acquired, or will be settled at a
discount.
7. None of the compensation to be received by any shareholder-employee
of Radio Broadcasting will be separate consideration for, or allocable to,
any of their shares of Radio Broadcasting stock; none of the shares of
EMCLA stock to be received by any such shareholder-employee will be
separate consideration for, or allocable to, any employment agreement; and
the compensation to be paid to any such shareholder-employee will be for
services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services.
8. EMCLA does not own, nor has EMCLA owned during the past five years,
more than a de minimis number of shares of stock of Radio Broadcasting.
9. EMCLA is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended
(the "Code").
10. EMCLA is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
- ---------------
1 May be modified on delivery of certificate to exclude any asset disposition
not in the ordinary course, provided, however, that any such disposition does
not prevent counsel for EMCLA and Radio Broadcasting from delivering the
opinions required by Sections 6.2(c) and 6.3(c) of the Merger Agreement.
A-G-1
<PAGE> 385
11. The fair market value of the assets of Radio Broadcasting to be
transferred to EMCLA will equal or exceed the sum of the liabilities to be
assumed by EMCLA plus the amount of liabilities, if any, to which the
transferred assets are subject.
12. The Merger Agreement represents the full and complete agreement
among EMCLA and Radio Broadcasting regarding the Subsidiary Merger, and
there are no other written or oral agreements regarding the Subsidiary
Merger other than those expressly referred to in the Merger Agreement.
IN WITNESS WHEREOF, EMCLA has executed this Certificate on this day of
, 1997.
EVERGREEN MEDIA CORPORATION
OF LOS ANGELES
By:
------------------------------------
A-G-2
<PAGE> 386
EXHIBIT H
, 1997
Evergreen Media Corporation
413 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Ladies & Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of (i) the merger (the "Merger") of Chancellor Broadcasting
Company, a Delaware corporation (the "Company"), with and into Evergreen
Mezzanine Holdings Corporation, a Delaware corporation ("EMHC"), and a direct
wholly-owned subsidiary of Evergreen Media Corporation, a Delaware corporation
("Evergreen"), and (ii) the merger (the "Subsidiary Merger") of Chancellor Radio
Broadcasting Company, a Delaware corporation ("Radio Broadcasting"), with and
into Evergreen Media Corporation of Los Angeles, a Delaware corporation
("EMCLA").
In formulating our opinion, we examined such documents as we deemed
appropriate, including the Amended and Restated Agreement and Plan of Merger
among the Company, Radio Broadcasting, Evergreen, EMHC and EMCLA dated as of
July 31, 1997 (the "Merger Agreement"), the Joint Proxy Statement/Prospectus
filed by the Company, Radio Broadcasting, Evergreen, EMHC and EMCLA on
, 1997 (the "Joint Proxy Statement"), and the Registration Statement
on Form S-4, as filed by Evergreen with the SEC on , 1997, in which
the Joint Proxy Statement/Prospectus is included as a prospectus (with all
amendments thereto, the "Registration Statement"). In addition, we have obtained
such additional information as we deemed relevant and necessary through
consultation with various officers and representatives of the Company, Radio
Broadcasting, Evergreen, EMHC and EMCLA.
Our opinion set forth below assumes (1) the accuracy of the statements and
facts concerning the Merger and the Subsidiary Merger set forth in the Merger
Agreement, the Joint Proxy Statement, and the Registration Statement, (2) the
consummation of the Merger and the Subsidiary Merger in the manner contemplated
by, and in accordance with the terms set forth in, the Merger Agreement, the
Joint Proxy Statement and the Registration Statement and (3) the accuracy of (i)
the representations made by the Company and by Radio Broadcasting, which are set
forth in the Certificates delivered to us by the Company and Radio Broadcasting,
dated the date hereof, (ii) the representations made by Evergreen, EMHC and by
EMCLA which are set forth in the Certificate delivered to us by Evergreen, EMHC
and EMCLA, dated the date hereof and (iii) the representations made by certain
shareholders of the Company and of Radio Broadcasting in Certificates delivered
to us by such persons, dated the date hereof.
Based upon the facts and statements set forth above, our examination and
review of the documents referred to above and subject to the assumptions set
forth herein, we are of the opinion that for federal income tax purposes:
1. The Merger and the Subsidiary Merger will each constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
2. Each of the Company, Evergreen and EMHC will be a party to the
Merger within the meaning of Section 368(b) of the Code.
3. Each of Radio Broadcasting and EMCLA will be a party to the
Subsidiary Merger within the meaning of Section 368(b) of the Code.
4. No gain or loss will be recognized by the Company, Evergreen or
EMHC as a result of the Merger.
5. No gain or loss will be recognized by Radio Broadcasting or EMCLA
as a result of the Subsidiary Merger.
A-H-1
<PAGE> 387
6. No gain or loss will be recognized by holders of Evergreen Class A
Common Stock or holders of Evergreen Class B Common Stock on the exchange
of such shares for shares of Evergreen Common Stock pursuant to the Merger
Agreement.
7. No gain or loss will be recognized by holders of Evergreen
Convertible Exchangeable Preferred Stock as a result of the Merger.
We express no opinion concerning any tax consequences of the Merger or the
Subsidiary Merger other than those specifically set forth herein.
Our opinion is based on current provisions of the Code, the Treasury
Regulations promulgated thereunder, published pronouncements of the Internal
Revenue Service and case law, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or facts and circumstances
surrounding the Merger or the Subsidiary Merger, or any inaccuracy in the
statements, facts, assumptions and representations on which we have relied, may
affect the continuing validity of the opinions set forth herein. We assume no
responsibility to inform you of any such change or inaccuracy that may occur or
come to our attention.
Very truly yours,
A-H-2
<PAGE> 388
EXHIBIT I
, 1997
Chancellor Broadcasting Company
12655 N. Central Expressway
Suite 405
Dallas, Texas 75243
Ladies & Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of (i) the merger (the "Merger") of Chancellor Broadcasting
Company, a Delaware corporation (the "Company"), with and into Evergreen
Mezzanine Holdings Corporation, a Delaware corporation ("EMHC"), and a direct
wholly-owned subsidiary of Evergreen Media Corporation, a Delaware corporation
("Evergreen"), and (ii) the merger (the "Subsidiary Merger") of Chancellor Radio
Broadcasting Company, a Delaware corporation ("Radio Broadcasting"), with and
into Evergreen Media Corporation of Los Angeles, a Delaware corporation
("EMCLA").
In formulating our opinion, we examined such documents as we deemed
appropriate, including the Amended and Restated Agreement and Plan of Merger
among the Company, Radio Broadcasting, Evergreen, EMHC and EMCLA dated as of
July 31, 1997 (the "Merger Agreement"), the Joint Proxy Statement and Prospectus
(the "Joint Proxy Statement") included in the Registration Statement on Form
S-4, as filed by Evergreen with the Securities and Exchange Commission on
, 1997, in which the Joint Proxy Statement is included as a prospectus
(with all amendments thereto, the "Registration Statement"). In addition, we
have obtained such additional information as we have deemed relevant and
necessary through consultation with various officers and representatives of the
Company, Radio Broadcasting, Evergreen, EMHC and EMCLA.
Our opinion set forth below assumes (1) the accuracy of the statements and
facts concerning the Merger and the Subsidiary Merger set forth in the Merger
Agreement, the Joint Proxy Statement, and the Registration Statement, (2) the
consummation of the Merger and the Subsidiary Merger in the manner contemplated
by, and in accordance with the terms set forth in, the Merger Agreement, the
Joint Proxy Statement and the Registration Statement and (3) the accuracy of (i)
the representations made by the Company and by Radio Broadcasting, which are set
forth in the Certificates delivered to us by the Company and Radio Broadcasting,
dated the date hereof, (ii) the representations made by Evergreen, EMHC and
EMCLA which are set forth in the Certificate delivered to us by Evergreen, EMHC
and EMCLA dated the date hereof, and (iii) the representations made by certain
shareholders of the Company and of Radio Broadcasting in Certificates delivered
to us by such persons, dated the date hereof.
Based on the facts and statements set forth above, our examination and
review of the documents referred to above and subject to the assumptions set
forth above, we are of the opinion that for federal income tax purposes:
1. The Merger and the Subsidiary Merger will each constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
2. No gain or loss will be recognized by stockholders of the Company
with respect to shares of common stock of Evergreen received in the Merger
in exchange for shares of common stock of the Company, or with respect to
shares of Evergreen convertible preferred stock received in the Merger in
exchange for shares of Company convertible preferred stock, except with
respect to cash received by dissenters or in lieu of fractional shares of
Evergreen common stock.
3. No gain or loss will be recognized by stockholders of Radio
Broadcasting with respect to shares of EMCLA preferred stock received in
the Subsidiary Merger in exchange for shares of Radio Broadcasting
preferred stock, except with respect to cash received by dissenters.
We express no opinion concerning any tax consequences of the Merger or the
Subsidiary Merger other than those specifically set forth herein.
A-I-1
<PAGE> 389
Our opinion is based on current provisions of the Code, the Treasury
Regulations promulgated thereunder, published pronouncements of the Internal
Revenue Service and case law, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or in the facts and
circumstances surrounding the Merger or the Subsidiary Merger, or any inaccuracy
in the statements, facts, assumptions and representations on which we have
relied, may affect the continuing validity of the opinions set forth herein. We
assume no responsibility to inform you of any such change or inaccuracy that may
occur or come to our attention.
Very truly yours,
A-I-2
<PAGE> 390
ANNEX B
SECTION 262 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation or consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation: and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more share, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a nation market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a and b of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a, b and c of this paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidated has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the
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date the notice is given; provided that, if the notice is given on or after
the effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall by borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial up on the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporate pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
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(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holder of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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ANNEX C
PROPOSED FORM OF
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 12 1/4% SERIES A SENIOR
CUMULATIVE EXCHANGEABLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
---------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
---------------------
Chancellor Media Corporation of Los Angeles (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware and formerly known as Evergreen Media Corporation of Los
Angeles, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Corporation (the "Board of Directors") by its
Certificate of Incorporation, as amended (hereinafter referred to as the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of Directors
duly approved and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority conferred on the Board of
Directors by its Certificate of Incorporation (which authorizes 10,000,000
shares of preferred stock, $.01 per share), and pursuant to Section 151(g)
of the General Corporation Law of the State of Delaware, the Chief
Financial Officer of the Corporation be, and hereby is, authorized and
directed to execute and file with the Secretary of State of the State of
Delaware the Certificate of Designation of 12 1/4% Series A Senior
Cumulative Exchangeable Preferred Stock of the Corporation, pursuant to
which the Board of Directors has fixed the designation powers and
preferences, and the relative participating, optional and other special
rights, and the qualifications, limitations and restrictions thereof, of a
series of the Corporation's Preferred Stock.
(a) Designation. There is hereby created out of the authorized and unissued
shares of Preferred Stock of the Corporation a class of Preferred Stock
designated as the "12 1/4% Series A Senior Cumulative Exchangeable Preferred
Stock." The number of shares constituting such class shall be 1,000,000 and are
referred to as the "Series A Senior Exchangeable Preferred Stock." The initial
liquidation preference of the Series A Senior Exchangeable Preferred Stock shall
be $119.444944 per share; such amount shall be subject to increase as provided
in paragraph (c)(i).
(b) Rank. The Series A Senior Exchangeable Preferred Stock shall, with
respect to dividends and distributions upon liquidation, winding-up and
dissolution of the Corporation, rank (i) senior to all classes of common stock
of the Corporation (including, without limitation, the Common Stock) and to each
other class of Capital Stock of the Corporation or series of Preferred Stock of
the Corporation hereafter created the terms of which do not expressly provide
that it ranks senior to, or on a parity with, the Series A Senior Exchangeable
Preferred Stock as to dividends and distributions upon liquidation, winding-up
and dissolution of the Corporation (collectively referred to, together with all
classes of common stock of the Corporation, as "Junior Stock"); (ii) on a parity
with any class of Capital Stock of the Corporation or series of Preferred Stock
of the Corporation hereafter created the terms of which expressly provide that
such class or series will rank on a parity with the Series A Senior Exchangeable
Preferred Stock as to dividends and distributions upon liquidation, winding-up
and dissolution (collectively referred to as "Parity Stock"); provided that any
such Parity Stock that was not approved by the Holders in accordance with
paragraph (f)(ii)(A) hereof (to the extent such approval is required) shall be
deemed to be Junior Stock and not Parity Stock; and (iii) junior to each class
of Capital Stock of the Corporation or series of Preferred Stock of the
Corporation hereafter created that has been approved by the Holders in
accordance with paragraph (f)(ii)(B) hereof and the terms of which expressly
provide that such class or series will rank senior to the Series A Senior
Exchangeable
<PAGE> 395
Preferred Stock as to dividends and distributions upon liquidation, winding-up
and dissolution of the Company (collectively referred to as "Senior Stock").
(c) Dividends. (i) Beginning on the Issue Date, the Holders of the
outstanding shares of Series A Senior Exchangeable Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, distributions in the form of cash dividends on
each share of Series A Senior Exchangeable Preferred Stock, at a rate per annum
equal to 12 1/4% of the then effective liquidation preference per share of the
Series A Senior Exchangeable Preferred Stock, payable quarterly. No interest
shall be payable in respect of any dividends that may be in arrears. All
dividends shall be cumulative, whether or not earned or declared, on a daily
basis from August 15, 1997, and shall be payable quarterly in arrears on each
Dividend Payment Date, commencing on the first Dividend Payment Date after the
Issue Date, provided that if any dividend payable on any Dividend Payment Date
on or before February 15, 2001 is not declared and paid in full in cash on such
Dividend Payment Date, the amount payable as dividends on such Dividend Payment
Date that is not paid in cash on such Dividend Payment Date shall be added to
the liquidation preference of the Series A Senior Exchangeable Preferred Stock
on such Dividend Payment Date and the amount so added to the liquidation
preference shall be deemed paid in full and shall not accumulate. Each dividend
shall be payable to, or added to the liquidation preference of as herein
provided, the Series A Senior Exchangeable Preferred Stock held by Holders of
record as they appear on the stock books of the Corporation on the Dividend
Record Date immediately preceding the related Dividend Payment Date. Dividends
shall cease to accumulate in respect of the Series A Senior Exchangeable
Preferred Stock on the Exchange Date or on the date of their earlier redemption
unless the Corporation shall have failed to issue the appropriate aggregate
principal amount of Exchange Debentures in respect of the Series A Senior
Exchangeable Preferred Stock on such Exchange Date or shall have failed to pay
the relevant redemption price on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Series A Senior
Exchangeable Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata
to the Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any circumstances
be construed or deemed to require the Board of Directors to declare, or the
Corporation to pay or set apart for payment, any dividends on shares of the
Series A Senior Exchangeable Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption pursuant to paragraph
(e)(i) may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to Holders of record on such date, not more than
forty-five (45) days prior to the payment thereof, as may be fixed by the Board
of Directors of the Corporation.
(v) No full dividends shall be declared by the Board of Directors or paid
or set apart for payment by the Corporation on any Parity Stock for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid (or are deemed declared and paid) in full, or declared and, if payable in
cash, a sum in cash set apart sufficient for such payment, on the Series A
Senior Exchangeable Preferred Stock for all Dividend Periods terminating on or
prior to the date of payment of such full dividends on such Parity Stock. If any
dividends are not so paid, all dividends declared upon shares of the Series A
Senior Exchangeable Preferred Stock and any other Parity Stock shall be declared
pro rata so that the amount of dividends declared per share on the Series A
Senior Exchangeable Preferred Stock and such Parity Stock shall in all cases
bear to each other the same ratio that accrued dividends per share on the Series
A Senior Exchangeable Preferred Stock and such Parity Stock bear to each other.
(vi) (A) Holders of shares of the Series A Senior Exchangeable Preferred
Stock shall be entitled to receive the dividends provided for in paragraph
(c)(i) hereof in preference to and in priority over any dividends upon any of
the Junior Stock.
(B) So long as any share of the Series A Senior Exchangeable Preferred
Stock is outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend on any of the Junior Stock or make any payment on account
of, or set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Junior Stock or any
warrants, rights, calls or options
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exercisable for or convertible into any of the Junior Stock whether in cash,
obligations or shares of the Corporation or other property (other than dividends
in Junior Stock to the holders of Junior Stock), and shall not permit any
corporation or other entity directly or indirectly controlled by the Corporation
to purchase or redeem any of the Junior Stock or any such warrants, rights,
calls or options unless full cumulative dividends determined in accordance
herewith on the Series A Senior Exchangeable Preferred Stock have been paid (or
are deemed paid) in full.
(C) So long as any share of the Series A Senior Exchangeable Preferred
Stock is outstanding, the Corporation shall not make any payment on account of,
or set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Parity Stock or any
warrants, rights, calls or options exercisable for or convertible into any of
the Parity Stock, and shall not permit any corporation or other entity directly
or indirectly controlled by the Corporation to purchase or redeem any of the
Parity Stock or any such warrants, rights, calls or options unless full
cumulative dividends determined in accordance herewith on the Series A Senior
Exchangeable Preferred Stock have been paid (or are deemed paid) in full.
(vii) Dividends payable on the Series A Senior Exchangeable Preferred Stock
for any period less than a year shall be computed on the basis of a 360-day year
of twelve 30-day months and the actual number of days elapsed in the period for
which payable.
(d) Liquidation Preference. (i) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the Holders of shares of Series A Senior Exchangeable Preferred
Stock then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders an amount in cash
equal to the then effective liquidation preference for each share outstanding,
plus, without duplication, an amount in cash equal to accumulated and unpaid
dividends thereon to the date fixed for liquidation, dissolution or winding up
(including an amount equal to a prorated dividend for the period from the last
Dividend Payment Date to the date fixed for liquidation, dissolution or winding
up) before any payment shall be made or any assets distributed to the holders of
any of the Junior Stock including, without limitation, common stock of the
Corporation. Except as provided in the preceding sentence, Holders of Series A
Senior Exchangeable Preferred Stock shall not be entitled to any distribution in
the event of any liquidation, dissolution or winding up of the affairs of the
Corporation. If the assets of the Corporation are not sufficient to pay in full
the liquidation payments payable to the Holders of outstanding shares of the
Series A Senior Exchangeable Preferred Stock and all Parity Stock, then the
holders of all such shares shall share equally and ratably in such distribution
of assets in proportion to the full liquidation preference, including, without
duplication, all accrued and unpaid dividends to which each is entitled.
(ii) For the purposes of this paragraph (d), neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Corporation nor the consolidation or merger of the Corporation with or into one
or more entities shall be deemed to be a liquidation, dissolution or winding up
of the affairs of the Corporation.
(e) Redemption. (i) Optional Redemption. (A) The Corporation may, at the
option of the Board of Directors, redeem at any time on or after February 15,
2001, subject to contractual and other restrictions with respect thereto and
from any source of funds legally available therefor, in whole or in part, in the
manner provided for in paragraph (e)(iii) hereof, any or all of the shares of
the Series A Senior Exchangeable Preferred Stock, at the redemption prices
(expressed as a percentage of the then effective liquidation preference) set
forth below plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends per share (including an amount in cash equal to
a prorated dividend for the period from the Dividend Payment Date immediately
prior to the Redemption Date to the Redemption Date) (the "Optional
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Redemption Price") if redeemed during the 12-month period beginning February 15
of each of the years set forth below:
<TABLE>
<S> <C>
2001..................................................... 106.125%
2002..................................................... 104.900%
2003..................................................... 103.675%
2004..................................................... 102.450%
2005..................................................... 101.225%
2006 and thereafter...................................... 100.000%
</TABLE>
provided that no redemption pursuant to this paragraph (e)(i)(A) shall be
authorized or made unless prior thereto full accumulated and unpaid dividends
are declared and paid in full, or declared and a sum in cash set apart
sufficient for such payment, on the Series A Senior Exchangeable Preferred Stock
for all Dividend Periods terminating on or prior to the Redemption Date.
(B) In addition to the foregoing paragraph (e)(i)(A), on or prior to
February 15, 1999, the Corporation may, at its option, use the net cash proceeds
of one or more Public Equity Offerings to redeem from any source of funds
legally available therefor, in the manner provided for in paragraph (e)(iii)
hereof, the Series A Senior Exchangeable Preferred Stock, in part, at a
redemption price of 111.025% of the then effective liquidation preference
thereof if redeemed during the 12-month period commencing on February 15, 1997
and 109.800% of the then effective liquidation preference thereof if redeemed
during the 12-month period commencing on February 15, 1998, plus, in each case,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends to the redemption date (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date immediately
prior to the redemption date to the redemption date) (the "Cash Proceeds
Redemption Price"); provided, however, that after any such redemption, the
number of shares of Series A Senior Exchangeable Preferred Stock outstanding
must equal at least 75% of the number of shares of Radio Broadcasting Preferred
Stock originally issued on the Radio Broadcasting Preferred Stock Issue Date.
Any such redemption pursuant to this paragraph (e)(i)(B) must occur on or prior
to 60 days after the receipt by the Corporation of the proceeds of each Public
Equity Offering.
(C) In the event of a redemption pursuant to paragraph (e)(i)(A) or
(e)(i)(B) hereof of only a portion of the then outstanding shares of the Series
A Senior Exchangeable Preferred Stock, the Corporation shall effect such
redemption on a pro rata basis according to the number of shares held by each
Holder of the Series A Senior Exchangeable Preferred Stock, except that the
Corporation may redeem such shares held by Holders of fewer than 100 shares (or
shares held by Holders who would hold less than 100 shares as a result of such
redemption), as may be determined by the Corporation.
(ii) Mandatory Redemption. On February 15, 2008, the Corporation shall
redeem, to the extent of funds legally available therefor, in the manner
provided for in paragraph (e)(iii) hereof, all of the shares of the Series A
Senior Exchangeable Preferred Stock then outstanding at a redemption price equal
to 100% of the then effective liquidation preference per share, plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends per
share (including an amount equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Redemption Date to the Redemption
Date) (the "Mandatory Redemption Price").
(iii) Procedures for Redemption. (A) At least thirty (30) days and not more
than sixty (60) days prior to the date fixed for any redemption of the Series A
Senior Exchangeable Preferred Stock, written notice (the "Redemption Notice")
shall be given by first class mail, postage prepaid, to each Holder of record on
the record date fixed for such redemption of the Series A Senior Exchangeable
Preferred Stock at such Holder's address as it appears on the stock books of the
Corporation, provided that no failure to give such notice nor any deficiency
therein shall affect the validity of the procedure for the redemption of any
shares of Series A Senior Exchangeable Preferred Stock to be redeemed except as
to the Holder or Holders to whom the Corporation
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has failed to give said notice or except as to the Holder or Holders whose
notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i)(A), (e)(i)(B) or
(e)(ii) hereof;
(2) the Optional Redemption Price, the Mandatory Redemption Price or the
Cash Proceeds Redemption Price, as the case may be;
(3) whether all or less than all the outstanding shares of the Series A
Senior Exchangeable Preferred Stock are to be redeemed and the total number of
shares of the Series A Senior Exchangeable Preferred Stock being redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Corporation, in the manner, at
the place or places and at the price designated, his certificate or certificates
representing the shares of Series A Senior Exchangeable Preferred Stock to be
redeemed; and
(6) that dividends on the shares of the Series A Senior Exchangeable
Preferred Stock to be redeemed shall cease to accumulate on such Redemption Date
unless the Corporation defaults in the payment of the Optional Redemption Price,
the Mandatory Redemption Price or the Cash Proceeds Redemption Price, as the
case may be.
(B) Each Holder of Series A Senior Exchangeable Preferred stock shall
surrender the certificate or certificates representing such shares of Series A
Senior Exchangeable Preferred Stock to the Corporation, duly endorsed (or
otherwise in proper form for transfer, as determined by the Corporation), in the
manner and at the place designated in the Redemption Notice, and on the
Redemption Date the full Optional Redemption Price, Mandatory Redemption Price
or Cash Proceeds Redemption Price, as the case may be, for such shares shall be
payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. In the event that less than all of the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation defaults in
the payment in full of the applicable redemption price, dividends on the Series
A Senior Exchangeable Preferred Stock called for redemption shall cease to
accumulate on the Redemption Date, and all rights of the Holders of redeemed
shares shall terminate with respect thereto on the Redemption Date, other than
the right to receive the Optional Redemption Price, the Mandatory Redemption
Price or the Cash Proceeds Redemption Price, as the case may be, without
interest; provided, however, that if a notice of redemption shall have been
given as provided in paragraph (iii)(A) above and the funds necessary for
redemption (including an amount in respect of all dividends that will accrue to
the Redemption Date) shall have been irrevocably deposited in trust for the
equal and ratable benefit for the Holders of the shares to be redeemed, then, at
the close of business on the day on which such funds are segregated and set
aside, the Holders of the shares to be redeemed shall cease to be stockholders
of the Corporation and shall be entitled only to receive the Optional Redemption
Price, the Mandatory Redemption Price or the Cash Redemption Price, as the case
may be, without interest.
(f) Voting Rights. (i) The Holders of Series A Senior Exchangeable
Preferred Stock, except as otherwise required under Delaware law or as set forth
in paragraphs (ii), (iii) and (iv) below, shall not be entitled or permitted to
vote on any matter required or permitted to be voted upon by the stockholders of
the Corporation.
(ii) (A) So long as any shares of the Series A Senior Exchangeable
Preferred Stock are outstanding, the Corporation shall not authorize any class
of Parity Stock without the affirmative vote or consent of Holders of at least a
majority of the then outstanding shares of Series A Senior Exchangeable
Preferred Stock, voting or consenting, as the case may be, as one class, given
in person or by proxy, either in writing or by resolution adopted at an annual
or special meeting.
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(B) So long as any shares of the Series A Senior Exchangeable Preferred
Stock are outstanding, the Corporation shall not authorize any class of Senior
Stock without the affirmative vote or consent of Holders of at least a majority
of the outstanding shares of Series A Senior Exchangeable Preferred Stock,
voting or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting.
(C) So long as any shares of the Series A Senior Exchangeable Preferred
Stock are outstanding, the Corporation shall not amend this Certificate of
Designation so as to affect adversely the specified rights, preferences,
privileges or voting rights of holders of shares of Series A Senior Exchangeable
Preferred Stock or to authorize the issuance of any additional shares of Series
A Senior Exchangeable Preferred Stock without the affirmative vote or consent of
Holders of at least a majority of the issued and outstanding shares of Series A
Senior Exchangeable Preferred Stock, voting or consenting, as the case may be,
as one class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting.
(D) Prior to the exchange of Series A Senior Exchangeable Preferred Stock
for Exchange Debentures, the Corporation shall not amend or modify the Indenture
for the Exchange Debentures in the form in effect on the Issue Date (the
"Indenture") (except as expressly provided therein in respect of amendments
without the consent of Holders of Exchange Debentures) without the affirmative
vote or consent of Holders of at least a majority of the shares of Series A
Senior Exchangeable Preferred Stock then outstanding, voting or consenting, as
the case may be, as one class, given in person or by proxy, either in writing or
by resolution adopted at an annual or special meeting.
(E) Except as set forth in paragraphs (f)(ii)(A), (f)(ii)(B) and (f)(ii)(C)
above, (x) the creation, authorization or issuance of any shares of any Junior
Stock, Parity Stock or Senior Stock or (y) the increase or decrease in the
amount of authorized Capital Stock of any class, including Preferred Stock,
shall not require the consent of Holders of Series A Senior Exchangeable
Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of Holders of Series A Senior
Exchangeable Preferred Stock.
(iii) Without the affirmative vote or consent of Holders of a majority of
the issued and outstanding shares of Series A Senior Exchangeable Preferred
Stock, voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting, the Corporation shall not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets to,
another Person or adopt a plan of liquidation unless: (A) either (1) the
Corporation is the surviving or continuing Person or (2) the Person (if other
than the Corporation) formed by such consolidation or into which the Corporation
is merged or the Person that acquires by conveyance, transfer or lease the
properties and assets of the Corporation substantially as an entirety or in the
case of a plan of liquidation, the Person to which assets of the Corporation
have been transferred, shall be a corporation, partnership or trust organized
and existing under the laws of the United States or any State thereof or the
District of Columbia; (B) the Series A Senior Exchangeable Preferred Stock shall
be converted into or exchanged for and shall become shares of such successor,
transferee or resulting Person, having in respect of such successor, transferee
or resulting Person the same powers, preferences and relative, participating,
optional or other special rights and the qualifications, limitations or
restrictions thereon, that the Series A Senior Exchangeable Preferred Stock had
immediately prior to such transaction; (C) immediately after giving effect to
such transaction and the use of the proceeds therefrom (on a pro forma basis,
including giving effect to any Indebtedness incurred or anticipated to be
incurred in connection with such transaction), the Corporation (in the case of
clause (1) of the foregoing clause (A)) or such Person (in the case of clause
(2) of the foregoing clause (A)) shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under paragraph
(l)(i) hereof; (D) immediately after giving effect to such transactions, no
Voting Rights Triggering Event shall have occurred or be continuing; and (E) the
Corporation has delivered to the transfer agent for the Series A Senior
Exchangeable Preferred Stock prior to the consummation of the proposed
transaction an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer complies with the terms hereof and
that all conditions precedent herein relating to such transaction have been
satisfied.
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For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of related transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Corporation, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Corporation shall be deemed to be the transfer
of all or substantially all of the properties and assets of the Corporation.
(iv) (A) If (1) after February 15, 2001 cash dividends on the Series A
Senior Exchangeable Preferred Stock are in arrears and unpaid for six or more
Dividend Periods (whether or not consecutive) (a "Dividend Default"); (2) the
Corporation fails to redeem all of the then outstanding shares of Series A
Senior Exchangeable Preferred Stock on February 15, 2008 or otherwise fails to
discharge any redemption obligation with respect to the Series A Senior
Exchangeable Preferred Stock; (3) the Corporation fails to make a Change of
Control Offer (whether pursuant to the terms of paragraph (h)(v) or otherwise)
following a Change of Control if such Change of Control Offer is required by
paragraph (h) hereof or fails to purchase shares of Series A Senior Exchangeable
Preferred Stock from Holders who elect to have such shares purchased pursuant to
the Change of Control Offer; (4) the Corporation breaches or violates one of the
provisions set forth in any of paragraphs (l)(i), (l)(ii) or (l)(iii) hereof and
the breach or violation continues for a period of 30 days or more after the
Corporation receives notice thereof specifying the default from the holders of
at least 25% of the shares of Series A Senior Exchangeable Preferred Stock then
outstanding or (5) the Corporation fails to pay at the final stated maturity
(giving effect to any extensions thereof) the principal amount of any
Indebtedness of the Corporation or any Subsidiary of the Corporation, or the
final stated maturity of any such Indebtedness is accelerated, if the aggregate
principal amount of such Indebtedness, together with the aggregate principal
amount of any other such Indebtedness in default for failure to pay principal at
the final stated maturity (giving effect to any extensions thereof) or that has
been accelerated, aggregates $5,000,000 or more at one time, in each case, after
a 10-day period during which such default shall not have been cured or such
acceleration rescinded, then in the case of any of clauses (1)-(5) the number of
directors constituting the Board of Directors shall be adjusted by the number,
if any, necessary to permit the Holders of Series A Senior Exchangeable
Preferred Stock, voting separately and as one class, to elect the lesser of two
directors or 25% of the members of the Board of Directors. Each such event
described in clauses (1), (2), (3), (4) and (5) is a "Voting Rights Triggering
Event." Holders of a majority of the issued and outstanding shares of Series A
Senior Exchangeable Preferred Stock, voting separately and as one class, shall
have the exclusive right to elect the lesser of two directors or 25% of the
members of the Board of Directors at a meeting therefor called upon occurrence
of such Voting Rights Triggering Event, and at every subsequent meeting at which
the terms of office of the directors so elected by the Holders of the Series A
Senior Exchangeable Preferred Stock expire (other than as described in
(f)(iv)(B) below). The voting rights provided herein shall be the exclusive
remedy at law or in equity of the holders of the Series A Senior Exchangeable
Preferred Stock for any Voting Rights Triggering Event.
(B) The right of the Holders of Series A Senior Exchangeable Preferred
Stock voting together as a separate class to elect members of the Board of
Directors as set forth in subparagraph (f)(iv)(A) above shall continue until
such time as (x) in the event such right arises due to a Dividend Default, all
accumulated dividends that are in arrears on the Series A Senior Exchangeable
Preferred Stock are paid in full in cash; and (y) in all other cases, the
failure, breach or default giving rise to such Voting Rights Triggering Event is
remedied or waived by the holders of at least a majority of the shares of Series
A Senior Exchangeable Preferred Stock then outstanding and entitled to vote
thereon, at which time (1) the special right of the Holders of Series A Senior
Exchangeable Preferred Stock so to vote as a class for the election of directors
and (2) the term of office of the directors elected by the Holders of the Series
A Senior Exchangeable Preferred Stock shall each terminate and the directors
elected by the holders of Common Stock shall constitute the entire Board of
Directors. At any time after voting power to elect directors shall have become
vested and be continuing in the Holders of Series A Senior Exchangeable
Preferred Stock pursuant to paragraph (f)(iv) hereof, or if vacancies shall
exist in the offices of directors elected by the Holders of Series A Senior
Exchangeable Preferred Stock, a proper officer of the Corporation may, and upon
the written request of the Holders of record of at least twenty-five percent
(25%) of the shares of Series A Senior Exchangeable Preferred Stock then
outstanding addressed to the secretary of the Corporation shall, call a special
meeting of the Holders of Series A Senior Exchangeable Preferred Stock, for the
purpose of electing the directors which
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such Holders are entitled to elect. If such meeting shall not be called by a
proper officer of the Corporation within twenty (20) days after personal service
of said written request upon the secretary of the Corporation, or within twenty
(20) days after mailing the same within the United States by certified mail,
addressed to the secretary of the Corporation at its principal executive
offices, then the Holders of record of at least twenty-five percent (25%) of the
outstanding shares of Series A Senior Exchangeable Preferred Stock may designate
in writing one of their number to call such meeting at the expense of the
Corporation, and such meeting may be called by the Person so designated upon the
notice required for the annual meetings of stockholders of the Corporation and
shall be held at the place for holding the annual meetings of stockholders. Any
Holder of Series A Senior Exchangeable Preferred Stock so designated shall have,
and the Corporation shall provide, access to the lists of stockholders to be
called pursuant to the provisions hereof.
(C) At any meeting held for the purpose of electing directors at which the
Holders of Series A Senior Exchangeable Preferred Stock shall have the right,
voting together as a separate class, to elect directors as aforesaid, the
presence in person or by proxy of the Holders of at least a majority of the
outstanding shares of Series A Senior Exchangeable Preferred Stock shall be
required to constitute a quorum of such Series A Senior Exchangeable Preferred
Stock.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Series A Senior Exchangeable Preferred Stock may be filled by the
remaining directors elected by the Holders of Series A Senior Exchangeable
Preferred Stock unless and until such vacancy shall be filled by the Holders of
Series A Senior Exchangeable Preferred Stock.
(v) In any case in which the Holders of Series A Senior Exchangeable
Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of Series A Senior Exchangeable Preferred
Stock entitled to vote with respect to such matter shall be entitled to one vote
for each share of Series A Senior Exchangeable Preferred Stock held.
(g) Exchange. (i) Requirements. The outstanding shares of Series A Senior
Exchangeable Preferred Stock are exchangeable as a whole but not in part, at the
option of the Corporation and subject to the terms and conditions of the Credit
Agreement and the 9 3/8% Note Indenture, at any time on any Dividend Payment
Date for the Corporation's 12 1/4% Subordinated Exchange Debentures due 2008
(the "Exchange Debentures") to be substantially in the form of Exhibit A to the
Indenture, a copy of which is on file with the secretary of the Corporation,
provided that any such exchange may only be made if on or prior to the date of
such exchange (i) the Corporation has paid (or is deemed to have paid) all
accumulated dividends on the Series A Senior Exchangeable Preferred Stock
(including the dividends payable on the date of exchange) and there shall be no
contractual impediment to such exchange; (ii) there shall be funds legally
available sufficient therefor; and (iii) immediately after giving effect to such
exchange, no Default or Event of Default (as defined in the Indenture) would
exist under the Indenture and no default or event of default would exist under
the Credit Agreement or the 9 3/8% Note Indenture. The exchange rate shall be
$1.00 principal amount of Exchange Debentures for each $1.00 of liquidation
preference of Series A Senior Exchangeable Preferred Stock, including, to the
extent necessary, Exchange Debentures in principal amounts less than $1,000,
provided that the Corporation shall have the right, at its option, to pay cash
in an amount equal to the principal amount of that portion of any Exchange
Debenture that is not an integral multiple of $1,000 instead of delivering an
Exchange Debenture in a denomination of less than $1,000.
(ii) Procedure for Exchange. (A) At least thirty (30) days and not more
than sixty (60) days prior to the date fixed for exchange, written notice (the
"Exchange Notice") shall be given by first-class mail, postage prepaid, to each
Holder of record on the record date fixed for such exchange of the Series A
Senior Exchangeable Preferred Stock at such Holder's address as the same appears
on the stock books of the Corporation, provided that no failure to give such
notice nor any deficiency therein shall affect the validity of the procedure for
the exchange of any shares of Series A Senior Exchangeable Preferred Stock to be
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exchanged except as to the Holder or Holders to whom the Corporation has failed
to give said notice or except as to the Holder or Holders whose notice was
defective. The Exchange Notice shall state:
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in the manner and
at the place or places designated, his certificate or certificates representing
the shares of Series A Senior Exchangeable Preferred Stock to be exchanged;
(3) that dividends on the shares of Series A Senior Exchangeable Preferred
Stock to be exchanged shall cease to accrue on such Exchange Date whether or not
certificates for shares of Series A Senior Exchangeable Preferred Stock are
surrendered for exchange on such Exchange Date unless the corporation shall
default in the delivery of Exchange Debentures; and
(4) that interest on the Exchange Debentures shall accrue from the Exchange
Date whether or not certificates for shares of Series A Senior Exchangeable
Preferred Stock are surrendered for exchange on such Exchange Date.
(B) On or before the Exchange Date, each Holder of Series A Senior
Exchangeable Preferred Stock shall surrender the certificate or certificates
representing such shares of Series A Senior Exchangeable Preferred Stock, in the
manner and at the place designated in the Exchange Notice. The Corporation shall
cause the Exchange Debentures to be executed on the Exchange Date and, upon
surrender in accordance with the Exchange Notice of the certificates for any
shares of Series A Senior Exchangeable Preferred Stock so exchanged, duly
endorsed (or otherwise in proper form for transfer, as determined by the
Corporation), such shares shall be exchanged by the Corporation into Exchange
Debentures. The Corporation shall pay interest on the Exchange Debentures at the
rate and on the dates specified therein from the Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the Exchange Date
specified in such notice (1) the Indenture shall have been duly executed and
delivered by the Corporation and the trustee thereunder and (2) all Exchange
Debentures necessary for such exchange shall have been duly executed by the
Corporation and delivered to the trustee under the Indenture with irrevocable
instructions to authenticate the Exchange Debentures necessary for such
exchange, then the rights of the Holders of Series A Senior Exchangeable
Preferred Stock so exchanged as stockholders of the Corporation shall cease
(except the right to receive Exchange Debentures, an amount in cash equal to the
amount of accrued and unpaid dividends to the Exchange Date and, if the
Corporation so elects, cash in lieu of any Exchange Debenture not an integral
multiple of $1,000), and the Person or Persons entitled to receive the Exchange
Debentures issuable upon exchange shall be treated for all purposes as the
registered Holder or Holders of such Exchange Debentures as of the Exchange
Date.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (g), the Corporation shall not be entitled to
exchange the Series A Senior Exchangeable Preferred Stock for Exchange
Debentures if such exchange, or any term or provision of the Indenture or the
Exchange Debentures, or the performance of the Corporation's obligations under
the Indenture or the Exchange Debentures, shall materially violate or conflict
with any applicable law or agreement or instrument then binding on the
Corporation or if, at the time of such exchange, the Corporation is insolvent or
if it would be rendered insolvent by such exchange.
(h) Change of Control. (i) In the event of a Change of Control (the date of
such occurrence being the "Change of Control Date"), the Corporation shall
notify the Holders of the Series A Senior Exchangeable Preferred Stock in
writing of such occurrence and shall make an offer to purchase (the "Change of
Control Offer") all then outstanding shares of Series A Senior Exchangeable
Preferred Stock at a purchase price of 101% of the then effective liquidation
preference thereof plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends per share (including an amount in cash equal to
a prorated dividend for the period from the Dividend Payment Date immediately
prior to the Change of Control Payment Date to the Change of Control Payment
Date).
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(ii) Within 30 days following the Change of Control Date, the Corporation
shall send, by first class mail, postage prepaid, a notice to each Holder of
Series A Senior Exchangeable Preferred Stock at such Holder's address as it
appears on the stock books of the Corporation, which notice shall govern the
terms of the Change of Control Offer. The notice to the Holders shall contain
all instructions and materials necessary to enable such Holders to tender Series
A Senior Exchangeable Preferred Stock pursuant to the Change of Control Offer.
Such notice shall state:
(A) that a Change of Control has occurred, that the Change of Control Offer
is being made pursuant to this paragraph (h) and that all Series A Senior
Exchangeable Preferred Stock validly tendered and not withdrawn will be accepted
for payment;
(B) the purchase price (including the amount of accrued dividends, if any)
and the purchase date (which shall be no earlier than 30 days nor later than 45
days from the date such notice is mailed, other than as may be required by law)
(the "Change of Control Payment Date");
(C) that any shares of Series A Senior Exchangeable Preferred Stock not
tendered will continue to accrue dividends;
(D) that, unless the Corporation defaults in making payment therefor, any
share of Series A Senior Exchangeable Preferred Stock accepted for payment
pursuant to the Change of Control Offer shall cease to accrue dividends after
the Change of Control Payment Date;
(E) that Holders electing to have any shares of Series A Senior
Exchangeable Preferred Stock purchased pursuant to a Change of Control Offer
will be required to surrender the certificate or certificates representing such
shares, properly endorsed for transfer together with such customary documents as
the Corporation and the transfer agent may reasonably require, in the manner and
at the place specified in the notice prior to the close of business on the
Business Day prior to the Change of Control Payment Date;
(F) that Holders will be entitled to withdraw their election if the
Corporation receives, not later than five Business Days prior to the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the number of shares of Series A Senior
Exchangeable Preferred Stock the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have such shares of Series A
Senior Exchangeable Preferred Stock purchased;
(G) that Holders whose shares of Series A Senior Exchangeable Preferred
Stock are purchased only in part will be issued a new certificate representing
the unpurchased shares of Series A Senior Exchangeable Preferred Stock; and
(H) the circumstances and relevant facts regarding such Change of Control.
(iii) The Corporation will comply with any securities laws and regulations,
to the extent such laws and regulations are applicable to the repurchase of the
Series A Senior Exchangeable Preferred Stock in connection with a Change of
Control Offer.
(iv) On the Change of Control Payment Date the Corporation shall (A) accept
for payment the shares of Series A Senior Exchangeable Preferred Stock validly
tendered pursuant to the Change of Control Offer, (B) pay to the Holders of
shares so accepted the purchase price therefor in cash and (C) cancel and retire
each surrendered certificate. Unless the Corporation defaults in the payment for
the shares of Series A Senior Exchangeable Preferred Stock tendered pursuant to
the Change of Control Offer, dividends will cease to accrue with respect to the
shares of Series A Senior Exchangeable Preferred Stock tendered and all rights
of Holders of such tendered shares will terminate, except for the right to
receive payment therefor, on the Change of Control Payment Date.
(v) If the purchase of the Series A Senior Exchangeable Preferred Stock
would violate or constitute a default under the Credit Agreement, the 9 3/8%
Note Indenture or other Indebtedness of the Corporation, then, notwithstanding
anything to the contrary contained above, prior to complying with the foregoing
provisions, but in any event within 30 days following the Change of Control
Date, the Corporation shall either (A) repay in full all such Indebtedness and
terminate all commitments outstanding under the Credit Agreement or
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(B) obtain the requisite consents, if any, under the Credit Agreement, the
9 3/8% Note Indenture or such Indebtedness required to permit the repurchase of
Series A Senior Exchangeable Preferred Stock required by this paragraph (h).
Until the requirements of the immediately preceding sentence are satisfied, the
Corporation shall not make, and shall not be obligated to make, any Change of
Control Offer; provided that the Corporation's failure to comply with the
provisions of this paragraph (h)(v) shall constitute a Voting Rights Triggering
Event.
(i) Conversion or Exchange. The Holders of shares of Series A Senior
Exchangeable Preferred Stock shall not have any rights hereunder to convert such
shares into or exchange such shares for shares of any other class or classes or
of any other series of any class or classes of Capital Stock of the Corporation.
(j) Reissuance of Series A Senior Exchangeable Preferred Stock. Shares of
Series A Senior Exchangeable Preferred Stock that have been issued and
reacquired in any manner, including shares purchased or redeemed or exchanged,
shall (upon compliance with any applicable provisions of the laws of Delaware)
have the status of authorized and unissued shares of Preferred stock
undesignated as to series and may be redesignated and reissued as part of any
series of Preferred Stock, provided that any issuance of such shares as Series A
Senior Exchangeable Preferred Stock must be in compliance with the terms hereof.
(k) Business Day. If any payment, redemption or exchange shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Additional Provisions.
(i) Limitation on Incurrence of Additional Indebtedness. Neither the
Corporation nor any of its Subsidiaries shall, directly or indirectly, create,
incur, assume, guarantee, acquire or become liable for, contingently or
otherwise (collectively, "incur"), any Indebtedness other than Permitted
Indebtedness. Notwithstanding the foregoing limitation, the Corporation or any
Subsidiary may incur Indebtedness if, on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence of such Indebtedness and the
receipt and application of the proceeds thereof, the Corporation's Leverage
Ratio is less than 7.0 to 1.
(ii) Limitation on Restricted Payments. (A) Neither the Corporation nor any
of its Subsidiaries shall, directly or indirectly, make any Restricted Payment
if immediately after giving effect thereto:
(1) any Voting Rights Triggering Event shall have occurred and be
continuing; or
(2) the Corporation is not able to incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with paragraph (l)(i) above;
or
(3) the aggregate amount of Restricted Payments made on or subsequent to
the Issue Date, together with the aggregate amount of Restricted Payments made
by Radio Broadcasting subsequent to the Radio Broadcasting Preferred Stock Issue
Date and through the date immediately preceding the Issue Date (the amount
expended for such purposes, if other than in cash, being the fair market value
of such property as determined by the respective Board of Directors in good
faith) exceeds the sum of (I) (x) 100% of the aggregate Consolidated EBITDA of
Radio Broadcasting from February 14, 1996 through the date immediately preceding
the Issue Date, plus 100% of the aggregate Consolidated EBITDA of the
Corporation from and after the Issue Date (or, in the event that either such
Consolidated EBITDA shall be a deficit, minus 100% of such deficit), to the most
recent date for which financial information is available to the Corporation,
taken as one accounting period, less (y) 1.4 times Consolidated Interest Expense
for the same entities and for the same periods, plus (II) 100% of the aggregate
net proceeds, including the fair market value of property other than cash as
determined by the Board of Directors in good faith, received by the Corporation
from any Person (other than a Subsidiary of the Corporation) from the issuance
and sale on or subsequent to the Issue Date of Qualified Capital Stock of the
Corporation, plus 100% of the aggregate net proceeds, including the fair market
value of property other than cash as previously determined by the board of
directors of Radio Broadcasting in good faith, previously received by Radio
Broadcasting from any Person (other than a Subsidiary of Radio Broadcasting)
from the issuance and sale on or subsequent to February 14, 1996 of Qualified
Capital Stock of Radio Broadcasting (excluding any net proceeds from issuances
and sales financed
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directly or indirectly using funds borrowed from the Corporation or any
Subsidiary of the Corporation or from Radio Broadcasting or any Subsidiary of
Radio Broadcasting, respectively, until and to the extent such borrowing is
repaid, but including the proceeds from the issuance and sale of any securities
convertible into or exchangeable for Qualified Capital Stock to the extent such
securities are so converted or exchanged and including any additional proceeds
received by the Corporation or Radio Broadcasting, respectively, upon such
conversion or exchange), plus (III) without duplication of any amount included
in clause (3)(II) above, 100% of the aggregate net proceeds, including the fair
market value of property other than cash (valued as provided in clause (3)(II)
above), received by the Corporation as a capital contribution on or subsequent
to the Issue Date, plus 100% of the aggregate net proceeds, including the fair
market value of property other than cash (valued as provided in clause (3)(II)
above), previously received by Radio Broadcasting as a capital contribution on
or subsequent to February 14, 1996 (excluding the net proceeds from a Public
Equity Offering by Chancellor Mezzanine to the extent used by the Corporation to
redeem the Series A Senior Exchangeable Preferred Stock); plus (IV) $2,500,000.
(B) Notwithstanding the foregoing, these provisions will not prohibit: (1)
the payment of any dividend or the making of any distribution within 60 days
after the date of its declaration if such dividend or distribution would have
been permitted on the date of declaration; (2) the acquisition of any Capital
Stock of the Corporation or any warrants, options or other rights to acquire
shares of any class of such Capital Stock either (I) solely in exchange for
shares of Qualified Capital Stock or other rights to acquire Qualified Capital
Stock or (II) through the application of the net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Corporation) of
shares of Qualified Capital Stock or warrants, options or other rights to
acquire Qualified Capital Stock; (3) payments by the Corporation to fund the
operating expenses of Chancellor Mezzanine in an amount not to exceed $500,000
per annum; (4) payments by the Corporation to Chancellor Mezzanine to enable
Chancellor Mezzanine to make payments pursuant to (x) the Financial Monitoring
and Oversight Agreement or (y) the Tax Sharing Agreement; (5) payments by the
Corporation to repurchase, or enable Chancellor Mezzanine to repurchase, Capital
Stock or other securities of Chancellor Mezzanine from employees of Chancellor
Mezzanine or the Corporation in an aggregate amount not to exceed $5,000,000;
(6) payments to enable Chancellor Mezzanine to redeem or repurchase stock
purchase or similar rights in an aggregate amount not to exceed $500,000; (7)
payments, not to exceed $100,000 in the aggregate, to enable the Corporation to
make cash payments to holders of its Capital Stock in lieu of the issuance of
fractional shares of its Capital Stock; and (8) payments made pursuant to any
merger, consolidation or sale of assets effected in accordance with paragraph
(f)(iii) above; provided, however, that no such payment may be made pursuant to
this clause (8) unless, after giving effect to such transaction (and the
incurrence of any Indebtedness in connection therewith and the use of the
proceeds thereof), the Corporation would be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with paragraph
(l)(i) above such that after incurring that $1.00 of additional Indebtedness,
the Leverage Ratio would be less than 6.0 to 1; provided, further, however, that
in the case of clauses (4)(x), (5), (6), (7) and (8), no Voting Rights
Triggering Event shall have occurred or be continuing at the time of such
payment or as a result thereof. In determining the aggregate amount of
Restricted Payments made by the Corporation on or subsequent to the Issue Date
and the aggregate amount of Restricted Payments made by Radio Broadcasting
subsequent to the Radio Broadcasting Preferred Stock Issue Date and through the
date immediately preceding the Issue Date, amounts expended pursuant to clauses
(1), (2), (4)(x), (5), (6), (7) and (8) (including any amounts previously
expended by Radio Broadcasting pursuant to clauses l(ii)(B)(1), (2), (4)(x),
(5), (6), (7) and (8) under the certification of designation for the Radio
Broadcasting Preferred Stock) shall be included in such calculation.
(iii) Limitation on Preferred Stock of Subsidiaries. The Corporation shall
not permit any of its Subsidiaries to issue any Preferred Stock (other than to
the Corporation or to a Wholly Owned Subsidiary of the Corporation) or permit
any Person (other than to the Corporation or a Wholly Owned Subsidiary of the
Corporation) to own any Preferred Stock of a Subsidiary of the Corporation
(other than Acquired Preferred Stock; provided that at the time the issuer of
such Acquired Preferred Stock becomes a Subsidiary of the Corporation or merges
with the Corporation or any of its Subsidiaries, and after giving effect to such
transaction, the Corporation shall be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with paragraph
(l)(i) above).
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(iv) Reports. So long as any shares of Series A Senior Exchangeable
Preferred Stock are outstanding, the Corporation will provide to the holders of
Series A Senior Exchangeable Preferred Stock, within 15 days after it files them
with the Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the Commission may by rules and regulations prescribe) which the Corporation
files with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
In the event that the Corporation is no longer required to furnish such reports
to its securityholders pursuant to the Exchange Act, the Corporation will cause
its consolidated financial statements, comparable to those which would have been
required to appear in annual or quarterly reports, to be delivered to the
Holders of Series A Senior Exchangeable Preferred Stock.
(m) Definitions. As used in this Certificate of Designation, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
"9 3/8% Note Indenture" means the Indenture governing the 9 3/8% Notes
as such Indenture may be amended or supplemented from time to time in
accordance with the terms thereof.
"9 3/8% Notes" means Radio Broadcasting's $200.0 million aggregate
principal amount of 9 3/8% Senior Subordinated Notes due 2004 of Radio
Broadcasting, as assumed by the Corporation, as the same may be modified or
amended from time to time and future refinancings thereof.
"12 1/2% Notes" means Radio Broadcasting's previously outstanding
$60.0 million aggregate principal amount of 12 1/2% Senior Subordinated
Notes due 2004.
"Acquired Preferred Stock" means Preferred Stock of any Person at the
time such Person becomes a Subsidiary of the Corporation or at the time it
merges or consolidates with the Corporation or any of its Subsidiaries and
not issued by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Subsidiary of the Corporation or
such acquisition, merger or consolidation.
"Affiliate" means a Person who, directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common
control with, the Corporation. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an Investment by the Corporation or any
Subsidiary of the Corporation in any other Person pursuant to which such
Person shall become a Subsidiary of the Corporation or shall be
consolidated or merged with the Corporation or any Subsidiary of the
Corporation or (ii) the acquisition by the Corporation or any Subsidiary of
the Corporation of assets of any Person comprising a division or line of
business of such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the
Corporation or any of its Subsidiaries (excluding any Sale and Leaseback
Transaction or any pledge of assets or stock by the Corporation or any of
its Subsidiaries) to any Person other than the Corporation or a Wholly
Owned Subsidiary of the Corporation of (i) any Capital Stock of any
Subsidiary of the Corporation or (ii) any other property or assets of the
Corporation or any Subsidiary of the Corporation other than in the ordinary
course of business.
"Board of Directors" shall have the meaning ascribed to it in the
first paragraph of this Resolution.
"Business Day" means any day except a Saturday, a Sunday, or any day
on which banking institutions in New York, New York are required or
authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated) of capital stock of such Person and (ii)
with respect to any Person that is not a corporation. any and all
partnership or other equity interests of such Person.
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"Capitalized Lease Obligation" means, as to any Person, the obligation
of such Person to pay rent or other amounts under a lease to which such
Person is a party that is required to be classified and accounted for as a
capital lease obligation under GAAP, and for purposes of this definition,
the amount of such obligation at any date shall be the capitalized amount
of such obligation at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc.; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from Standard & Poor's
Corporation or at least P-1 from Moody's Investors Service, Inc.; (iv)
certificates of deposit or bankers' acceptances maturing within one year
from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state
thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of
not less than $200,000,000; (v) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications
specified in clause (iv) above; and (vi) investments in money market funds
which invest substantially all their assets in securities of the types
described in clauses (i) through (v) above.
"Chancellor Broadcasting" means Chancellor Broadcasting Company, a
Delaware corporation that was merged with and into Evergreen Mezzanine
Holdings Corporation, a Delaware corporation, pursuant to the Merger
Agreement on September , 1997.
"Chancellor Media" means Chancellor Media Corporation, a Delaware
corporation, and its successors.
"Chancellor Mezzanine" means Chancellor Mezzanine Holdings
Corporation, a Delaware corporation, and its successors.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Corporation to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a "Group")
(whether or not otherwise in compliance with the provisions of the Exchange
Indenture), other than to Hicks Muse or any of its Affiliates, officers and
directors or to Steven Dinetz (the "Permitted Holders"); or (ii) a majority
of the Board of Directors of Chancellor Media, Chancellor Mezzanine or the
Corporation shall consist of Persons who are not Continuing Directors; or
(iii) the acquisition by any Person or Group (other than the Permitted
Holders) of the power, directly or indirectly, to vote or direct the voting
of securities having more than 50% of the ordinary voting power for the
election of directors of Chancellor Media, Chancellor Mezzanine or the
Corporation.
"Change of Control Date" shall have the meaning ascribed to it in
paragraph (h) hereof.
"Change of Control Payment Date" shall have the meaning ascribed to it
in paragraph (h) hereof.
"Change of Control Offer" shall have the meaning ascribed to it in
paragraph (h) hereof.
"Commission" means the Securities and Exchange Commission.
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement entered into by the
Corporation or any of its Subsidiaries designed to protect the Corporation
or any of its Subsidiaries against fluctuations in the price of commodities
actually used in the ordinary course of business of the Corporation and its
Subsidiaries.
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"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been reduced thereby, (a)
all income taxes of such Person and its Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable
to extraordinary or nonrecurring gains or losses), (b) Consolidated
Interest Expense and (c) Consolidated Non-Cash Charges, all as determined
on a consolidated basis for such Person and its Subsidiaries in conformity
with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the interest expense of
such Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation,
(a) any amortization of debt discount, (b) the net cost under Interest Swap
Obligations (including any amortization of discounts), (c) the interest
portion of any deferred payment obligation, (d) all commissions, discounts
and other fees and charges owed with respect to letters of credit, bankers'
acceptance financing or similar facilities, and (e) all accrued interest
and (ii) the interest component of Capitalized Lease Obligations paid or
accrued by such Person and its Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom, without duplication, (i)
gains and losses from Asset Sales or abandonments or reserves relating
thereto and the related tax effects, (ii) items classified as extraordinary
or nonrecurring gains and losses, and the related tax effects according to
GAAP, (iii) the net income (or loss) of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Subsidiary of
such first referred to Person or is merged or consolidated with it or any
of its Subsidiaries, (iv) the net income of any Subsidiary to the extent
that the declaration of dividends or similar distributions by that
Subsidiary of that income is restricted by contract, operation of law or
otherwise and (v) the net income of any Person, other than a Subsidiary,
except to the extent of the lesser of (a) dividends or distributions paid
to such first referred to Person or its Subsidiary by such Person and (b)
the net income of such Person (but in no event less than zero), and the net
loss of such Person shall be included only to the extent of the aggregate
Investment of the first referred to Person or a consolidated Subsidiary of
such Person.
"Consolidated Non-Cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries reducing Consolidated Net
Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary or nonrecurring item).
"Continuing Director" means, as of the date of determination, any
Person who (i) was a member of the Board of Directors of Chancellor
Broadcasting or Radio Broadcasting on the Radio Broadcasting Preferred
Stock Issue Date, (ii) was nominated for election or elected to the Board
of Directors of Chancellor Media, Chancellor Mezzanine or the Corporation
with the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election, or (iii) is a representative of a Permitted Holder.
"CRBC Credit Agreement" means the Credit Agreement, dated February 14,
1996 among Chancellor Broadcasting, Radio Broadcasting, the lenders from
time to time party thereto and Bankers Trust Company as agent, together
with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such
agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including
any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including by way of adding subsidiaries of Radio
Broadcasting as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
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"Credit Agreement" means the Credit Agreement, dated April 25, 1997
among Evergreen Media Corporation of Los Angeles, the lenders from time to
time party thereto, The Toronto-Dominion Bank, Bankers Trust Company, The
Bank of New York, NationsBank of Texas, N.A. and Union Bank of California,
as Managing Agents; Toronto Dominion Securities (USA), Inc., as Arranging
Agent; and Toronto Dominion (Texas), Inc., as Administrative Agent for the
lenders, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case
as such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including
any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including by way of adding subsidiaries of the
Corporation as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agents, lender
or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to
protect the Corporation or any of its Subsidiaries against fluctuations in
currency values.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures
(excluding any maturity as the result of an optional redemption by the
issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of a Change of Control),
in whole or in part, on or prior to February 15, 2008.
"Dividend Payment Date" means February 15, May 15, August 15 and
November 15, of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"Dividend Record Date" means February 1, May 1, August 1 and November
1 of each year.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exchange Date" means a date on which shares of Series A Senior
Exchangeable Preferred Stock are exchanged by the Corporation for Exchange
Debentures.
"Exchange Debentures" shall have the meaning ascribed to it in
paragraph (g) hereof.
"Exchange Notice" shall have the meaning ascribed to it in paragraph
(g) hereof.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any successor thereto.
"Financial Monitoring and Oversight Agreement" means, collectively,
the Financial Monitoring and Oversight Agreement among Hicks, Muse & Co.
Partners, L.P., Radio Broadcasting and Chancellor Broadcasting, as in
effect on the Radio Broadcasting Preferred Stock Issue Date, and the
Financial Advisory Agreement among HM/2 Management Partners, L.P., Radio
Broadcasting and Chancellor Broadcasting, as in effect on the Radio
Broadcasting Preferred Stock Issue Date.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America as of the Issue Date.
"Hicks Muse" means Hicks, Muse, Tate & Furst Incorporated.
"Holder" means a holder of shares of Series A Senior Exchangeable
Preferred Stock as reflected in the stock books of the Corporation.
"Indebtedness" means with respect to any Person, without duplication,
any liability of such Person (i) for borrowed money, (ii) evidenced by
bonds, debentures, notes or other similar instruments,
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(iii) constituting Capitalized Lease Obligations, (iv) incurred or assumed
as the deferred purchase price of property, or pursuant to conditional sale
obligations and title retention agreements (but excluding trade accounts
payable arising in the ordinary course of business), (v) for the
reimbursement of any obligor on any letter of credit, banker's acceptance
or similar credit transaction, (vi) for Indebtedness of others guaranteed
by such Person, (vii) for Interest Swap Obligations, Commodity Agreements
and Currency Agreements and (viii) for Indebtedness of any other Person of
the type referred to in clauses (i) through (vii) which is secured by any
Lien on any property or asset of such first referred to Person, the amount
of such Indebtedness being deemed to be the lesser of the value of such
property or asset or the amount of the Indebtedness so secured. The amount
of Indebtedness of any Person at any date shall be the outstanding
principal amount of all unconditional obligations described above, as such
amount would be reflected on a balance sheet prepared in accordance with
GAAP, and the maximum liability at such date of such Person for any
contingent obligations described above.
"Initial Dividend Period" means the dividend period commencing on
August 16, 1997 and ending on the first Dividend Payment Date to occur
thereafter.
"Interest Swap Obligations" means the obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge
or arrangement.
"Investment" means (i) any transfer or delivery of cash, stock or
other property of value in exchange for Indebtedness, stock or other
security or ownership interest in any Person by way of loan, advance,
capital contribution, guarantee or otherwise and (ii) an investment deemed
to have been made by the Corporation at the time any entity which was a
Subsidiary of the Corporation ceases to be such a Subsidiary in an amount
equal to the value of the loans and advances made, and any remaining
ownership interest in, such entity immediately following such entity
ceasing to be a Subsidiary of the Corporation. The amount of any non-cash
Investment shall be the fair market value of such Investment, as determined
conclusively in good faith by management of the Corporation unless the fair
market value of such Investment exceeds $1,000,000, in which case the fair
market value shall be determined conclusively in good faith by the Board of
Directors at the time such Investment is made.
"Issue Date" means September , 1997, the date of original issuance
of the Series A Senior Exchangeable Preferred Stock.
"Junior Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Leverage Ratio" shall mean, as to any Person, the ratio of (i) the
sum of the aggregate outstanding amount of Indebtedness of such Person and
its Subsidiaries as of the date of calculation on a consolidated basis in
accordance with GAAP to (ii) the Consolidated EBITDA of such Person for the
four full fiscal quarters (the "Four Quarter Period") ending on or prior to
the date of determination.
For purposes of this definition, the aggregate outstanding principal amount
of Indebtedness of the Person and its Subsidiaries for which such calculation is
made shall be determined on a pro forma basis as if the Indebtedness giving rise
to the need to perform such calculation had been incurred and the proceeds
therefrom had been applied, and all other transactions in respect of which such
Indebtedness is being incurred had occurred, on the last day of the Four Quarter
Period. In addition to the foregoing, for purposes of this definition,
"Consolidated EBITDA" shall be calculated on a pro forma basis after giving
effect to (i) the incurrence of the Indebtedness of such Person and its
Subsidiaries (and the application of the proceeds therefrom) giving rise to the
need to make such calculation and any incurrence (and the application of the
proceeds therefrom) or repayment of other Indebtedness, other than the
incurrence or repayment of Indebtedness pursuant to working capital facilities,
at any time subsequent to the beginning of the Four Quarter Period and on or
prior to the date of determination, as if such incurrence (and the application
of the proceeds thereof), or the repayment, as the case may be, occurred on the
first day of the Four Quarter Period and (ii) any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of such Person or one of its
Subsidiaries (including any Person that becomes a Subsidiary as a result of such
Asset Acquisition) incurring, assuming or otherwise becoming
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liable for Indebtedness) at any time on or subsequent to the first day of the
Four Quarter Period and on or prior to the date of determination, as if such
Asset Sale or Asset Acquisition (including the incurrence, assumption or
liability for any such Indebtedness and also including any Consolidated EBITDA
associated with such Asset Acquisition) occurred on the first day of the Four
Quarter Period. Furthermore, in calculating "Consolidated Interest Expense" for
purposes of the calculation of "Consolidated EBITDA," (i) interest on
Indebtedness determined on a fluctuating basis as of the date of determination
(including Indebtedness actually incurred on the date of the transaction giving
rise to the need to calculate the Leverage Ratio) and which will continue to be
so determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness as in effect on the
date of determination and (ii) notwithstanding (i) above, interest determined on
a fluctuating basis, to the extent such interest is covered by Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (e) hereof.
"Merger Agreement" means the Agreement and Plan of Merger, dated
February 19, 1997, as amended and restated on July 31, 1997, among
Chancellor Broadcasting, Radio Broadcasting, Evergreen Media Corporation,
Evergreen Mezzanine Holdings Corporation and Evergreen Media Corporation of
Los Angeles.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing, or otherwise
relating to, any Indebtedness.
"Officers' Certificate" means a certificate signed by two officers or
by an officer and either an Assistant Treasurer or an Assistant Secretary
of the Corporation which certificate shall include a statement that, in the
opinion of such signers all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken. In
addition, such certificate shall include (i) a statement that the
signatories have read the relevant covenant or condition, (ii) a brief
statement of the nature and scope of such examination or investigation upon
which the statements are based, (iii) a statement that, in the opinion of
such signatories, they have made such examination or investigation as is
reasonably necessary to express an informed opinion and (iv) a statement as
to whether or not, in the opinion of the signatories, such relevant
conditions or covenants have been complied with.
"Opinion of Counsel" means an opinion of counsel that, in such
counsel's opinion, all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken.
Such opinion shall also include the statements called for in the second
sentence under "Officers' Certificate".
"Optional Redemption Price" shall have the meaning ascribed to it in
paragraph (e)(i) hereof.
"Parity Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Permitted Indebtedness" means, without duplication, (i) Indebtedness
of Radio Broadcasting outstanding on the Radio Broadcasting Preferred Stock
Issue Date, including, without limitation, the 9 3/8% Notes, and guarantees
thereof, plus Indebtedness of Radio Broadcasting incurred subsequent to the
Radio Broadcasting Preferred Stock Issue Date, in the aggregate principal
amount of $60.0 million, for the purpose of refinancing the 12 1/2% Notes,
and future refinancings of such Indebtedness; (ii) Indebtedness of Radio
Broadcasting or the Corporation incurred pursuant to the CRBC Credit
Agreement or the Credit Agreement in an aggregate principal amount at any
time outstanding not to exceed the sum of the aggregate commitments
pursuant to the CRBC Credit Agreement as initially in effect reduced by the
aggregate principal amount permanently repaid with the proceeds of Asset
Sales; (iii) Indebtedness evidenced by the Exchange Debentures, including
any Exchange Debentures issued in
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accordance with the Exchange Indenture as the payment of interest on the
Exchange Debentures; (iv) Interest Swap Obligations; provided that such
Interest Swap Obligations are entered into to protect the Corporation from
fluctuations in interest rates of its Indebtedness; (v) additional
Indebtedness of the Corporation or any of its Subsidiaries not to exceed
$10,000,000 in principal amount outstanding at any time (which amount may,
but need not, be incurred under the Credit Agreement); (vi) Refinancing
Indebtedness; (vii) Indebtedness owed by the Corporation to any Wholly
Owned Subsidiary or by any Subsidiary to the Corporation or any Wholly
Owned Subsidiary of the Corporation; and (viii) guarantees by Subsidiaries
of any Indebtedness permitted to be incurred pursuant to the terms of
paragraph (1)(i) hereof.
"Permitted Investments" means (i) Investments by the Corporation or
any Subsidiary to acquire the stock or assets of any Person (or
Indebtedness of such Person acquired in connection with a transaction in
which such Person becomes a Subsidiary of the Corporation) engaged in the
broadcast business or businesses reasonably related thereto; provided that
if any such Investment or series of related Investments involves an
Investment by the Corporation in excess of $5,000,000, the Corporation is
able, at the time of such investment and immediately after giving effect
thereto, to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with paragraph (l)(i) hereof, (ii)
Investments received by the Corporation or its Subsidiaries as
consideration for a sale of assets, (iii) Investments by the Corporation or
any Wholly Owned Subsidiary of the Corporation in any Wholly Owned
Subsidiary of the Corporation (whether existing on the Issue Date or
created thereafter) or any Person that after such Investments, and as a
result thereof, becomes a Wholly Owned Subsidiary of the Corporation and
Investments in the Corporation by any Wholly Owned Subsidiary of the
Corporation, (iv) cash and Cash Equivalents, (v) Investments in securities
of trade creditors, wholesalers or customers received pursuant to any plan
of reorganization or similar arrangement and (vi) additional Investments in
an aggregate amount not to exceed $2,500,000 at any time outstanding.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or
a governmental agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"pro forma" means, unless otherwise provided herein, with respect to
any calculation made or required to be made pursuant hereto, a calculation
in accordance with Article 11 of Regulation S-X under the Securities Act.
"Public Equity Offering" means an underwritten public offering of
Capital Stock (other than Disqualified Capital Stock) of the Corporation or
Chancellor Mezzanine, pursuant to an effective registration statement filed
with the Commission in accordance with the Securities Act; provided,
however, that, in the case of a Public Equity Offering by Chancellor
Mezzanine, Chancellor Mezzanine contributes to the capital of the
Corporation net cash proceeds in an amount sufficient to redeem the Series
A Senior Exchangeable Preferred Stock called for redemption in accordance
with the terms hereof.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Quarterly Dividend Period" shall mean the quarterly period commencing
on each February 16, May 16, August 16 and November 16 and ending on the
next succeeding Dividend Payment Date, respectively.
"Series A Senior Exchangeable Preferred Stock" shall have the meaning
ascribed to it in paragraph (a) hereof.
"Radio Broadcasting" means Chancellor Radio Broadcasting Company, a
Delaware corporation that was merged with and into Evergreen Media
Corporation of Los Angeles pursuant to the Merger Agreement on September
, 1997.
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"Radio Broadcasting Preferred Stock" shall mean the 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock of Radio Broadcasting.
"Radio Broadcasting Preferred Stock Issue Date" shall mean September
9, 1996, the date of original issuance of the Radio Broadcasting Preferred
Stock.
"Redemption Date", with respect to any shares of Series A Senior
Exchangeable Preferred Stock, means the date on which such shares of Series
A Senior Exchangeable Preferred Stock are redeemed by the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph
(e) hereof.
"Refinancing Indebtedness" means any refinancing by the Corporation of
Indebtedness of the Corporation or any of its Subsidiaries incurred in
accordance with paragraph (l)(i) hereof (other than pursuant to clause (ii)
or (iv) of the definition of Permitted Indebtedness) that does not (i)
result in an increase in the aggregate principal amount of Indebtedness
(such principal amount to include, for purposes of this definition, any
premiums, penalties or accrued interest paid with the proceeds of the
Refinancing Indebtedness) of such Person or (ii) create Indebtedness with
(a) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being refinanced or (b) a
final maturity earlier than the final maturity of the Indebtedness being
refinanced.
"Restricted Payment" means (i) the declaration or payment of any
dividend or the making of any other distribution (other than dividends or
distributions payable in Qualified Capital Stock) on shares of Junior
Stock, (ii) any purchase, redemption, retirement or other acquisition for
value of any Junior Stock, or any warrants, rights or options to acquire
shares of Junior Stock, other than through the exchange of such Junior
Stock or any warrants, rights or options to acquire shares of any class of
such Junior Stock for Qualified Capital Stock or warrants, rights or
options to acquire Qualified Capital Stock or (iii) the making of any
Investment (other than a Permitted Investment).
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to the Corporation or a Subsidiary of any
property, whether owned by the Corporation or any Subsidiary at the Issue
Date or later acquired, which has been or is to be sold or transferred by
the Corporation or such Subsidiary to such Person or to any other Person
from whom funds have been or are to be advanced by such Person on the
security of such property.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person. Notwithstanding anything contained herein
to the contrary, all references to the Corporation and its consolidated
Subsidiaries or to financial information prepared on a consolidated basis
in accordance with GAAP shall be deemed to include the Corporation and its
Subsidiaries as to which financial statements are prepared on a combined
basis in accordance with GAAP and to financial information prepared on such
a combined basis. Notwithstanding anything herein to the contrary, an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes
hereof.
"Tax Sharing Agreement" means the Tax Sharing Agreement between Radio
Broadcasting and Chancellor Broadcasting, as in effect on the Radio
Broadcasting Preferred Stock Issue Date.
"Unrestricted Subsidiary" means a Subsidiary of the Corporation
created after the Issue Date and so designated by a resolution adopted by
the Board of Directors, provided that (i) neither the Corporation nor any
of its other Subsidiaries (other than Unrestricted Subsidiaries) (a)
provides any credit support
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for any Indebtedness of such Subsidiary (including any undertaking,
agreement or instrument evidencing such Indebtedness) or (b) is directly or
indirectly liable for any Indebtedness of such Subsidiary, (ii) the
creditors with respect to Indebtedness for borrowed money of such
Subsidiary, having a principal amount in excess of $5,000,000, have agreed
in writing that they have no recourse, direct or indirect, to the
Corporation or any other Subsidiary of the Corporation (other than
Unrestricted Subsidiaries), including, without limitation, recourse with
respect to the payment of principal of or interest on any Indebtedness of
such Subsidiary and (iii) at the time of designation of such Subsidiary
such Subsidiary has no property or assets (other than de minimis assets
resulting from the initial capitalization of such Subsidiary). Any such
designation by the Board of Directors shall be evidenced by a resolution of
the Board of Directors giving effect to such designation.
"Voting Rights Triggering Event" shall have the meaning ascribed to it
in paragraph f(iv) hereof.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b)
the total of the product obtained by multiplying (i) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payment of principal, including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest one-
twelfth) which will elapse between such date and the making of such
payment.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities (other than
directors' qualifying shares) which normally have the right to vote m the
election of directors are owned by such Person.
IN WITNESS WHEREOF, Chancellor Media Corporation of Los Angeles has caused
this Certificate to be signed by Matthew E. Devine, its Chief Financial Officer,
this day of September 1997.
CHANCELLOR MEDIA CORPORATION OF LOS
ANGELES
By:
----------------------------------
Name: Matthew E. Devine
Title: Chief Financial Officer
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ANNEX D
PROPOSED FORM OF
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 12%
EXCHANGEABLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
---------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
---------------------
Chancellor Media Corporation of Los Angeles (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware and formerly known as Evergreen Media Corporation of Los
Angeles, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Corporation (the "Board of Directors") by its
Certificate of Incorporation, as amended (hereinafter referred to as the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of Directors
duly approved and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority conferred on the Board of
Directors by its Certificate of Incorporation (which authorizes 10,000,000
shares of preferred stock, $.01 per share), and pursuant to Section 151(g)
of the General Corporation Law of the State of Delaware, the Chief
Financial Officer of the Corporation be, and hereby is, authorized and
directed to execute and file with the Secretary of State of the State of
Delaware the Certificate of Designation of 12% Exchangeable Preferred
Stock, par value $.01 per share, of the Corporation, pursuant to which the
Board of Directors has fixed the designations, powers and preferences and
the relative participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof, of a series of the
Corporation's Preferred Stock.
(a) Designation. There is hereby created out of the authorized and unissued
shares of Preferred Stock of the Corporation a class of Preferred Stock
designated as the "12% Exchangeable Preferred Stock." The number of shares
constituting such class shall be 3,600,000, and are referred to as the
"Exchangeable Preferred Stock." The liquidation preference of the Exchangeable
Preferred Stock shall be $100.00 per share.
(b) Rank. The Exchangeable Preferred Stock shall, with respect to dividends
and distributions upon liquidation, winding-up and dissolution of the
Corporation, rank (i) senior to all classes of common stock of the Corporation
(including, without limitation, the Common Stock) and to each other class of
Capital Stock of the Corporation or series of Preferred Stock of the Corporation
hereafter created the terms of which expressly provide that it ranks junior to
the Exchangeable Preferred Stock as to dividends and distributions upon
liquidation, winding-up and dissolution of the Corporation (collectively
referred to, together with all classes of common stock of the Corporation, as
"Junior Stock"); (ii) on a parity with any class of Capital Stock of the
Corporation or series of Preferred Stock of the Corporation hereafter created
the terms of which expressly provide that such class or series will rank on a
parity with the Exchangeable Preferred Stock as to dividends and distributions
upon liquidation, winding-up and dissolution (collectively referred to as
"Parity Stock"); provided that any such Parity Stock that was not approved by
the Holders in accordance with paragraph (f)(ii)(A) hereof (to the extent such
approval is required) shall be deemed to be Junior Stock and not Parity Stock;
and (iii) junior to the 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock (the "Senior Exchangeable Preferred Stock") and each class of
Capital Stock of the Corporation or series of Preferred Stock of the Corporation
hereafter created that has been approved by the Holders in accordance with
paragraph (f)(ii)(B) hereof and the terms of which do not expressly provide that
such class or series will rank junior to, or on a parity with, the Exchangeable
Preferred Stock as to dividends and distributions upon liquidation, winding-up
and dissolution of the Company (collectively referred to as "Senior Stock").
<PAGE> 416
(c) Dividends. (i) Beginning on the Issue Date, the Holders of the
outstanding shares of Exchangeable Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, out of funds legally
available therefor, distributions in the form of cash dividends on each share of
Exchangeable Preferred Stock, at a rate per annum equal to 12% of the
liquidation preference per share of the Exchangeable Preferred Stock, payable
semi-annually. Holders of Exchangeable Preferred Stock will also be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, amounts owing as additional dividends pursuant to
the certificate of designation governing the Radio Broadcasting Preferred Stock
and the Registration Rights Agreement, dated January 23, 1997, among Radio
Broadcasting and the initial purchasers of the Radio Broadcasting Preferred
Stock. No interest shall be payable in respect of any dividends that may be in
arrears. All dividends shall be cumulative, whether or not earned or declared,
on a daily basis from July 15, 1997 and shall be payable semi-annually in
arrears on each Dividend Payment Date, commencing on the first Dividend Payment
Date after the Issue Date, provided that if any dividend payable on any Dividend
Payment Date on or before January 15, 2002 is not declared and paid in full in
cash on such Dividend Payment Date, the amount payable as dividends on such
Dividend Payment Date that is not paid in cash on such Dividend Payment Date
shall be paid in additional whole shares of Exchangeable Preferred Stock
(calculated by dividing (x) the amount of the cash dividend payable to each
holder of record of the Exchangeable Preferred Stock on the basis of all shares
held of record by such holder, whether evidenced by one or more certificates, by
(y) $100.00, with amounts in respect of any partial shares to be paid in cash by
the Corporation) on such Dividend Payment Date and shall be deemed paid in full
and shall not accumulate. Each dividend shall be payable to Holders of record of
the Exchangeable Preferred Stock as they appear on the stock books of the
Corporation on the Dividend Record Date immediately preceding the related
Dividend Payment Date. Dividends shall cease to accumulate in respect of the
Exchangeable Preferred Stock on the Exchange Date or on the date of their
earlier redemption unless the Corporation shall have failed to issue the
appropriate aggregate principal amount of Exchange Debentures in respect of the
Exchangeable Preferred Stock on such Exchange Date or shall have failed to pay
the relevant redemption price on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Exchangeable
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any circumstances
be construed or deemed to require the Board of Directors to declare, or the
Corporation to pay or set apart for payment, any dividends on shares of the
Exchangeable Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption pursuant to paragraph
(e)(i) may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to Holders of record on such date, not more than
forty-five (45) days prior to the payment thereof, as may be fixed by the Board
of Directors of the Corporation.
(v) No full dividends shall be declared by the Board of Directors or paid
or set apart for payment by the Corporation on any Parity Stock for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid (or are deemed declared and paid) in full, or declared and, if payable in
cash, a sum in cash set apart sufficient for such payment, on the Exchangeable
Preferred Stock for all Dividend Periods terminating on or prior to the date of
payment of such full dividends on such Parity Stock. If any dividends are not so
paid, all dividends declared upon shares of the Exchangeable Preferred Stock and
any other Parity Stock shall be declared pro rata so that the amount of
dividends declared per share on the Exchangeable Preferred Stock and such Parity
Stock shall in all cases bear to each other the same ratio that accrued and
unpaid dividends per share on the Exchangeable Preferred Stock and such Parity
Stock bear to each other.
(vi) (A) Holders of shares of the Exchangeable Preferred Stock shall be
entitled to receive the dividends provided for in paragraph (c)(i) hereof in
preference to and in priority over any dividends upon any of the Junior Stock.
(B) So long as any share of the Exchangeable Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart for payment any
dividend on any of the Junior Stock or make any payment on account
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of, or set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Junior Stock or any
warrants, rights, calls or options exercisable for or convertible into any of
the Junior Stock whether in cash, obligations or shares of the Corporation or
other property (other than dividends in Junior Stock to the holders of Junior
Stock), and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any of the Junior
Stock or any such warrants, rights, calls or options unless full cumulative
dividends determined in accordance herewith on the Exchangeable Preferred Stock
have been paid (or are deemed paid) in full or declared and, if payable in cash,
a sum in cash set apart sufficient for such payment on the Exchangeable
Preferred Stock for all Dividend Periods terminating on or prior to the date of
such dividends or payments on such Junior Stock.
(A) So long as any share of the Exchangeable Preferred Stock is
outstanding, the Corporation shall not make any payment on account of, or set
apart for payment money for a sinking or other similar fund for, the purchase,
redemption or other retirement of, any of the Parity Stock or any warrants,
rights, calls or options exercisable for or convertible into any of the Parity
Stock, and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any of the Parity
Stock or any such warrants, rights, calls or options unless full cumulative
dividends determined in accordance herewith on the Exchangeable Preferred Stock
have been paid (or are deemed paid) in full.
(vii) Dividends payable on the Exchangeable Preferred Stock for any period
less than a year shall be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed in the period for which
payable.
(d) Liquidation Preference. (i) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the Holders of shares of Exchangeable Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders an amount in cash equal to the
liquidation preference for each share outstanding, plus an amount in cash equal
to accrued and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up (including an amount equal to a prorated dividend for
the period from the last Dividend Payment Date to the date fixed for
liquidation, dissolution or winding up) before any payment shall be made or any
assets distributed to the holders of any of the Junior Stock including, without
limitation, common stock of the Corporation. Except as provided in the preceding
sentence, Holders of Exchangeable Preferred Stock shall not be entitled to any
distribution in the event of any liquidation, dissolution or winding up of the
affairs of the Corporation. If the assets of the Corporation are not sufficient
to pay in full the liquidation payments payable to the Holders of outstanding
shares of the Exchangeable Preferred Stock and all Parity Stock, then the
holders of all such shares shall share equally and ratably in such distribution
of assets in proportion to the full liquidation preference, including all
accrued and unpaid dividends to which each is entitled.
(ii) For the purposes of this paragraph (d), neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Corporation nor the consolidation or merger of the Corporation with or into one
or more entities shall be deemed to be a liquidation, dissolution or winding up
of the affairs of the Corporation.
(e) Redemption. (i) Optional Redemption. (A) The Corporation may, at the
option of the Board of Directors, redeem at any time on or after January 15,
2002, subject to contractual and other restrictions with respect thereto and
from any source of funds legally available therefor, in whole or in part, in the
manner provided for in paragraph (e)(iii) hereof, any or all of the shares of
the Exchangeable Preferred Stock, at the redemption prices (expressed as a
percentage of the liquidation preference) set forth below plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends per
share (including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the
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Redemption Date to the Redemption Date) (the "Optional Redemption Price") if
redeemed during the 12-month period beginning January 15 of each of the years
set forth below:
<TABLE>
<S> <C>
2002....................................................... 106.00%
2003....................................................... 104.80%
2004....................................................... 103.60%
2005....................................................... 102.40%
2006....................................................... 101.20%
2007 and thereafter........................................ 100.00%
</TABLE>
provided that no redemption pursuant to this paragraph (e)(i)(A) shall be
authorized or made unless prior thereto full accrued and unpaid dividends are
declared and paid in full, or declared and a sum in cash set apart sufficient
for such payment, on the Exchangeable Preferred Stock for all Dividend Periods
terminating on or prior to the Redemption Date.
(B) In addition to the foregoing paragraph (e)(i)(A), on or prior to
January 15, 2000, the Corporation may, at its option, use the net cash proceeds
of one or more Public Equity Offerings to redeem from any source of funds
legally available therefor, in the manner provided for in paragraph (e)(iii)
hereof, the Exchangeable Preferred Stock, in part, at a redemption price of 112%
of the liquidation preference thereof plus an amount in cash equal to all
accumulated and unpaid dividends to the redemption date (including an amount in
cash equal to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the redemption date to the redemption date) (the "Cash
Proceeds Redemption Price"); provided, however, that after any such redemption,
there must be at least $150,000,000 aggregate liquidation preference of
Exchangeable Preferred Stock outstanding. Any such redemption pursuant to this
paragraph (e)(i)(B) must occur on or prior to 60 days after the receipt by the
Corporation of the proceeds of each Public Equity Offering.
(C) In the event of a redemption pursuant to paragraph (e)(i)(A) or
(e)(i)(B) hereof of only a portion of the then outstanding shares of the
Exchangeable Preferred Stock, the Corporation shall effect such redemption on a
pro rata basis according to the number of shares held by each Holder of the
Exchangeable Preferred Stock, except that the Corporation may redeem such shares
held by Holders of fewer than 100 shares (or shares held by Holders who would
hold less than 100 shares as a result of such redemption), as may be determined
by the Corporation.
(D) In addition to the foregoing paragraphs (e)(i)(A), and (e)(i)(B), prior
to January 15, 1999, upon the occurrence of a Change of Control, the Company
will have the option to redeem the Exchangeable Preferred Stock in whole but not
in part (a "Change of Control Redemption") at a redemption price equal to 112%
of the liquidation preference thereof (the "Change of Control Redemption
Price"), together with accrued and unpaid dividends to the date of redemption.
In order to effect a Change of Control Redemption, the Company must send a
notice to each Holder within 30 days following the date the Change of Control
occurred, stating that the Company is effecting a Change of Control Redemption
in lieu of a Change of Control Offer.
(ii) Mandatory Redemption. On January 15, 2009, the Corporation shall
redeem, to the extent of funds legally available therefor, in the manner
provided for in paragraph (e)(iii) hereof, all of the shares of the Exchangeable
Preferred Stock then outstanding at a redemption price equal to 100% of the
liquidation preference per share, plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends per share (including an amount
equal to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date) (the "Mandatory
Redemption Price").
(iii) Procedures for Redemption. (A) At least thirty (30) days and not more
than sixty (60) days prior to the date fixed for any redemption of the
Exchangeable Preferred Stock, written notice (the "Redemption Notice") shall be
given by first class mail, postage prepaid, to each Holder of record on the
record date fixed for such redemption of the Exchangeable Preferred Stock at
such Holder's address as it appears on the stock books of the Corporation,
provided that no failure to give such notice nor any deficiency therein shall
affect the
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validity of the procedure for the redemption of any shares of Exchangeable
Preferred Stock to be redeemed except as to the Holder or Holders to whom the
Corporation has failed to give said notice or except as to the Holder or Holders
whose notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i)(A), (e)(i)(B),
(e)(i)(D) or (e)(ii) hereof;
(2) the Optional Redemption Price, the Mandatory Redemption Price, the
Change of Control Redemption Price or the Cash Proceeds Redemption Price, as the
case may be;
(3) whether all or less than all the outstanding shares of the Exchangeable
Preferred Stock are to be redeemed and the total number of shares of the
Exchangeable Preferred Stock being redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Corporation, in the manner, at
the place or places and at the price designated, his certificate or certificates
representing the shares of Exchangeable Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Exchangeable Preferred Stock to be
redeemed shall cease to accumulate on such Redemption Date unless the
Corporation defaults in the payment of the Optional Redemption Price, the
Mandatory Redemption Price, the Change of Control Redemption Price or the Cash
Proceeds Redemption Price, as the case may be.
(B) Each Holder of Exchangeable Preferred Stock called for redemption shall
surrender the certificate or certificates representing such shares of
Exchangeable Preferred Stock to the Corporation, duly endorsed (or otherwise in
proper form for transfer, as determined by the Corporation), in the manner and
at the place designated in the Redemption Notice, and on the Redemption Date the
full Optional Redemption Price, Mandatory Redemption Price, the Change of
Control Redemption Price or Cash Proceeds Redemption Price, as the case may be,
for such shares shall be payable in cash to the Person whose name appears on
such certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation defaults in
the payment in full of the applicable redemption price, dividends on the
Exchangeable Preferred Stock called for redemption shall cease to accumulate on
the Redemption Date, and all rights of the Holders of redeemed shares shall
terminate with respect thereto on the Redemption Date, other than the right to
receive the Optional Redemption Price, the Mandatory Redemption Price, the
Change of Control Redemption Price or the Cash Proceeds Redemption Price, as the
case may be, without interest; provided, however, that if a notice of redemption
shall have been given as provided in paragraph (iii)(A) above and the funds
necessary for redemption (including an amount in respect of all dividends that
will accrue to the Redemption Date) shall have been irrevocably deposited in
trust for the equal and ratable benefit for the Holders of the shares to be
redeemed, then, at the close of business on the day on which such funds are
segregated and set aside, the Holders of the shares to be redeemed shall cease
to be stockholders of the Corporation and shall be entitled only to receive the
Optional Redemption Price, the Mandatory Redemption Price, the Change of Control
Redemption Price or the Cash Redemption Price, as the case may be, without
interest.
(f) Voting Rights. (i) The Holders of Exchangeable Preferred Stock, except
as otherwise required under Delaware law or as set forth in paragraphs (ii),
(iii) and (iv) below, shall not be entitled or permitted to vote on any matter
required or permitted to be voted upon by the stockholders of the Corporation.
(ii) (A) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not authorize any class of Senior Stock
without the affirmative vote or consent of Holders of at least a majority of the
outstanding shares of Exchangeable Preferred Stock, voting or consenting, as the
case may be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
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(B) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not authorize any class of Parity Stock
without the affirmative vote or consent of Holders of at least a majority of the
then outstanding shares of Exchangeable Preferred Stock, voting or consenting,
as the case may be, as one class, given in person or by proxy, either in writing
or by resolution adopted at an annual or special meeting. Notwithstanding the
foregoing sentence, the Corporation may authorize up to $50,000,000 initial
liquidation preference of other Parity Stock (plus Parity Stock payable as
dividends thereon in lieu of cash dividends) without the vote described in the
foregoing sentence.
(C) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not amend this Certificate of Designation so
as to affect adversely the specified rights, preferences, privileges or voting
rights of the Exchangeable Preferred Stock or to authorize the issuance of any
additional shares of Exchangeable Preferred Stock without the affirmative vote
or consent of Holders of at least a majority of the issued and outstanding
shares of Exchangeable Preferred Stock, voting or consenting, as the case may
be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(D) Prior to the exchange of Exchangeable Preferred Stock for Exchange
Debentures, the Corporation shall not amend or modify the Indenture for the
Exchange Debentures in the form in effect on the Issue Date (the "Indenture")
(except as expressly provided therein in respect of amendments without the
consent of Holders of Exchange Debentures) without the affirmative vote or
consent of Holders of at least a majority of the shares of Exchangeable
Preferred Stock then outstanding, voting or consenting, as the case may be, as
one class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting.
(E) Except as set forth in paragraphs (f)(ii)(A), (f)(ii)(B) and (f)(ii)(C)
above, (x) the creation, authorization or issuance of any shares of any Junior
Stock, Parity Stock or Senior Stock or (y) the increase or decrease in the
amount of authorized Capital Stock of any class, including Preferred Stock,
shall not require the consent of Holders of Senior Exchangeable Preferred Stock
and shall not be deemed to affect adversely the rights, preferences, privileges
or voting rights of shares of Exchangeable Preferred Stock.
(iii) Without the affirmative vote or consent of Holders of a majority of
the issued and outstanding shares of Exchangeable Preferred Stock, voting or
consenting, as the case may be, as one class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special meeting, the
Corporation shall not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets to,
another Person or adopt a plan of liquidation unless: (A) either (1) the
Corporation is the surviving or continuing Person or (2) the Person (if other
than the Corporation) formed by such consolidation or into which the Corporation
is merged or the Person that acquires by conveyance, transfer or lease the
properties and assets of the Corporation substantially as an entirety or in the
case of a plan of liquidation, the Person to which assets of the Corporation
have been transferred, shall be a corporation, partnership or trust organized
and existing under the laws of the United States or any State thereof or the
District of Columbia; (B) the Exchangeable Preferred Stock shall be converted
into or exchanged for and shall become shares of such successor, transferee or
resulting Person, having in respect of such successor, transferee or resulting
Person the same powers, preferences and relative, participating, optional or
other special rights and the qualifications, limitations or restrictions
thereon, that the Exchangeable Preferred Stock had immediately prior to such
transaction; (C) immediately after giving effect to such transaction and the use
of the proceeds therefrom (on a pro forma basis, including giving effect to any
Indebtedness incurred or anticipated to be incurred in connection with such
transaction), the Corporation (in the case of clause (1) of the foregoing clause
(A)) or such Person (in the case of clause (2) of the foregoing clause (A))
shall be able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under paragraph (l)(i) hereof; (D) immediately after
giving effect to such transactions, no Voting Rights Triggering Event shall have
occurred or be continuing; and (E) the Corporation has delivered to the transfer
agent for the Exchangeable Preferred Stock prior to the consummation of the
proposed transaction an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer complies with the terms
hereof and that all conditions precedent herein relating to such transaction
have been satisfied.
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For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of related transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Corporation, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Corporation shall be deemed to be the transfer
of all or substantially all of the properties and assets of the Corporation.
(iv) (A) If (1) after January 15, 2002 cash dividends on the Exchangeable
Preferred Stock are in arrears and unpaid for three or more Dividend Periods
(whether or not consecutive) (a "Dividend Default"); (2) the Corporation fails
to redeem all of the then outstanding shares of Exchangeable Preferred Stock on
January 15, 2009 or otherwise fails to discharge any redemption obligation with
respect to the Exchangeable Preferred Stock; (3) the Corporation fails to make a
Change of Control Offer (whether pursuant to the terms of paragraph (h)(v) or
otherwise) following a Change of Control if such Change of Control Offer is
required by paragraph (h) hereof or fails to purchase shares of Exchangeable
Preferred Stock from Holders who elect to have such shares purchased pursuant to
the Change of Control Offer (unless, in either case, the Corporation has decided
to effect a Change of Control Redemption in lieu of such Change of Control Offer
pursuant to the terms of paragraph (e)(i)(D)); (4) the Corporation breaches or
violates one of the provisions set forth in any of paragraphs (l)(i), (l)(ii) or
(l)(iii) hereof and the breach or violation continues for a period of 30 days or
more after the Corporation receives notice thereof specifying the default from
the holders of at least 25% of the shares of Exchangeable Preferred Stock then
outstanding or (5) the Corporation fails to pay at the final stated maturity
(giving effect to any extensions thereof) the principal amount of any
Indebtedness of the Corporation or any Subsidiary of the Corporation, or the
final stated maturity of any such Indebtedness is accelerated, if the aggregate
principal amount of such Indebtedness, together with the aggregate principal
amount of any other such Indebtedness in default for failure to pay principal at
the final stated maturity (giving effect to any extensions thereof) or that has
been accelerated, aggregates $5,000,000 or more at one time, in each case, after
a 10-day period during which such default shall not have been cured or such
acceleration rescinded, then in the case of any of clauses (1)-(5) the number of
directors constituting the Board of Directors shall be adjusted by the number,
if any, necessary to permit the Holders of Exchangeable Preferred Stock, voting
separately and as one class (together with the holders of any Parity Stock
having similar rights), to elect the lesser of two directors or 25% of the
members of the Board of Directors. Each such event described in clauses (1),
(2), (3), (4) and (5) is a "Voting Rights Triggering Event." Holders of a
majority of the issued and outstanding shares of Exchangeable Preferred Stock,
voting separately and as one class (together with the holders of any Parity
Stock having similar rights), shall have the exclusive right to elect the lesser
of two directors or 25% of the members of the Board of Directors at a meeting
therefor called upon occurrence of such Voting Rights Triggering Event, and at
every subsequent meeting at which the terms of office of the directors so
elected by the Holders of the Exchangeable Preferred Stock expire (other than as
described in (f)(iv)(B) below). The voting rights provided herein shall be the
exclusive remedy at law or in equity of the holders of the Exchangeable
Preferred Stock for any Voting Rights Triggering Event.
(B) The right of the Holders of Exchangeable Preferred Stock voting
separately and as a class (together with the holders of any Parity Stock then
having similar rights) to elect members of the Board of Directors as set forth
in subparagraph (f)(iv)(A) above shall continue until such time as (x) in the
event such right arises due to a Dividend Default, all accumulated dividends
that are in arrears on the Exchangeable Preferred Stock are paid in full in
cash; and (y) in all other cases, the failure, breach or default giving rise to
such Voting Rights Triggering Event is remedied or waived by the holders of at
least a majority of the shares of Exchangeable Preferred Stock then outstanding
and entitled to vote thereon, at which time (1) the special right of the Holders
of Exchangeable Preferred Stock so to vote as a class for the election of
directors and (2) the term of office of the directors elected by the Holders of
the Exchangeable Preferred Stock shall each terminate and the directors elected
by the holders of Common Stock shall constitute the entire Board of Directors.
At any time after voting power to elect directors shall have become vested and
be continuing in the Holders of Exchangeable Preferred Stock pursuant to
paragraph (f)(iv) hereof, or if vacancies shall exist in the offices of
directors elected by the Holders of Exchangeable Preferred Stock, a proper
officer of the Corporation may, and upon the written request of the Holders of
record of at least twenty-five percent (25%) of the shares of Exchangeable
Preferred Stock then outstanding addressed to the secretary of the Corporation
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shall, call a special meeting of the Holders of Exchangeable Preferred Stock,
for the purpose of electing the directors which such Holders are entitled to
elect. If such meeting shall not be called by a proper officer of the
Corporation within twenty (20) days after personal service of said written
request upon the secretary of the Corporation, or within twenty (20) days after
mailing the same within the United States by certified mail, addressed to the
secretary of the Corporation at its principal executive offices, then the
Holders of record of at least twenty-five percent (25%) of the outstanding
shares of Exchangeable Preferred Stock may designate in writing one of their
number to call such meeting at the expense of the Corporation, and such meeting
may be called by the Person so designated upon the notice required for the
annual meetings of stockholders of the Corporation and shall be held at the
place for holding the annual meetings of stockholders. Any Holder of
Exchangeable Preferred Stock so designated shall have, and the Corporation shall
provide, access to the lists of stockholders to be called pursuant to the
provisions hereof.
(C) At any meeting held for the purpose of electing directors at which the
Holders of Exchangeable Preferred Stock shall have the right, voting together as
a separate class, to elect directors as aforesaid, the presence in person or by
proxy of the Holders of at least a majority of the outstanding shares of
Exchangeable Preferred Stock shall be required to constitute a quorum of such
Exchangeable Preferred Stock.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Exchangeable Preferred Stock may be filled by the remaining directors
elected by the Holders of Exchangeable Preferred Stock unless and until such
vacancy shall be filled by the Holders of Senior Exchangeable Preferred Stock.
(v) In any case in which the Holders of Exchangeable Preferred Stock shall
be entitled to vote pursuant to this paragraph (f) or pursuant to Delaware law,
each Holder of Exchangeable Preferred Stock entitled to vote with respect to
such matter shall be entitled to one vote for each share of Exchangeable
Preferred Stock held.
(g) Exchange. (i) Requirements. The outstanding shares of Exchangeable
Preferred Stock are exchangeable as a whole but not in part, at the option of
the Corporation and subject to the terms and conditions of the Credit Agreement,
the 9 3/8% Note Indenture and the certificate of designation for the Senior
Exchangeable Preferred Stock, at any time on any Dividend Payment Date for the
Corporation's 12% Subordinated Exchange Debentures due 2009 (the "Exchange
Debentures") to be substantially in the form of Exhibit A to the Indenture, a
copy of which is on file with the secretary of the Corporation, provided that
any such exchange may only be made if on or prior to the date of such exchange
(i) the Corporation has paid (or is deemed to have paid) all accumulated
dividends on the Exchangeable Preferred Stock (including the dividends payable
on the date of exchange) and there shall be no contractual impediment to such
exchange; (ii) there shall be funds legally available sufficient therefor; and
(iii) immediately after giving effect to such exchange, no Default or Event of
Default (as defined in the Indenture) would exist under the Indenture and no
default or event of default would exist under the Credit Agreement or the 9 3/8%
Note Indenture. The exchange rate shall be $1.00 principal amount of Exchange
Debentures for each $1.00 of liquidation preference of Exchangeable Preferred
Stock, including, to the extent necessary, Exchange Debentures in principal
amounts less than $1,000, provided that the Corporation shall have the right, at
its option, to pay cash in an amount equal to the principal amount of that
portion of any Exchange Debenture that is not an integral multiple of $1,000
instead of delivering an Exchange Debenture in a denomination of less than
$1,000.
(iii) Procedure for Exchange. (A) At least thirty (30) days and not more
than sixty (60) days prior to the date fixed for exchange, written notice (the
"Exchange Notice") shall be given by first-class mail, postage prepaid, to each
Holder of record on the record date fixed for such exchange of the Exchangeable
Preferred Stock at such Holder's address as the same appears on the stock books
of the Corporation, provided that no failure to give such notice nor any
deficiency therein shall affect the validity of the procedure for the exchange
of any shares of Exchangeable Preferred Stock to be exchanged except as to the
Holder or Holders to whom
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the Corporation has failed to give said notice or except as to the Holder or
Holders whose notice was defective. The Exchange Notice shall state:
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in the manner and
at the place or places designated, his certificate or certificates representing
the shares of Exchangeable Preferred Stock to be exchanged;
(3) that dividends on the shares of Exchangeable Preferred Stock to be
exchanged shall cease to accrue on such Exchange Date whether or not
certificates for shares of Exchangeable Preferred Stock are surrendered for
exchange on such Exchange Date unless the corporation shall default in the
delivery of Exchange Debentures; and
(4) that interest on the Exchange Debentures shall accrue from the Exchange
Date whether or not certificates for shares of Exchangeable Preferred Stock are
surrendered for exchange on such Exchange Date.
(B) On or before the Exchange Date, each Holder of Exchangeable Preferred
Stock shall surrender the certificate or certificates representing such shares
of Exchangeable Preferred Stock, in the manner and at the place designated in
the Exchange Notice. The Corporation shall cause the Exchange Debentures to be
executed on the Exchange Date and, upon surrender in accordance with the
Exchange Notice of the certificates for any shares of Exchangeable Preferred
Stock so exchanged, duly endorsed (or otherwise in proper form for transfer, as
determined by the Corporation), such shares shall be exchanged by the
Corporation into Exchange Debentures. The Corporation shall pay interest on the
Exchange Debentures at the rate and on the dates specified therein from the
Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the Exchange Date
specified in such notice (1) the Indenture shall have been duly executed and
delivered by the Corporation and the trustee thereunder and (2) all Exchange
Debentures necessary for such exchange shall have been duly executed by the
Corporation and delivered to the trustee under the Indenture with irrevocable
instructions to authenticate the Exchange Debentures necessary for such
exchange, then the rights of the Holders of Exchangeable Preferred Stock so
exchanged as stockholders of the Corporation shall cease (except the right to
receive Exchange Debentures, an amount in cash equal to the amount of accrued
and unpaid dividends to the Exchange Date and, if the Corporation so elects,
cash in lieu of any Exchange Debenture not an integral multiple of $1,000), and
the Person or Persons entitled to receive the Exchange Debentures issuable upon
exchange shall be treated for all purposes as the registered Holder or Holders
of such Exchange Debentures as of the Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (g), the Corporation shall not be entitled to
exchange the Exchangeable Preferred Stock for Exchange Debentures if such
exchange, or any term or provision of the Indenture or the Exchange Debentures,
or the performance of the Corporation's obligations under the Indenture or the
Exchange Debentures, shall materially violate or conflict with any applicable
law or agreement or instrument then binding on the Corporation or if, at the
time of such exchange, the Corporation is insolvent or if it would be rendered
insolvent by such exchange.
(h) Change of Control. (i) In the event of a Change of Control (the date of
such occurrence being the "Change of Control Date"), the Corporation shall
notify the Holders of the Exchangeable Preferred Stock in writing of such
occurrence and shall make an offer to purchase (the "Change of Control Offer")
all then outstanding shares of Exchangeable Preferred Stock at a purchase price
of 101% of the then effective liquidation preference thereof plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends per
share (including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Change of Control
Payment Date to the Change of Control Payment Date).
(ii) Within 30 days following the Change of Control Date, the Corporation
shall send, by first class mail, postage prepaid, a notice to each Holder of
Exchangeable Preferred Stock at such Holder's address as it appears on the stock
books of the Corporation, which notice shall govern the terms of the Change of
Control
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Offer. The notice to the Holders shall contain all instructions and materials
necessary to enable such Holders to tender Exchangeable Preferred Stock pursuant
to the Change of Control Offer. Such notice shall state:
(A) that a Change of Control has occurred, that the Change of Control Offer
is being made pursuant to this paragraph (h) and that all Exchangeable Preferred
Stock validly tendered and not withdrawn will be accepted for payment;
(B) the purchase price (including the amount of accrued dividends, if any)
and the purchase date (which shall be no earlier than 30 days nor later than 45
days from the date such notice is mailed, other than as may be required by law)
(the "Change of Control Payment Date");
(C) that any shares of Exchangeable Preferred Stock not tendered will
continue to accrue dividends;
(D) that, unless the Corporation defaults in making payment therefor, any
share of Exchangeable Preferred Stock accepted for payment pursuant to the
Change of Control Offer shall cease to accrue dividends after the Change of
Control Payment Date;
(E) that Holders electing to have any shares of Exchangeable Preferred
Stock purchased pursuant to a Change of Control Offer will be required to
surrender the certificate or certificates representing such shares, properly
endorsed for transfer together with such customary documents as the Corporation
and the transfer agent may reasonably require, in the manner and at the place
specified in the notice prior to the close of business on the Business Day prior
to the Change of Control Payment Date;
(F) that Holders will be entitled to withdraw their election if the
Corporation receives, not later than five Business Days prior to the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the number of shares of Exchangeable
Preferred Stock the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such shares of Exchangeable Preferred
Stock purchased;
(G) that Holders whose shares of Exchangeable Preferred Stock are purchased
only in part will be issued a new certificate representing the unpurchased
shares of Exchangeable Preferred Stock; and
(H) the circumstances and relevant facts regarding such Change of Control.
(iii) The Corporation will comply with any securities laws and regulations,
to the extent such laws and regulations are applicable to the repurchase of the
Exchangeable Preferred Stock in connection with a Change of Control Offer.
(iv) On the Change of Control Payment Date the Corporation shall (A) accept
for payment the shares of Exchangeable Preferred Stock validly tendered pursuant
to the Change of Control Offer, (B) pay to the Holders of shares so accepted the
purchase price therefor in cash and (C) cancel and retire each surrendered
certificate. Unless the Corporation defaults in the payment for the shares of
Exchangeable Preferred Stock tendered pursuant to the Change of Control Offer,
dividends will cease to accrue with respect to the shares of Exchangeable
Preferred Stock tendered and all rights of Holders of such tendered shares will
terminate, except for the right to receive payment therefor, on the Change of
Control Payment Date.
(v) If the purchase of the Exchangeable Preferred Stock would violate or
constitute a default under the certificate of designation for the Senior
Exchangeable Preferred Stock, the Credit Agreement, the 9 3/8% Note Indenture or
other Indebtedness of the Corporation, then, notwithstanding anything to the
contrary contained above, prior to complying with the foregoing provisions, but
in any event within 30 days following the Change of Control Date, the
Corporation shall either (A) repay in full all such Indebtedness and terminate
all commitments outstanding under the Credit Agreement or (B) obtain the
requisite consents, if any, under the Credit Agreement, the 9 3/8% Note
Indenture or such Indebtedness required to permit the repurchase of Exchangeable
Preferred Stock required by this paragraph (h). Until the requirements of the
immediately preceding sentence are satisfied, the Corporation shall not make,
and shall not be obligated to make, any Change of Control Offer; provided that
the Corporation's failure to comply with the provisions of this paragraph (h)(v)
shall constitute a Voting Rights Triggering Event.
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(vi) Paragraphs (i)-(v) of this Section (h) notwithstanding, the
Corporation shall not be required to make a Change of Control Offer if, instead,
the Corporation elects to effect a Change of Control Redemption pursuant to the
provisions of and in compliance with paragraph (e)(i)(D) hereof.
(i) Conversion or Exchange. The Holders of shares of Exchangeable Preferred
Stock shall not have any rights hereunder to convert such shares into or
exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Corporation.
(j) Reissuance of Exchangeable Preferred Stock. Shares of Exchangeable
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock, provided
that any issuance of such shares as Exchangeable Preferred Stock must be in
compliance with the terms hereof.
(k) Business Day. If any payment, redemption or exchange shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Additional Provisions. (i) Limitation on Incurrence of
Additional Indebtedness. Neither the Corporation nor any of its Subsidiaries
shall, directly or indirectly, create, incur, assume, guarantee, acquire or
become liable for, contingently or otherwise (collectively, "incur"), any
Indebtedness other than Permitted Indebtedness. Notwithstanding the foregoing
limitation, the Corporation or any Subsidiary may incur Indebtedness if, on the
date of the incurrence of such Indebtedness, after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Corporation's Leverage Ratio is less than 7.0 to 1.
(ii) Limitation on Restricted Payments. (A) Neither the Corporation nor any
of its Subsidiaries shall, directly or indirectly, make any Restricted Payment
if immediately after giving effect thereto:
(1) any Voting Rights Triggering Event shall have occurred and be
continuing; or
(2) the Corporation is not able to incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with paragraph (l)(i) above;
or
(3) the aggregate amount of Restricted Payments made on or subsequent to
the Issue Date, together with the aggregate amount of Restricted Payments made
by Radio Broadcasting subsequent to the Radio Broadcasting Preferred Stock Issue
Date and through the date immediately preceding the Issue Date (the amount
expended for such purposes, if other than in cash, being the fair market value
of such property as determined by the respective Board of Directors in good
faith) exceeds the sum of (I) (x) 100% of the aggregate Consolidated EBITDA of
Radio Broadcasting from February 14, 1996 through the date immediately preceding
the Issue Date, plus 100% of the aggregate Consolidated EBITDA of the
Corporation from and after the Issue Date (or, in the event that either such
Consolidated EBITDA shall be a deficit, minus 100% of such deficit), to the most
recent date for which financial information is available to the Corporation,
taken as one accounting period, less (y) 1.4 times Consolidated Interest Expense
for the same entities and for the same periods, plus (II) 100% of the aggregate
net proceeds, including the fair market value of property other than cash as
determined by the Board of Directors in good faith, received by the Corporation
from any Person (other than a Subsidiary of the Corporation) from the issuance
and sale on or subsequent to the Issue Date of Qualified Capital Stock of the
Corporation, plus 100% of the aggregate net proceeds, including the fair market
value of property other than cash as previously determined by the board of
directors of Radio Broadcasting in good faith, previously received by Radio
Broadcasting from any Person (other than a Subsidiary of Radio Broadcasting)
from the issuance and sale on or subsequent to February 14, 1996 of Qualified
Capital Stock of Radio Broadcasting (excluding any net proceeds from issuances
and sales financed directly or indirectly using funds borrowed from the
Corporation or any Subsidiary of the Corporation or from Radio Broadcasting or
any subsidiary of Radio Broadcasting, respectively, until and to the extent such
borrowing is repaid, but including the proceeds from the issuance and sale of
any securities convertible into or exchangeable for Qualified Capital Stock to
the extent such securities are so converted or exchanged and
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including any additional proceeds received by the Corporation or Radio
Broadcasting, respectively, upon such conversion or exchange), plus (III)
without duplication of any amount included in clause (3)(II) above, 100% of the
aggregate net proceeds, including the fair market value of property other than
cash (valued as provided in clause (3)(II) above), received by the Corporation
as a capital contribution on or subsequent to the Issue Date, plus 100% of the
aggregate net proceeds, including the fair market value of property other than
cash (valued as provided in clause (3)(II) above), previously received by Radio
Broadcasting as a capital contribution on or subsequent to February 14, 1996
(excluding the net proceeds from a Public Equity Offering by Chancellor
Mezzanine to the extent used by the Corporation to redeem the Exchangeable
Preferred Stock); plus (IV) $2,500,000.
(B) Notwithstanding the foregoing, these provisions will not prohibit: (1)
the payment of any dividend or the making of any distribution within 60 days
after the date of its declaration if such dividend or distribution would have
been permitted on the date of declaration; (2) the acquisition of any Capital
Stock of the Corporation or any warrants, options or other rights to acquire
shares of any class of such Capital Stock either (I) solely in exchange for
shares of Qualified Capital Stock or other rights to acquire Qualified Capital
Stock or (II) through the application of the net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Corporation) of
shares of Qualified Capital Stock or warrants, options or other rights to
acquire Qualified Capital Stock; (3) payments by the Corporation to fund the
operating expenses of Chancellor Mezzanine in an amount not to exceed $500,000
per annum; (4) payments by the Corporation to Chancellor Mezzanine to enable
Chancellor Mezzanine to make payments pursuant to (x) the Financial Monitoring
and Oversight Agreement or (y) the Tax Sharing Agreement; (5) payments by the
Corporation to repurchase, or enable Chancellor Mezzanine to repurchase, Capital
Stock or other securities of Chancellor Mezzanine from employees of Chancellor
Mezzanine or the Corporation in an aggregate amount not to exceed $5,000,000;
(6) payments to enable Chancellor Mezzanine to redeem or repurchase stock
purchase or similar rights in an aggregate amount not to exceed $500,000; (7)
payments, not to exceed $100,000 in the aggregate, to enable the Corporation to
make cash payments to holders of its Capital Stock in lieu of the issuance of
fractional shares of its Capital Stock; and (8) payments made pursuant to any
merger, consolidation or sale of assets effected in accordance with paragraph
(f)(iii) above; provided, however, that no such payment may be made pursuant to
this clause (8) unless, after giving effect to such transaction (and the
incurrence of any Indebtedness in connection therewith and the use of the
proceeds thereof), the Corporation would be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with paragraph
(l)(i) above such that after incurring that $1.00 of additional Indebtedness,
the Leverage Ratio would be less than 6.0 to 1; provided, further, however, that
in the case of clauses (4)(x), (5), (6), (7) and (8), no Voting Rights
Triggering Event shall have occurred or be continuing at the time of such
payment or as a result thereof. In determining the aggregate amount of
Restricted Payments made by the Corporation on or subsequent to the Issue Date
and the aggregate amount of Restricted Payments made by Radio Broadcasting
subsequent to the Radio Broadcasting Preferred Stock Issue Date and through the
date immediately preceding the Issue Date, amounts expended pursuant to clauses
(1), (2), (4)(x), (5), (6), (7) and (8) (including any amounts previously
expended by Radio Broadcasting pursuant to clauses l(ii)(B)(1), (2), (4)(x),
(5), (6), (7) and (8) under the certification of designation for the Radio
Broadcasting Preferred Stock) shall be included in such calculation.
(iii) Limitation on Preferred Stock of Subsidiaries. The Corporation shall
not permit any of its Subsidiaries to issue any Preferred Stock (other than to
the Corporation or to a Wholly Owned Subsidiary of the Corporation) or permit
any Person (other than to the Corporation or a Wholly Owned Subsidiary of the
Corporation) to own any Preferred Stock of a Subsidiary of the Corporation
(other than Acquired Preferred Stock; provided that at the time the issuer of
such Acquired Preferred Stock becomes a Subsidiary of the Corporation or merges
with the Corporation or any of its Subsidiaries, and after giving effect to such
transaction, the Corporation shall be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with paragraph
(l)(i) above).
(iv) Reports. So long as any shares of Exchangeable Preferred Stock are
outstanding, the Corporation will provide to the holders of Exchangeable
Preferred Stock, within 15 days after it files them with the Commission, copies
of the annual reports and of the information, documents and other reports (or
copies of
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such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) which the Corporation files with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act. In the event that the Corporation is
no longer required to furnish such reports to its securityholders pursuant to
the Exchange Act, the Corporation will cause its consolidated financial
statements, comparable to those which would have been required to appear in
annual or quarterly reports, to be delivered to the Holders of Exchangeable
Preferred Stock.
(m) Definitions. As used in this Certificate of Designation, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
"9 3/8% Note Indenture" means the Indenture governing the 9 3/8% Notes
as such Indenture may be amended or supplemented from time to time in
accordance with the terms thereof.
"9 3/8% Notes" means the Corporation's $200.0 million aggregate
principal amount of 9 3/8% Senior Subordinated Notes due 2004 of the
Corporation, as assumed by the Corporation, as the same may be modified or
amended from time to time and future refinancings thereof.
"12 1/2% Notes" means Radio Broadcasting's previously outstanding
$60.0 million aggregate principal amount of 12 1/2% Senior Subordinated
Notes due 2004.
"Acquired Preferred Stock" means Preferred Stock of any Person at the
time such Person becomes a Subsidiary of the Corporation or at the time it
merges or consolidates with the Corporation or any of its Subsidiaries and
not issued by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Subsidiary of the Corporation or
such acquisition, merger or consolidation.
"Affiliate" means a Person who, directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common
control with, the Corporation. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an Investment by the Corporation or any
Subsidiary of the Corporation in any other Person pursuant to which such
Person shall become a Subsidiary of the Corporation or shall be
consolidated or merged with the Corporation or any Subsidiary of the
Corporation or (ii) the acquisition by the Corporation or any Subsidiary of
the Corporation of assets of any Person comprising a division or line of
business of such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the
Corporation or any of its Subsidiaries (excluding any Sale and Leaseback
Transaction or any pledge of assets or stock by the Corporation or any of
its Subsidiaries) to any Person other than the Corporation or a Wholly
Owned Subsidiary of the Corporation of (i) any Capital Stock of any
Subsidiary of the Corporation or (ii) any other property or assets of the
Corporation or any Subsidiary of the Corporation other than in the ordinary
course of business.
"Board of Directors" shall have the meaning ascribed to it in the
first paragraph of this Resolution.
"Business Day" means any day except a Saturday, a Sunday, or any day
on which banking institutions in New York, New York are required or
authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated) of capital stock of such Person and (ii)
with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligation
of such Person to pay rent or other amounts under a lease to which such
Person is a party that is required to be classified and accounted for as a
capital lease obligation under GAAP, and for purposes of this definition,
the amount of
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such obligation at any date shall be the capitalized amount of such
obligation at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc.; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from Standard & Poor's
Corporation or at least P-1 from Moody's Investors Service, Inc.; (iv)
certificates of deposit or bankers' acceptances maturing within one year
from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state
thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of
not less than $200,000,000; (v) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications
specified in clause (iv) above; and (vi) investments in money market funds
which invest substantially all their assets in securities of the types
described in clauses (i) through (v) above.
"Chancellor Broadcasting" means Chancellor Broadcasting Company, a
Delaware corporation that was merged with and into Evergreen Mezzanine
Holdings Corporation, a Delaware corporation, pursuant to the Merger
Agreement on September , 1997.
"Chancellor Media" means Chancellor Media Corporation, a Delaware
corporation, and its successors.
"Chancellor Mezzanine" means Chancellor Mezzanine Holdings
Corporation, a Delaware corporation, and its successors.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Corporation to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a "Group")
(whether or not otherwise in compliance with the provisions of the Exchange
Indenture), other than to Hicks Muse or any of its Affiliates, officers and
directors or to Steven Dinetz (the "Permitted Holders"); or (ii) a majority
of the Board of Directors of Chancellor Media, Chancellor Mezzanine or the
Corporation shall consist of Persons who are not Continuing Directors; or
(iii) the acquisition by any Person or Group (other than the Permitted
Holders) of the power, directly or indirectly, to vote or direct the voting
of securities having more than 50% of the ordinary voting power for the
election of directors of Chancellor Media, Chancellor Mezzanine or the
Corporation.
"Change of Control Date" shall have the meaning ascribed to it in
paragraph (h) hereof.
"Change of Control Payment Date" shall have the meaning ascribed to it
in paragraph (h) hereof.
"Change of Control Offer" shall have the meaning ascribed to it in
paragraph (h) hereof.
"Commission" means the Securities and Exchange Commission.
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement entered into by the
Corporation or any of its Subsidiaries designed to protect the Corporation
or any of its Subsidiaries against fluctuations in the price of commodities
actually used in the ordinary course of business of the Corporation and its
Subsidiaries.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been
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reduced thereby, (a) all income taxes of such Person and its Subsidiaries
paid or accrued in accordance with GAAP for such period (other than income
taxes attributable to extraordinary or nonrecurring gains or losses), (b)
Consolidated Interest Expense and (c) Consolidated Non-Cash Charges, all as
determined on a consolidated basis for such Person and its Subsidiaries in
conformity with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the interest expense of
such Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation,
(a) any amortization of debt discount, (b) the net cost under Interest Swap
Obligations (including any amortization of discounts), (c) the interest
portion of any deferred payment obligation, (d) all commissions, discounts
and other fees and charges owed with respect to letters of credit, bankers'
acceptance financing or similar facilities, and (e) all accrued interest
and (ii) the interest component of Capitalized Lease Obligations paid or
accrued by such Person and its Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom, without duplication, (i)
gains and losses from Asset Sales or abandonments or reserves relating
thereto and the related tax effects, (ii) items classified as extraordinary
or nonrecurring gains and losses, and the related tax effects according to
GAAP, (iii) the net income (or loss) of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Subsidiary of
such first referred to Person or is merged or consolidated with it or any
of its Subsidiaries, (iv) the net income of any Subsidiary to the extent
that the declaration of dividends or similar distributions by that
Subsidiary of that income is restricted by contract, operation of law or
otherwise and (v) the net income of any Person, other than a Subsidiary,
except to the extent of the lesser of (a) dividends or distributions paid
to such first referred to Person or its Subsidiary by such Person and (b)
the net income of such Person (but in no event less than zero), and the net
loss of such Person shall be included only to the extent of the aggregate
Investment of the first referred to Person or a consolidated Subsidiary of
such Person.
"Consolidated Non-Cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries reducing Consolidated Net
Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary or nonrecurring item).
"Continuing Director" means, as of the date of determination, any
Person who (i) was a member of the Board of Directors of Chancellor
Broadcasting or Radio Broadcasting on the Radio Broadcasting Preferred
Stock Issue Date, (ii) was nominated for election or elected to the Board
of Directors of Chancellor Media, Chancellor Mezzanine or the Corporation
with the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election, or (iii) is a representative of a Permitted Holder.
"CRBC Credit Agreement" means the amended and restated Credit
Agreement dated January 23, 1997 among Chancellor Broadcasting, Radio
Broadcasting, the lenders from time to time party thereto and Bankers Trust
Company as administrative agent, Goldman Sachs Credit Partners, L.P., as
documentation agent and Nations Bank, N.A., as syndication agent, together
with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such
agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including
any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including by way of adding subsidiaries of Radio
Broadcasting as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
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"Credit Agreement" means the Credit Agreement, dated April 25, 1997
among Evergreen Media Corporation of Los Angeles, the lenders from time to
time party thereto, The Toronto-Dominion Bank, Bankers Trust Company, The
Bank of New York, NationsBank of Texas, N.A. and Union Bank of California,
as Managing Agents; Toronto Dominion Securities (USA), Inc., as Arranging
Agent; and Toronto Dominion (Texas), Inc., as Administrative Agent for the
lenders, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case
as such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including
any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including by way of adding subsidiaries of the
Corporation as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agents, lender
or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to
protect the Corporation or any of its Subsidiaries against fluctuations in
currency values.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures
(excluding any maturity as the result of an optional redemption by the
issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of a Change of Control),
in whole or in part, on or prior to January 15, 2009.
"Dividend Payment Date" means January 15 and July 15 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Semi-Annual Dividend Period.
"Dividend Record Date" means January 1 and July 1 of each year.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exchange Date" means a date on which shares of Exchangeable Preferred
Stock are exchanged by the Corporation for Exchange Debentures.
"Exchange Debentures" shall have the meaning ascribed to it in
paragraph (g) hereof.
"Exchange Notice" shall have the meaning ascribed to it in paragraph
(g) hereof.
"Exchangeable Preferred Stock" shall have the meaning ascribed to it
in paragraph (a) hereof.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any successor thereto.
"Financial Monitoring and Oversight Agreement" means, collectively,
the Financial Monitoring and Oversight Agreement among Hicks, Muse & Co.
Partners, L.P., Radio Broadcasting and Chancellor Broadcasting, as in
effect on the Radio Broadcasting Preferred Stock Issue Date, and the
Financial Advisory Agreement among HM/2 Management Partners, L.P., Radio
Broadcasting and Chancellor Broadcasting, as in effect on the Radio
Broadcasting Preferred Stock Issue Date.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America as of the Preferred Stock Issue Date.
"Hicks Muse" means Hicks, Muse, Tate & Furst Incorporated.
"Holder" means a holder of shares of Exchangeable Preferred Stock as
reflected in the stock books of the Corporation.
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"Indebtedness" means with respect to any Person, without duplication,
any liability of such Person (i) for borrowed money, (ii) evidenced by
bonds, debentures, notes or other similar instruments, (iii) constituting
Capitalized Lease Obligations, (iv) incurred or assumed as the deferred
purchase price of property, or pursuant to conditional sale obligations and
title retention agreements (but excluding trade accounts payable arising in
the ordinary course of business), (v) for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction,
(vi) for Indebtedness of others guaranteed by such Person, (vii) for
Interest Swap Obligations, Commodity Agreements and Currency Agreements and
(viii) for Indebtedness of any other Person of the type referred to in
clauses (i) through (vii) which is secured by any Lien on any property or
asset of such first referred to Person, the amount of such Indebtedness
being deemed to be the lesser of the value of such property or asset or the
amount of the Indebtedness so secured. The amount of Indebtedness of any
Person at any date shall be the outstanding principal amount of all
unconditional obligations described above, as such amount would be
reflected on a balance sheet prepared in accordance with GAAP, and the
maximum liability at such date of such Person for any contingent
obligations described above.
"Initial Dividend Period" means the dividend period commencing on July
16, 1997 and ending on the first Dividend Payment Date to occur thereafter.
"Interest Swap Obligations" means the obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge
or arrangement.
"Investment" means (i) any transfer or delivery of cash, stock or
other property of value in exchange for Indebtedness, stock or other
security or ownership interest in any Person by way of loan, advance,
capital contribution, guarantee or otherwise and (ii) an investment deemed
to have been made by the Corporation at the time any entity which was a
Subsidiary of the Corporation ceases to be such a Subsidiary in an amount
equal to the value of the loans and advances made, and any remaining
ownership interest in, such entity immediately following such entity
ceasing to be a Subsidiary of the Corporation. The amount of any non-cash
Investment shall be the fair market value of such Investment, as determined
conclusively in good faith by management of the Corporation unless the fair
market value of such Investment exceeds $1,000,000, in which case the fair
market value shall be determined conclusively in good faith by the Board of
Directors at the time such Investment is made.
"Issue Date" means September , 1997, the date of original issuance
of the Exchangeable Preferred Stock.
"Junior Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Leverage Ratio" shall mean, as to any Person, the ratio of (i) the
sum of the aggregate outstanding amount of Indebtedness of such Person and
its Subsidiaries as of the date of calculation on a consolidated basis in
accordance with GAAP to (ii) the Consolidated EBITDA of such Person for the
four full fiscal quarters (the "Four Quarter Period") ending on or prior to
the date of determination.
For purposes of this definition, the aggregate outstanding principal amount
of Indebtedness of the Person and its Subsidiaries for which such calculation is
made shall be determined on a pro forma basis as if the Indebtedness giving rise
to the need to perform such calculation had been incurred and the proceeds
therefrom had been applied, and all other transactions in respect of which such
Indebtedness is being incurred had occurred, on the last day of the Four Quarter
Period. In addition to the foregoing, for purposes of this definition,
"Consolidated EBITDA" shall be calculated on a pro forma basis after giving
effect to (i) the incurrence of the Indebtedness of such Person and its
Subsidiaries (and the application of the proceeds therefrom) giving rise to the
need to make such calculation and any incurrence (and the application of the
proceeds therefrom) or repayment of other Indebtedness, other than the
incurrence or repayment of Indebtedness pursuant to working capital facilities,
at any time subsequent to the beginning of the Four Quarter Period and on or
prior to the date of determination, as if such incurrence (and the application
of the proceeds thereof), or the repayment, as the case may be, occurred on the
first day of the Four Quarter Period and (ii) any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
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to the need to make such calculation as a result of such Person or one of its
Subsidiaries (including any Person that becomes a Subsidiary as a result of such
Asset Acquisition) incurring, assuming or otherwise becoming liable for
Indebtedness) at any time on or subsequent to the first day of the Four Quarter
Period and on or prior to the date of determination, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for any
such Indebtedness and also including any Consolidated EBITDA associated with
such Asset Acquisition) occurred on the first day of the Four Quarter Period.
Furthermore, in calculating "Consolidated Interest Expense" for purposes of the
calculation of "Consolidated EBITDA," (i) interest on Indebtedness determined on
a fluctuating basis as of the date of determination (including Indebtedness
actually incurred on the date of the transaction giving rise to the need to
calculate the Leverage Ratio) and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness as in effect on the date of
determination and (ii) notwithstanding (i) above, interest determined on a
fluctuating basis, to the extent such interest is covered by Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (e) hereof.
"Merger Agreement" means the Agreement and Plan of Merger, dated
February 19, 1997, as amended and restated on July 31, 1997, among
Chancellor Broadcasting, Radio Broadcasting, Evergreen Media Corporation,
Evergreen Mezzanine Holdings Corporation and Evergreen Media Corporation of
Los Angeles.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing, or otherwise
relating to, any Indebtedness.
"Officers' Certificate" means a certificate signed by two officers or
by an officer and either an Assistant Treasurer or an Assistant Secretary
of the Corporation which certificate shall include a statement that, in the
opinion of such signers all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken. In
addition, such certificate shall include (i) a statement that the
signatories have read the relevant covenant or condition, (ii) a brief
statement of the nature and scope of such examination or investigation upon
which the statements are based, (iii) a statement that, in the opinion of
such signatories, they have made such examination or investigation as is
reasonably necessary to express an informed opinion and (iv) a statement as
to whether or not, in the opinion of the signatories, such relevant
conditions or covenants have been complied with.
"Opinion of Counsel" means an opinion of counsel that, in such
counsel's opinion, all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken.
Such opinion shall also include the statements called for in the second
sentence under "Officers' Certificate".
"Optional Redemption Price" shall have the meaning ascribed to it in
paragraph (e)(i) hereof.
"Parity Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Permitted Indebtedness" means, without duplication, (i) Indebtedness
of Radio Broadcasting outstanding on the Radio Broadcasting Preferred Stock
Issue Date, including, without limitation, the 9 3/8% Notes and guarantees
thereof, plus Indebtedness of Radio Broadcasting incurred subsequent to the
Radio Broadcasting Preferred Stock Issue Date in the aggregate principal
amount of $60.0 million for the purpose of refinancing the 12 1/2% Notes,
and future refinancing of such Indebtedness; (ii) Indebtedness of Radio
Broadcasting or the Corporation incurred pursuant to the CRBC Credit
Agreement or the Credit Agreement in an aggregate principal amount at any
time outstanding not to exceed the sum of the aggregate commitments
pursuant to the CRBC Credit Agreement as initially in effect reduced by the
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aggregate principal amount permanently repaid with the proceeds of Asset
Sales; (iii) Indebtedness evidenced by the Exchange Debentures, including
any Exchange Debentures issued in accordance with the Exchange Indenture as
the payment of interest on the Exchange Debentures; (iv) Interest Swap
Obligations; provided that such Interest Swap Obligations are entered into
to protect the Corporation from fluctuations in interest rates of its
Indebtedness; (v) additional Indebtedness of the Corporation or any of its
Subsidiaries not to exceed $10,000,000 in principal amount outstanding at
any time (which amount may, but need not, be incurred under the Credit
Agreement); (vi) Refinancing Indebtedness; (vii) Indebtedness owed by the
Corporation to any Wholly Owned Subsidiary or by any Subsidiary to the
Corporation or any Wholly Owned Subsidiary of the Corporation; and (viii)
guarantees by Subsidiaries of any Indebtedness permitted to be incurred
pursuant to the terms of paragraph (1)(i) hereof.
"Permitted Investments" means (i) Investments by the Corporation or
any Subsidiary to acquire the stock or assets of any Person (or
Indebtedness of such Person acquired in connection with a transaction in
which such Person becomes a Subsidiary of the Corporation) engaged in the
broadcast business or businesses reasonably related thereto; provided that
if any such Investment or series of related Investments involves an
Investment by the Corporation in excess of $5,000,000, the Corporation is
able, at the time of such investment and immediately after giving effect
thereto, to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with paragraph (l)(i) hereof, (ii)
Investments received by the Corporation or its Subsidiaries as
consideration for a sale of assets, (iii) Investments by the Corporation or
any Wholly Owned Subsidiary of the Corporation in any Wholly Owned
Subsidiary of the Corporation (whether existing on the Issue Date or
created thereafter) or any Person that after such Investments, and as a
result thereof, becomes a Wholly Owned Subsidiary of the Corporation and
Investments in the Corporation by any Wholly Owned Subsidiary of the
Corporation, (iv) cash and Cash Equivalents, (v) Investments in securities
of trade creditors, wholesalers or customers received pursuant to any plan
of reorganization or similar arrangement and (vi) additional Investments in
an aggregate amount not to exceed $2,500,000 at any time outstanding.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or
a governmental agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"pro forma" means, unless otherwise provided herein, with respect to
any calculation made or required to be made pursuant hereto, a calculation
in accordance with Article 11 of Regulation S-X under the Securities Act.
"Public Equity Offering" means an underwritten public offering of
Capital Stock (other than Disqualified Capital Stock) of the Corporation or
Chancellor Mezzanine, pursuant to an effective registration statement filed
with the Commission in accordance with the Securities Act; provided,
however, that, in the case of a Public Equity Offering by Chancellor
Mezzanine, Chancellor Mezzanine contributes to the capital of the
Corporation net cash proceeds in an amount sufficient to redeem the
Exchangeable Preferred Stock called for redemption in accordance with the
terms hereof.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Radio Broadcasting" means Chancellor Radio Broadcasting Company, a
Delaware corporation that was merged with and into Evergreen Media
Corporation of Los Angeles pursuant to the Merger Agreement on September
, 1997.
"Radio Broadcasting Preferred Stock" shall mean the 12% Exchangeable
Preferred Stock of Radio Broadcasting.
"Radio Broadcasting Preferred Stock Issue Date" shall mean January 23,
1997, the date of original issuance of the Radio Broadcasting Preferred
Stock.
"Redemption Date", with respect to any shares of Exchangeable
Preferred Stock, means the date on which such shares of Exchangeable
Preferred Stock are redeemed by the Corporation.
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"Redemption Notice" shall have the meaning ascribed to it in paragraph
(e) hereof.
"Refinancing Indebtedness" means any refinancing by the Corporation of
Indebtedness of the Corporation or any of its Subsidiaries incurred in
accordance with paragraph (l)(i) hereof (other than pursuant to clause (ii)
or (iv) of the definition of Permitted Indebtedness) that does not (i)
result in an increase in the aggregate principal amount of Indebtedness
(such principal amount to include, for purposes of this definition, any
premiums, penalties or accrued interest paid with the proceeds of the
Refinancing Indebtedness) of such Person or (ii) create Indebtedness with
(a) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being refinanced or (b) a
final maturity earlier than the final maturity of the Indebtedness being
refinanced.
"Restricted Payment" means (i) the declaration or payment of any
dividend or the making of any other distribution (other than dividends or
distributions payable in Qualified Capital Stock) on shares of Junior
Stock, (ii) any purchase, redemption, retirement or other acquisition for
value of any Junior Stock, or any warrants, rights or options to acquire
shares of Junior Stock, other than through the exchange of such Junior
Stock or any warrants, rights or options to acquire shares of any class of
such Junior Stock for Qualified Capital Stock or warrants, rights or
options to acquire Qualified Capital Stock or (iii) the making of any
Investment (other than a Permitted Investment).
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to the Corporation or a Subsidiary of any
property, whether owned by the Corporation or any Subsidiary at the Issue
Date or later acquired, which has been or is to be sold or transferred by
the Corporation or such Subsidiary to such Person or to any other Person
from whom funds have been or are to be advanced by such Person on the
security of such property.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Semi-Annual Dividend Period" shall mean the semi-annual period
commencing on each January 16 and July 16 and ending on the next succeeding
Dividend Payment Date, respectively.
"Senior Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person. Notwithstanding anything contained herein
to the contrary, all references to the Corporation and its consolidated
Subsidiaries or to financial information prepared on a consolidated basis
in accordance with GAAP shall be deemed to include the Corporation and its
Subsidiaries as to which financial statements are prepared on a combined
basis in accordance with GAAP and to financial information prepared on such
a combined basis. Notwithstanding anything herein to the contrary, an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes
hereof.
"Tax Sharing Agreement" means the Tax Sharing Agreement between Radio
Broadcasting and Chancellor Broadcasting, as in effect on the Radio
Broadcasting Preferred Stock Issue Date.
"Unrestricted Subsidiary" means a Subsidiary of the Corporation
created after the Preferred Stock Issue Date and so designated by a
resolution adopted by the Board of Directors, provided that (i) neither the
Corporation nor any of its other Subsidiaries (other than Unrestricted
Subsidiaries) (a) provides any credit support for any Indebtedness of such
Subsidiary (including any undertaking, agreement or instrument evidencing
such Indebtedness) or (b) is directly or indirectly liable for any
Indebtedness of such Subsidiary, (ii) the creditors with respect to
Indebtedness for borrowed money of such Subsidiary, having a principal
amount in excess of $5,000,000, have agreed in writing that they have no
recourse, direct or indirect, to the Corporation or any other Subsidiary of
the Corporation (other than Unrestricted Subsidiaries), including, without
limitation, recourse with respect to the payment of principal of or
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interest on any Indebtedness of such Subsidiary and (iii) at the time of
designation of such Subsidiary such Subsidiary has no property or assets
(other than de minimis assets resulting from the initial capitalization of
such Subsidiary). Any such designation by the Board of Directors shall be
evidenced by a resolution of the Board of Directors giving effect to such
designation.
"Voting Rights Triggering Event" shall have the meaning ascribed to it
in paragraph f(iv) hereof.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b)
the total of the product obtained by multiplying (i) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payment of principal, including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest one-
twelfth) which will elapse between such date and the making of such
payment.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities (other than
directors' qualifying shares) which normally have the right to vote in the
election of directors are owned by such Person.
IN WITNESS WHEREOF, said Chancellor Media Corporation of Los Angeles, has
caused this Certificate to be signed by Matthew E. Devine, its Chief Financial
Officer, this day of September, 1997.
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
By:
----------------------------------
Name: Matthew E. Devine
Title: Chief Financial Officer
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======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY EMCLA OR CRBC (AS DEFINED HEREIN). THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES, BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF EMCLA OR CRBC SINCE SUCH DATE.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................... iii
Summary..................................... 1
Selected Consolidated Historical Financial
Data Evergreen Media Corporation of Los
Angeles................................... 13
Selected Consolidated Historical Financial
Data Chancellor Radio Broadcasting
Company................................... 15
Risk Factors................................ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................. 24
Business.................................... 34
The Merger.................................. 55
The Merger Agreement........................ 73
Description of Surviving Subsidiary
Corporation Capital Stock................. 81
Description of Surviving Subsidiary Series A
Preferred Stock and 12 1/4% Exchange
Debentures................................ 82
Description of Surviving Subsidiary Junior
Preferred Stock and 12% Exchange
Debentures................................ 86
Management After the Merger................. 90
Summary Compensation Table.................. 94
Certain Relationships and Related
Transactions.............................. 107
Experts..................................... 108
Legal Matters............................... 109
Glossary of Certain Terms and Market and
Industry Data............................. 110
Pro Forma Financial Information............. P-1
Financial Statements........................ F-1
Annex A -- Merger Agreement................. A-1
Annex B -- Section 262 of the General
Corporation Law of the State of
Delaware......................... B-1
Annex C -- Proposed form of Certificate of
Designation for the Surviving
Subsidiary Series A Preferred
Stock............................ C-1
Annex D -- Proposed form of Certificate of
Designation for the Surviving
Subsidiary Junior Preferred
Stock............................ D-1
</TABLE>
======================================================
======================================================
---------------------------
PROSPECTUS
---------------------------
1,000,000 SHARES
12 1/4% SERIES A SENIOR
CUMULATIVE EXCHANGEABLE
PREFERRED STOCK
2,117,638 SHARES
12% EXCHANGEABLE
PREFERRED STOCK
EVERGREEN MEDIA CORPORATION OF
LOS ANGELES
(TO BE RENAMED CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES PURSUANT TO THE CONSUMMATION
OF THE SUBSIDIARY MERGER (AS DEFINED HEREIN))
AUGUST 5, 1997
======================================================
<PAGE> 437
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify any person who is, or is threatened to be made, 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 such corporation) by reason of the fact that such person is or was
an officer or director of such corporation, or is or was serving at the request
of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that 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. A Delaware corporation may indemnify officers
and directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation. Where an officer
or director is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which he actually and reasonably incurred in connection therewith.
EMCLA's Certificate of Incorporation provides that no director of EMCLA
shall be liable to EMCLA or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to EMCLA or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
EMCLA's Bylaws provide that EMCLA shall indemnify every person who is or
was a party or is or was threatened to be made a party to any action suit, or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a director or officer of the Corporation or, while
a director or officer or employee of the Corporation, is or was serving at the
request of the Corporation as a director, officer, employee, agent or trustee of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including counsel fees), judgments, fines
and amounts paid in settlement actually and reasonable incurred by him in
connection with such action, suit or proceeding, to the full extent permitted by
applicable law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.9(f) -- Plan of Reorganization and Merger by and between
Evergreen Media Corporation and Broadcasting Partners,
Inc., dated as of January 31, 1995, as amended, including
the Form of Registration Rights Agreement among MLGA Fund
I, L.P., MLGA Fund II, L.P., MLGA/BPI Partners I, L.P.,
MLGAL Partners, Limited Partnership and Evergreen Media
Corporation (see table of contents for a list of omitted
schedules).
2.9A(g) -- Agreement dated as of January 31, 1995 among Evergreen
Media Corporation, Broadcasting Partners, Inc., the
holders of the shares of capital stock of Broadcasting
Partners, Inc. and Scott K. Ginsburg, holder of shares of
capital stock of Evergreen Media Corporation.
</TABLE>
II-1
<PAGE> 438
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.10(f) -- Plan and Agreement of Merger among Evergreen Media
Partners Corporation, Evergreen Media Corporation and
Broadcasting Partners, Inc., dated as of April 12, 1995.
2.11(h) -- Agreement and Plan of Merger by and among Pyramid
Communications, Inc., Evergreen Media Corporation and
Evergreen Media/Pyramid Corporation dated as of July 14,
1995 (see table of contents for list of omitted exhibits
and schedules).
2.11A(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/Pyramid Corporation dated September
7, 1995.
2.11B(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/Pyramid Corporation dated January 11,
1996.
2.12(j) -- Purchase Agreement between Fairbanks Communications, Inc.
and Evergreen Media Corporation dated October 12, 1995
(see table of contents for list of omitted exhibits and
schedules).
2.13(n) -- Option Agreement dated as of January 9, 1996 between
Chancellor Broadcasting Company and Evergreen Media
Corporation (including Form of Advertising Brokerage
Agreement and Form of Asset Purchase Agreement).
2.14(o) -- Asset Purchase Agreement dated April 4, 1996 between
American Radio Systems Corporation and Evergreen Media
Corporation of Buffalo (see table of contents for list of
omitted exhibits and schedules).
2.15(o) -- Asset Purchase Agreement dated April 11, 1996 between
Mercury Radio Communications, L.P. and Evergreen Media
Corporation of Los Angeles, Evergreen Media/Pyramid
Holdings Corporation, WHTT (AM) License Corp. and WHTT
(FM) License Corp. (see table of contents for list of
omitted exhibits and schedules).
2.16(o) -- Asset Purchase Agreement dated April 19, 1996 between
Crescent Communications L.P. and Evergreen Media
Corporation of Los Angeles (see table of contents for
list of omitted exhibits and schedules).
2.17(p) -- Asset Purchase Agreement dated June 13, 1996 between
Evergreen Media Corporation of Los Angeles and Greater
Washington Radio, Inc. (see table of contents for list of
omitted exhibits and schedules).
2.18(p) -- Asset Exchange Agreement dated June 13, 1996 among
Evergreen Media Corporation of Los Angeles, Evergreen
Media Corporation of the Bay State, WKLB License Corp.,
Greater Media Radio, Inc. and Greater Washington Radio,
Inc. (see table of contents for list of omitted exhibits
and schedules).
2.19(p) -- Purchase Agreement dated June 27, 1996 between WEDR,
Inc., Seller and Evergreen Media Corporation of Los
Angeles, Buyer. (See table of contents for list of
omitted schedules)
2.20(p) -- Time Brokerage Agreement dated July 10, 1996 by and
between Evergreen Media Corporation of Detroit, as
Licensee, and Kidstar Interactive Media Incorporated, as
Time Broker.
2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among
Century Chicago Broadcasting L.P., an Illinois limited
partnership, ("Seller"), Century Broadcasting
Corporation, a Delaware Corporation ("Century"),
Evergreen Media Corporation of Los Angeles, a Delaware
Corporation ("Parent"), and Evergreen Media Corporation
of Chicago, a Delaware Corporation ("Buyer").
</TABLE>
II-2
<PAGE> 439
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.22(p) -- Asset Purchase Agreement dated August 12, 1996 by and
among Chancellor Broadcasting Company, Shamrock
Broadcasting, Inc. and Evergreen Media Corporation of the
Great Lakes.
2.23(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles (WQRS-FM).
(See table of contents for list of omitted exhibits and
schedules)
2.24(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles. (See table of
contents for list of omitted schedules)
2.25(q) -- Letter of intent dated August 27, 1996 between EZ
Communications, Inc. and Evergreen Media Corporation.
2.26(q) -- Asset Purchase Agreement dated September 19, 1996 between
Beasley-FM Acquisition Corp., WDAS License Limited
Partnership and Evergreen Media Corporation of Los
Angeles.
2.27(q) -- Asset Purchase Agreement dated September 19, 1996 between
The Brown Organization and Evergreen Media Corporation of
Los Angeles.
2.28(r) -- Stock Purchase Agreement by and between Viacom
International Inc. and Evergreen Media Corporation of Los
Angeles, dated February 16, 1997 (See table of contents
for omitted schedules and exhibits).
2.29(r) -- Agreement and Plan of Merger, by and among Evergreen
Media Corporation, Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company, dated as of
February 19, 1997.
2.30(r) -- Stockholders Agreement, by and among Chancellor
Broadcasting Company, Evergreen Media Corporation, Scott
K. Ginsburg (individually and as custodian for certain
shares held by his children), HM2/Chancellor, L.P.,
Hicks, Muse, Tate & First Equity Fund II, L.P., HM2/HMW,
L.P., The Chancellor Business Trust, HM2/HMD Sacramento
GP, L.P., Thomas O. Hicks, as Trustee of the William Cree
Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as Trustee
of the Catherine Forgave Hicks 1993 Irrevocable Trust,
Thomas O. Hicks, as Trustee of the John Alexander Hicks
1984 Trust, Thomas O. Hicks, as Trustee of the Mack
Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of
Robert Bradley Hicks 1984 Trust, Thomas O. Hicks, as
Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O.
Hicks and H. Rand Reynolds, as Trustees for the Muse
Children's GS Trust, and Thomas O. Hicks, dated as of
February 19, 1997.
2.31(r) -- Joint Purchase Agreement, by and among Chancellor Radio
Broadcasting Company, Chancellor Broadcasting Company,
Evergreen Media Corporation of Los Angeles, and Evergreen
Media Corporation, dated as of February 19, 1997.
2.32(s) -- Asset Exchange Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Philadelphia, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of Charlotte,
Evergreen Media Corporation of the East, Evergreen Media
Corporation of Carolinaland, WBAV/WBAV-FM/WPEG License
Corp. and WRFX License Corp., dated as of December 5,
1996 (See table of contents for list of omitted
schedules).
</TABLE>
II-3
<PAGE> 440
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
2.33(s) -- Asset Purchase Agreement, by and among EZ Communications, Inc., Professional
Broadcasting Incorporated, EZ Charlotte, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of the East and Evergreen Media Corporation of
Carolinaland, dated as of December 5, 1996 (See table of contents for list of omitted
schedules).
2.34(t) -- Asset Purchase Agreement by and between Pacific and Southern Company, Inc. and
Evergreen Media Corporation of Los Angeles (re: WGCI-AM and WGCI-FM), dated as of April
4, 1997 (see table of contents for list of omitted schedules and exhibits).
2.35(t) -- Asset Purchase Agreement by and between Pacific and Southern Company, Inc. and
Evergreen Media Corporation of Los Angeles (re: KKBQ-AM and KKBQ-FM), dated as of April
4, 1997 (see table of contents for list of omitted schedules and exhibits)
2.36(t) -- Asset Purchase Agreement by and between Pacific and Southern Company, Inc. and
Evergreen Media Corporation of Los Angeles (re: KHKS-FM), dated as of April 4, 1997
(see table of contents for list of omitted schedules and exhibits).
2.41(y) -- Amended and Restated Agreement and Plan of Merger among Chancellor Broadcasting
Company, Chancellor Radio Broadcasting Company, Evergreen Media Corporation, Evergreen
Mezzanine Holdings Corporation and Evergreen Media Corporation of Los Angeles, dated as
of February 19, 1997, amended and restated as of July 31, 1997.
3.3** -- Certificate of Incorporation of Evergreen Media Corporation of Los Angeles.
3.4** -- Bylaws of Evergreen Media Corporation of Los Angeles.
4.10(t) -- Second Amended and Restated Loan Agreement dated as of April 25, 1997 among Evergreen
Media Corporation of Los Angeles, the financial institutions whose names appear as
Lenders on the signature pages thereof (the "Lenders"), Toronto Dominion Securities,
Inc., as Arranging Agent, The Bank of New York and Bankers Trust Company, as
Co-Syndication Agents, NationsBank of Texas, N.A. and Union Bank of California, as
Co-Documentation Agents, and Toronto Dominion (Texas), Inc., as Administrative Agent
for the Lenders, together with certain collateral documents attached thereto as
exhibits, including Assignment of Partnership Interests, Assignment of Trust Interests,
Borrower's Pledge Agreement, Parent Company Guaranty, Stock Pledge Agreement,
Subsidiary.
4.11(z) -- First Amendment to Second Amended and Restated Loan Agreement, dated June 26, 1997,
among Evergreen Media Corporation of Los Angeles, the Lenders, the Agents and the
Administrative Agent.
4.15(aa) -- Indenture, dated as of February 14, 1996, governing the 9 3/8% Senior Subordinated
Notes due 2004 of Chancellor Radio Broadcasting Company.
4.16(bb) -- First Supplemental Indenture, dated as of February 14, 1996, to the Indenture dated
February 14, 1996, governing the 9 3/8% Senior Subordinated Notes due 2004 of
Chancellor Radio Broadcasting Company.
4.17(cc) -- Indenture, dated as of February 26, 1996, governing the 12 1/4% Subordinated Exchange
Debentures due 2008 of Chancellor Radio Broadcasting Company.
4.18(dd) -- Indenture, dated as of January 23, 1997, governing the 12% Subordinated Exchange
Debentures due 2009 of Chancellor Radio Broadcasting Company.
4.19(ee) -- Indenture, dated as of June 24, 1997, governing the 8 3/4% Senior Subordinated Notes
due 2004 of Chancellor Radio Broadcasting Company.
</TABLE>
II-4
<PAGE> 441
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.21+ -- Specimen 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock certificate of Chancellor Media
Broadcasting Corporation of Los Angeles.
4.22+ -- Specimen 12% Exchangeable Preferred Stock certificate of
Chancellor Media Broadcasting Corporation of Los Angeles.
4.23+ -- Form of Certificate of Designation for 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock of
Chancellor Media Corporation of Los Angeles.
4.24+ -- Form of Certificate of Designation for 12% Exchangeable
Preferred Stock of Chancellor Media Corporation of Los
Angeles.
5.1+ -- Opinion of Latham & Watkins.
8.1+ -- Form of Tax Matters Opinion of Latham & Watkins.
8.2+ -- Form of Tax Matters Opinion of Weil, Gotshal & Manges
LLP.
10.23(f) -- Evergreen Media Corporation Stock Option Plan for
Non-employee Directors.
10.24(n) -- Employment Agreement dated November 28, 1995 by and
between Evergreen Media Corporation and Matthew E.
Devine.
10.25(n) -- Employment Agreement dated November 28, 1995 by and
between Evergreen Media Corporation and James de Castro.
10.26(n) -- Employment Agreement dated February 9, 1996 by and
between Evergreen Media Corporation and Kenneth J.
O'Keefe.
10.27(o) -- Employment Agreement dated April 15, 1996 by and between
Evergreen Media Corporation and Scott K. Ginsburg, as
amended.
10.28(o) -- 1995 Stock Option Plan for executive officers and key
employees of Evergreen Media Corporation.
10.29(s) -- Memorandum of Agreement, dated February 19, 1997, between
Evergreen Media Corporation and Scott K. Ginsburg, as
agreed and acknowledged by Chancellor Broadcasting
Company and Chancellor Radio Broadcasting Company.
12.1** -- Evergreen Media Corporation of Los Angeles Computation of
Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends.
12.2** -- Chancellor Radio Broadcasting Company Computation of
Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends.
21.1** -- Subsidiaries of Evergreen Media Corporation of Los
Angeles.
23.1+ -- Consent of Latham & Watkins (included as part of their
opinion listed as Exhibit 5.1).
23.2+ -- Consent of KPMG Peat Marwick LLP, independent
accountants.
23.3+ -- Consent of KPMG Peat Marwick LLP, independent
accountants.
23.4+ -- Consent of Price Waterhouse LLP, independent accountants.
23.5+ -- Consent of Arthur Andersen LLP, independent accountants.
</TABLE>
II-5
<PAGE> 442
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
23.6+ -- Consent of Coopers & Lybrand L.L.P., independent
accountants.
23.7+ -- Consent of Coopers & Lybrand L.L.P., independent
accountants.
23.8+ -- Consent of Price Waterhouse LLP, independent accountants.
23.9+ -- Consent of Arthur Andersen LLP, independent accountants.
23.10+ -- Consent of Latham & Watkins.
23.11+ -- Consent of Weil, Gotshal & Manges LLP.
25.1+ -- Statement of Eligibility on Form T-1 of U.S. Trust
Company of Texas, N.A. under the 12 1/4% Exchange
Indenture (see Exhibit 4.17).
25.2+ -- Statement of Eligibility on Form T-1 of U.S. Trust
Company of Texas, N.A. under the 12% Exchange Indenture
(see Exhibit 4.18).
99.1** -- Independent Auditors' Report on Financial Statement
Schedule.
99.1(a)** -- Evergreen Media Corporation of Los Angeles Schedule
II -- Valuation and Qualifying Accounts for the years
ended December 31, 1994, 1995 and 1996.
</TABLE>
B. Financial Statements
1. Consolidated Financial Statements of Evergreen Media Corporation of
Los Angeles and Subsidiaries as of December 31, 1995 and 1996 and for
the years ended December 31, 1994, 1995 and 1996.
2. Consolidated Financial Statements of Chancellor Radio Broadcasting
Company and Subsidiaries as of December 31, 1995 and 1996 and for the
years ended December 31, 1994, 1995 and 1996.
3. Combined Financial Statements of Riverside Broadcasting Co., Inc. and
WAXQ Inc. as of December 31, 1995 and 1996 and March 31, 1997 and for
the years ended December 31, 1994, 1995 and 1996 and the three months
ended March 31, 1996 and 1997.
4. Combined Financial Statements of WMZQ Inc. and Viacom Broadcasting
East, Inc. as of December 31, 1995 and 1996 and March 31, 1997 and
for the years ended December 31, 1994, 1995 and 1996 and the three
months ended March 31, 1996 and 1997.
5. Financial Statements of KKSF-FM/KDFC-FM and AM (A Division of the
Brown Organization) as of December 31, 1995 and 1996 and for the
years ended December 31, 1995 and 1996.
6. Financial Statements of WDAS-AM/FM (Station owned and operated by
Beasley FM Acquisition Corp.) as of December 31, 1996 and March 31,
1997 and for the year ended December 31, 1996 and the three months
ended March 31, 1996 and 1997.
7. Financial Statements of Century Chicago Broadcasting, L.P. as of
December 31, 1996 and March 31, 1997 and for the year ended December
31, 1996 and the three months ended March 31, 1996 and 1997.
8. Combined Financial Statements of WJLB/WMXD, DETROIT as of December
31, 1996 and March 31, 1997 and for the year ended December 31, 1996
and the three months ended March 31, 1996 and 1997.
9. Combined Financial Statements of KYSR Inc. and KIBB Inc. as of
December 31, 1995 and 1996 and March 31, 1997 and for the years ended
December 31, 1994, 1995 and 1996 and the three months ended March 31,
1996 and 1997.
10. Financial Statements of WLIT, Inc. as of December 31, 1995 and 1996
and March 31, 1997 and for the years ended December 31, 1994, 1995
and 1996 and the three months ended March 31, 1996 and 1997.
II-6
<PAGE> 443
11. Financial Statements of WDRQ, Inc. as of December 31, 1995 and 1996
and March 31, 1997 and for the years ended December 31, 1994, 1995
and 1996 and the three months ended March 31, 1996 and 1997.
12. Consolidated Financial Statements of Trefoil Communications, Inc. and
Subsidiaries as of December 31, 1994 and 1995 and for the years ended
December 31, 1994 and 1995 and for the period ended February 13,
1996.
13. Combined Financial Statements of Colfax Communications, Inc. Radio
Group as of December 31, 1994, 1995 and 1996 and for the years ended
December 31, 1994, 1995 and 1996.
- ---------------
* To be filed by amendment.
** Previously filed.
+ Filed herewith.
(a) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-60036).
(f) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-4, as amended (Reg. No.
33-89838).
(g) Incorporated by reference to Exhibit No. 4.8 to Evergreen's Registration
Statement on Form S-4, as amended (Reg. No. 33-89838).
(h) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 14, 1995.
(i) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated January 17, 1996.
(j) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
September 30, 1995.
(k) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-69752).
(n) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
(o) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
March 31, 1996.
(p) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996.
(q) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-3, as amended (Reg. No.
333-12453).
(r) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated February 16, 1997 and filed
March 9, 1997.
(s) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1996.
(t) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated April 1, 1997 and filed May 9,
1997.
(y) Incorporated by reference to the identically numbered exhibit of
Evergreen's Registration Statement on Form S-4, filed August 1, 1997.
(z) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 7, 1997 and filed July
31, 1997.
(aa) Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
II-7
<PAGE> 444
(bb) Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K
of Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company
and Chancellor Broadcasting Licensee Company for the fiscal year ended
December 31, 1995.
(cc) Incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
(dd) Incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K
of Chancellor Radio Broadcasting Company, as filed on February 6, 1997.
(ee) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company as filed on July 17, 1997.
EMCLA hereby agrees to furnish supplementarily a copy of any omitted
schedule or exhibit to the Commission upon request.
ITEM 22. UNDERTAKINGS.
A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 20 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expense incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's Annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's Annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
C. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, 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.
D. The undersigned registrant hereby undertakes 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.
E. (1) The undersigned registrant hereby undertakes 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, 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.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of
II-8
<PAGE> 445
determining any liability under the Securities Act of 1933, 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.
II-9
<PAGE> 446
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irving, State of Texas,
on August 5, 1997.
EVERGREEN MEDIA CORPORATION
OF LOS ANGELES
By: /s/ MATTHEW E. DEVINE
----------------------------------
Matthew E. Devine
Vice President
POWERS OF ATTORNEY
Each person whose signature appears below constitutes and appoints Matthew
E. Devine and Scott K. Ginsburg as his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for such person and
in his name, place and stead, in any and all capacities, to sign any or all
further amendment (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 attorney-in-fact and agent, 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 attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1933, AS
AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ SCOTT K. GINSBURG Chief Executive Officer, President August 5, 1997
- ----------------------------------------------------- and Director (Principal Executive
Scott K. Ginsburg Officer)
/s/ MATTHEW E. DEVINE Vice President (Principal Financial August 5, 1997
- ----------------------------------------------------- Officer and Principal Accounting
Matthew E. Devine Officer)
</TABLE>
II-10
<PAGE> 447
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.9(f) -- Plan of Reorganization and Merger by and between
Evergreen Media Corporation and Broadcasting Partners,
Inc., dated as of January 31, 1995, as amended, including
the Form of Registration Rights Agreement among MLGA Fund
I, L.P., MLGA Fund II, L.P., MLGA/BPI Partners I, L.P.,
MLGAL Partners, Limited Partnership and Evergreen Media
Corporation (see table of contents for a list of omitted
schedules).
2.9A(g) -- Agreement dated as of January 31, 1995 among Evergreen
Media Corporation, Broadcasting Partners, Inc., the
holders of the shares of capital stock of Broadcasting
Partners, Inc. and Scott K. Ginsburg, holder of shares of
capital stock of Evergreen Media Corporation.
2.10(f) -- Plan and Agreement of Merger among Evergreen Media
Partners Corporation, Evergreen Media Corporation and
Broadcasting Partners, Inc., dated as of April 12, 1995.
2.11(h) -- Agreement and Plan of Merger by and among Pyramid
Communications, Inc., Evergreen Media Corporation and
Evergreen Media/Pyramid Corporation dated as of July 14,
1995 (see table of contents for list of omitted exhibits
and schedules).
2.11A(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/Pyramid Corporation dated September
7, 1995.
2.11B(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/Pyramid Corporation dated January 11,
1996.
2.12(j) -- Purchase Agreement between Fairbanks Communications, Inc.
and Evergreen Media Corporation dated October 12, 1995
(see table of contents for list of omitted exhibits and
schedules).
2.13(n) -- Option Agreement dated as of January 9, 1996 between
Chancellor Broadcasting Company and Evergreen Media
Corporation (including Form of Advertising Brokerage
Agreement and Form of Asset Purchase Agreement).
2.14(o) -- Asset Purchase Agreement dated April 4, 1996 between
American Radio Systems Corporation and Evergreen Media
Corporation of Buffalo (see table of contents for list of
omitted exhibits and schedules).
2.15(o) -- Asset Purchase Agreement dated April 11, 1996 between
Mercury Radio Communications, L.P. and Evergreen Media
Corporation of Los Angeles, Evergreen Media/Pyramid
Holdings Corporation, WHTT (AM) License Corp. and WHTT
(FM) License Corp. (see table of contents for list of
omitted exhibits and schedules).
2.16(o) -- Asset Purchase Agreement dated April 19, 1996 between
Crescent Communications L.P. and Evergreen Media
Corporation of Los Angeles (see table of contents for
list of omitted exhibits and schedules).
2.17(p) -- Asset Purchase Agreement dated June 13, 1996 between
Evergreen Media Corporation of Los Angeles and Greater
Washington Radio, Inc. (see table of contents for list of
omitted exhibits and schedules).
</TABLE>
<PAGE> 448
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.18(p) -- Asset Exchange Agreement dated June 13, 1996 among
Evergreen Media Corporation of Los Angeles, Evergreen
Media Corporation of the Bay State, WKLB License Corp.,
Greater Media Radio, Inc. and Greater Washington Radio,
Inc. (see table of contents for list of omitted exhibits
and schedules).
2.19(p) -- Purchase Agreement dated June 27, 1996 between WEDR,
Inc., Seller and Evergreen Media Corporation of Los
Angeles, Buyer. (See table of contents for list of
omitted schedules)
2.20(p) -- Time Brokerage Agreement dated July 10, 1996 by and
between Evergreen Media Corporation of Detroit, as
Licensee, and Kidstar Interactive Media Incorporated, as
Time Broker.
2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among
Century Chicago Broadcasting L.P., an Illinois limited
partnership, ("Seller"), Century Broadcasting
Corporation, a Delaware Corporation ("Century"),
Evergreen Media Corporation of Los Angeles, a Delaware
Corporation ("Parent"), and Evergreen Media Corporation
of Chicago, a Delaware Corporation ("Buyer").
2.22(p) -- Asset Purchase Agreement dated August 12, 1996 by and
among Chancellor Broadcasting Company, Shamrock
Broadcasting, Inc. and Evergreen Media Corporation of the
Great Lakes.
2.23(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles (WQRS-FM).
(See table of contents for list of omitted exhibits and
schedules)
2.24(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles. (See table of
contents for list of omitted schedules)
2.25(q) -- Letter of intent dated August 27, 1996 between EZ
Communications, Inc. and Evergreen Media Corporation.
2.26(q) -- Asset Purchase Agreement dated September 19, 1996 between
Beasley-FM Acquisition Corp., WDAS License Limited
Partnership and Evergreen Media Corporation of Los
Angeles.
2.27(q) -- Asset Purchase Agreement dated September 19, 1996 between
The Brown Organization and Evergreen Media Corporation of
Los Angeles.
2.28(r) -- Stock Purchase Agreement by and between Viacom
International Inc. and Evergreen Media Corporation of Los
Angeles, dated February 16, 1997 (See table of contents
for omitted schedules and exhibits).
2.29(r) -- Agreement and Plan of Merger, by and among Evergreen
Media Corporation, Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company, dated as of
February 19, 1997.
</TABLE>
<PAGE> 449
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
2.30(r) -- Stockholders Agreement, by and among Chancellor Broadcasting Company, Evergreen Media
Corporation, Scott K. Ginsburg (individually and as custodian for certain shares held
by his children), HM2/Chancellor, L.P., Hicks, Muse, Tate & First Equity Fund II, L.P.,
HM2/HMW, L.P., The Chancellor Business Trust, HM2/HMD Sacramento GP, L.P., Thomas O.
Hicks, as Trustee of the William Cree Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as
Trustee of the Catherine Forgave Hicks 1993 Irrevocable Trust, Thomas O. Hicks, as
Trustee of the John Alexander Hicks 1984 Trust, Thomas O. Hicks, as Trustee of the Mack
Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of Robert Bradley Hicks 1984
Trust, Thomas O. Hicks, as Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O.
Hicks and H. Rand Reynolds, as Trustees for the Muse Children's GS Trust, and Thomas O.
Hicks, dated as of February 19, 1997.
2.31(r) -- Joint Purchase Agreement, by and among Chancellor Radio Broadcasting Company,
Chancellor Broadcasting Company, Evergreen Media Corporation of Los Angeles, and
Evergreen Media Corporation, dated as of February 19, 1997.
2.32(s) -- Asset Exchange Agreement, by and among EZ Communications, Inc., Professional
Broadcasting Incorporated, EZ Philadelphia, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of Charlotte, Evergreen Media Corporation of the
East, Evergreen Media Corporation of Carolinaland, WBAV/ WBAV-FM/WPEG License Corp. and
WRFX License Corp., dated as of December 5, 1996 (See table of contents for list of
omitted schedules).
2.33(s) -- Asset Purchase Agreement, by and among EZ Communications, Inc., Professional
Broadcasting Incorporated, EZ Charlotte, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of the East and Evergreen Media Corporation of
Carolinaland, dated as of December 5, 1996 (See table of contents for list of omitted
schedules).
2.34(t) -- Asset Purchase Agreement by and between Pacific and Southern Company, Inc. and
Evergreen Media Corporation of Los Angeles (re: WGCI-AM and WGCI-FM), dated as of April
4, 1997 (see table of contents for list of omitted schedules and exhibits).
2.35(t) -- Asset Purchase Agreement by and between Pacific and Southern Company, Inc. and
Evergreen Media Corporation of Los Angeles (re: KKBQ-AM and KKBQ-FM), dated as of April
4, 1997 (see table of contents for list of omitted schedules and exhibits)
2.36(t) -- Asset Purchase Agreement by and between Pacific and Southern Company, Inc. and
Evergreen Media Corporation of Los Angeles (re: KHKS-FM), dated as of April 4, 1997
(see table of contents for list of omitted schedules and exhibits).
2.41(y) -- Amended and Restated Agreement and Plan of Merger among Chancellor Broadcasting
Company, Chancellor Radio Broadcasting Company, Evergreen Media Corporation, Evergreen
Mezzanine Holdings Corporation and Evergreen Media Corporation of Los Angeles, dated as
of February 19, 1997, amended and restated as of July 31, 1997.
3.3** -- Certificate of Incorporation of Evergreen Media Corporation of Los Angeles.
3.4** -- Bylaws of Evergreen Media Corporation of Los Angeles.
</TABLE>
<PAGE> 450
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.10(t) -- Second Amended and Restated Loan Agreement dated as of April 25, 1997 among Evergreen
Media Corporation of Los Angeles, the financial institutions whose names appear as
Lenders on the signature pages thereof (the "Lenders"), Toronto Dominion Securities,
Inc., as Arranging Agent, The Bank of New York and Bankers Trust Company, as
Co-Syndication Agents, NationsBank of Texas, N.A. and Union Bank of California, as
Co-Documentation Agents, and Toronto Dominion (Texas), Inc., as Administrative Agent
for the Lenders, together with certain collateral documents attached thereto as
exhibits, including Assignment of Partnership Interests, Assignment of Trust Interests,
Borrower's Pledge Agreement, Parent Company Guaranty, Stock Pledge Agreement,
Subsidiary.
4.11(z) -- First Amendment to Second Amended and Restated Loan Agreement, dated June 26, 1997,
among Evergreen Media Corporation of Los Angeles, the Lenders, the Agents and the
Administrative Agent.
4.15(aa) -- Indenture, dated as of February 14, 1996, governing the 9 3/8% Senior Subordinated
Notes due 2004 of Chancellor Radio Broadcasting Company.
4.16(bb) -- First Supplemental Indenture, dated as of February 14, 1996, to the Indenture dated
February 14, 1996, governing the 9 3/8% Senior Subordinated Notes due 2004 of
Chancellor Radio Broadcasting Company.
4.17(cc) -- Indenture, dated as of February 26, 1996, governing the 12 1/4% Subordinated Exchange
Debentures due 2008 of Chancellor Radio Broadcasting Company.
4.18(dd) -- Indenture, dated as of January 23, 1997, governing the 12% Subordinated Exchange
Debentures due 2009 of Chancellor Radio Broadcasting Company.
4.19(ee) -- Indenture, dated as of June 24, 1997, governing the 8 3/4% Senior Subordinated Notes
due 2004 of Chancellor Radio Broadcasting Company.
4.21+ -- Specimen 12 1/4% Series A Senior Cumulative Exchangeable Preferred Stock certificate of
Chancellor Media Broadcasting Corporation of Los Angeles.
4.22+ -- Specimen 12% Exchangeable Preferred Stock certificate of Chancellor Media Broadcasting
Corporation of Los Angeles.
4.23+ -- Form of Certificate of Designation for 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock of Chancellor Media Corporation of Los Angeles.
4.24+ -- Form of Certificate of Designation for 12% Exchangeable Preferred Stock of Chancellor
Media Corporation of Los Angeles.
5.1+ -- Opinion of Latham & Watkins.
8.1+ -- Form of Tax Matters Opinion of Latham & Watkins.
8.2+ -- Form of Tax Matters Opinion of Weil, Gotshal & Manges LLP.
10.23(f) -- Evergreen Media Corporation Stock Option Plan for Non-employee Directors.
10.24(n) -- Employment Agreement dated November 28, 1995 by and between Evergreen Media Corporation
and Matthew E. Devine.
10.25(n) -- Employment Agreement dated November 28, 1995 by and between Evergreen Media Corporation
and James de Castro.
10.26(n) -- Employment Agreement dated February 9, 1996 by and between Evergreen Media Corporation
and Kenneth J. O'Keefe.
10.27(o) -- Employment Agreement dated April 15, 1996 by and between Evergreen Media Corporation
and Scott K. Ginsburg, as amended.
10.28(o) -- 1995 Stock Option Plan for executive officers and key employees of Evergreen Media
Corporation.
</TABLE>
<PAGE> 451
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
10.29(s) -- Memorandum of Agreement, dated February 19, 1997, between Evergreen Media Corporation
and Scott K. Ginsburg, as agreed and acknowledged by Chancellor Broadcasting Company
and Chancellor Radio Broadcasting Company.
12.1** -- Evergreen Media Corporation of Los Angeles Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends.
12.2** -- Chancellor Radio Broadcasting Company Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends.
21.1** -- Subsidiaries of Evergreen Media Corporation of Los Angeles.
23.1+ -- Consent of Latham & Watkins (included as part of their opinion listed as Exhibit 5.1).
23.2+ -- Consent of KPMG Peat Marwick LLP, independent accountants.
23.3+ -- Consent of KPMG Peat Marwick LLP, independent accountants.
23.4+ -- Consent of Price Waterhouse LLP, independent accountants.
23.5+ -- Consent of Arthur Andersen LLP, independent accountants.
23.6+ -- Consent of Coopers & Lybrand L.L.P., independent accountants.
23.7+ -- Consent of Coopers & Lybrand L.L.P., independent accountants.
23.8+ -- Consent of Price Waterhouse LLP, independent accountants.
23.9+ -- Consent of Arthur Andersen LLP, independent accountants.
23.10+ -- Consent of Latham & Watkins.
23.11+ -- Consent of Weil, Gotshal & Manges LLP.
25.1+ -- Statement of Eligibility on Form T-1 of U.S. Trust Company of Texas, N.A. under the
12 1/4% Exchange Indenture (see Exhibit 4.17).
25.2+ -- Statement of Eligibility on Form T-1 of U.S. Trust Company of Texas, N.A. under the 12%
Exchange Indenture (see Exhibit 4.18).
99.1** -- Independent Auditors' Report on Financial Statement Schedule
99.1(a)** -- Evergreen Media Corporation of Los Angeles Schedule II -- Valuation and Qualifying
Accounts for the years ended December 31, 1994, 1995 and 1996.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Filed herewith.
(a) Incorporated by reference to the identically numbered exhibit to Evergreen's
Registration Statement on Form S-1, as amended (Reg. No. 33-60036).
(f) Incorporated by reference to the identically numbered exhibit to Evergreen's
Registration Statement on Form S-4, as amended (Reg. No. 33-89838).
(g) Incorporated by reference to Exhibit No. 4.8 to Evergreen's Registration
Statement on Form S-4, as amended (Reg. No. 33-89838).
(h) Incorporated by reference to the identically numbered exhibit to Evergreen's
Current Report on Form 8-K dated July 14, 1995.
(i) Incorporated by reference to the identically numbered exhibit to Evergreen's
Current Report on Form 8-K dated January 17, 1996.
(j) Incorporated by reference to the identically numbered exhibit to Evergreen's
Quarterly Report on Form 10-Q for the quarterly period ending September 30,
1995.
<PAGE> 452
(k) Incorporated by reference to the identically numbered exhibit to Evergreen's
Registration Statement on Form S-1, as amended (Reg. No. 33-69752).
(n) Incorporated by reference to the identically numbered exhibit to Evergreen's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
(o) Incorporated by reference to the identically numbered exhibit to Evergreen's
Quarterly Report on Form 10-Q for the quarterly period ending March 31,
1996.
(p) Incorporated by reference to the identically numbered exhibit to Evergreen's
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996.
(q) Incorporated by reference to the identically numbered exhibit to Evergreen's
Registration Statement on Form S-3, as amended (Reg. No. 333-12453).
(r) Incorporated by reference to the identically numbered exhibit to Evergreen's
Current Report on Form 8-K dated February 16, 1997 and filed March 9, 1997.
(s) Incorporated by reference to the identically numbered exhibit to Evergreen's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
(t) Incorporated by reference to the identically numbered exhibit to Evergreen's
Current Report on Form 8-K dated April 1, 1997 and filed May 9, 1997.
(y) Incorporated by reference to the identically numbered exhibit to Evergreen's
Registration Statement on Form S-4, filed August 1, 1997.
(z) Incorporated by reference to the identically numbered exhibit to Evergreen's
Current Report on Form 8-K dated July 7, 1997 and filed July 31, 1997.
(aa) Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
(bb) Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K
of Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company
and Chancellor Broadcasting Licensee Company for the fiscal year ended
December 31, 1995.
(cc) Incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.
(dd) Incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K
of Chancellor Radio Broadcasting Company, as filed on February 6, 1997.
(ee) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
of Chancellor Broadcasting Company as filed on July 17, 1997.
<PAGE> 1
EXHIBIT 4.21
NUMBER CHANCELLOR MEDIA CORPORATION SHARES
OF LOS ANGELES
INCORPORATED UNDER THE
LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR
CERTAIN DEFINITIONS CUSIP
AND RESTRICTIONS
THIS CERTIFIES THAT
is the owner of:
FULLY PAID AND NON-ASSESSABLE SHARES OF THE 12 1/4% SERIES A SENIOR CUMULATIVE
EXCHANGEABLE PREFERRED STOCK, PAR VALUE $0.01 PER SHARE OF
=================CHANCELLOR MEDIA CORPORATION OF LOS ANGELES====================
(the "Corporation"), a Delaware corporation. The shares represented by this
certificate are transferable only on the stock transfer books of the
Corporation by the holder of record hereof, or by his duly authorized attorney
or legal representative, upon the surrender of this certificate properly
endorsed. This certificate is not valid until countersigned and registered by
the Corporation's transfer agent and registrar.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by the facsimile signatures of its duly authorized officers and has
caused a facsimile of its corporate seal to be hereunto affixed.
Dated:
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
THE FACSIMILE SIGNATURE THE FACSIMILE SIGNATURE
[SEAL]
----------------------- -----------------------
TO APPEAR HERE TO APPEAR HERE
DELAWARE
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
Countersigned and Registered:
THE BANK OF NEW YORK
(NEW YORK)
Transfer Agent and Registrar
BY
Authorized Signature
<PAGE> 2
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
This Certificate and the shares represented hereby are issued and shall be
subject to all the provisions of the Certificate of Incorporation and Bylaws of
the Corporation and the amendments from time to time made thereto, copies of
which are on file at the principal office of the Corporation, to all of which
the holder of this Certificate asserts by acceptance hereof.
- --------------------------------------------------------------------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the ------ --------
entireties (Cust) (Minor)
JT TEN - as joint tenants with under Uniform Gifts to
right of survivorship Minors
and not as tenants Act
in common ------------------
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, hereby sell, assign and transfer unto
--------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
----------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Shares
----------------------------------------------------------------------
of the preferred stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
------------------------------------------
Attorney
--------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated
---------------------------------
X
-------------------------------------------
X
-------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
--------------------------------------
NOTICE: SIGNATURE(S) SHOULD BE GUARANTEED BY
A QUALIFIED MEDALLION GUARANTEE MEMBER AND
MUST CORRESPOND EXACTLY WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE.
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to issuer or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, or OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, Inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
<PAGE> 1
EXHIBIT 4.22
NUMBER CHANCELLOR MEDIA CORPORATION SHARES
OF LOS ANGELES
INCORPORATED UNDER THE
LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR
CERTAIN DEFINITIONS CUSIP
AND RESTRICTIONS
THIS CERTIFIES THAT
is the owner of:
FULLY PAID AND NON-ASSESSABLE SHARES OF THE 12% EXCHANGEABLE PREFERRED STOCK,
PAR VALUE $0.01 PER SHARE OF
=================CHANCELLOR MEDIA CORPORATION OF LOS ANGELES====================
(the "Corporation"), a Delaware corporation. The shares represented by this
certificate are transferable only on the stock transfer books of the
Corporation by the holder of record hereof, or by his duly authorized attorney
or legal representative, upon the surrender of this certificate properly
endorsed. This certificate is not valid until countersigned and registered by
the Corporation's transfer agent and registrar.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by the facsimile signatures of its duly authorized officers and has
caused a facsimile of its corporate seal to be hereunto affixed.
Dated:
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
THE FACSIMILE SIGNATURE THE FACSIMILE SIGNATURE
[SEAL]
----------------------- -----------------------
TO APPEAR HERE TO APPEAR HERE
DELAWARE
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
Countersigned and Registered:
THE BANK OF NEW YORK
(NEW YORK)
Transfer Agent and Registrar
BY
Authorized Signature
<PAGE> 2
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
This Certificate and the shares represented hereby are issued and shall be
subject to all the provisions of the Certificate of Incorporation and Bylaws of
the Corporation and the amendments from time to time made thereto, copies of
which are on file at the principal office of the Corporation, to all of which
the holder of this Certificate asserts by acceptance hereof.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS UNDER
THE COMMUNICATIONS ACT OF 1934, AS AMENDED, RELATING TO OWNERSHIP BY FOREIGN
NATIONALS, FOREIGN ENTITIES, FOREIGN GOVERNMENTS OR REPRESENTATIVES OF THE
FOREGOING.
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES IS AUTHORIZED TO ISSUE SHARES OF
MORE THAN ONE CLASS AND/OR TO ISSUE SHARES IN MORE THAN ONE SERIES OF AT LEAST
ONE CLASS. CHANCELLOR MEDIA CORPORATION OF LOS ANGELES WILL FURNISH WITHOUT
CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS A STATEMENT OF THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
- --------------------------------------------------------------------------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the ------ --------
entireties (Cust) (Minor)
JT TEN - as joint tenants with under Uniform Gifts to
right of survivorship Minors
and not as tenants Act
in common ------------------
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, hereby sell, assign and transfer unto
--------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
----------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Shares
----------------------------------------------------------------------
of the preferred stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
-----------------------------------------
Attorney
--------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated
---------------------------------
X
-------------------------------------------
X
-------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
--------------------------------------
NOTICE: SIGNATURE(S) SHOULD BE GUARANTEED BY
A QUALIFIED MEDALLION GUARANTEE MEMBER AND
MUST CORRESPOND EXACTLY WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE.
<PAGE> 1
ANNEX C
PROPOSED FORM OF
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 12 1/4% SERIES A SENIOR
CUMULATIVE EXCHANGEABLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
---------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
---------------------
Chancellor Media Corporation of Los Angeles (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware and formerly known as Evergreen Media Corporation of Los
Angeles, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Corporation (the "Board of Directors") by its
Certificate of Incorporation, as amended (hereinafter referred to as the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of Directors
duly approved and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority conferred on the Board of
Directors by its Certificate of Incorporation (which authorizes 10,000,000
shares of preferred stock, $.01 per share), and pursuant to Section 151(g)
of the General Corporation Law of the State of Delaware, the Chief
Financial Officer of the Corporation be, and hereby is, authorized and
directed to execute and file with the Secretary of State of the State of
Delaware the Certificate of Designation of 12 1/4% Series A Senior
Cumulative Exchangeable Preferred Stock of the Corporation, pursuant to
which the Board of Directors has fixed the designation powers and
preferences, and the relative participating, optional and other special
rights, and the qualifications, limitations and restrictions thereof, of a
series of the Corporation's Preferred Stock.
(a) Designation. There is hereby created out of the authorized and unissued
shares of Preferred Stock of the Corporation a class of Preferred Stock
designated as the "12 1/4% Series A Senior Cumulative Exchangeable Preferred
Stock." The number of shares constituting such class shall be 1,000,000 and are
referred to as the "Series A Senior Exchangeable Preferred Stock." The initial
liquidation preference of the Series A Senior Exchangeable Preferred Stock shall
be $119.444944 per share; such amount shall be subject to increase as provided
in paragraph (c)(i).
(b) Rank. The Series A Senior Exchangeable Preferred Stock shall, with
respect to dividends and distributions upon liquidation, winding-up and
dissolution of the Corporation, rank (i) senior to all classes of common stock
of the Corporation (including, without limitation, the Common Stock) and to each
other class of Capital Stock of the Corporation or series of Preferred Stock of
the Corporation hereafter created the terms of which do not expressly provide
that it ranks senior to, or on a parity with, the Series A Senior Exchangeable
Preferred Stock as to dividends and distributions upon liquidation, winding-up
and dissolution of the Corporation (collectively referred to, together with all
classes of common stock of the Corporation, as "Junior Stock"); (ii) on a parity
with any class of Capital Stock of the Corporation or series of Preferred Stock
of the Corporation hereafter created the terms of which expressly provide that
such class or series will rank on a parity with the Series A Senior Exchangeable
Preferred Stock as to dividends and distributions upon liquidation, winding-up
and dissolution (collectively referred to as "Parity Stock"); provided that any
such Parity Stock that was not approved by the Holders in accordance with
paragraph (f)(ii)(A) hereof (to the extent such approval is required) shall be
deemed to be Junior Stock and not Parity Stock; and (iii) junior to each class
of Capital Stock of the Corporation or series of Preferred Stock of the
Corporation hereafter created that has been approved by the Holders in
accordance with paragraph (f)(ii)(B) hereof and the terms of which expressly
provide that such class or series will rank senior to the Series A Senior
Exchangeable
<PAGE> 2
Preferred Stock as to dividends and distributions upon liquidation, winding-up
and dissolution of the Company (collectively referred to as "Senior Stock").
(c) Dividends. (i) Beginning on the Issue Date, the Holders of the
outstanding shares of Series A Senior Exchangeable Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, distributions in the form of cash dividends on
each share of Series A Senior Exchangeable Preferred Stock, at a rate per annum
equal to 12 1/4% of the then effective liquidation preference per share of the
Series A Senior Exchangeable Preferred Stock, payable quarterly. No interest
shall be payable in respect of any dividends that may be in arrears. All
dividends shall be cumulative, whether or not earned or declared, on a daily
basis from August 15, 1997, and shall be payable quarterly in arrears on each
Dividend Payment Date, commencing on the first Dividend Payment Date after the
Issue Date, provided that if any dividend payable on any Dividend Payment Date
on or before February 15, 2001 is not declared and paid in full in cash on such
Dividend Payment Date, the amount payable as dividends on such Dividend Payment
Date that is not paid in cash on such Dividend Payment Date shall be added to
the liquidation preference of the Series A Senior Exchangeable Preferred Stock
on such Dividend Payment Date and the amount so added to the liquidation
preference shall be deemed paid in full and shall not accumulate. Each dividend
shall be payable to, or added to the liquidation preference of as herein
provided, the Series A Senior Exchangeable Preferred Stock held by Holders of
record as they appear on the stock books of the Corporation on the Dividend
Record Date immediately preceding the related Dividend Payment Date. Dividends
shall cease to accumulate in respect of the Series A Senior Exchangeable
Preferred Stock on the Exchange Date or on the date of their earlier redemption
unless the Corporation shall have failed to issue the appropriate aggregate
principal amount of Exchange Debentures in respect of the Series A Senior
Exchangeable Preferred Stock on such Exchange Date or shall have failed to pay
the relevant redemption price on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Series A Senior
Exchangeable Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata
to the Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any circumstances
be construed or deemed to require the Board of Directors to declare, or the
Corporation to pay or set apart for payment, any dividends on shares of the
Series A Senior Exchangeable Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption pursuant to paragraph
(e)(i) may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to Holders of record on such date, not more than
forty-five (45) days prior to the payment thereof, as may be fixed by the Board
of Directors of the Corporation.
(v) No full dividends shall be declared by the Board of Directors or paid
or set apart for payment by the Corporation on any Parity Stock for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid (or are deemed declared and paid) in full, or declared and, if payable in
cash, a sum in cash set apart sufficient for such payment, on the Series A
Senior Exchangeable Preferred Stock for all Dividend Periods terminating on or
prior to the date of payment of such full dividends on such Parity Stock. If any
dividends are not so paid, all dividends declared upon shares of the Series A
Senior Exchangeable Preferred Stock and any other Parity Stock shall be declared
pro rata so that the amount of dividends declared per share on the Series A
Senior Exchangeable Preferred Stock and such Parity Stock shall in all cases
bear to each other the same ratio that accrued dividends per share on the Series
A Senior Exchangeable Preferred Stock and such Parity Stock bear to each other.
(vi) (A) Holders of shares of the Series A Senior Exchangeable Preferred
Stock shall be entitled to receive the dividends provided for in paragraph
(c)(i) hereof in preference to and in priority over any dividends upon any of
the Junior Stock.
(B) So long as any share of the Series A Senior Exchangeable Preferred
Stock is outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend on any of the Junior Stock or make any payment on account
of, or set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Junior Stock or any
warrants, rights, calls or options
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<PAGE> 3
exercisable for or convertible into any of the Junior Stock whether in cash,
obligations or shares of the Corporation or other property (other than dividends
in Junior Stock to the holders of Junior Stock), and shall not permit any
corporation or other entity directly or indirectly controlled by the Corporation
to purchase or redeem any of the Junior Stock or any such warrants, rights,
calls or options unless full cumulative dividends determined in accordance
herewith on the Series A Senior Exchangeable Preferred Stock have been paid (or
are deemed paid) in full.
(C) So long as any share of the Series A Senior Exchangeable Preferred
Stock is outstanding, the Corporation shall not make any payment on account of,
or set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Parity Stock or any
warrants, rights, calls or options exercisable for or convertible into any of
the Parity Stock, and shall not permit any corporation or other entity directly
or indirectly controlled by the Corporation to purchase or redeem any of the
Parity Stock or any such warrants, rights, calls or options unless full
cumulative dividends determined in accordance herewith on the Series A Senior
Exchangeable Preferred Stock have been paid (or are deemed paid) in full.
(vii) Dividends payable on the Series A Senior Exchangeable Preferred Stock
for any period less than a year shall be computed on the basis of a 360-day year
of twelve 30-day months and the actual number of days elapsed in the period for
which payable.
(d) Liquidation Preference. (i) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the Holders of shares of Series A Senior Exchangeable Preferred
Stock then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders an amount in cash
equal to the then effective liquidation preference for each share outstanding,
plus, without duplication, an amount in cash equal to accumulated and unpaid
dividends thereon to the date fixed for liquidation, dissolution or winding up
(including an amount equal to a prorated dividend for the period from the last
Dividend Payment Date to the date fixed for liquidation, dissolution or winding
up) before any payment shall be made or any assets distributed to the holders of
any of the Junior Stock including, without limitation, common stock of the
Corporation. Except as provided in the preceding sentence, Holders of Series A
Senior Exchangeable Preferred Stock shall not be entitled to any distribution in
the event of any liquidation, dissolution or winding up of the affairs of the
Corporation. If the assets of the Corporation are not sufficient to pay in full
the liquidation payments payable to the Holders of outstanding shares of the
Series A Senior Exchangeable Preferred Stock and all Parity Stock, then the
holders of all such shares shall share equally and ratably in such distribution
of assets in proportion to the full liquidation preference, including, without
duplication, all accrued and unpaid dividends to which each is entitled.
(ii) For the purposes of this paragraph (d), neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Corporation nor the consolidation or merger of the Corporation with or into one
or more entities shall be deemed to be a liquidation, dissolution or winding up
of the affairs of the Corporation.
(e) Redemption. (i) Optional Redemption. (A) The Corporation may, at the
option of the Board of Directors, redeem at any time on or after February 15,
2001, subject to contractual and other restrictions with respect thereto and
from any source of funds legally available therefor, in whole or in part, in the
manner provided for in paragraph (e)(iii) hereof, any or all of the shares of
the Series A Senior Exchangeable Preferred Stock, at the redemption prices
(expressed as a percentage of the then effective liquidation preference) set
forth below plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends per share (including an amount in cash equal to
a prorated dividend for the period from the Dividend Payment Date immediately
prior to the Redemption Date to the Redemption Date) (the "Optional
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Redemption Price") if redeemed during the 12-month period beginning February 15
of each of the years set forth below:
<TABLE>
<S> <C>
2001..................................................... 106.125%
2002..................................................... 104.900%
2003..................................................... 103.675%
2004..................................................... 102.450%
2005..................................................... 101.225%
2006 and thereafter...................................... 100.000%
</TABLE>
provided that no redemption pursuant to this paragraph (e)(i)(A) shall be
authorized or made unless prior thereto full accumulated and unpaid dividends
are declared and paid in full, or declared and a sum in cash set apart
sufficient for such payment, on the Series A Senior Exchangeable Preferred Stock
for all Dividend Periods terminating on or prior to the Redemption Date.
(B) In addition to the foregoing paragraph (e)(i)(A), on or prior to
February 15, 1999, the Corporation may, at its option, use the net cash proceeds
of one or more Public Equity Offerings to redeem from any source of funds
legally available therefor, in the manner provided for in paragraph (e)(iii)
hereof, the Series A Senior Exchangeable Preferred Stock, in part, at a
redemption price of 111.025% of the then effective liquidation preference
thereof if redeemed during the 12-month period commencing on February 15, 1997
and 109.800% of the then effective liquidation preference thereof if redeemed
during the 12-month period commencing on February 15, 1998, plus, in each case,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends to the redemption date (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date immediately
prior to the redemption date to the redemption date) (the "Cash Proceeds
Redemption Price"); provided, however, that after any such redemption, the
number of shares of Series A Senior Exchangeable Preferred Stock outstanding
must equal at least 75% of the number of shares of Radio Broadcasting Preferred
Stock originally issued on the Radio Broadcasting Preferred Stock Issue Date.
Any such redemption pursuant to this paragraph (e)(i)(B) must occur on or prior
to 60 days after the receipt by the Corporation of the proceeds of each Public
Equity Offering.
(C) In the event of a redemption pursuant to paragraph (e)(i)(A) or
(e)(i)(B) hereof of only a portion of the then outstanding shares of the Series
A Senior Exchangeable Preferred Stock, the Corporation shall effect such
redemption on a pro rata basis according to the number of shares held by each
Holder of the Series A Senior Exchangeable Preferred Stock, except that the
Corporation may redeem such shares held by Holders of fewer than 100 shares (or
shares held by Holders who would hold less than 100 shares as a result of such
redemption), as may be determined by the Corporation.
(ii) Mandatory Redemption. On February 15, 2008, the Corporation shall
redeem, to the extent of funds legally available therefor, in the manner
provided for in paragraph (e)(iii) hereof, all of the shares of the Series A
Senior Exchangeable Preferred Stock then outstanding at a redemption price equal
to 100% of the then effective liquidation preference per share, plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends per
share (including an amount equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Redemption Date to the Redemption
Date) (the "Mandatory Redemption Price").
(iii) Procedures for Redemption. (A) At least thirty (30) days and not more
than sixty (60) days prior to the date fixed for any redemption of the Series A
Senior Exchangeable Preferred Stock, written notice (the "Redemption Notice")
shall be given by first class mail, postage prepaid, to each Holder of record on
the record date fixed for such redemption of the Series A Senior Exchangeable
Preferred Stock at such Holder's address as it appears on the stock books of the
Corporation, provided that no failure to give such notice nor any deficiency
therein shall affect the validity of the procedure for the redemption of any
shares of Series A Senior Exchangeable Preferred Stock to be redeemed except as
to the Holder or Holders to whom the Corporation
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<PAGE> 5
has failed to give said notice or except as to the Holder or Holders whose
notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i)(A), (e)(i)(B) or
(e)(ii) hereof;
(2) the Optional Redemption Price, the Mandatory Redemption Price or the
Cash Proceeds Redemption Price, as the case may be;
(3) whether all or less than all the outstanding shares of the Series A
Senior Exchangeable Preferred Stock are to be redeemed and the total number of
shares of the Series A Senior Exchangeable Preferred Stock being redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Corporation, in the manner, at
the place or places and at the price designated, his certificate or certificates
representing the shares of Series A Senior Exchangeable Preferred Stock to be
redeemed; and
(6) that dividends on the shares of the Series A Senior Exchangeable
Preferred Stock to be redeemed shall cease to accumulate on such Redemption Date
unless the Corporation defaults in the payment of the Optional Redemption Price,
the Mandatory Redemption Price or the Cash Proceeds Redemption Price, as the
case may be.
(B) Each Holder of Series A Senior Exchangeable Preferred stock shall
surrender the certificate or certificates representing such shares of Series A
Senior Exchangeable Preferred Stock to the Corporation, duly endorsed (or
otherwise in proper form for transfer, as determined by the Corporation), in the
manner and at the place designated in the Redemption Notice, and on the
Redemption Date the full Optional Redemption Price, Mandatory Redemption Price
or Cash Proceeds Redemption Price, as the case may be, for such shares shall be
payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. In the event that less than all of the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation defaults in
the payment in full of the applicable redemption price, dividends on the Series
A Senior Exchangeable Preferred Stock called for redemption shall cease to
accumulate on the Redemption Date, and all rights of the Holders of redeemed
shares shall terminate with respect thereto on the Redemption Date, other than
the right to receive the Optional Redemption Price, the Mandatory Redemption
Price or the Cash Proceeds Redemption Price, as the case may be, without
interest; provided, however, that if a notice of redemption shall have been
given as provided in paragraph (iii)(A) above and the funds necessary for
redemption (including an amount in respect of all dividends that will accrue to
the Redemption Date) shall have been irrevocably deposited in trust for the
equal and ratable benefit for the Holders of the shares to be redeemed, then, at
the close of business on the day on which such funds are segregated and set
aside, the Holders of the shares to be redeemed shall cease to be stockholders
of the Corporation and shall be entitled only to receive the Optional Redemption
Price, the Mandatory Redemption Price or the Cash Redemption Price, as the case
may be, without interest.
(f) Voting Rights. (i) The Holders of Series A Senior Exchangeable
Preferred Stock, except as otherwise required under Delaware law or as set forth
in paragraphs (ii), (iii) and (iv) below, shall not be entitled or permitted to
vote on any matter required or permitted to be voted upon by the stockholders of
the Corporation.
(ii) (A) So long as any shares of the Series A Senior Exchangeable
Preferred Stock are outstanding, the Corporation shall not authorize any class
of Parity Stock without the affirmative vote or consent of Holders of at least a
majority of the then outstanding shares of Series A Senior Exchangeable
Preferred Stock, voting or consenting, as the case may be, as one class, given
in person or by proxy, either in writing or by resolution adopted at an annual
or special meeting.
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<PAGE> 6
(B) So long as any shares of the Series A Senior Exchangeable Preferred
Stock are outstanding, the Corporation shall not authorize any class of Senior
Stock without the affirmative vote or consent of Holders of at least a majority
of the outstanding shares of Series A Senior Exchangeable Preferred Stock,
voting or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting.
(C) So long as any shares of the Series A Senior Exchangeable Preferred
Stock are outstanding, the Corporation shall not amend this Certificate of
Designation so as to affect adversely the specified rights, preferences,
privileges or voting rights of holders of shares of Series A Senior Exchangeable
Preferred Stock or to authorize the issuance of any additional shares of Series
A Senior Exchangeable Preferred Stock without the affirmative vote or consent of
Holders of at least a majority of the issued and outstanding shares of Series A
Senior Exchangeable Preferred Stock, voting or consenting, as the case may be,
as one class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting.
(D) Prior to the exchange of Series A Senior Exchangeable Preferred Stock
for Exchange Debentures, the Corporation shall not amend or modify the Indenture
for the Exchange Debentures in the form in effect on the Issue Date (the
"Indenture") (except as expressly provided therein in respect of amendments
without the consent of Holders of Exchange Debentures) without the affirmative
vote or consent of Holders of at least a majority of the shares of Series A
Senior Exchangeable Preferred Stock then outstanding, voting or consenting, as
the case may be, as one class, given in person or by proxy, either in writing or
by resolution adopted at an annual or special meeting.
(E) Except as set forth in paragraphs (f)(ii)(A), (f)(ii)(B) and (f)(ii)(C)
above, (x) the creation, authorization or issuance of any shares of any Junior
Stock, Parity Stock or Senior Stock or (y) the increase or decrease in the
amount of authorized Capital Stock of any class, including Preferred Stock,
shall not require the consent of Holders of Series A Senior Exchangeable
Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of Holders of Series A Senior
Exchangeable Preferred Stock.
(iii) Without the affirmative vote or consent of Holders of a majority of
the issued and outstanding shares of Series A Senior Exchangeable Preferred
Stock, voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting, the Corporation shall not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets to,
another Person or adopt a plan of liquidation unless: (A) either (1) the
Corporation is the surviving or continuing Person or (2) the Person (if other
than the Corporation) formed by such consolidation or into which the Corporation
is merged or the Person that acquires by conveyance, transfer or lease the
properties and assets of the Corporation substantially as an entirety or in the
case of a plan of liquidation, the Person to which assets of the Corporation
have been transferred, shall be a corporation, partnership or trust organized
and existing under the laws of the United States or any State thereof or the
District of Columbia; (B) the Series A Senior Exchangeable Preferred Stock shall
be converted into or exchanged for and shall become shares of such successor,
transferee or resulting Person, having in respect of such successor, transferee
or resulting Person the same powers, preferences and relative, participating,
optional or other special rights and the qualifications, limitations or
restrictions thereon, that the Series A Senior Exchangeable Preferred Stock had
immediately prior to such transaction; (C) immediately after giving effect to
such transaction and the use of the proceeds therefrom (on a pro forma basis,
including giving effect to any Indebtedness incurred or anticipated to be
incurred in connection with such transaction), the Corporation (in the case of
clause (1) of the foregoing clause (A)) or such Person (in the case of clause
(2) of the foregoing clause (A)) shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under paragraph
(l)(i) hereof; (D) immediately after giving effect to such transactions, no
Voting Rights Triggering Event shall have occurred or be continuing; and (E) the
Corporation has delivered to the transfer agent for the Series A Senior
Exchangeable Preferred Stock prior to the consummation of the proposed
transaction an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer complies with the terms hereof and
that all conditions precedent herein relating to such transaction have been
satisfied.
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<PAGE> 7
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of related transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Corporation, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Corporation shall be deemed to be the transfer
of all or substantially all of the properties and assets of the Corporation.
(iv) (A) If (1) after February 15, 2001 cash dividends on the Series A
Senior Exchangeable Preferred Stock are in arrears and unpaid for six or more
Dividend Periods (whether or not consecutive) (a "Dividend Default"); (2) the
Corporation fails to redeem all of the then outstanding shares of Series A
Senior Exchangeable Preferred Stock on February 15, 2008 or otherwise fails to
discharge any redemption obligation with respect to the Series A Senior
Exchangeable Preferred Stock; (3) the Corporation fails to make a Change of
Control Offer (whether pursuant to the terms of paragraph (h)(v) or otherwise)
following a Change of Control if such Change of Control Offer is required by
paragraph (h) hereof or fails to purchase shares of Series A Senior Exchangeable
Preferred Stock from Holders who elect to have such shares purchased pursuant to
the Change of Control Offer; (4) the Corporation breaches or violates one of the
provisions set forth in any of paragraphs (l)(i), (l)(ii) or (l)(iii) hereof and
the breach or violation continues for a period of 30 days or more after the
Corporation receives notice thereof specifying the default from the holders of
at least 25% of the shares of Series A Senior Exchangeable Preferred Stock then
outstanding or (5) the Corporation fails to pay at the final stated maturity
(giving effect to any extensions thereof) the principal amount of any
Indebtedness of the Corporation or any Subsidiary of the Corporation, or the
final stated maturity of any such Indebtedness is accelerated, if the aggregate
principal amount of such Indebtedness, together with the aggregate principal
amount of any other such Indebtedness in default for failure to pay principal at
the final stated maturity (giving effect to any extensions thereof) or that has
been accelerated, aggregates $5,000,000 or more at one time, in each case, after
a 10-day period during which such default shall not have been cured or such
acceleration rescinded, then in the case of any of clauses (1)-(5) the number of
directors constituting the Board of Directors shall be adjusted by the number,
if any, necessary to permit the Holders of Series A Senior Exchangeable
Preferred Stock, voting separately and as one class, to elect the lesser of two
directors or 25% of the members of the Board of Directors. Each such event
described in clauses (1), (2), (3), (4) and (5) is a "Voting Rights Triggering
Event." Holders of a majority of the issued and outstanding shares of Series A
Senior Exchangeable Preferred Stock, voting separately and as one class, shall
have the exclusive right to elect the lesser of two directors or 25% of the
members of the Board of Directors at a meeting therefor called upon occurrence
of such Voting Rights Triggering Event, and at every subsequent meeting at which
the terms of office of the directors so elected by the Holders of the Series A
Senior Exchangeable Preferred Stock expire (other than as described in
(f)(iv)(B) below). The voting rights provided herein shall be the exclusive
remedy at law or in equity of the holders of the Series A Senior Exchangeable
Preferred Stock for any Voting Rights Triggering Event.
(B) The right of the Holders of Series A Senior Exchangeable Preferred
Stock voting together as a separate class to elect members of the Board of
Directors as set forth in subparagraph (f)(iv)(A) above shall continue until
such time as (x) in the event such right arises due to a Dividend Default, all
accumulated dividends that are in arrears on the Series A Senior Exchangeable
Preferred Stock are paid in full in cash; and (y) in all other cases, the
failure, breach or default giving rise to such Voting Rights Triggering Event is
remedied or waived by the holders of at least a majority of the shares of Series
A Senior Exchangeable Preferred Stock then outstanding and entitled to vote
thereon, at which time (1) the special right of the Holders of Series A Senior
Exchangeable Preferred Stock so to vote as a class for the election of directors
and (2) the term of office of the directors elected by the Holders of the Series
A Senior Exchangeable Preferred Stock shall each terminate and the directors
elected by the holders of Common Stock shall constitute the entire Board of
Directors. At any time after voting power to elect directors shall have become
vested and be continuing in the Holders of Series A Senior Exchangeable
Preferred Stock pursuant to paragraph (f)(iv) hereof, or if vacancies shall
exist in the offices of directors elected by the Holders of Series A Senior
Exchangeable Preferred Stock, a proper officer of the Corporation may, and upon
the written request of the Holders of record of at least twenty-five percent
(25%) of the shares of Series A Senior Exchangeable Preferred Stock then
outstanding addressed to the secretary of the Corporation shall, call a special
meeting of the Holders of Series A Senior Exchangeable Preferred Stock, for the
purpose of electing the directors which
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such Holders are entitled to elect. If such meeting shall not be called by a
proper officer of the Corporation within twenty (20) days after personal service
of said written request upon the secretary of the Corporation, or within twenty
(20) days after mailing the same within the United States by certified mail,
addressed to the secretary of the Corporation at its principal executive
offices, then the Holders of record of at least twenty-five percent (25%) of the
outstanding shares of Series A Senior Exchangeable Preferred Stock may designate
in writing one of their number to call such meeting at the expense of the
Corporation, and such meeting may be called by the Person so designated upon the
notice required for the annual meetings of stockholders of the Corporation and
shall be held at the place for holding the annual meetings of stockholders. Any
Holder of Series A Senior Exchangeable Preferred Stock so designated shall have,
and the Corporation shall provide, access to the lists of stockholders to be
called pursuant to the provisions hereof.
(C) At any meeting held for the purpose of electing directors at which the
Holders of Series A Senior Exchangeable Preferred Stock shall have the right,
voting together as a separate class, to elect directors as aforesaid, the
presence in person or by proxy of the Holders of at least a majority of the
outstanding shares of Series A Senior Exchangeable Preferred Stock shall be
required to constitute a quorum of such Series A Senior Exchangeable Preferred
Stock.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Series A Senior Exchangeable Preferred Stock may be filled by the
remaining directors elected by the Holders of Series A Senior Exchangeable
Preferred Stock unless and until such vacancy shall be filled by the Holders of
Series A Senior Exchangeable Preferred Stock.
(v) In any case in which the Holders of Series A Senior Exchangeable
Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of Series A Senior Exchangeable Preferred
Stock entitled to vote with respect to such matter shall be entitled to one vote
for each share of Series A Senior Exchangeable Preferred Stock held.
(g) Exchange. (i) Requirements. The outstanding shares of Series A Senior
Exchangeable Preferred Stock are exchangeable as a whole but not in part, at the
option of the Corporation and subject to the terms and conditions of the Credit
Agreement and the 9 3/8% Note Indenture, at any time on any Dividend Payment
Date for the Corporation's 12 1/4% Subordinated Exchange Debentures due 2008
(the "Exchange Debentures") to be substantially in the form of Exhibit A to the
Indenture, a copy of which is on file with the secretary of the Corporation,
provided that any such exchange may only be made if on or prior to the date of
such exchange (i) the Corporation has paid (or is deemed to have paid) all
accumulated dividends on the Series A Senior Exchangeable Preferred Stock
(including the dividends payable on the date of exchange) and there shall be no
contractual impediment to such exchange; (ii) there shall be funds legally
available sufficient therefor; and (iii) immediately after giving effect to such
exchange, no Default or Event of Default (as defined in the Indenture) would
exist under the Indenture and no default or event of default would exist under
the Credit Agreement or the 9 3/8% Note Indenture. The exchange rate shall be
$1.00 principal amount of Exchange Debentures for each $1.00 of liquidation
preference of Series A Senior Exchangeable Preferred Stock, including, to the
extent necessary, Exchange Debentures in principal amounts less than $1,000,
provided that the Corporation shall have the right, at its option, to pay cash
in an amount equal to the principal amount of that portion of any Exchange
Debenture that is not an integral multiple of $1,000 instead of delivering an
Exchange Debenture in a denomination of less than $1,000.
(ii) Procedure for Exchange. (A) At least thirty (30) days and not more
than sixty (60) days prior to the date fixed for exchange, written notice (the
"Exchange Notice") shall be given by first-class mail, postage prepaid, to each
Holder of record on the record date fixed for such exchange of the Series A
Senior Exchangeable Preferred Stock at such Holder's address as the same appears
on the stock books of the Corporation, provided that no failure to give such
notice nor any deficiency therein shall affect the validity of the procedure for
the exchange of any shares of Series A Senior Exchangeable Preferred Stock to be
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exchanged except as to the Holder or Holders to whom the Corporation has failed
to give said notice or except as to the Holder or Holders whose notice was
defective. The Exchange Notice shall state:
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in the manner and
at the place or places designated, his certificate or certificates representing
the shares of Series A Senior Exchangeable Preferred Stock to be exchanged;
(3) that dividends on the shares of Series A Senior Exchangeable Preferred
Stock to be exchanged shall cease to accrue on such Exchange Date whether or not
certificates for shares of Series A Senior Exchangeable Preferred Stock are
surrendered for exchange on such Exchange Date unless the corporation shall
default in the delivery of Exchange Debentures; and
(4) that interest on the Exchange Debentures shall accrue from the Exchange
Date whether or not certificates for shares of Series A Senior Exchangeable
Preferred Stock are surrendered for exchange on such Exchange Date.
(B) On or before the Exchange Date, each Holder of Series A Senior
Exchangeable Preferred Stock shall surrender the certificate or certificates
representing such shares of Series A Senior Exchangeable Preferred Stock, in the
manner and at the place designated in the Exchange Notice. The Corporation shall
cause the Exchange Debentures to be executed on the Exchange Date and, upon
surrender in accordance with the Exchange Notice of the certificates for any
shares of Series A Senior Exchangeable Preferred Stock so exchanged, duly
endorsed (or otherwise in proper form for transfer, as determined by the
Corporation), such shares shall be exchanged by the Corporation into Exchange
Debentures. The Corporation shall pay interest on the Exchange Debentures at the
rate and on the dates specified therein from the Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the Exchange Date
specified in such notice (1) the Indenture shall have been duly executed and
delivered by the Corporation and the trustee thereunder and (2) all Exchange
Debentures necessary for such exchange shall have been duly executed by the
Corporation and delivered to the trustee under the Indenture with irrevocable
instructions to authenticate the Exchange Debentures necessary for such
exchange, then the rights of the Holders of Series A Senior Exchangeable
Preferred Stock so exchanged as stockholders of the Corporation shall cease
(except the right to receive Exchange Debentures, an amount in cash equal to the
amount of accrued and unpaid dividends to the Exchange Date and, if the
Corporation so elects, cash in lieu of any Exchange Debenture not an integral
multiple of $1,000), and the Person or Persons entitled to receive the Exchange
Debentures issuable upon exchange shall be treated for all purposes as the
registered Holder or Holders of such Exchange Debentures as of the Exchange
Date.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (g), the Corporation shall not be entitled to
exchange the Series A Senior Exchangeable Preferred Stock for Exchange
Debentures if such exchange, or any term or provision of the Indenture or the
Exchange Debentures, or the performance of the Corporation's obligations under
the Indenture or the Exchange Debentures, shall materially violate or conflict
with any applicable law or agreement or instrument then binding on the
Corporation or if, at the time of such exchange, the Corporation is insolvent or
if it would be rendered insolvent by such exchange.
(h) Change of Control. (i) In the event of a Change of Control (the date of
such occurrence being the "Change of Control Date"), the Corporation shall
notify the Holders of the Series A Senior Exchangeable Preferred Stock in
writing of such occurrence and shall make an offer to purchase (the "Change of
Control Offer") all then outstanding shares of Series A Senior Exchangeable
Preferred Stock at a purchase price of 101% of the then effective liquidation
preference thereof plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends per share (including an amount in cash equal to
a prorated dividend for the period from the Dividend Payment Date immediately
prior to the Change of Control Payment Date to the Change of Control Payment
Date).
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(ii) Within 30 days following the Change of Control Date, the Corporation
shall send, by first class mail, postage prepaid, a notice to each Holder of
Series A Senior Exchangeable Preferred Stock at such Holder's address as it
appears on the stock books of the Corporation, which notice shall govern the
terms of the Change of Control Offer. The notice to the Holders shall contain
all instructions and materials necessary to enable such Holders to tender Series
A Senior Exchangeable Preferred Stock pursuant to the Change of Control Offer.
Such notice shall state:
(A) that a Change of Control has occurred, that the Change of Control Offer
is being made pursuant to this paragraph (h) and that all Series A Senior
Exchangeable Preferred Stock validly tendered and not withdrawn will be accepted
for payment;
(B) the purchase price (including the amount of accrued dividends, if any)
and the purchase date (which shall be no earlier than 30 days nor later than 45
days from the date such notice is mailed, other than as may be required by law)
(the "Change of Control Payment Date");
(C) that any shares of Series A Senior Exchangeable Preferred Stock not
tendered will continue to accrue dividends;
(D) that, unless the Corporation defaults in making payment therefor, any
share of Series A Senior Exchangeable Preferred Stock accepted for payment
pursuant to the Change of Control Offer shall cease to accrue dividends after
the Change of Control Payment Date;
(E) that Holders electing to have any shares of Series A Senior
Exchangeable Preferred Stock purchased pursuant to a Change of Control Offer
will be required to surrender the certificate or certificates representing such
shares, properly endorsed for transfer together with such customary documents as
the Corporation and the transfer agent may reasonably require, in the manner and
at the place specified in the notice prior to the close of business on the
Business Day prior to the Change of Control Payment Date;
(F) that Holders will be entitled to withdraw their election if the
Corporation receives, not later than five Business Days prior to the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the number of shares of Series A Senior
Exchangeable Preferred Stock the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have such shares of Series A
Senior Exchangeable Preferred Stock purchased;
(G) that Holders whose shares of Series A Senior Exchangeable Preferred
Stock are purchased only in part will be issued a new certificate representing
the unpurchased shares of Series A Senior Exchangeable Preferred Stock; and
(H) the circumstances and relevant facts regarding such Change of Control.
(iii) The Corporation will comply with any securities laws and regulations,
to the extent such laws and regulations are applicable to the repurchase of the
Series A Senior Exchangeable Preferred Stock in connection with a Change of
Control Offer.
(iv) On the Change of Control Payment Date the Corporation shall (A) accept
for payment the shares of Series A Senior Exchangeable Preferred Stock validly
tendered pursuant to the Change of Control Offer, (B) pay to the Holders of
shares so accepted the purchase price therefor in cash and (C) cancel and retire
each surrendered certificate. Unless the Corporation defaults in the payment for
the shares of Series A Senior Exchangeable Preferred Stock tendered pursuant to
the Change of Control Offer, dividends will cease to accrue with respect to the
shares of Series A Senior Exchangeable Preferred Stock tendered and all rights
of Holders of such tendered shares will terminate, except for the right to
receive payment therefor, on the Change of Control Payment Date.
(v) If the purchase of the Series A Senior Exchangeable Preferred Stock
would violate or constitute a default under the Credit Agreement, the 9 3/8%
Note Indenture or other Indebtedness of the Corporation, then, notwithstanding
anything to the contrary contained above, prior to complying with the foregoing
provisions, but in any event within 30 days following the Change of Control
Date, the Corporation shall either (A) repay in full all such Indebtedness and
terminate all commitments outstanding under the Credit Agreement or
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(B) obtain the requisite consents, if any, under the Credit Agreement, the
9 3/8% Note Indenture or such Indebtedness required to permit the repurchase of
Series A Senior Exchangeable Preferred Stock required by this paragraph (h).
Until the requirements of the immediately preceding sentence are satisfied, the
Corporation shall not make, and shall not be obligated to make, any Change of
Control Offer; provided that the Corporation's failure to comply with the
provisions of this paragraph (h)(v) shall constitute a Voting Rights Triggering
Event.
(i) Conversion or Exchange. The Holders of shares of Series A Senior
Exchangeable Preferred Stock shall not have any rights hereunder to convert such
shares into or exchange such shares for shares of any other class or classes or
of any other series of any class or classes of Capital Stock of the Corporation.
(j) Reissuance of Series A Senior Exchangeable Preferred Stock. Shares of
Series A Senior Exchangeable Preferred Stock that have been issued and
reacquired in any manner, including shares purchased or redeemed or exchanged,
shall (upon compliance with any applicable provisions of the laws of Delaware)
have the status of authorized and unissued shares of Preferred stock
undesignated as to series and may be redesignated and reissued as part of any
series of Preferred Stock, provided that any issuance of such shares as Series A
Senior Exchangeable Preferred Stock must be in compliance with the terms hereof.
(k) Business Day. If any payment, redemption or exchange shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Additional Provisions.
(i) Limitation on Incurrence of Additional Indebtedness. Neither the
Corporation nor any of its Subsidiaries shall, directly or indirectly, create,
incur, assume, guarantee, acquire or become liable for, contingently or
otherwise (collectively, "incur"), any Indebtedness other than Permitted
Indebtedness. Notwithstanding the foregoing limitation, the Corporation or any
Subsidiary may incur Indebtedness if, on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence of such Indebtedness and the
receipt and application of the proceeds thereof, the Corporation's Leverage
Ratio is less than 7.0 to 1.
(ii) Limitation on Restricted Payments. (A) Neither the Corporation nor any
of its Subsidiaries shall, directly or indirectly, make any Restricted Payment
if immediately after giving effect thereto:
(1) any Voting Rights Triggering Event shall have occurred and be
continuing; or
(2) the Corporation is not able to incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with paragraph (l)(i) above;
or
(3) the aggregate amount of Restricted Payments made on or subsequent to
the Issue Date, together with the aggregate amount of Restricted Payments made
by Radio Broadcasting subsequent to the Radio Broadcasting Preferred Stock Issue
Date and through the date immediately preceding the Issue Date (the amount
expended for such purposes, if other than in cash, being the fair market value
of such property as determined by the respective Board of Directors in good
faith) exceeds the sum of (I) (x) 100% of the aggregate Consolidated EBITDA of
Radio Broadcasting from February 14, 1996 through the date immediately preceding
the Issue Date, plus 100% of the aggregate Consolidated EBITDA of the
Corporation from and after the Issue Date (or, in the event that either such
Consolidated EBITDA shall be a deficit, minus 100% of such deficit), to the most
recent date for which financial information is available to the Corporation,
taken as one accounting period, less (y) 1.4 times Consolidated Interest Expense
for the same entities and for the same periods, plus (II) 100% of the aggregate
net proceeds, including the fair market value of property other than cash as
determined by the Board of Directors in good faith, received by the Corporation
from any Person (other than a Subsidiary of the Corporation) from the issuance
and sale on or subsequent to the Issue Date of Qualified Capital Stock of the
Corporation, plus 100% of the aggregate net proceeds, including the fair market
value of property other than cash as previously determined by the board of
directors of Radio Broadcasting in good faith, previously received by Radio
Broadcasting from any Person (other than a Subsidiary of Radio Broadcasting)
from the issuance and sale on or subsequent to February 14, 1996 of Qualified
Capital Stock of Radio Broadcasting (excluding any net proceeds from issuances
and sales financed
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directly or indirectly using funds borrowed from the Corporation or any
Subsidiary of the Corporation or from Radio Broadcasting or any Subsidiary of
Radio Broadcasting, respectively, until and to the extent such borrowing is
repaid, but including the proceeds from the issuance and sale of any securities
convertible into or exchangeable for Qualified Capital Stock to the extent such
securities are so converted or exchanged and including any additional proceeds
received by the Corporation or Radio Broadcasting, respectively, upon such
conversion or exchange), plus (III) without duplication of any amount included
in clause (3)(II) above, 100% of the aggregate net proceeds, including the fair
market value of property other than cash (valued as provided in clause (3)(II)
above), received by the Corporation as a capital contribution on or subsequent
to the Issue Date, plus 100% of the aggregate net proceeds, including the fair
market value of property other than cash (valued as provided in clause (3)(II)
above), previously received by Radio Broadcasting as a capital contribution on
or subsequent to February 14, 1996 (excluding the net proceeds from a Public
Equity Offering by Chancellor Mezzanine to the extent used by the Corporation to
redeem the Series A Senior Exchangeable Preferred Stock); plus (IV) $2,500,000.
(B) Notwithstanding the foregoing, these provisions will not prohibit: (1)
the payment of any dividend or the making of any distribution within 60 days
after the date of its declaration if such dividend or distribution would have
been permitted on the date of declaration; (2) the acquisition of any Capital
Stock of the Corporation or any warrants, options or other rights to acquire
shares of any class of such Capital Stock either (I) solely in exchange for
shares of Qualified Capital Stock or other rights to acquire Qualified Capital
Stock or (II) through the application of the net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Corporation) of
shares of Qualified Capital Stock or warrants, options or other rights to
acquire Qualified Capital Stock; (3) payments by the Corporation to fund the
operating expenses of Chancellor Mezzanine in an amount not to exceed $500,000
per annum; (4) payments by the Corporation to Chancellor Mezzanine to enable
Chancellor Mezzanine to make payments pursuant to (x) the Financial Monitoring
and Oversight Agreement or (y) the Tax Sharing Agreement; (5) payments by the
Corporation to repurchase, or enable Chancellor Mezzanine to repurchase, Capital
Stock or other securities of Chancellor Mezzanine from employees of Chancellor
Mezzanine or the Corporation in an aggregate amount not to exceed $5,000,000;
(6) payments to enable Chancellor Mezzanine to redeem or repurchase stock
purchase or similar rights in an aggregate amount not to exceed $500,000; (7)
payments, not to exceed $100,000 in the aggregate, to enable the Corporation to
make cash payments to holders of its Capital Stock in lieu of the issuance of
fractional shares of its Capital Stock; and (8) payments made pursuant to any
merger, consolidation or sale of assets effected in accordance with paragraph
(f)(iii) above; provided, however, that no such payment may be made pursuant to
this clause (8) unless, after giving effect to such transaction (and the
incurrence of any Indebtedness in connection therewith and the use of the
proceeds thereof), the Corporation would be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with paragraph
(l)(i) above such that after incurring that $1.00 of additional Indebtedness,
the Leverage Ratio would be less than 6.0 to 1; provided, further, however, that
in the case of clauses (4)(x), (5), (6), (7) and (8), no Voting Rights
Triggering Event shall have occurred or be continuing at the time of such
payment or as a result thereof. In determining the aggregate amount of
Restricted Payments made by the Corporation on or subsequent to the Issue Date
and the aggregate amount of Restricted Payments made by Radio Broadcasting
subsequent to the Radio Broadcasting Preferred Stock Issue Date and through the
date immediately preceding the Issue Date, amounts expended pursuant to clauses
(1), (2), (4)(x), (5), (6), (7) and (8) (including any amounts previously
expended by Radio Broadcasting pursuant to clauses l(ii)(B)(1), (2), (4)(x),
(5), (6), (7) and (8) under the certification of designation for the Radio
Broadcasting Preferred Stock) shall be included in such calculation.
(iii) Limitation on Preferred Stock of Subsidiaries. The Corporation shall
not permit any of its Subsidiaries to issue any Preferred Stock (other than to
the Corporation or to a Wholly Owned Subsidiary of the Corporation) or permit
any Person (other than to the Corporation or a Wholly Owned Subsidiary of the
Corporation) to own any Preferred Stock of a Subsidiary of the Corporation
(other than Acquired Preferred Stock; provided that at the time the issuer of
such Acquired Preferred Stock becomes a Subsidiary of the Corporation or merges
with the Corporation or any of its Subsidiaries, and after giving effect to such
transaction, the Corporation shall be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with paragraph
(l)(i) above).
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(iv) Reports. So long as any shares of Series A Senior Exchangeable
Preferred Stock are outstanding, the Corporation will provide to the holders of
Series A Senior Exchangeable Preferred Stock, within 15 days after it files them
with the Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the Commission may by rules and regulations prescribe) which the Corporation
files with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
In the event that the Corporation is no longer required to furnish such reports
to its securityholders pursuant to the Exchange Act, the Corporation will cause
its consolidated financial statements, comparable to those which would have been
required to appear in annual or quarterly reports, to be delivered to the
Holders of Series A Senior Exchangeable Preferred Stock.
(m) Definitions. As used in this Certificate of Designation, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
"9 3/8% Note Indenture" means the Indenture governing the 9 3/8% Notes
as such Indenture may be amended or supplemented from time to time in
accordance with the terms thereof.
"9 3/8% Notes" means Radio Broadcasting's $200.0 million aggregate
principal amount of 9 3/8% Senior Subordinated Notes due 2004 of Radio
Broadcasting, as assumed by the Corporation, as the same may be modified or
amended from time to time and future refinancings thereof.
"12 1/2% Notes" means Radio Broadcasting's previously outstanding
$60.0 million aggregate principal amount of 12 1/2% Senior Subordinated
Notes due 2004.
"Acquired Preferred Stock" means Preferred Stock of any Person at the
time such Person becomes a Subsidiary of the Corporation or at the time it
merges or consolidates with the Corporation or any of its Subsidiaries and
not issued by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Subsidiary of the Corporation or
such acquisition, merger or consolidation.
"Affiliate" means a Person who, directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common
control with, the Corporation. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an Investment by the Corporation or any
Subsidiary of the Corporation in any other Person pursuant to which such
Person shall become a Subsidiary of the Corporation or shall be
consolidated or merged with the Corporation or any Subsidiary of the
Corporation or (ii) the acquisition by the Corporation or any Subsidiary of
the Corporation of assets of any Person comprising a division or line of
business of such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the
Corporation or any of its Subsidiaries (excluding any Sale and Leaseback
Transaction or any pledge of assets or stock by the Corporation or any of
its Subsidiaries) to any Person other than the Corporation or a Wholly
Owned Subsidiary of the Corporation of (i) any Capital Stock of any
Subsidiary of the Corporation or (ii) any other property or assets of the
Corporation or any Subsidiary of the Corporation other than in the ordinary
course of business.
"Board of Directors" shall have the meaning ascribed to it in the
first paragraph of this Resolution.
"Business Day" means any day except a Saturday, a Sunday, or any day
on which banking institutions in New York, New York are required or
authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated) of capital stock of such Person and (ii)
with respect to any Person that is not a corporation. any and all
partnership or other equity interests of such Person.
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"Capitalized Lease Obligation" means, as to any Person, the obligation
of such Person to pay rent or other amounts under a lease to which such
Person is a party that is required to be classified and accounted for as a
capital lease obligation under GAAP, and for purposes of this definition,
the amount of such obligation at any date shall be the capitalized amount
of such obligation at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc.; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from Standard & Poor's
Corporation or at least P-1 from Moody's Investors Service, Inc.; (iv)
certificates of deposit or bankers' acceptances maturing within one year
from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state
thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of
not less than $200,000,000; (v) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications
specified in clause (iv) above; and (vi) investments in money market funds
which invest substantially all their assets in securities of the types
described in clauses (i) through (v) above.
"Chancellor Broadcasting" means Chancellor Broadcasting Company, a
Delaware corporation that was merged with and into Evergreen Mezzanine
Holdings Corporation, a Delaware corporation, pursuant to the Merger
Agreement on September , 1997.
"Chancellor Media" means Chancellor Media Corporation, a Delaware
corporation, and its successors.
"Chancellor Mezzanine" means Chancellor Mezzanine Holdings
Corporation, a Delaware corporation, and its successors.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Corporation to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a "Group")
(whether or not otherwise in compliance with the provisions of the Exchange
Indenture), other than to Hicks Muse or any of its Affiliates, officers and
directors or to Steven Dinetz (the "Permitted Holders"); or (ii) a majority
of the Board of Directors of Chancellor Media, Chancellor Mezzanine or the
Corporation shall consist of Persons who are not Continuing Directors; or
(iii) the acquisition by any Person or Group (other than the Permitted
Holders) of the power, directly or indirectly, to vote or direct the voting
of securities having more than 50% of the ordinary voting power for the
election of directors of Chancellor Media, Chancellor Mezzanine or the
Corporation.
"Change of Control Date" shall have the meaning ascribed to it in
paragraph (h) hereof.
"Change of Control Payment Date" shall have the meaning ascribed to it
in paragraph (h) hereof.
"Change of Control Offer" shall have the meaning ascribed to it in
paragraph (h) hereof.
"Commission" means the Securities and Exchange Commission.
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement entered into by the
Corporation or any of its Subsidiaries designed to protect the Corporation
or any of its Subsidiaries against fluctuations in the price of commodities
actually used in the ordinary course of business of the Corporation and its
Subsidiaries.
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"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been reduced thereby, (a)
all income taxes of such Person and its Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable
to extraordinary or nonrecurring gains or losses), (b) Consolidated
Interest Expense and (c) Consolidated Non-Cash Charges, all as determined
on a consolidated basis for such Person and its Subsidiaries in conformity
with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the interest expense of
such Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation,
(a) any amortization of debt discount, (b) the net cost under Interest Swap
Obligations (including any amortization of discounts), (c) the interest
portion of any deferred payment obligation, (d) all commissions, discounts
and other fees and charges owed with respect to letters of credit, bankers'
acceptance financing or similar facilities, and (e) all accrued interest
and (ii) the interest component of Capitalized Lease Obligations paid or
accrued by such Person and its Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom, without duplication, (i)
gains and losses from Asset Sales or abandonments or reserves relating
thereto and the related tax effects, (ii) items classified as extraordinary
or nonrecurring gains and losses, and the related tax effects according to
GAAP, (iii) the net income (or loss) of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Subsidiary of
such first referred to Person or is merged or consolidated with it or any
of its Subsidiaries, (iv) the net income of any Subsidiary to the extent
that the declaration of dividends or similar distributions by that
Subsidiary of that income is restricted by contract, operation of law or
otherwise and (v) the net income of any Person, other than a Subsidiary,
except to the extent of the lesser of (a) dividends or distributions paid
to such first referred to Person or its Subsidiary by such Person and (b)
the net income of such Person (but in no event less than zero), and the net
loss of such Person shall be included only to the extent of the aggregate
Investment of the first referred to Person or a consolidated Subsidiary of
such Person.
"Consolidated Non-Cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries reducing Consolidated Net
Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary or nonrecurring item).
"Continuing Director" means, as of the date of determination, any
Person who (i) was a member of the Board of Directors of Chancellor
Broadcasting or Radio Broadcasting on the Radio Broadcasting Preferred
Stock Issue Date, (ii) was nominated for election or elected to the Board
of Directors of Chancellor Media, Chancellor Mezzanine or the Corporation
with the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election, or (iii) is a representative of a Permitted Holder.
"CRBC Credit Agreement" means the Credit Agreement, dated February 14,
1996 among Chancellor Broadcasting, Radio Broadcasting, the lenders from
time to time party thereto and Bankers Trust Company as agent, together
with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such
agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including
any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including by way of adding subsidiaries of Radio
Broadcasting as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
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"Credit Agreement" means the Credit Agreement, dated April 25, 1997
among Evergreen Media Corporation of Los Angeles, the lenders from time to
time party thereto, The Toronto-Dominion Bank, Bankers Trust Company, The
Bank of New York, NationsBank of Texas, N.A. and Union Bank of California,
as Managing Agents; Toronto Dominion Securities (USA), Inc., as Arranging
Agent; and Toronto Dominion (Texas), Inc., as Administrative Agent for the
lenders, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case
as such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including
any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including by way of adding subsidiaries of the
Corporation as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agents, lender
or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to
protect the Corporation or any of its Subsidiaries against fluctuations in
currency values.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures
(excluding any maturity as the result of an optional redemption by the
issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of a Change of Control),
in whole or in part, on or prior to February 15, 2008.
"Dividend Payment Date" means February 15, May 15, August 15 and
November 15, of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"Dividend Record Date" means February 1, May 1, August 1 and November
1 of each year.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exchange Date" means a date on which shares of Series A Senior
Exchangeable Preferred Stock are exchanged by the Corporation for Exchange
Debentures.
"Exchange Debentures" shall have the meaning ascribed to it in
paragraph (g) hereof.
"Exchange Notice" shall have the meaning ascribed to it in paragraph
(g) hereof.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any successor thereto.
"Financial Monitoring and Oversight Agreement" means, collectively,
the Financial Monitoring and Oversight Agreement among Hicks, Muse & Co.
Partners, L.P., Radio Broadcasting and Chancellor Broadcasting, as in
effect on the Radio Broadcasting Preferred Stock Issue Date, and the
Financial Advisory Agreement among HM/2 Management Partners, L.P., Radio
Broadcasting and Chancellor Broadcasting, as in effect on the Radio
Broadcasting Preferred Stock Issue Date.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America as of the Issue Date.
"Hicks Muse" means Hicks, Muse, Tate & Furst Incorporated.
"Holder" means a holder of shares of Series A Senior Exchangeable
Preferred Stock as reflected in the stock books of the Corporation.
"Indebtedness" means with respect to any Person, without duplication,
any liability of such Person (i) for borrowed money, (ii) evidenced by
bonds, debentures, notes or other similar instruments,
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(iii) constituting Capitalized Lease Obligations, (iv) incurred or assumed
as the deferred purchase price of property, or pursuant to conditional sale
obligations and title retention agreements (but excluding trade accounts
payable arising in the ordinary course of business), (v) for the
reimbursement of any obligor on any letter of credit, banker's acceptance
or similar credit transaction, (vi) for Indebtedness of others guaranteed
by such Person, (vii) for Interest Swap Obligations, Commodity Agreements
and Currency Agreements and (viii) for Indebtedness of any other Person of
the type referred to in clauses (i) through (vii) which is secured by any
Lien on any property or asset of such first referred to Person, the amount
of such Indebtedness being deemed to be the lesser of the value of such
property or asset or the amount of the Indebtedness so secured. The amount
of Indebtedness of any Person at any date shall be the outstanding
principal amount of all unconditional obligations described above, as such
amount would be reflected on a balance sheet prepared in accordance with
GAAP, and the maximum liability at such date of such Person for any
contingent obligations described above.
"Initial Dividend Period" means the dividend period commencing on
August 16, 1997 and ending on the first Dividend Payment Date to occur
thereafter.
"Interest Swap Obligations" means the obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge
or arrangement.
"Investment" means (i) any transfer or delivery of cash, stock or
other property of value in exchange for Indebtedness, stock or other
security or ownership interest in any Person by way of loan, advance,
capital contribution, guarantee or otherwise and (ii) an investment deemed
to have been made by the Corporation at the time any entity which was a
Subsidiary of the Corporation ceases to be such a Subsidiary in an amount
equal to the value of the loans and advances made, and any remaining
ownership interest in, such entity immediately following such entity
ceasing to be a Subsidiary of the Corporation. The amount of any non-cash
Investment shall be the fair market value of such Investment, as determined
conclusively in good faith by management of the Corporation unless the fair
market value of such Investment exceeds $1,000,000, in which case the fair
market value shall be determined conclusively in good faith by the Board of
Directors at the time such Investment is made.
"Issue Date" means September , 1997, the date of original issuance
of the Series A Senior Exchangeable Preferred Stock.
"Junior Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Leverage Ratio" shall mean, as to any Person, the ratio of (i) the
sum of the aggregate outstanding amount of Indebtedness of such Person and
its Subsidiaries as of the date of calculation on a consolidated basis in
accordance with GAAP to (ii) the Consolidated EBITDA of such Person for the
four full fiscal quarters (the "Four Quarter Period") ending on or prior to
the date of determination.
For purposes of this definition, the aggregate outstanding principal amount
of Indebtedness of the Person and its Subsidiaries for which such calculation is
made shall be determined on a pro forma basis as if the Indebtedness giving rise
to the need to perform such calculation had been incurred and the proceeds
therefrom had been applied, and all other transactions in respect of which such
Indebtedness is being incurred had occurred, on the last day of the Four Quarter
Period. In addition to the foregoing, for purposes of this definition,
"Consolidated EBITDA" shall be calculated on a pro forma basis after giving
effect to (i) the incurrence of the Indebtedness of such Person and its
Subsidiaries (and the application of the proceeds therefrom) giving rise to the
need to make such calculation and any incurrence (and the application of the
proceeds therefrom) or repayment of other Indebtedness, other than the
incurrence or repayment of Indebtedness pursuant to working capital facilities,
at any time subsequent to the beginning of the Four Quarter Period and on or
prior to the date of determination, as if such incurrence (and the application
of the proceeds thereof), or the repayment, as the case may be, occurred on the
first day of the Four Quarter Period and (ii) any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of such Person or one of its
Subsidiaries (including any Person that becomes a Subsidiary as a result of such
Asset Acquisition) incurring, assuming or otherwise becoming
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<PAGE> 18
liable for Indebtedness) at any time on or subsequent to the first day of the
Four Quarter Period and on or prior to the date of determination, as if such
Asset Sale or Asset Acquisition (including the incurrence, assumption or
liability for any such Indebtedness and also including any Consolidated EBITDA
associated with such Asset Acquisition) occurred on the first day of the Four
Quarter Period. Furthermore, in calculating "Consolidated Interest Expense" for
purposes of the calculation of "Consolidated EBITDA," (i) interest on
Indebtedness determined on a fluctuating basis as of the date of determination
(including Indebtedness actually incurred on the date of the transaction giving
rise to the need to calculate the Leverage Ratio) and which will continue to be
so determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness as in effect on the
date of determination and (ii) notwithstanding (i) above, interest determined on
a fluctuating basis, to the extent such interest is covered by Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (e) hereof.
"Merger Agreement" means the Agreement and Plan of Merger, dated
February 19, 1997, as amended and restated on July 31, 1997, among
Chancellor Broadcasting, Radio Broadcasting, Evergreen Media Corporation,
Evergreen Mezzanine Holdings Corporation and Evergreen Media Corporation of
Los Angeles.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing, or otherwise
relating to, any Indebtedness.
"Officers' Certificate" means a certificate signed by two officers or
by an officer and either an Assistant Treasurer or an Assistant Secretary
of the Corporation which certificate shall include a statement that, in the
opinion of such signers all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken. In
addition, such certificate shall include (i) a statement that the
signatories have read the relevant covenant or condition, (ii) a brief
statement of the nature and scope of such examination or investigation upon
which the statements are based, (iii) a statement that, in the opinion of
such signatories, they have made such examination or investigation as is
reasonably necessary to express an informed opinion and (iv) a statement as
to whether or not, in the opinion of the signatories, such relevant
conditions or covenants have been complied with.
"Opinion of Counsel" means an opinion of counsel that, in such
counsel's opinion, all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken.
Such opinion shall also include the statements called for in the second
sentence under "Officers' Certificate".
"Optional Redemption Price" shall have the meaning ascribed to it in
paragraph (e)(i) hereof.
"Parity Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Permitted Indebtedness" means, without duplication, (i) Indebtedness
of Radio Broadcasting outstanding on the Radio Broadcasting Preferred Stock
Issue Date, including, without limitation, the 9 3/8% Notes, and guarantees
thereof, plus Indebtedness of Radio Broadcasting incurred subsequent to the
Radio Broadcasting Preferred Stock Issue Date, in the aggregate principal
amount of $60.0 million, for the purpose of refinancing the 12 1/2% Notes,
and future refinancings of such Indebtedness; (ii) Indebtedness of Radio
Broadcasting or the Corporation incurred pursuant to the CRBC Credit
Agreement or the Credit Agreement in an aggregate principal amount at any
time outstanding not to exceed the sum of the aggregate commitments
pursuant to the CRBC Credit Agreement as initially in effect reduced by the
aggregate principal amount permanently repaid with the proceeds of Asset
Sales; (iii) Indebtedness evidenced by the Exchange Debentures, including
any Exchange Debentures issued in
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accordance with the Exchange Indenture as the payment of interest on the
Exchange Debentures; (iv) Interest Swap Obligations; provided that such
Interest Swap Obligations are entered into to protect the Corporation from
fluctuations in interest rates of its Indebtedness; (v) additional
Indebtedness of the Corporation or any of its Subsidiaries not to exceed
$10,000,000 in principal amount outstanding at any time (which amount may,
but need not, be incurred under the Credit Agreement); (vi) Refinancing
Indebtedness; (vii) Indebtedness owed by the Corporation to any Wholly
Owned Subsidiary or by any Subsidiary to the Corporation or any Wholly
Owned Subsidiary of the Corporation; and (viii) guarantees by Subsidiaries
of any Indebtedness permitted to be incurred pursuant to the terms of
paragraph (1)(i) hereof.
"Permitted Investments" means (i) Investments by the Corporation or
any Subsidiary to acquire the stock or assets of any Person (or
Indebtedness of such Person acquired in connection with a transaction in
which such Person becomes a Subsidiary of the Corporation) engaged in the
broadcast business or businesses reasonably related thereto; provided that
if any such Investment or series of related Investments involves an
Investment by the Corporation in excess of $5,000,000, the Corporation is
able, at the time of such investment and immediately after giving effect
thereto, to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with paragraph (l)(i) hereof, (ii)
Investments received by the Corporation or its Subsidiaries as
consideration for a sale of assets, (iii) Investments by the Corporation or
any Wholly Owned Subsidiary of the Corporation in any Wholly Owned
Subsidiary of the Corporation (whether existing on the Issue Date or
created thereafter) or any Person that after such Investments, and as a
result thereof, becomes a Wholly Owned Subsidiary of the Corporation and
Investments in the Corporation by any Wholly Owned Subsidiary of the
Corporation, (iv) cash and Cash Equivalents, (v) Investments in securities
of trade creditors, wholesalers or customers received pursuant to any plan
of reorganization or similar arrangement and (vi) additional Investments in
an aggregate amount not to exceed $2,500,000 at any time outstanding.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or
a governmental agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"pro forma" means, unless otherwise provided herein, with respect to
any calculation made or required to be made pursuant hereto, a calculation
in accordance with Article 11 of Regulation S-X under the Securities Act.
"Public Equity Offering" means an underwritten public offering of
Capital Stock (other than Disqualified Capital Stock) of the Corporation or
Chancellor Mezzanine, pursuant to an effective registration statement filed
with the Commission in accordance with the Securities Act; provided,
however, that, in the case of a Public Equity Offering by Chancellor
Mezzanine, Chancellor Mezzanine contributes to the capital of the
Corporation net cash proceeds in an amount sufficient to redeem the Series
A Senior Exchangeable Preferred Stock called for redemption in accordance
with the terms hereof.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Quarterly Dividend Period" shall mean the quarterly period commencing
on each February 16, May 16, August 16 and November 16 and ending on the
next succeeding Dividend Payment Date, respectively.
"Series A Senior Exchangeable Preferred Stock" shall have the meaning
ascribed to it in paragraph (a) hereof.
"Radio Broadcasting" means Chancellor Radio Broadcasting Company, a
Delaware corporation that was merged with and into Evergreen Media
Corporation of Los Angeles pursuant to the Merger Agreement on September
, 1997.
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"Radio Broadcasting Preferred Stock" shall mean the 12 1/4% Series A
Senior Cumulative Exchangeable Preferred Stock of Radio Broadcasting.
"Radio Broadcasting Preferred Stock Issue Date" shall mean September
9, 1996, the date of original issuance of the Radio Broadcasting Preferred
Stock.
"Redemption Date", with respect to any shares of Series A Senior
Exchangeable Preferred Stock, means the date on which such shares of Series
A Senior Exchangeable Preferred Stock are redeemed by the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph
(e) hereof.
"Refinancing Indebtedness" means any refinancing by the Corporation of
Indebtedness of the Corporation or any of its Subsidiaries incurred in
accordance with paragraph (l)(i) hereof (other than pursuant to clause (ii)
or (iv) of the definition of Permitted Indebtedness) that does not (i)
result in an increase in the aggregate principal amount of Indebtedness
(such principal amount to include, for purposes of this definition, any
premiums, penalties or accrued interest paid with the proceeds of the
Refinancing Indebtedness) of such Person or (ii) create Indebtedness with
(a) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being refinanced or (b) a
final maturity earlier than the final maturity of the Indebtedness being
refinanced.
"Restricted Payment" means (i) the declaration or payment of any
dividend or the making of any other distribution (other than dividends or
distributions payable in Qualified Capital Stock) on shares of Junior
Stock, (ii) any purchase, redemption, retirement or other acquisition for
value of any Junior Stock, or any warrants, rights or options to acquire
shares of Junior Stock, other than through the exchange of such Junior
Stock or any warrants, rights or options to acquire shares of any class of
such Junior Stock for Qualified Capital Stock or warrants, rights or
options to acquire Qualified Capital Stock or (iii) the making of any
Investment (other than a Permitted Investment).
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to the Corporation or a Subsidiary of any
property, whether owned by the Corporation or any Subsidiary at the Issue
Date or later acquired, which has been or is to be sold or transferred by
the Corporation or such Subsidiary to such Person or to any other Person
from whom funds have been or are to be advanced by such Person on the
security of such property.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person. Notwithstanding anything contained herein
to the contrary, all references to the Corporation and its consolidated
Subsidiaries or to financial information prepared on a consolidated basis
in accordance with GAAP shall be deemed to include the Corporation and its
Subsidiaries as to which financial statements are prepared on a combined
basis in accordance with GAAP and to financial information prepared on such
a combined basis. Notwithstanding anything herein to the contrary, an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes
hereof.
"Tax Sharing Agreement" means the Tax Sharing Agreement between Radio
Broadcasting and Chancellor Broadcasting, as in effect on the Radio
Broadcasting Preferred Stock Issue Date.
"Unrestricted Subsidiary" means a Subsidiary of the Corporation
created after the Issue Date and so designated by a resolution adopted by
the Board of Directors, provided that (i) neither the Corporation nor any
of its other Subsidiaries (other than Unrestricted Subsidiaries) (a)
provides any credit support
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for any Indebtedness of such Subsidiary (including any undertaking,
agreement or instrument evidencing such Indebtedness) or (b) is directly or
indirectly liable for any Indebtedness of such Subsidiary, (ii) the
creditors with respect to Indebtedness for borrowed money of such
Subsidiary, having a principal amount in excess of $5,000,000, have agreed
in writing that they have no recourse, direct or indirect, to the
Corporation or any other Subsidiary of the Corporation (other than
Unrestricted Subsidiaries), including, without limitation, recourse with
respect to the payment of principal of or interest on any Indebtedness of
such Subsidiary and (iii) at the time of designation of such Subsidiary
such Subsidiary has no property or assets (other than de minimis assets
resulting from the initial capitalization of such Subsidiary). Any such
designation by the Board of Directors shall be evidenced by a resolution of
the Board of Directors giving effect to such designation.
"Voting Rights Triggering Event" shall have the meaning ascribed to it
in paragraph f(iv) hereof.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b)
the total of the product obtained by multiplying (i) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payment of principal, including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest one-
twelfth) which will elapse between such date and the making of such
payment.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities (other than
directors' qualifying shares) which normally have the right to vote m the
election of directors are owned by such Person.
IN WITNESS WHEREOF, Chancellor Media Corporation of Los Angeles has caused
this Certificate to be signed by Matthew E. Devine, its Chief Financial Officer,
this day of September 1997.
CHANCELLOR MEDIA CORPORATION OF LOS
ANGELES
By:
----------------------------------
Name: Matthew E. Devine
Title: Chief Financial Officer
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ANNEX D
PROPOSED FORM OF
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 12%
EXCHANGEABLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
---------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
---------------------
Chancellor Media Corporation of Los Angeles (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware and formerly known as Evergreen Media Corporation of Los
Angeles, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Corporation (the "Board of Directors") by its
Certificate of Incorporation, as amended (hereinafter referred to as the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of Directors
duly approved and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority conferred on the Board of
Directors by its Certificate of Incorporation (which authorizes 10,000,000
shares of preferred stock, $.01 per share), and pursuant to Section 151(g)
of the General Corporation Law of the State of Delaware, the Chief
Financial Officer of the Corporation be, and hereby is, authorized and
directed to execute and file with the Secretary of State of the State of
Delaware the Certificate of Designation of 12% Exchangeable Preferred
Stock, par value $.01 per share, of the Corporation, pursuant to which the
Board of Directors has fixed the designations, powers and preferences and
the relative participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof, of a series of the
Corporation's Preferred Stock.
(a) Designation. There is hereby created out of the authorized and unissued
shares of Preferred Stock of the Corporation a class of Preferred Stock
designated as the "12% Exchangeable Preferred Stock." The number of shares
constituting such class shall be 3,600,000, and are referred to as the
"Exchangeable Preferred Stock." The liquidation preference of the Exchangeable
Preferred Stock shall be $100.00 per share.
(b) Rank. The Exchangeable Preferred Stock shall, with respect to dividends
and distributions upon liquidation, winding-up and dissolution of the
Corporation, rank (i) senior to all classes of common stock of the Corporation
(including, without limitation, the Common Stock) and to each other class of
Capital Stock of the Corporation or series of Preferred Stock of the Corporation
hereafter created the terms of which expressly provide that it ranks junior to
the Exchangeable Preferred Stock as to dividends and distributions upon
liquidation, winding-up and dissolution of the Corporation (collectively
referred to, together with all classes of common stock of the Corporation, as
"Junior Stock"); (ii) on a parity with any class of Capital Stock of the
Corporation or series of Preferred Stock of the Corporation hereafter created
the terms of which expressly provide that such class or series will rank on a
parity with the Exchangeable Preferred Stock as to dividends and distributions
upon liquidation, winding-up and dissolution (collectively referred to as
"Parity Stock"); provided that any such Parity Stock that was not approved by
the Holders in accordance with paragraph (f)(ii)(A) hereof (to the extent such
approval is required) shall be deemed to be Junior Stock and not Parity Stock;
and (iii) junior to the 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock (the "Senior Exchangeable Preferred Stock") and each class of
Capital Stock of the Corporation or series of Preferred Stock of the Corporation
hereafter created that has been approved by the Holders in accordance with
paragraph (f)(ii)(B) hereof and the terms of which do not expressly provide that
such class or series will rank junior to, or on a parity with, the Exchangeable
Preferred Stock as to dividends and distributions upon liquidation, winding-up
and dissolution of the Company (collectively referred to as "Senior Stock").
<PAGE> 2
(c) Dividends. (i) Beginning on the Issue Date, the Holders of the
outstanding shares of Exchangeable Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, out of funds legally
available therefor, distributions in the form of cash dividends on each share of
Exchangeable Preferred Stock, at a rate per annum equal to 12% of the
liquidation preference per share of the Exchangeable Preferred Stock, payable
semi-annually. Holders of Exchangeable Preferred Stock will also be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, amounts owing as additional dividends pursuant to
the certificate of designation governing the Radio Broadcasting Preferred Stock
and the Registration Rights Agreement, dated January 23, 1997, among Radio
Broadcasting and the initial purchasers of the Radio Broadcasting Preferred
Stock. No interest shall be payable in respect of any dividends that may be in
arrears. All dividends shall be cumulative, whether or not earned or declared,
on a daily basis from July 15, 1997 and shall be payable semi-annually in
arrears on each Dividend Payment Date, commencing on the first Dividend Payment
Date after the Issue Date, provided that if any dividend payable on any Dividend
Payment Date on or before January 15, 2002 is not declared and paid in full in
cash on such Dividend Payment Date, the amount payable as dividends on such
Dividend Payment Date that is not paid in cash on such Dividend Payment Date
shall be paid in additional whole shares of Exchangeable Preferred Stock
(calculated by dividing (x) the amount of the cash dividend payable to each
holder of record of the Exchangeable Preferred Stock on the basis of all shares
held of record by such holder, whether evidenced by one or more certificates, by
(y) $100.00, with amounts in respect of any partial shares to be paid in cash by
the Corporation) on such Dividend Payment Date and shall be deemed paid in full
and shall not accumulate. Each dividend shall be payable to Holders of record of
the Exchangeable Preferred Stock as they appear on the stock books of the
Corporation on the Dividend Record Date immediately preceding the related
Dividend Payment Date. Dividends shall cease to accumulate in respect of the
Exchangeable Preferred Stock on the Exchange Date or on the date of their
earlier redemption unless the Corporation shall have failed to issue the
appropriate aggregate principal amount of Exchange Debentures in respect of the
Exchangeable Preferred Stock on such Exchange Date or shall have failed to pay
the relevant redemption price on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Exchangeable
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any circumstances
be construed or deemed to require the Board of Directors to declare, or the
Corporation to pay or set apart for payment, any dividends on shares of the
Exchangeable Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption pursuant to paragraph
(e)(i) may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to Holders of record on such date, not more than
forty-five (45) days prior to the payment thereof, as may be fixed by the Board
of Directors of the Corporation.
(v) No full dividends shall be declared by the Board of Directors or paid
or set apart for payment by the Corporation on any Parity Stock for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid (or are deemed declared and paid) in full, or declared and, if payable in
cash, a sum in cash set apart sufficient for such payment, on the Exchangeable
Preferred Stock for all Dividend Periods terminating on or prior to the date of
payment of such full dividends on such Parity Stock. If any dividends are not so
paid, all dividends declared upon shares of the Exchangeable Preferred Stock and
any other Parity Stock shall be declared pro rata so that the amount of
dividends declared per share on the Exchangeable Preferred Stock and such Parity
Stock shall in all cases bear to each other the same ratio that accrued and
unpaid dividends per share on the Exchangeable Preferred Stock and such Parity
Stock bear to each other.
(vi) (A) Holders of shares of the Exchangeable Preferred Stock shall be
entitled to receive the dividends provided for in paragraph (c)(i) hereof in
preference to and in priority over any dividends upon any of the Junior Stock.
(B) So long as any share of the Exchangeable Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart for payment any
dividend on any of the Junior Stock or make any payment on account
D-2
<PAGE> 3
of, or set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Junior Stock or any
warrants, rights, calls or options exercisable for or convertible into any of
the Junior Stock whether in cash, obligations or shares of the Corporation or
other property (other than dividends in Junior Stock to the holders of Junior
Stock), and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any of the Junior
Stock or any such warrants, rights, calls or options unless full cumulative
dividends determined in accordance herewith on the Exchangeable Preferred Stock
have been paid (or are deemed paid) in full or declared and, if payable in cash,
a sum in cash set apart sufficient for such payment on the Exchangeable
Preferred Stock for all Dividend Periods terminating on or prior to the date of
such dividends or payments on such Junior Stock.
(A) So long as any share of the Exchangeable Preferred Stock is
outstanding, the Corporation shall not make any payment on account of, or set
apart for payment money for a sinking or other similar fund for, the purchase,
redemption or other retirement of, any of the Parity Stock or any warrants,
rights, calls or options exercisable for or convertible into any of the Parity
Stock, and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any of the Parity
Stock or any such warrants, rights, calls or options unless full cumulative
dividends determined in accordance herewith on the Exchangeable Preferred Stock
have been paid (or are deemed paid) in full.
(vii) Dividends payable on the Exchangeable Preferred Stock for any period
less than a year shall be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed in the period for which
payable.
(d) Liquidation Preference. (i) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the Holders of shares of Exchangeable Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders an amount in cash equal to the
liquidation preference for each share outstanding, plus an amount in cash equal
to accrued and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up (including an amount equal to a prorated dividend for
the period from the last Dividend Payment Date to the date fixed for
liquidation, dissolution or winding up) before any payment shall be made or any
assets distributed to the holders of any of the Junior Stock including, without
limitation, common stock of the Corporation. Except as provided in the preceding
sentence, Holders of Exchangeable Preferred Stock shall not be entitled to any
distribution in the event of any liquidation, dissolution or winding up of the
affairs of the Corporation. If the assets of the Corporation are not sufficient
to pay in full the liquidation payments payable to the Holders of outstanding
shares of the Exchangeable Preferred Stock and all Parity Stock, then the
holders of all such shares shall share equally and ratably in such distribution
of assets in proportion to the full liquidation preference, including all
accrued and unpaid dividends to which each is entitled.
(ii) For the purposes of this paragraph (d), neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Corporation nor the consolidation or merger of the Corporation with or into one
or more entities shall be deemed to be a liquidation, dissolution or winding up
of the affairs of the Corporation.
(e) Redemption. (i) Optional Redemption. (A) The Corporation may, at the
option of the Board of Directors, redeem at any time on or after January 15,
2002, subject to contractual and other restrictions with respect thereto and
from any source of funds legally available therefor, in whole or in part, in the
manner provided for in paragraph (e)(iii) hereof, any or all of the shares of
the Exchangeable Preferred Stock, at the redemption prices (expressed as a
percentage of the liquidation preference) set forth below plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends per
share (including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the
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Redemption Date to the Redemption Date) (the "Optional Redemption Price") if
redeemed during the 12-month period beginning January 15 of each of the years
set forth below:
<TABLE>
<S> <C>
2002....................................................... 106.00%
2003....................................................... 104.80%
2004....................................................... 103.60%
2005....................................................... 102.40%
2006....................................................... 101.20%
2007 and thereafter........................................ 100.00%
</TABLE>
provided that no redemption pursuant to this paragraph (e)(i)(A) shall be
authorized or made unless prior thereto full accrued and unpaid dividends are
declared and paid in full, or declared and a sum in cash set apart sufficient
for such payment, on the Exchangeable Preferred Stock for all Dividend Periods
terminating on or prior to the Redemption Date.
(B) In addition to the foregoing paragraph (e)(i)(A), on or prior to
January 15, 2000, the Corporation may, at its option, use the net cash proceeds
of one or more Public Equity Offerings to redeem from any source of funds
legally available therefor, in the manner provided for in paragraph (e)(iii)
hereof, the Exchangeable Preferred Stock, in part, at a redemption price of 112%
of the liquidation preference thereof plus an amount in cash equal to all
accumulated and unpaid dividends to the redemption date (including an amount in
cash equal to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the redemption date to the redemption date) (the "Cash
Proceeds Redemption Price"); provided, however, that after any such redemption,
there must be at least $150,000,000 aggregate liquidation preference of
Exchangeable Preferred Stock outstanding. Any such redemption pursuant to this
paragraph (e)(i)(B) must occur on or prior to 60 days after the receipt by the
Corporation of the proceeds of each Public Equity Offering.
(C) In the event of a redemption pursuant to paragraph (e)(i)(A) or
(e)(i)(B) hereof of only a portion of the then outstanding shares of the
Exchangeable Preferred Stock, the Corporation shall effect such redemption on a
pro rata basis according to the number of shares held by each Holder of the
Exchangeable Preferred Stock, except that the Corporation may redeem such shares
held by Holders of fewer than 100 shares (or shares held by Holders who would
hold less than 100 shares as a result of such redemption), as may be determined
by the Corporation.
(D) In addition to the foregoing paragraphs (e)(i)(A), and (e)(i)(B), prior
to January 15, 1999, upon the occurrence of a Change of Control, the Company
will have the option to redeem the Exchangeable Preferred Stock in whole but not
in part (a "Change of Control Redemption") at a redemption price equal to 112%
of the liquidation preference thereof (the "Change of Control Redemption
Price"), together with accrued and unpaid dividends to the date of redemption.
In order to effect a Change of Control Redemption, the Company must send a
notice to each Holder within 30 days following the date the Change of Control
occurred, stating that the Company is effecting a Change of Control Redemption
in lieu of a Change of Control Offer.
(ii) Mandatory Redemption. On January 15, 2009, the Corporation shall
redeem, to the extent of funds legally available therefor, in the manner
provided for in paragraph (e)(iii) hereof, all of the shares of the Exchangeable
Preferred Stock then outstanding at a redemption price equal to 100% of the
liquidation preference per share, plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends per share (including an amount
equal to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date) (the "Mandatory
Redemption Price").
(iii) Procedures for Redemption. (A) At least thirty (30) days and not more
than sixty (60) days prior to the date fixed for any redemption of the
Exchangeable Preferred Stock, written notice (the "Redemption Notice") shall be
given by first class mail, postage prepaid, to each Holder of record on the
record date fixed for such redemption of the Exchangeable Preferred Stock at
such Holder's address as it appears on the stock books of the Corporation,
provided that no failure to give such notice nor any deficiency therein shall
affect the
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<PAGE> 5
validity of the procedure for the redemption of any shares of Exchangeable
Preferred Stock to be redeemed except as to the Holder or Holders to whom the
Corporation has failed to give said notice or except as to the Holder or Holders
whose notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i)(A), (e)(i)(B),
(e)(i)(D) or (e)(ii) hereof;
(2) the Optional Redemption Price, the Mandatory Redemption Price, the
Change of Control Redemption Price or the Cash Proceeds Redemption Price, as the
case may be;
(3) whether all or less than all the outstanding shares of the Exchangeable
Preferred Stock are to be redeemed and the total number of shares of the
Exchangeable Preferred Stock being redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Corporation, in the manner, at
the place or places and at the price designated, his certificate or certificates
representing the shares of Exchangeable Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Exchangeable Preferred Stock to be
redeemed shall cease to accumulate on such Redemption Date unless the
Corporation defaults in the payment of the Optional Redemption Price, the
Mandatory Redemption Price, the Change of Control Redemption Price or the Cash
Proceeds Redemption Price, as the case may be.
(B) Each Holder of Exchangeable Preferred Stock called for redemption shall
surrender the certificate or certificates representing such shares of
Exchangeable Preferred Stock to the Corporation, duly endorsed (or otherwise in
proper form for transfer, as determined by the Corporation), in the manner and
at the place designated in the Redemption Notice, and on the Redemption Date the
full Optional Redemption Price, Mandatory Redemption Price, the Change of
Control Redemption Price or Cash Proceeds Redemption Price, as the case may be,
for such shares shall be payable in cash to the Person whose name appears on
such certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation defaults in
the payment in full of the applicable redemption price, dividends on the
Exchangeable Preferred Stock called for redemption shall cease to accumulate on
the Redemption Date, and all rights of the Holders of redeemed shares shall
terminate with respect thereto on the Redemption Date, other than the right to
receive the Optional Redemption Price, the Mandatory Redemption Price, the
Change of Control Redemption Price or the Cash Proceeds Redemption Price, as the
case may be, without interest; provided, however, that if a notice of redemption
shall have been given as provided in paragraph (iii)(A) above and the funds
necessary for redemption (including an amount in respect of all dividends that
will accrue to the Redemption Date) shall have been irrevocably deposited in
trust for the equal and ratable benefit for the Holders of the shares to be
redeemed, then, at the close of business on the day on which such funds are
segregated and set aside, the Holders of the shares to be redeemed shall cease
to be stockholders of the Corporation and shall be entitled only to receive the
Optional Redemption Price, the Mandatory Redemption Price, the Change of Control
Redemption Price or the Cash Redemption Price, as the case may be, without
interest.
(f) Voting Rights. (i) The Holders of Exchangeable Preferred Stock, except
as otherwise required under Delaware law or as set forth in paragraphs (ii),
(iii) and (iv) below, shall not be entitled or permitted to vote on any matter
required or permitted to be voted upon by the stockholders of the Corporation.
(ii) (A) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not authorize any class of Senior Stock
without the affirmative vote or consent of Holders of at least a majority of the
outstanding shares of Exchangeable Preferred Stock, voting or consenting, as the
case may be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
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<PAGE> 6
(B) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not authorize any class of Parity Stock
without the affirmative vote or consent of Holders of at least a majority of the
then outstanding shares of Exchangeable Preferred Stock, voting or consenting,
as the case may be, as one class, given in person or by proxy, either in writing
or by resolution adopted at an annual or special meeting. Notwithstanding the
foregoing sentence, the Corporation may authorize up to $50,000,000 initial
liquidation preference of other Parity Stock (plus Parity Stock payable as
dividends thereon in lieu of cash dividends) without the vote described in the
foregoing sentence.
(C) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not amend this Certificate of Designation so
as to affect adversely the specified rights, preferences, privileges or voting
rights of the Exchangeable Preferred Stock or to authorize the issuance of any
additional shares of Exchangeable Preferred Stock without the affirmative vote
or consent of Holders of at least a majority of the issued and outstanding
shares of Exchangeable Preferred Stock, voting or consenting, as the case may
be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(D) Prior to the exchange of Exchangeable Preferred Stock for Exchange
Debentures, the Corporation shall not amend or modify the Indenture for the
Exchange Debentures in the form in effect on the Issue Date (the "Indenture")
(except as expressly provided therein in respect of amendments without the
consent of Holders of Exchange Debentures) without the affirmative vote or
consent of Holders of at least a majority of the shares of Exchangeable
Preferred Stock then outstanding, voting or consenting, as the case may be, as
one class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting.
(E) Except as set forth in paragraphs (f)(ii)(A), (f)(ii)(B) and (f)(ii)(C)
above, (x) the creation, authorization or issuance of any shares of any Junior
Stock, Parity Stock or Senior Stock or (y) the increase or decrease in the
amount of authorized Capital Stock of any class, including Preferred Stock,
shall not require the consent of Holders of Senior Exchangeable Preferred Stock
and shall not be deemed to affect adversely the rights, preferences, privileges
or voting rights of shares of Exchangeable Preferred Stock.
(iii) Without the affirmative vote or consent of Holders of a majority of
the issued and outstanding shares of Exchangeable Preferred Stock, voting or
consenting, as the case may be, as one class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special meeting, the
Corporation shall not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets to,
another Person or adopt a plan of liquidation unless: (A) either (1) the
Corporation is the surviving or continuing Person or (2) the Person (if other
than the Corporation) formed by such consolidation or into which the Corporation
is merged or the Person that acquires by conveyance, transfer or lease the
properties and assets of the Corporation substantially as an entirety or in the
case of a plan of liquidation, the Person to which assets of the Corporation
have been transferred, shall be a corporation, partnership or trust organized
and existing under the laws of the United States or any State thereof or the
District of Columbia; (B) the Exchangeable Preferred Stock shall be converted
into or exchanged for and shall become shares of such successor, transferee or
resulting Person, having in respect of such successor, transferee or resulting
Person the same powers, preferences and relative, participating, optional or
other special rights and the qualifications, limitations or restrictions
thereon, that the Exchangeable Preferred Stock had immediately prior to such
transaction; (C) immediately after giving effect to such transaction and the use
of the proceeds therefrom (on a pro forma basis, including giving effect to any
Indebtedness incurred or anticipated to be incurred in connection with such
transaction), the Corporation (in the case of clause (1) of the foregoing clause
(A)) or such Person (in the case of clause (2) of the foregoing clause (A))
shall be able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under paragraph (l)(i) hereof; (D) immediately after
giving effect to such transactions, no Voting Rights Triggering Event shall have
occurred or be continuing; and (E) the Corporation has delivered to the transfer
agent for the Exchangeable Preferred Stock prior to the consummation of the
proposed transaction an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer complies with the terms
hereof and that all conditions precedent herein relating to such transaction
have been satisfied.
D-6
<PAGE> 7
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of related transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Corporation, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Corporation shall be deemed to be the transfer
of all or substantially all of the properties and assets of the Corporation.
(iv) (A) If (1) after January 15, 2002 cash dividends on the Exchangeable
Preferred Stock are in arrears and unpaid for three or more Dividend Periods
(whether or not consecutive) (a "Dividend Default"); (2) the Corporation fails
to redeem all of the then outstanding shares of Exchangeable Preferred Stock on
January 15, 2009 or otherwise fails to discharge any redemption obligation with
respect to the Exchangeable Preferred Stock; (3) the Corporation fails to make a
Change of Control Offer (whether pursuant to the terms of paragraph (h)(v) or
otherwise) following a Change of Control if such Change of Control Offer is
required by paragraph (h) hereof or fails to purchase shares of Exchangeable
Preferred Stock from Holders who elect to have such shares purchased pursuant to
the Change of Control Offer (unless, in either case, the Corporation has decided
to effect a Change of Control Redemption in lieu of such Change of Control Offer
pursuant to the terms of paragraph (e)(i)(D)); (4) the Corporation breaches or
violates one of the provisions set forth in any of paragraphs (l)(i), (l)(ii) or
(l)(iii) hereof and the breach or violation continues for a period of 30 days or
more after the Corporation receives notice thereof specifying the default from
the holders of at least 25% of the shares of Exchangeable Preferred Stock then
outstanding or (5) the Corporation fails to pay at the final stated maturity
(giving effect to any extensions thereof) the principal amount of any
Indebtedness of the Corporation or any Subsidiary of the Corporation, or the
final stated maturity of any such Indebtedness is accelerated, if the aggregate
principal amount of such Indebtedness, together with the aggregate principal
amount of any other such Indebtedness in default for failure to pay principal at
the final stated maturity (giving effect to any extensions thereof) or that has
been accelerated, aggregates $5,000,000 or more at one time, in each case, after
a 10-day period during which such default shall not have been cured or such
acceleration rescinded, then in the case of any of clauses (1)-(5) the number of
directors constituting the Board of Directors shall be adjusted by the number,
if any, necessary to permit the Holders of Exchangeable Preferred Stock, voting
separately and as one class (together with the holders of any Parity Stock
having similar rights), to elect the lesser of two directors or 25% of the
members of the Board of Directors. Each such event described in clauses (1),
(2), (3), (4) and (5) is a "Voting Rights Triggering Event." Holders of a
majority of the issued and outstanding shares of Exchangeable Preferred Stock,
voting separately and as one class (together with the holders of any Parity
Stock having similar rights), shall have the exclusive right to elect the lesser
of two directors or 25% of the members of the Board of Directors at a meeting
therefor called upon occurrence of such Voting Rights Triggering Event, and at
every subsequent meeting at which the terms of office of the directors so
elected by the Holders of the Exchangeable Preferred Stock expire (other than as
described in (f)(iv)(B) below). The voting rights provided herein shall be the
exclusive remedy at law or in equity of the holders of the Exchangeable
Preferred Stock for any Voting Rights Triggering Event.
(B) The right of the Holders of Exchangeable Preferred Stock voting
separately and as a class (together with the holders of any Parity Stock then
having similar rights) to elect members of the Board of Directors as set forth
in subparagraph (f)(iv)(A) above shall continue until such time as (x) in the
event such right arises due to a Dividend Default, all accumulated dividends
that are in arrears on the Exchangeable Preferred Stock are paid in full in
cash; and (y) in all other cases, the failure, breach or default giving rise to
such Voting Rights Triggering Event is remedied or waived by the holders of at
least a majority of the shares of Exchangeable Preferred Stock then outstanding
and entitled to vote thereon, at which time (1) the special right of the Holders
of Exchangeable Preferred Stock so to vote as a class for the election of
directors and (2) the term of office of the directors elected by the Holders of
the Exchangeable Preferred Stock shall each terminate and the directors elected
by the holders of Common Stock shall constitute the entire Board of Directors.
At any time after voting power to elect directors shall have become vested and
be continuing in the Holders of Exchangeable Preferred Stock pursuant to
paragraph (f)(iv) hereof, or if vacancies shall exist in the offices of
directors elected by the Holders of Exchangeable Preferred Stock, a proper
officer of the Corporation may, and upon the written request of the Holders of
record of at least twenty-five percent (25%) of the shares of Exchangeable
Preferred Stock then outstanding addressed to the secretary of the Corporation
D-7
<PAGE> 8
shall, call a special meeting of the Holders of Exchangeable Preferred Stock,
for the purpose of electing the directors which such Holders are entitled to
elect. If such meeting shall not be called by a proper officer of the
Corporation within twenty (20) days after personal service of said written
request upon the secretary of the Corporation, or within twenty (20) days after
mailing the same within the United States by certified mail, addressed to the
secretary of the Corporation at its principal executive offices, then the
Holders of record of at least twenty-five percent (25%) of the outstanding
shares of Exchangeable Preferred Stock may designate in writing one of their
number to call such meeting at the expense of the Corporation, and such meeting
may be called by the Person so designated upon the notice required for the
annual meetings of stockholders of the Corporation and shall be held at the
place for holding the annual meetings of stockholders. Any Holder of
Exchangeable Preferred Stock so designated shall have, and the Corporation shall
provide, access to the lists of stockholders to be called pursuant to the
provisions hereof.
(C) At any meeting held for the purpose of electing directors at which the
Holders of Exchangeable Preferred Stock shall have the right, voting together as
a separate class, to elect directors as aforesaid, the presence in person or by
proxy of the Holders of at least a majority of the outstanding shares of
Exchangeable Preferred Stock shall be required to constitute a quorum of such
Exchangeable Preferred Stock.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Exchangeable Preferred Stock may be filled by the remaining directors
elected by the Holders of Exchangeable Preferred Stock unless and until such
vacancy shall be filled by the Holders of Senior Exchangeable Preferred Stock.
(v) In any case in which the Holders of Exchangeable Preferred Stock shall
be entitled to vote pursuant to this paragraph (f) or pursuant to Delaware law,
each Holder of Exchangeable Preferred Stock entitled to vote with respect to
such matter shall be entitled to one vote for each share of Exchangeable
Preferred Stock held.
(g) Exchange. (i) Requirements. The outstanding shares of Exchangeable
Preferred Stock are exchangeable as a whole but not in part, at the option of
the Corporation and subject to the terms and conditions of the Credit Agreement,
the 9 3/8% Note Indenture and the certificate of designation for the Senior
Exchangeable Preferred Stock, at any time on any Dividend Payment Date for the
Corporation's 12% Subordinated Exchange Debentures due 2009 (the "Exchange
Debentures") to be substantially in the form of Exhibit A to the Indenture, a
copy of which is on file with the secretary of the Corporation, provided that
any such exchange may only be made if on or prior to the date of such exchange
(i) the Corporation has paid (or is deemed to have paid) all accumulated
dividends on the Exchangeable Preferred Stock (including the dividends payable
on the date of exchange) and there shall be no contractual impediment to such
exchange; (ii) there shall be funds legally available sufficient therefor; and
(iii) immediately after giving effect to such exchange, no Default or Event of
Default (as defined in the Indenture) would exist under the Indenture and no
default or event of default would exist under the Credit Agreement or the 9 3/8%
Note Indenture. The exchange rate shall be $1.00 principal amount of Exchange
Debentures for each $1.00 of liquidation preference of Exchangeable Preferred
Stock, including, to the extent necessary, Exchange Debentures in principal
amounts less than $1,000, provided that the Corporation shall have the right, at
its option, to pay cash in an amount equal to the principal amount of that
portion of any Exchange Debenture that is not an integral multiple of $1,000
instead of delivering an Exchange Debenture in a denomination of less than
$1,000.
(iii) Procedure for Exchange. (A) At least thirty (30) days and not more
than sixty (60) days prior to the date fixed for exchange, written notice (the
"Exchange Notice") shall be given by first-class mail, postage prepaid, to each
Holder of record on the record date fixed for such exchange of the Exchangeable
Preferred Stock at such Holder's address as the same appears on the stock books
of the Corporation, provided that no failure to give such notice nor any
deficiency therein shall affect the validity of the procedure for the exchange
of any shares of Exchangeable Preferred Stock to be exchanged except as to the
Holder or Holders to whom
D-8
<PAGE> 9
the Corporation has failed to give said notice or except as to the Holder or
Holders whose notice was defective. The Exchange Notice shall state:
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in the manner and
at the place or places designated, his certificate or certificates representing
the shares of Exchangeable Preferred Stock to be exchanged;
(3) that dividends on the shares of Exchangeable Preferred Stock to be
exchanged shall cease to accrue on such Exchange Date whether or not
certificates for shares of Exchangeable Preferred Stock are surrendered for
exchange on such Exchange Date unless the corporation shall default in the
delivery of Exchange Debentures; and
(4) that interest on the Exchange Debentures shall accrue from the Exchange
Date whether or not certificates for shares of Exchangeable Preferred Stock are
surrendered for exchange on such Exchange Date.
(B) On or before the Exchange Date, each Holder of Exchangeable Preferred
Stock shall surrender the certificate or certificates representing such shares
of Exchangeable Preferred Stock, in the manner and at the place designated in
the Exchange Notice. The Corporation shall cause the Exchange Debentures to be
executed on the Exchange Date and, upon surrender in accordance with the
Exchange Notice of the certificates for any shares of Exchangeable Preferred
Stock so exchanged, duly endorsed (or otherwise in proper form for transfer, as
determined by the Corporation), such shares shall be exchanged by the
Corporation into Exchange Debentures. The Corporation shall pay interest on the
Exchange Debentures at the rate and on the dates specified therein from the
Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the Exchange Date
specified in such notice (1) the Indenture shall have been duly executed and
delivered by the Corporation and the trustee thereunder and (2) all Exchange
Debentures necessary for such exchange shall have been duly executed by the
Corporation and delivered to the trustee under the Indenture with irrevocable
instructions to authenticate the Exchange Debentures necessary for such
exchange, then the rights of the Holders of Exchangeable Preferred Stock so
exchanged as stockholders of the Corporation shall cease (except the right to
receive Exchange Debentures, an amount in cash equal to the amount of accrued
and unpaid dividends to the Exchange Date and, if the Corporation so elects,
cash in lieu of any Exchange Debenture not an integral multiple of $1,000), and
the Person or Persons entitled to receive the Exchange Debentures issuable upon
exchange shall be treated for all purposes as the registered Holder or Holders
of such Exchange Debentures as of the Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (g), the Corporation shall not be entitled to
exchange the Exchangeable Preferred Stock for Exchange Debentures if such
exchange, or any term or provision of the Indenture or the Exchange Debentures,
or the performance of the Corporation's obligations under the Indenture or the
Exchange Debentures, shall materially violate or conflict with any applicable
law or agreement or instrument then binding on the Corporation or if, at the
time of such exchange, the Corporation is insolvent or if it would be rendered
insolvent by such exchange.
(h) Change of Control. (i) In the event of a Change of Control (the date of
such occurrence being the "Change of Control Date"), the Corporation shall
notify the Holders of the Exchangeable Preferred Stock in writing of such
occurrence and shall make an offer to purchase (the "Change of Control Offer")
all then outstanding shares of Exchangeable Preferred Stock at a purchase price
of 101% of the then effective liquidation preference thereof plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends per
share (including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Change of Control
Payment Date to the Change of Control Payment Date).
(ii) Within 30 days following the Change of Control Date, the Corporation
shall send, by first class mail, postage prepaid, a notice to each Holder of
Exchangeable Preferred Stock at such Holder's address as it appears on the stock
books of the Corporation, which notice shall govern the terms of the Change of
Control
D-9
<PAGE> 10
Offer. The notice to the Holders shall contain all instructions and materials
necessary to enable such Holders to tender Exchangeable Preferred Stock pursuant
to the Change of Control Offer. Such notice shall state:
(A) that a Change of Control has occurred, that the Change of Control Offer
is being made pursuant to this paragraph (h) and that all Exchangeable Preferred
Stock validly tendered and not withdrawn will be accepted for payment;
(B) the purchase price (including the amount of accrued dividends, if any)
and the purchase date (which shall be no earlier than 30 days nor later than 45
days from the date such notice is mailed, other than as may be required by law)
(the "Change of Control Payment Date");
(C) that any shares of Exchangeable Preferred Stock not tendered will
continue to accrue dividends;
(D) that, unless the Corporation defaults in making payment therefor, any
share of Exchangeable Preferred Stock accepted for payment pursuant to the
Change of Control Offer shall cease to accrue dividends after the Change of
Control Payment Date;
(E) that Holders electing to have any shares of Exchangeable Preferred
Stock purchased pursuant to a Change of Control Offer will be required to
surrender the certificate or certificates representing such shares, properly
endorsed for transfer together with such customary documents as the Corporation
and the transfer agent may reasonably require, in the manner and at the place
specified in the notice prior to the close of business on the Business Day prior
to the Change of Control Payment Date;
(F) that Holders will be entitled to withdraw their election if the
Corporation receives, not later than five Business Days prior to the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the number of shares of Exchangeable
Preferred Stock the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such shares of Exchangeable Preferred
Stock purchased;
(G) that Holders whose shares of Exchangeable Preferred Stock are purchased
only in part will be issued a new certificate representing the unpurchased
shares of Exchangeable Preferred Stock; and
(H) the circumstances and relevant facts regarding such Change of Control.
(iii) The Corporation will comply with any securities laws and regulations,
to the extent such laws and regulations are applicable to the repurchase of the
Exchangeable Preferred Stock in connection with a Change of Control Offer.
(iv) On the Change of Control Payment Date the Corporation shall (A) accept
for payment the shares of Exchangeable Preferred Stock validly tendered pursuant
to the Change of Control Offer, (B) pay to the Holders of shares so accepted the
purchase price therefor in cash and (C) cancel and retire each surrendered
certificate. Unless the Corporation defaults in the payment for the shares of
Exchangeable Preferred Stock tendered pursuant to the Change of Control Offer,
dividends will cease to accrue with respect to the shares of Exchangeable
Preferred Stock tendered and all rights of Holders of such tendered shares will
terminate, except for the right to receive payment therefor, on the Change of
Control Payment Date.
(v) If the purchase of the Exchangeable Preferred Stock would violate or
constitute a default under the certificate of designation for the Senior
Exchangeable Preferred Stock, the Credit Agreement, the 9 3/8% Note Indenture or
other Indebtedness of the Corporation, then, notwithstanding anything to the
contrary contained above, prior to complying with the foregoing provisions, but
in any event within 30 days following the Change of Control Date, the
Corporation shall either (A) repay in full all such Indebtedness and terminate
all commitments outstanding under the Credit Agreement or (B) obtain the
requisite consents, if any, under the Credit Agreement, the 9 3/8% Note
Indenture or such Indebtedness required to permit the repurchase of Exchangeable
Preferred Stock required by this paragraph (h). Until the requirements of the
immediately preceding sentence are satisfied, the Corporation shall not make,
and shall not be obligated to make, any Change of Control Offer; provided that
the Corporation's failure to comply with the provisions of this paragraph (h)(v)
shall constitute a Voting Rights Triggering Event.
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(vi) Paragraphs (i)-(v) of this Section (h) notwithstanding, the
Corporation shall not be required to make a Change of Control Offer if, instead,
the Corporation elects to effect a Change of Control Redemption pursuant to the
provisions of and in compliance with paragraph (e)(i)(D) hereof.
(i) Conversion or Exchange. The Holders of shares of Exchangeable Preferred
Stock shall not have any rights hereunder to convert such shares into or
exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Corporation.
(j) Reissuance of Exchangeable Preferred Stock. Shares of Exchangeable
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock, provided
that any issuance of such shares as Exchangeable Preferred Stock must be in
compliance with the terms hereof.
(k) Business Day. If any payment, redemption or exchange shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Additional Provisions. (i) Limitation on Incurrence of
Additional Indebtedness. Neither the Corporation nor any of its Subsidiaries
shall, directly or indirectly, create, incur, assume, guarantee, acquire or
become liable for, contingently or otherwise (collectively, "incur"), any
Indebtedness other than Permitted Indebtedness. Notwithstanding the foregoing
limitation, the Corporation or any Subsidiary may incur Indebtedness if, on the
date of the incurrence of such Indebtedness, after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Corporation's Leverage Ratio is less than 7.0 to 1.
(ii) Limitation on Restricted Payments. (A) Neither the Corporation nor any
of its Subsidiaries shall, directly or indirectly, make any Restricted Payment
if immediately after giving effect thereto:
(1) any Voting Rights Triggering Event shall have occurred and be
continuing; or
(2) the Corporation is not able to incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with paragraph (l)(i) above;
or
(3) the aggregate amount of Restricted Payments made on or subsequent to
the Issue Date, together with the aggregate amount of Restricted Payments made
by Radio Broadcasting subsequent to the Radio Broadcasting Preferred Stock Issue
Date and through the date immediately preceding the Issue Date (the amount
expended for such purposes, if other than in cash, being the fair market value
of such property as determined by the respective Board of Directors in good
faith) exceeds the sum of (I) (x) 100% of the aggregate Consolidated EBITDA of
Radio Broadcasting from February 14, 1996 through the date immediately preceding
the Issue Date, plus 100% of the aggregate Consolidated EBITDA of the
Corporation from and after the Issue Date (or, in the event that either such
Consolidated EBITDA shall be a deficit, minus 100% of such deficit), to the most
recent date for which financial information is available to the Corporation,
taken as one accounting period, less (y) 1.4 times Consolidated Interest Expense
for the same entities and for the same periods, plus (II) 100% of the aggregate
net proceeds, including the fair market value of property other than cash as
determined by the Board of Directors in good faith, received by the Corporation
from any Person (other than a Subsidiary of the Corporation) from the issuance
and sale on or subsequent to the Issue Date of Qualified Capital Stock of the
Corporation, plus 100% of the aggregate net proceeds, including the fair market
value of property other than cash as previously determined by the board of
directors of Radio Broadcasting in good faith, previously received by Radio
Broadcasting from any Person (other than a Subsidiary of Radio Broadcasting)
from the issuance and sale on or subsequent to February 14, 1996 of Qualified
Capital Stock of Radio Broadcasting (excluding any net proceeds from issuances
and sales financed directly or indirectly using funds borrowed from the
Corporation or any Subsidiary of the Corporation or from Radio Broadcasting or
any subsidiary of Radio Broadcasting, respectively, until and to the extent such
borrowing is repaid, but including the proceeds from the issuance and sale of
any securities convertible into or exchangeable for Qualified Capital Stock to
the extent such securities are so converted or exchanged and
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including any additional proceeds received by the Corporation or Radio
Broadcasting, respectively, upon such conversion or exchange), plus (III)
without duplication of any amount included in clause (3)(II) above, 100% of the
aggregate net proceeds, including the fair market value of property other than
cash (valued as provided in clause (3)(II) above), received by the Corporation
as a capital contribution on or subsequent to the Issue Date, plus 100% of the
aggregate net proceeds, including the fair market value of property other than
cash (valued as provided in clause (3)(II) above), previously received by Radio
Broadcasting as a capital contribution on or subsequent to February 14, 1996
(excluding the net proceeds from a Public Equity Offering by Chancellor
Mezzanine to the extent used by the Corporation to redeem the Exchangeable
Preferred Stock); plus (IV) $2,500,000.
(B) Notwithstanding the foregoing, these provisions will not prohibit: (1)
the payment of any dividend or the making of any distribution within 60 days
after the date of its declaration if such dividend or distribution would have
been permitted on the date of declaration; (2) the acquisition of any Capital
Stock of the Corporation or any warrants, options or other rights to acquire
shares of any class of such Capital Stock either (I) solely in exchange for
shares of Qualified Capital Stock or other rights to acquire Qualified Capital
Stock or (II) through the application of the net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Corporation) of
shares of Qualified Capital Stock or warrants, options or other rights to
acquire Qualified Capital Stock; (3) payments by the Corporation to fund the
operating expenses of Chancellor Mezzanine in an amount not to exceed $500,000
per annum; (4) payments by the Corporation to Chancellor Mezzanine to enable
Chancellor Mezzanine to make payments pursuant to (x) the Financial Monitoring
and Oversight Agreement or (y) the Tax Sharing Agreement; (5) payments by the
Corporation to repurchase, or enable Chancellor Mezzanine to repurchase, Capital
Stock or other securities of Chancellor Mezzanine from employees of Chancellor
Mezzanine or the Corporation in an aggregate amount not to exceed $5,000,000;
(6) payments to enable Chancellor Mezzanine to redeem or repurchase stock
purchase or similar rights in an aggregate amount not to exceed $500,000; (7)
payments, not to exceed $100,000 in the aggregate, to enable the Corporation to
make cash payments to holders of its Capital Stock in lieu of the issuance of
fractional shares of its Capital Stock; and (8) payments made pursuant to any
merger, consolidation or sale of assets effected in accordance with paragraph
(f)(iii) above; provided, however, that no such payment may be made pursuant to
this clause (8) unless, after giving effect to such transaction (and the
incurrence of any Indebtedness in connection therewith and the use of the
proceeds thereof), the Corporation would be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with paragraph
(l)(i) above such that after incurring that $1.00 of additional Indebtedness,
the Leverage Ratio would be less than 6.0 to 1; provided, further, however, that
in the case of clauses (4)(x), (5), (6), (7) and (8), no Voting Rights
Triggering Event shall have occurred or be continuing at the time of such
payment or as a result thereof. In determining the aggregate amount of
Restricted Payments made by the Corporation on or subsequent to the Issue Date
and the aggregate amount of Restricted Payments made by Radio Broadcasting
subsequent to the Radio Broadcasting Preferred Stock Issue Date and through the
date immediately preceding the Issue Date, amounts expended pursuant to clauses
(1), (2), (4)(x), (5), (6), (7) and (8) (including any amounts previously
expended by Radio Broadcasting pursuant to clauses l(ii)(B)(1), (2), (4)(x),
(5), (6), (7) and (8) under the certification of designation for the Radio
Broadcasting Preferred Stock) shall be included in such calculation.
(iii) Limitation on Preferred Stock of Subsidiaries. The Corporation shall
not permit any of its Subsidiaries to issue any Preferred Stock (other than to
the Corporation or to a Wholly Owned Subsidiary of the Corporation) or permit
any Person (other than to the Corporation or a Wholly Owned Subsidiary of the
Corporation) to own any Preferred Stock of a Subsidiary of the Corporation
(other than Acquired Preferred Stock; provided that at the time the issuer of
such Acquired Preferred Stock becomes a Subsidiary of the Corporation or merges
with the Corporation or any of its Subsidiaries, and after giving effect to such
transaction, the Corporation shall be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with paragraph
(l)(i) above).
(iv) Reports. So long as any shares of Exchangeable Preferred Stock are
outstanding, the Corporation will provide to the holders of Exchangeable
Preferred Stock, within 15 days after it files them with the Commission, copies
of the annual reports and of the information, documents and other reports (or
copies of
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such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) which the Corporation files with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act. In the event that the Corporation is
no longer required to furnish such reports to its securityholders pursuant to
the Exchange Act, the Corporation will cause its consolidated financial
statements, comparable to those which would have been required to appear in
annual or quarterly reports, to be delivered to the Holders of Exchangeable
Preferred Stock.
(m) Definitions. As used in this Certificate of Designation, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
"9 3/8% Note Indenture" means the Indenture governing the 9 3/8% Notes
as such Indenture may be amended or supplemented from time to time in
accordance with the terms thereof.
"9 3/8% Notes" means the Corporation's $200.0 million aggregate
principal amount of 9 3/8% Senior Subordinated Notes due 2004 of the
Corporation, as assumed by the Corporation, as the same may be modified or
amended from time to time and future refinancings thereof.
"12 1/2% Notes" means Radio Broadcasting's previously outstanding
$60.0 million aggregate principal amount of 12 1/2% Senior Subordinated
Notes due 2004.
"Acquired Preferred Stock" means Preferred Stock of any Person at the
time such Person becomes a Subsidiary of the Corporation or at the time it
merges or consolidates with the Corporation or any of its Subsidiaries and
not issued by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Subsidiary of the Corporation or
such acquisition, merger or consolidation.
"Affiliate" means a Person who, directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common
control with, the Corporation. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an Investment by the Corporation or any
Subsidiary of the Corporation in any other Person pursuant to which such
Person shall become a Subsidiary of the Corporation or shall be
consolidated or merged with the Corporation or any Subsidiary of the
Corporation or (ii) the acquisition by the Corporation or any Subsidiary of
the Corporation of assets of any Person comprising a division or line of
business of such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the
Corporation or any of its Subsidiaries (excluding any Sale and Leaseback
Transaction or any pledge of assets or stock by the Corporation or any of
its Subsidiaries) to any Person other than the Corporation or a Wholly
Owned Subsidiary of the Corporation of (i) any Capital Stock of any
Subsidiary of the Corporation or (ii) any other property or assets of the
Corporation or any Subsidiary of the Corporation other than in the ordinary
course of business.
"Board of Directors" shall have the meaning ascribed to it in the
first paragraph of this Resolution.
"Business Day" means any day except a Saturday, a Sunday, or any day
on which banking institutions in New York, New York are required or
authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated) of capital stock of such Person and (ii)
with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligation
of such Person to pay rent or other amounts under a lease to which such
Person is a party that is required to be classified and accounted for as a
capital lease obligation under GAAP, and for purposes of this definition,
the amount of
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such obligation at any date shall be the capitalized amount of such
obligation at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc.; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from Standard & Poor's
Corporation or at least P-1 from Moody's Investors Service, Inc.; (iv)
certificates of deposit or bankers' acceptances maturing within one year
from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state
thereof or the District of Columbia or any U.S. branch of a foreign bank
having at the date of acquisition thereof combined capital and surplus of
not less than $200,000,000; (v) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications
specified in clause (iv) above; and (vi) investments in money market funds
which invest substantially all their assets in securities of the types
described in clauses (i) through (v) above.
"Chancellor Broadcasting" means Chancellor Broadcasting Company, a
Delaware corporation that was merged with and into Evergreen Mezzanine
Holdings Corporation, a Delaware corporation, pursuant to the Merger
Agreement on September , 1997.
"Chancellor Media" means Chancellor Media Corporation, a Delaware
corporation, and its successors.
"Chancellor Mezzanine" means Chancellor Mezzanine Holdings
Corporation, a Delaware corporation, and its successors.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Corporation to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a "Group")
(whether or not otherwise in compliance with the provisions of the Exchange
Indenture), other than to Hicks Muse or any of its Affiliates, officers and
directors or to Steven Dinetz (the "Permitted Holders"); or (ii) a majority
of the Board of Directors of Chancellor Media, Chancellor Mezzanine or the
Corporation shall consist of Persons who are not Continuing Directors; or
(iii) the acquisition by any Person or Group (other than the Permitted
Holders) of the power, directly or indirectly, to vote or direct the voting
of securities having more than 50% of the ordinary voting power for the
election of directors of Chancellor Media, Chancellor Mezzanine or the
Corporation.
"Change of Control Date" shall have the meaning ascribed to it in
paragraph (h) hereof.
"Change of Control Payment Date" shall have the meaning ascribed to it
in paragraph (h) hereof.
"Change of Control Offer" shall have the meaning ascribed to it in
paragraph (h) hereof.
"Commission" means the Securities and Exchange Commission.
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement entered into by the
Corporation or any of its Subsidiaries designed to protect the Corporation
or any of its Subsidiaries against fluctuations in the price of commodities
actually used in the ordinary course of business of the Corporation and its
Subsidiaries.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been
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reduced thereby, (a) all income taxes of such Person and its Subsidiaries
paid or accrued in accordance with GAAP for such period (other than income
taxes attributable to extraordinary or nonrecurring gains or losses), (b)
Consolidated Interest Expense and (c) Consolidated Non-Cash Charges, all as
determined on a consolidated basis for such Person and its Subsidiaries in
conformity with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the interest expense of
such Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation,
(a) any amortization of debt discount, (b) the net cost under Interest Swap
Obligations (including any amortization of discounts), (c) the interest
portion of any deferred payment obligation, (d) all commissions, discounts
and other fees and charges owed with respect to letters of credit, bankers'
acceptance financing or similar facilities, and (e) all accrued interest
and (ii) the interest component of Capitalized Lease Obligations paid or
accrued by such Person and its Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom, without duplication, (i)
gains and losses from Asset Sales or abandonments or reserves relating
thereto and the related tax effects, (ii) items classified as extraordinary
or nonrecurring gains and losses, and the related tax effects according to
GAAP, (iii) the net income (or loss) of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Subsidiary of
such first referred to Person or is merged or consolidated with it or any
of its Subsidiaries, (iv) the net income of any Subsidiary to the extent
that the declaration of dividends or similar distributions by that
Subsidiary of that income is restricted by contract, operation of law or
otherwise and (v) the net income of any Person, other than a Subsidiary,
except to the extent of the lesser of (a) dividends or distributions paid
to such first referred to Person or its Subsidiary by such Person and (b)
the net income of such Person (but in no event less than zero), and the net
loss of such Person shall be included only to the extent of the aggregate
Investment of the first referred to Person or a consolidated Subsidiary of
such Person.
"Consolidated Non-Cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries reducing Consolidated Net
Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary or nonrecurring item).
"Continuing Director" means, as of the date of determination, any
Person who (i) was a member of the Board of Directors of Chancellor
Broadcasting or Radio Broadcasting on the Radio Broadcasting Preferred
Stock Issue Date, (ii) was nominated for election or elected to the Board
of Directors of Chancellor Media, Chancellor Mezzanine or the Corporation
with the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election, or (iii) is a representative of a Permitted Holder.
"CRBC Credit Agreement" means the amended and restated Credit
Agreement dated January 23, 1997 among Chancellor Broadcasting, Radio
Broadcasting, the lenders from time to time party thereto and Bankers Trust
Company as administrative agent, Goldman Sachs Credit Partners, L.P., as
documentation agent and Nations Bank, N.A., as syndication agent, together
with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such
agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including
any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including by way of adding subsidiaries of Radio
Broadcasting as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
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"Credit Agreement" means the Credit Agreement, dated April 25, 1997
among Evergreen Media Corporation of Los Angeles, the lenders from time to
time party thereto, The Toronto-Dominion Bank, Bankers Trust Company, The
Bank of New York, NationsBank of Texas, N.A. and Union Bank of California,
as Managing Agents; Toronto Dominion Securities (USA), Inc., as Arranging
Agent; and Toronto Dominion (Texas), Inc., as Administrative Agent for the
lenders, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case
as such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including
any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including by way of adding subsidiaries of the
Corporation as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agents, lender
or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to
protect the Corporation or any of its Subsidiaries against fluctuations in
currency values.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures
(excluding any maturity as the result of an optional redemption by the
issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of a Change of Control),
in whole or in part, on or prior to January 15, 2009.
"Dividend Payment Date" means January 15 and July 15 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Semi-Annual Dividend Period.
"Dividend Record Date" means January 1 and July 1 of each year.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exchange Date" means a date on which shares of Exchangeable Preferred
Stock are exchanged by the Corporation for Exchange Debentures.
"Exchange Debentures" shall have the meaning ascribed to it in
paragraph (g) hereof.
"Exchange Notice" shall have the meaning ascribed to it in paragraph
(g) hereof.
"Exchangeable Preferred Stock" shall have the meaning ascribed to it
in paragraph (a) hereof.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any successor thereto.
"Financial Monitoring and Oversight Agreement" means, collectively,
the Financial Monitoring and Oversight Agreement among Hicks, Muse & Co.
Partners, L.P., Radio Broadcasting and Chancellor Broadcasting, as in
effect on the Radio Broadcasting Preferred Stock Issue Date, and the
Financial Advisory Agreement among HM/2 Management Partners, L.P., Radio
Broadcasting and Chancellor Broadcasting, as in effect on the Radio
Broadcasting Preferred Stock Issue Date.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America as of the Preferred Stock Issue Date.
"Hicks Muse" means Hicks, Muse, Tate & Furst Incorporated.
"Holder" means a holder of shares of Exchangeable Preferred Stock as
reflected in the stock books of the Corporation.
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"Indebtedness" means with respect to any Person, without duplication,
any liability of such Person (i) for borrowed money, (ii) evidenced by
bonds, debentures, notes or other similar instruments, (iii) constituting
Capitalized Lease Obligations, (iv) incurred or assumed as the deferred
purchase price of property, or pursuant to conditional sale obligations and
title retention agreements (but excluding trade accounts payable arising in
the ordinary course of business), (v) for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction,
(vi) for Indebtedness of others guaranteed by such Person, (vii) for
Interest Swap Obligations, Commodity Agreements and Currency Agreements and
(viii) for Indebtedness of any other Person of the type referred to in
clauses (i) through (vii) which is secured by any Lien on any property or
asset of such first referred to Person, the amount of such Indebtedness
being deemed to be the lesser of the value of such property or asset or the
amount of the Indebtedness so secured. The amount of Indebtedness of any
Person at any date shall be the outstanding principal amount of all
unconditional obligations described above, as such amount would be
reflected on a balance sheet prepared in accordance with GAAP, and the
maximum liability at such date of such Person for any contingent
obligations described above.
"Initial Dividend Period" means the dividend period commencing on July
16, 1997 and ending on the first Dividend Payment Date to occur thereafter.
"Interest Swap Obligations" means the obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge
or arrangement.
"Investment" means (i) any transfer or delivery of cash, stock or
other property of value in exchange for Indebtedness, stock or other
security or ownership interest in any Person by way of loan, advance,
capital contribution, guarantee or otherwise and (ii) an investment deemed
to have been made by the Corporation at the time any entity which was a
Subsidiary of the Corporation ceases to be such a Subsidiary in an amount
equal to the value of the loans and advances made, and any remaining
ownership interest in, such entity immediately following such entity
ceasing to be a Subsidiary of the Corporation. The amount of any non-cash
Investment shall be the fair market value of such Investment, as determined
conclusively in good faith by management of the Corporation unless the fair
market value of such Investment exceeds $1,000,000, in which case the fair
market value shall be determined conclusively in good faith by the Board of
Directors at the time such Investment is made.
"Issue Date" means September , 1997, the date of original issuance
of the Exchangeable Preferred Stock.
"Junior Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Leverage Ratio" shall mean, as to any Person, the ratio of (i) the
sum of the aggregate outstanding amount of Indebtedness of such Person and
its Subsidiaries as of the date of calculation on a consolidated basis in
accordance with GAAP to (ii) the Consolidated EBITDA of such Person for the
four full fiscal quarters (the "Four Quarter Period") ending on or prior to
the date of determination.
For purposes of this definition, the aggregate outstanding principal amount
of Indebtedness of the Person and its Subsidiaries for which such calculation is
made shall be determined on a pro forma basis as if the Indebtedness giving rise
to the need to perform such calculation had been incurred and the proceeds
therefrom had been applied, and all other transactions in respect of which such
Indebtedness is being incurred had occurred, on the last day of the Four Quarter
Period. In addition to the foregoing, for purposes of this definition,
"Consolidated EBITDA" shall be calculated on a pro forma basis after giving
effect to (i) the incurrence of the Indebtedness of such Person and its
Subsidiaries (and the application of the proceeds therefrom) giving rise to the
need to make such calculation and any incurrence (and the application of the
proceeds therefrom) or repayment of other Indebtedness, other than the
incurrence or repayment of Indebtedness pursuant to working capital facilities,
at any time subsequent to the beginning of the Four Quarter Period and on or
prior to the date of determination, as if such incurrence (and the application
of the proceeds thereof), or the repayment, as the case may be, occurred on the
first day of the Four Quarter Period and (ii) any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
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to the need to make such calculation as a result of such Person or one of its
Subsidiaries (including any Person that becomes a Subsidiary as a result of such
Asset Acquisition) incurring, assuming or otherwise becoming liable for
Indebtedness) at any time on or subsequent to the first day of the Four Quarter
Period and on or prior to the date of determination, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for any
such Indebtedness and also including any Consolidated EBITDA associated with
such Asset Acquisition) occurred on the first day of the Four Quarter Period.
Furthermore, in calculating "Consolidated Interest Expense" for purposes of the
calculation of "Consolidated EBITDA," (i) interest on Indebtedness determined on
a fluctuating basis as of the date of determination (including Indebtedness
actually incurred on the date of the transaction giving rise to the need to
calculate the Leverage Ratio) and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness as in effect on the date of
determination and (ii) notwithstanding (i) above, interest determined on a
fluctuating basis, to the extent such interest is covered by Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (e) hereof.
"Merger Agreement" means the Agreement and Plan of Merger, dated
February 19, 1997, as amended and restated on July 31, 1997, among
Chancellor Broadcasting, Radio Broadcasting, Evergreen Media Corporation,
Evergreen Mezzanine Holdings Corporation and Evergreen Media Corporation of
Los Angeles.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing, or otherwise
relating to, any Indebtedness.
"Officers' Certificate" means a certificate signed by two officers or
by an officer and either an Assistant Treasurer or an Assistant Secretary
of the Corporation which certificate shall include a statement that, in the
opinion of such signers all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken. In
addition, such certificate shall include (i) a statement that the
signatories have read the relevant covenant or condition, (ii) a brief
statement of the nature and scope of such examination or investigation upon
which the statements are based, (iii) a statement that, in the opinion of
such signatories, they have made such examination or investigation as is
reasonably necessary to express an informed opinion and (iv) a statement as
to whether or not, in the opinion of the signatories, such relevant
conditions or covenants have been complied with.
"Opinion of Counsel" means an opinion of counsel that, in such
counsel's opinion, all conditions precedent to be performed by the
Corporation prior to the taking of any proposed action have been taken.
Such opinion shall also include the statements called for in the second
sentence under "Officers' Certificate".
"Optional Redemption Price" shall have the meaning ascribed to it in
paragraph (e)(i) hereof.
"Parity Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Permitted Indebtedness" means, without duplication, (i) Indebtedness
of Radio Broadcasting outstanding on the Radio Broadcasting Preferred Stock
Issue Date, including, without limitation, the 9 3/8% Notes and guarantees
thereof, plus Indebtedness of Radio Broadcasting incurred subsequent to the
Radio Broadcasting Preferred Stock Issue Date in the aggregate principal
amount of $60.0 million for the purpose of refinancing the 12 1/2% Notes,
and future refinancing of such Indebtedness; (ii) Indebtedness of Radio
Broadcasting or the Corporation incurred pursuant to the CRBC Credit
Agreement or the Credit Agreement in an aggregate principal amount at any
time outstanding not to exceed the sum of the aggregate commitments
pursuant to the CRBC Credit Agreement as initially in effect reduced by the
D-18
<PAGE> 19
aggregate principal amount permanently repaid with the proceeds of Asset
Sales; (iii) Indebtedness evidenced by the Exchange Debentures, including
any Exchange Debentures issued in accordance with the Exchange Indenture as
the payment of interest on the Exchange Debentures; (iv) Interest Swap
Obligations; provided that such Interest Swap Obligations are entered into
to protect the Corporation from fluctuations in interest rates of its
Indebtedness; (v) additional Indebtedness of the Corporation or any of its
Subsidiaries not to exceed $10,000,000 in principal amount outstanding at
any time (which amount may, but need not, be incurred under the Credit
Agreement); (vi) Refinancing Indebtedness; (vii) Indebtedness owed by the
Corporation to any Wholly Owned Subsidiary or by any Subsidiary to the
Corporation or any Wholly Owned Subsidiary of the Corporation; and (viii)
guarantees by Subsidiaries of any Indebtedness permitted to be incurred
pursuant to the terms of paragraph (1)(i) hereof.
"Permitted Investments" means (i) Investments by the Corporation or
any Subsidiary to acquire the stock or assets of any Person (or
Indebtedness of such Person acquired in connection with a transaction in
which such Person becomes a Subsidiary of the Corporation) engaged in the
broadcast business or businesses reasonably related thereto; provided that
if any such Investment or series of related Investments involves an
Investment by the Corporation in excess of $5,000,000, the Corporation is
able, at the time of such investment and immediately after giving effect
thereto, to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with paragraph (l)(i) hereof, (ii)
Investments received by the Corporation or its Subsidiaries as
consideration for a sale of assets, (iii) Investments by the Corporation or
any Wholly Owned Subsidiary of the Corporation in any Wholly Owned
Subsidiary of the Corporation (whether existing on the Issue Date or
created thereafter) or any Person that after such Investments, and as a
result thereof, becomes a Wholly Owned Subsidiary of the Corporation and
Investments in the Corporation by any Wholly Owned Subsidiary of the
Corporation, (iv) cash and Cash Equivalents, (v) Investments in securities
of trade creditors, wholesalers or customers received pursuant to any plan
of reorganization or similar arrangement and (vi) additional Investments in
an aggregate amount not to exceed $2,500,000 at any time outstanding.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or
a governmental agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"pro forma" means, unless otherwise provided herein, with respect to
any calculation made or required to be made pursuant hereto, a calculation
in accordance with Article 11 of Regulation S-X under the Securities Act.
"Public Equity Offering" means an underwritten public offering of
Capital Stock (other than Disqualified Capital Stock) of the Corporation or
Chancellor Mezzanine, pursuant to an effective registration statement filed
with the Commission in accordance with the Securities Act; provided,
however, that, in the case of a Public Equity Offering by Chancellor
Mezzanine, Chancellor Mezzanine contributes to the capital of the
Corporation net cash proceeds in an amount sufficient to redeem the
Exchangeable Preferred Stock called for redemption in accordance with the
terms hereof.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Radio Broadcasting" means Chancellor Radio Broadcasting Company, a
Delaware corporation that was merged with and into Evergreen Media
Corporation of Los Angeles pursuant to the Merger Agreement on September
, 1997.
"Radio Broadcasting Preferred Stock" shall mean the 12% Exchangeable
Preferred Stock of Radio Broadcasting.
"Radio Broadcasting Preferred Stock Issue Date" shall mean January 23,
1997, the date of original issuance of the Radio Broadcasting Preferred
Stock.
"Redemption Date", with respect to any shares of Exchangeable
Preferred Stock, means the date on which such shares of Exchangeable
Preferred Stock are redeemed by the Corporation.
D-19
<PAGE> 20
"Redemption Notice" shall have the meaning ascribed to it in paragraph
(e) hereof.
"Refinancing Indebtedness" means any refinancing by the Corporation of
Indebtedness of the Corporation or any of its Subsidiaries incurred in
accordance with paragraph (l)(i) hereof (other than pursuant to clause (ii)
or (iv) of the definition of Permitted Indebtedness) that does not (i)
result in an increase in the aggregate principal amount of Indebtedness
(such principal amount to include, for purposes of this definition, any
premiums, penalties or accrued interest paid with the proceeds of the
Refinancing Indebtedness) of such Person or (ii) create Indebtedness with
(a) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being refinanced or (b) a
final maturity earlier than the final maturity of the Indebtedness being
refinanced.
"Restricted Payment" means (i) the declaration or payment of any
dividend or the making of any other distribution (other than dividends or
distributions payable in Qualified Capital Stock) on shares of Junior
Stock, (ii) any purchase, redemption, retirement or other acquisition for
value of any Junior Stock, or any warrants, rights or options to acquire
shares of Junior Stock, other than through the exchange of such Junior
Stock or any warrants, rights or options to acquire shares of any class of
such Junior Stock for Qualified Capital Stock or warrants, rights or
options to acquire Qualified Capital Stock or (iii) the making of any
Investment (other than a Permitted Investment).
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to the Corporation or a Subsidiary of any
property, whether owned by the Corporation or any Subsidiary at the Issue
Date or later acquired, which has been or is to be sold or transferred by
the Corporation or such Subsidiary to such Person or to any other Person
from whom funds have been or are to be advanced by such Person on the
security of such property.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Semi-Annual Dividend Period" shall mean the semi-annual period
commencing on each January 16 and July 16 and ending on the next succeeding
Dividend Payment Date, respectively.
"Senior Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person. Notwithstanding anything contained herein
to the contrary, all references to the Corporation and its consolidated
Subsidiaries or to financial information prepared on a consolidated basis
in accordance with GAAP shall be deemed to include the Corporation and its
Subsidiaries as to which financial statements are prepared on a combined
basis in accordance with GAAP and to financial information prepared on such
a combined basis. Notwithstanding anything herein to the contrary, an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary for purposes
hereof.
"Tax Sharing Agreement" means the Tax Sharing Agreement between Radio
Broadcasting and Chancellor Broadcasting, as in effect on the Radio
Broadcasting Preferred Stock Issue Date.
"Unrestricted Subsidiary" means a Subsidiary of the Corporation
created after the Preferred Stock Issue Date and so designated by a
resolution adopted by the Board of Directors, provided that (i) neither the
Corporation nor any of its other Subsidiaries (other than Unrestricted
Subsidiaries) (a) provides any credit support for any Indebtedness of such
Subsidiary (including any undertaking, agreement or instrument evidencing
such Indebtedness) or (b) is directly or indirectly liable for any
Indebtedness of such Subsidiary, (ii) the creditors with respect to
Indebtedness for borrowed money of such Subsidiary, having a principal
amount in excess of $5,000,000, have agreed in writing that they have no
recourse, direct or indirect, to the Corporation or any other Subsidiary of
the Corporation (other than Unrestricted Subsidiaries), including, without
limitation, recourse with respect to the payment of principal of or
D-20
<PAGE> 21
interest on any Indebtedness of such Subsidiary and (iii) at the time of
designation of such Subsidiary such Subsidiary has no property or assets
(other than de minimis assets resulting from the initial capitalization of
such Subsidiary). Any such designation by the Board of Directors shall be
evidenced by a resolution of the Board of Directors giving effect to such
designation.
"Voting Rights Triggering Event" shall have the meaning ascribed to it
in paragraph f(iv) hereof.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b)
the total of the product obtained by multiplying (i) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payment of principal, including payment at final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest one-
twelfth) which will elapse between such date and the making of such
payment.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities (other than
directors' qualifying shares) which normally have the right to vote in the
election of directors are owned by such Person.
IN WITNESS WHEREOF, said Chancellor Media Corporation of Los Angeles, has
caused this Certificate to be signed by Matthew E. Devine, its Chief Financial
Officer, this day of September, 1997.
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
By:
----------------------------------
Name: Matthew E. Devine
Title: Chief Financial Officer
D-21
<PAGE> 1
EXHIBIT 5.1
[LATHAM & WATKINS LETTERHEAD]
August 5, 1997
Evergreen Media Corporation of Los Angeles
433 East Las Colinas Boulevard
Irving, Texas 75039
Re: Evergreen Media Corporation of Los Angeles (the "Company")
Registration Statement on Form S-4
Ladies and Gentlemen:
In connection with the registration of the issuance of shares (the "12%
Preferred Shares") of 12% Exchangeable Preferred Stock of the Company, par value
$0.01 per share (the "12% Preferred Stock") and the shares (the "12 1/4%
Preferred Shares") of 12 1/4% Series A Senior Cumulative Exchangeable Preferred
Stock of the Company, par value $0.01 per share (the "12 1/4% Preferred Stock"),
and the related registration of the 12% Exchange Debentures and the 12 1/4%
Exchange Debentures (each as defined below) under the Securities Act of 1933, as
amended (the "Act"), by Evergreen Media Corporation of Los Angeles, a Delaware
corporation (the "Company"), on Form S-4 to be filed with the Securities and
Exchange Commission (the "Commission") on or about August 5, 1997 (the
"Registration Statement"), you have requested our opinion with respect to the
matters set forth below. Capitalized terms used herein without definition shall
have the meanings ascribed to such terms in the Registration Statement.
In our capacity as your counsel in connection with such registration, we
are familiar with the proceedings taken and proposed to be taken by the Company
in connection with the authorization and issuance of the 12% Preferred Shares
and the 12 1/4% Preferred Shares by the Company pursuant to the Agreement and
Plan of Merger, dated February 19, 1997, as amended and restated (the "Merger
Agreement"), among Evergreen Media Corporation, the Company, Evergreen Mezzanine
Holdings Corporation, Chancellor Broadcasting Company and Chancellor Radio
Broadcasting Company. For the purposes of this opinion, we have assumed such
proceedings will be timely completed in the manner presently proposed. We are
also familiar with the proceedings taken and proposed to be taken by the Company
in connection with the assumption by the Company pursuant to the Merger
Agreement of the obligations of Chancellor Radio Broadcasting Company ("CRBC")
in respect of the 12% Exchange Debentures and the 12 1/4% Exchange Debentures
which may, from time to time, be issued by the Company in exchange for the 12%
Preferred Stock and the 12 1/4% Preferred Stock, respectively. In addition, we
have made such legal and factual examinations and inquiries, including an
examination of originals or copies certified or otherwise identified to our
satisfaction of such documents, corporate records and instruments, as we have
deemed necessary or appropriate for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to original documents of all documents submitted to us as copies. We assume for
purposes of this opinion that (i) the Company's Certificate of Incorporation
will be amended in the form attached as Annex II to the Merger Agreement (the
"Restated Charter"), (ii) the Restated Charter will be effective at the
Subsidiary Merger Effective Time (as defined in the Merger Agreement), (iii) the
merger of Chancellor Radio Broadcasting Company with and into the Company will
take place at the Subsidiary Merger Effective Time in the manner contemplated by
the Merger Agreement and (iv) immediately following the Subsidiary Merger
Effective Time, the Company will assume the obligations of CRBC in respect of
the 12% Exchange Debentures and the 12 1/4% Exchange Debentures pursuant to the
terms of the 12% Exchange Indenture or the 12 1/4% Exchange Indenture, as the
case may be.
We are opining herein as to the effect on the subject transaction only of
the internal laws of the State of New York and the General Corporation Law of
the State of Delaware, and we express no opinion with respect to the
applicability thereto, or the effect thereon, of any other laws or as to any
matters of municipal law or the laws of any local agencies within any state.
Subject to the foregoing, it is our opinion that:
<PAGE> 2
1. The 12% Preferred Shares and 12 1/4% Preferred Shares have been
duly authorized by all necessary corporate action of the Company and, upon
issuance thereof in the manner contemplated by the Registration Statement
and the Merger Agreement, will be validly issued, fully paid and
nonassessable.
2. The 12% Exchange Debentures and the 12 1/4% Exchange Debentures
have each been duly authorized by all necessary corporate action of the
Company and, when executed by the Company and authenticated by the 12%
Exchange Debenture Trustee or the 12 1/4% Exchange Debenture Trustee, as
applicable, and delivered upon the exchange of the 12% Preferred Shares or
the 12 1/4% Preferred Shares, as applicable, in accordance with the terms
of the 12% Exchange Indenture or the 12 1/4% Exchange Indenture, as
applicable, will constitute legally valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms.
The opinions rendered in paragraph 2 relating to the legally valid and
binding nature of the 12% Exchange Debentures and the 12 1/4% Exchange
Debentures are subject to the following exceptions, limitations and
qualifications: (i) the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights and remedies of creditors; (ii) the effect of general
principles of equity, whether enforcement is considered in a proceeding in
equity or law, and the discretion of the court before which any proceeding
therefor may be brought; and (iii) we express no opinion concerning the
enforceability of any waiver of rights or defenses contained in the 12% Exchange
Indenture or the 12 1/4% Exchange Indenture.
To the extent that the obligations of the Company under the 12% Exchange
Indenture or the 12 1/4% Exchange Indenture may be dependent upon such matters,
we assume for purposes of this opinion that U.S. Trust Company of Texas, N.A.,
the trustee under each of the 12% Exchange Indenture and the 12 1/4% Exchange
Indenture (the "Trustee"), is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Trustee is
duly qualified to engage in the activities contemplated by each of the 12%
Exchange Indenture and the 12 1/4% Exchange Indenture; that each of the 12%
Exchange Indenture and the 12 1/4% Exchange Indenture has been duly authorized,
executed and delivered by the Trustee and constitutes the legally valid and
binding obligation of the Trustee, enforceable against the Trustee in accordance
with its terms; that the Trustee is in compliance, generally and with respect to
acting as a trustee under each of the 12% Exchange Indenture and the 12 1/4%
Exchange Indenture, with all applicable laws and regulations; and that the
Trustee has the requisite organizational and legal power and authority to
perform its obligations under each of the 12% Exchange Indenture and 12 1/4%
Exchange Indenture.
We consent to your filing this opinion as an exhibit to the Registration
Statement and to the reference to our firm contained under the heading "Legal
Matters."
Very truly yours,
/s/ LATHAM & WATKINS
------------------------------------
<PAGE> 1
EXHIBIT 8.1
[Latham & Watkins Letterhead]
__________ ___, 1997
Evergreen Media Corporation
413 East Las Colinas Boulevard
Suite 1130
Irving, Texas 75039
Ladies & Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of (i) the merger (the "Merger") of Chancellor Broadcasting
Company, a Delaware corporation (the "Company"), with and into Evergreen
Mezzanine Holdings Corporation, a Delaware corporation ("EMHC"), and a direct
wholly-owned subsidiary of Evergreen Media Corporation, a Delaware corporation
("Evergreen"), and (ii) the merger (the "Subsidiary Merger") of Chancellor
Radio Broadcasting Company, a Delaware corporation ("Radio Broadcasting"), with
and into Evergreen Media Corporation of Los Angeles, a Delaware corporation
("EMCLA").
In formulating our opinion, we examined such documents as we deemed
appropriate, including the Amended and Restated Agreement and Plan of Merger
among the Company, Radio Broadcasting, Evergreen, EMHC and EMCLA dated as of
July ____, 1997 (the "Merger Agreement"), the Joint Proxy Statement/Prospectus
filed by the Company, Radio Broadcasting, Evergreen, EMHC and EMCLA on ________
__, 1997 (the "Joint Proxy Statement"), and the Registration Statement on Form
S-4, as filed by Evergreen with the SEC on ____________ __, 1997, in which the
Joint Proxy Statement/Prospectus is included as a prospectus (with all
amendments thereto, the "Registration Statement"). In addition, we have
obtained such additional information as we deemed relevant and necessary
through consultation with various officers and representatives of the Company,
Radio Broadcasting, Evergreen, EMHC and EMCLA.
Our opinion set forth below assumes (1) the accuracy of the statements and
facts concerning the Merger and the Subsidiary Merger set forth in the Merger
Agreement, the Joint Proxy Statement, and the Registration Statement, (2) the
consummation of the Merger and the Subsidiary Merger in the manner contemplated
by, and in accordance with the terms set forth in, the Merger Agreement, the
Joint Proxy Statement and the Registration Statement and (3) the accuracy of
(i) the representations made by the Company and by Radio Broadcasting, which
are set forth in the Certificates delivered to us by the Company and Radio
Broadcasting, dated the date hereof, (ii) the representations made by
Evergreen, EMHC and by EMCLA which are set forth in the Certificate delivered
to us by Evergreen, EMHC and EMCLA, dated the date hereof and (iii) the
representations made by certain shareholders of the Company and of Radio
Broadcasting in Certificates delivered to us by such persons, dated the date
hereof.
<PAGE> 2
Evergreen Media Corporation
Page 2
Based upon the facts and statements set forth above, our examination and
review of the documents referred to above and subject to the assumptions set
forth herein, we are of the opinion that for federal income tax purposes:
1. The Merger and the Subsidiary Merger will each constitute a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Each of the Company, Evergreen and EMHC will be a party to the Merger
within the meaning of Section 368(b) of the Code.
3. Each of Radio Broadcasting and EMCLA will be a party to the
Subsidiary Merger within the meaning of Section 368(b) of the Code.
4. No gain or loss will be recognized by the Company, Evergreen or EMHC
as a result of the Merger.
5. No gain or loss will be recognized by Radio Broadcasting or EMCLA as
a result of the Subsidiary Merger.
6. No gain or loss will be recognized by holders of Evergreen Class A
Common Stock or holders of Evergreen Class B Common Stock on the
exchange of such shares for shares of Evergreen Common Stock pursuant
to the Merger Agreement.
7. No gain or loss will be recognized by holders of Evergreen
Convertible Exchangeable Preferred Stock as a result of the Merger.
We express no opinion concerning any tax consequences of the Merger or the
Subsidiary Merger other than those specifically set forth herein.
Our opinion is based on current provisions of the Code, the Treasury
Regulations promulgated thereunder, published pronouncements of the Internal
Revenue Service and case law, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or facts and circumstances
surrounding the Merger or the Subsidiary Merger, or any inaccuracy in the
statements, facts, assumptions and representations on which we have relied, may
affect the continuing validity of the opinions set forth herein. We assume no
responsibility to inform you of any such change or inaccuracy that may occur or
come to our attention.
Very truly yours,
<PAGE> 1
EXHIBIT 8.2
[Weil, Gotshal & Manges LLP Letterhead]
___________, 1997
Chancellor Broadcasting Company
12655 N. Central Expressway
Suite 405
Dallas, Texas 75243
Ladies & Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of (i) the merger (the "Merger") of Chancellor Broadcasting
Company, a Delaware corporation (the "Company"), with and into Evergreen
Mezzanine Holdings Corporation, a Delaware corporation ("EMHC"), and a direct
wholly-owned subsidiary of Evergreen Media Corporation, a Delaware corporation
("Evergreen"), and (ii) the merger (the "Subsidiary Merger") of Chancellor
Radio Broadcasting Company, a Delaware corporation ("Radio Broadcasting"), with
and into Evergreen Media Corporation of Los Angeles, a Delaware corporation
("EMCLA").
In formulating our opinion, we examined such documents as we deemed
appropriate, including the Amended and Restated Agreement and Plan of Merger
among the Company, Radio Broadcasting, Evergreen, EMHC and EMCLA dated as of
July __, 1997 (the "Merger Agreement"), the Joint Proxy Statement and
Prospectus (the "Joint Proxy Statement") included in the Registration Statement
on Form S-4, as filed by Evergreen with the Securities and Exchange Commission
on ______ __, 1997, in which the Joint Proxy Statement is included as a
prospectus (with all amendments thereto, the "Registration Statement"). In
addition, we have obtained such additional information as we have deemed
relevant and necessary through consultation with various officers and
representatives of the Company, Radio Broadcasting, Evergreen, EMHC and EMCLA.
Our opinion set forth below assumes (1) the accuracy of the
statements and facts concerning the Merger and the Subsidiary Merger set forth
in the Merger Agreement, the Joint Proxy Statement, and the Registration
Statement, (2) the consummation of the Merger and the Subsidiary Merger in the
manner contemplated by, and in accordance with the terms set forth in, the
Merger Agreement, the Joint Proxy Statement and the Registration Statement and
(3) the accuracy of (i) the representations made by the Company and by Radio
Broadcasting, which are
<PAGE> 2
Chancellor Broadcasting Company
_______________, 1997
Page 2
set forth in the Certificates delivered to us by the Company and Radio
Broadcasting, dated the date hereof, (ii) the representations made by
Evergreen, EMHC and EMCLA which are set forth in the Certificate delivered to
us by Evergreen, EMHC and EMCLA dated the date hereof, and (iii) the
representations made by certain shareholders of the Company and of Radio
Broadcasting in Certificates delivered to us by such persons, dated the date
hereof.
Based on the facts and statements set forth above, our examination and
review of the documents referred to above and subject to the assumptions set
forth above, we are of the opinion that for federal income tax purposes:
1. The Merger and the Subsidiary Merger will each constitute a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
2. No gain or loss will be recognized by stockholders of the Company
with respect to shares of common stock of Evergreen received in the
Merger in exchange for shares of common stock of the Company, or with
respect to shares of Evergreen convertible preferred stock received
in the Merger in exchange for shares of Company convertible preferred
stock, except with respect to cash received by dissenters or in lieu
of fractional shares of Evergreen common stock.
3. No gain or loss will be recognized by stockholders of Radio
Broadcasting with respect to shares of EMCLA preferred stock received
in the Subsidiary Merger in exchange for shares of Radio Broadcasting
preferred stock, except with respect to cash received by dissenters.
We express no opinion concerning any tax consequences of the Merger or the
Subsidiary Merger other than those specifically set forth herein.
Our opinion is based on current provisions of the Code, the Treasury
Regulations promulgated thereunder, published pronouncements of the Internal
Revenue Service and case law, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or in the facts and
circumstances surrounding the Merger or the Subsidiary Merger, or any
inaccuracy in the statements, facts, assumptions and representations on which
we have relied, may affect the continuing validity of the opinions set forth
herein. We assume no responsibility to inform you of any such change or
inaccuracy that may occur or come to our attention.
Very truly yours,
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Evergreen Media Corporation of Los Angeles:
We consent to the use of our reports herein on the following financial
statements: 1) the consolidated balance sheets of Evergreen Media Corporation of
Los Angeles as of December 31, 1995 and 1996 and the related consolidated
statements of operations, stockholder's equity and cash flows for each of the
years in the three-year period ended December 31, 1996; 2) the combined balance
sheets of WMZQ Inc. and Viacom Broadcasting East, Inc. as of December 31, 1995
and 1996 and the related combined statements of earnings and cash flows for each
of the years in the three-year period ended December 31, 1996; 3) the combined
balance sheets of Riverside Broadcasting Co., Inc. and WAXQ Inc. as of December
31, 1995 and 1996 and the related combined statements of earnings and cash flows
for each of the years in the three-year period ended December 31, 1996; 4) the
balance sheets of KKSF-FM/KDFC-FM and AM (A Division of the Brown Organization)
as of December 31, 1995 and 1996 and the related statements of earnings and
division equity and cash flows for the years then ended; (5) the balance sheets
of WLIT Inc. as of December 31, 1995 and 1996 and the related statements of
earnings and cash flows for each of the years in the three-year period ended
December 31, 1996; (6) the combined balance sheets of KYSR Inc. and KIBB Inc. as
of December 31, 1995 and 1996 and the related combined statements of operations
and cash flows for each of the years in the three-year period ended December 31,
1996; and (7) the balance sheets of WDRQ Inc. as of December 31, 1995 and 1996
and the related statements of earnings and cash flows for each of the years in
the three-year period ended December 31, 1996. We also consent to the reference
of our firm under the headings "Experts" and "Evergreen Media Corporation of Los
Angeles Selected Consolidated Historical Financial Data" in the Registration
Statement.
KPMG Peat Marwick LLP
Dallas, Texas
August 1, 1997
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Evergreen Media Corporation of Los Angeles:
We consent to the use of our report dated March 28, 1997, relating to the
consolidated balance sheets of WDAS-AM/FM (station owned and operated by Beasley
FM Acquisition Corp.) as of December 31, 1996 and the related combined
statements of earnings and station equity and cash flows for the year ended
December 31, 1996, and the reference to our firm under the heading "Experts" in
this Registration Statement on Form S-4.
KPMG Peat Marwick LLP
St. Petersburg, Florida
August 1, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 (No. 333-32259) of Evergreen Media
Corporation of Los Angeles of our report dated May 2, 1997 relating to the
financial statements of Century Chicago Broadcasting, L.P., which appears in
such Prospectus. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Chicago, Illinois
August 1, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated May 8, 1997, (and to all references to our Firm) included in this
Registration Statement on Form S-4 of Evergreen Media Corporation of Los Angeles
dated August 1, 1997.
Arthur Andersen LLP
Chicago, Illinois
August 1, 1997
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Evergreen Media Corporation of Los Angeles:
We consent to the inclusion in this Registration Statement on Form S-4 of
Evergreen Media Corporation of Los Angeles of our reports dated February 13,
1997, except for Note 15 as to which the date is February 19, 1997, on our
audits of the consolidated financial statements and financial statement
schedules of Chancellor Radio Broadcasting Company and Subsidiaries as of
December 31, 1995 and 1996 and for each of the three years in the period ended
December 31, 1996.
Coopers & Lybrand L.L.P.
Dallas, Texas
August 1, 1997
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Evergreen Media Corporation of Los Angeles:
We consent to the inclusion in this Registration Statement on Form S-4 of
Evergreen Media Corporation of Los Angeles of our report dated March 24, 1997,
on our audit of the consolidated financial statements of Trefoil Communications,
Inc. and Subsidiaries for the period January 1, 1996 through February 13, 1996.
Coopers & Lybrand L.L.P.
Dallas, Texas
August 1, 1997
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Evergreen Media Corporation of Los Angeles
of our report dated February 14, 1996 relating to the consolidated financial
statements of Trefoil Communications, Inc., which appears in such Prospectus. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
Price Waterhouse LLP
Los Angeles, California
August 1, 1997
<PAGE> 1
EXHIBIT 23.9
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Evergreen Media Corporation of Los Angeles:
As independent public accountants, we hereby consent to the use of our report
dated March 31, 1997 (and to all references to our Firm) included in this
Registration Statement on Form S-4 dated August 4, 1997 of Evergreen Media
Corporation of Los Angeles.
Arthur Andersen LLP
Washington, D.C.
August 1, 1997
<PAGE> 1
EXHIBIT 23.10
CONSENT OF LATHAM & WATKINS
The Board of Directors
Evergreen Media Corporation of Los Angeles
We hereby consent to the use in the Registration Statement on Form S-4 of
Evergreen Media Corporation of Los Angeles of our form of opinion related to tax
matters, appearing as Exhibit 8.1 to the Registration Statement, to the
description therein of such form of opinion, and to the references therein to us
under the headings "The Merger -- Certain Federal Income Tax Consequences."
LATHAM & WATKINS
Washington, D.C.
August 5, 1997
<PAGE> 1
EXHIBIT 23.11
CONSENT OF WEIL, GOTSHAL & MANGES LLP
The Board of Directors
Chancellor Radio Broadcasting Company
We hereby consent to the use in the Registration Statement on Form S-4 of
Evergreen Media Corporation of Los Angeles of our form of opinion related to tax
matters, appearing as Exhibit 8.2 to the Registration Statement, to the
description therein of such form of opinion, and to the references therein to us
under the headings "The Merger -- Certain Federal Income Tax Consequences."
WEIL, GOTSHAL & MANGES LLP
Dallas, Texas
August 1, 1997
<PAGE> 1
EXHIBIT 25.1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION 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)_________
---------------
U.S. TRUST COMPANY OF TEXAS, N.A.
(Exact name of trustee as specified in its charter)
75-2353745
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
2001 Ross Avenue, Suite 2700 75201-2936
Dallas, Texas (Zip Code)
(Address of trustee's
principal executive offices)
Compliance Officer
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
(214) 754-1200
(Name, address and telephone number of agent for service)
---------------
Chancellor Media Corporation of Los Angeles
(Exact name of obligor as specified in its charter)
Delaware 75-2451687
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
433 East Las Colinas Boulevard
Irving, Texas 75039
(Address of principal executive offices) (Zip Code)
---------------
12 1/4% Subordinated Exchange Debentures due 2008
(Title of the indenture securities)
===============================================================================
<PAGE> 2
GENERAL
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.
Federal Reserve Bank of Dallas (11th District), Dallas, Texas
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Dallas, Texas
The Office of the Comptroller of the Currency, Dallas, Texas
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
2. Affiliations with Obligor and Underwriters.
If the obligor or any underwriter for the obligor is an affiliate of the
Trustee, describe each such affiliation.
None.
3. Voting Securities of the Trustee.
Furnish the following information as to each class of voting securities of
the Trustee:
As of July 24, 1997
- -------------------------------------------------------------------------------
Col A. Col B.
- -------------------------------------------------------------------------------
Title of Class Amount Outstanding
- -------------------------------------------------------------------------------
Capital Stock - par value $100 per share 5,000 shares
4. Trusteeships under Other Indentures.
9 3/8% Senior Subordinated Notes due 2004
12% Subordinated Exchange Debentures due 2009
8 3/4% Senior Subordinated Notes die 2007
5. Interlocking Directorates and Similar Relationships with the Obligor or
Underwriters.
Not Applicable
<PAGE> 3
6. Voting Securities of the Trustee Owned by the Obligor or its Officials.
Not Applicable
7. Voting Securities of the Trustee Owned by Underwriters or their Officials.
Not Applicable
8. Securities of the Obligor Owned or Held by the Trustee.
Not Applicable
9. Securities of Underwriters Owned or Held by the Trustee.
Not Applicable
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Security Holders of the Obligor.
Not Applicable
11. Ownership or Holdings by the Trustee of any Securities of a Person Owning
50 Percent or More of the Voting Securities of the Obligor.
Not Applicable
12. Indebtedness of the Obligor to the Trustee.
Not Applicable
13. Defaults by the Obligor.
Not Applicable
14. Affiliations with the Underwriters.
Not Applicable
15. Foreign Trustee.
Not Applicable
16. List of Exhibits.
T-1.1 - A copy of the Articles of Association of U.S. Trust
Company of Texas, N.A.; incorporated herein by reference to
Exhibit T-1.1 filed with Form T-1 Statement, Registration
No. 22-21897.
<PAGE> 4
16. (con't.)
T-1.2 - A copy of the certificate of authority of the Trustee to
commence business; incorporated herein by reference to
Exhibit T-1.2 filed with Form T-1 Statement, Registration
No. 22-21897.
T-1.3 - A copy of the authorization of the Trustee to exercise
corporate trust powers; incorporated herein by reference to
Exhibit T-1.3 filed with Form T-1 Statement, Registration
No. 22-21897.
T-1.4 - A copy of the By-laws of the U.S. Trust Company of Texas,
N.A., as amended to date; incorporated herein by reference
to Exhibit T-1.4 filed with Form T-1 Statement,
Registration No. 22-21897.
T-1.6 - The consent of the Trustee required by Section 321(b) of
the Trust Indenture Act of 1939.
T-1.7 - A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of July 24, 1997, the Trustee had 5,000 shares of Capital Stock outstanding,
all of which are owned by U.S. T.L.P.O. Corp. As of April 18, 1997, U.S.
T.L.P.O. Corp. had 35 shares of Capital Stock outstanding, all of which are
owned by U.S. Trust Corporation. U.S. Trust Corporation had outstanding
19,296,927 shares of $1 par value Common Stock as of July 24, 1997.
The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S
Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of
all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10
and 11, the answers to said Items are based upon incomplete information. Items
2, 5, 6, 7, 9, 10 and 11 may, however, be considered correct unless amended by
an amendment to this Form T-1.
In answering any items in this Statement of Eligibility and Qualification which
relates to matters peculiarly within the knowledge of the obligors or their
directors or officers, or an underwriter for the obligors, the Trustee has
relied upon information furnished to it by the obligors and will rely on
information to be furnished by the obligors or such underwriter, and the
Trustee disclaims responsibility for the accuracy or completeness of such
information.
- ---------------
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee,
U.S Trust Company of Texas, N.A., a national banking association organized
under the laws of the United States of America, has duly caused this statement
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Dallas, and State of Texas on the
4th day ofAugust 1997.
U.S. Trust Company of Texas, N.A.,
Trustee
By: /s/ JOHN C. STOHLMANN
-------------------------------
John C. Stohlmann
Vice President
<PAGE> 6
Exhibit T-1.6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 as amended in connection with the proposed issue of ChancellorMedia
Corporation of Los Angeles 12 1/4% Subordinated Exchange Debentures due 2008,
we hereby consent that reports of examination by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefore.
U.S. Trust Company of Texas, N.A.
By: /s/ JOHN C. STOHLMANN
-------------------------------
John C. Stohlmann
Vice President
<PAGE> 7
EXHIBIT T-1.7
<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
Federal Financial Institutions Examination Council OMB Number: 1557-0081
Expires March 31, 2000
- ---------------------------------------------------------------------------------------------------------------------------
Please Refer to Page i, (1)
(LOGO) Table of Contents, for
the required disclosure
of estimated burden
- ---------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH
DOMESTIC OFFICES ONLY AND TOTAL ASSETS OF LESS THAN $100
MILLION - - FFIEC 034
(970331)
----------
REPORT AT THE CLOSE OF BUSINESS June 30,1997 (RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 This report form is to be filed by banks with domestic
(State member banks); 12 U.S. c. Section 1817 (State offices only. Banks with branches and consolidated
nonmember banks); and 12 U.S. C. Section 161 (National subsidiaries in U.S. territories and possessions, Edge or
banks). Agreement subsidiaries, foreign branches, consolidated
foreign subsidiaries, or International Banking Facilities
must file FFIEC 031.
- ---------------------------------------------------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by The Reports of Condition and Income are to be prepared in
an authorized officer and the Report of Condition must be accordance with Federal regulatory authority
attested to by not less than two directors (trustees) for instructions. NOTE: these instructions may in some
State nonmember banks and three directors for State member cases differ from generally accepted accounting
and National Banks. principles.
I, Alfred B. Childs, SVP & Cashier We, the undersigned directors (trustees), attest to the
----------------------------------- correctness of this Report of Condition (including the
Name and Title of Officer Authorized to Sign Report supporting schedules) and declare that it has been
examined by us and to the best of our knowledge and
of the named bank do hereby declare that these Reports of belief has been prepared in conformance with the
Condition and Income (including the supporting schedules) instructions issued by the appropriate Federal regulatory
have been prepared in conformance with the instructions authority and is true and correct.
issued by the appropriate Federal regulatory authority and
are true to the best of my knowledge and belief. /s/ William Goodwin
-----------------------
Director (Trustee)
/s/ Alfred B. Childs
- ---------------------------- /s/ Arthur C. White
Signature of Officer Authorized to Sign Report ------------------------
Director (Trustee)
June 16,1997 /s/ J.T. Moore
- -------------- --------------------
Date of Signature Director (Trustee)
- ---------------------------------------------------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to NATIONAL BANKS: Return the original only in the special
the appropriate Federal Reserve District Bank. return address envelope provided. If express mail is used
in lieu of the special return address envelope, return the
STATE NONMEMBER BANKS: Return the original only in the original only to the FDIC, c/o Quality Data Systems, 2127
special return address envelope provided. If express mail Espey Court, Suite 204, Crofton, MD 21114.
is used in lieu of the special return address envelope,
return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
- ---------------------------------------------------------------------------------------------------------------------------
FDIC Certificate Number ____________ 06-30-97
(RCRI 9050) Banks should affix the address label in this space.
U. S. Trust Company of Texas, National Association
--------------------------------------------------
Legal Title of Bank (TEXT 9010)
2001 Ross Avenue, Suite 2700
----------------------------
City (TEXT 9130)
Dallas, TX 75201
--------------------------------------------------
State Abbrev. (TEXT 9200) ZIP Code (TEXT 9220)
</TABLE>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE> 8
<TABLE>
<S> <C> <C> <C> <C>
Call Date: 06/30/97 State #: 6797 FFIEC 034
U.S. TRUST COMPANY OF TEXAS, N.A. Vendor ID: D Cert #: 33217 Page RC-2
2100 ROSS AVENUE, SUITE 2700 Transit #: 11101765
DALLAS, TX 75201 ---------
9
---------
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30,1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
<TABLE>
<S> <C> <C> <C> <C> <C>
SCHEDULE RC - BALANCE SHEET
C100
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------------
ASSETS
1. Cash and balances due from depository institutions: RCON
a. Noninterest-bearing balances and currency and coin (1,2) 0081 996 1.a
------------------ ------ -------
b. Interest bearing balances (3) 0071 679 1.b
-------------------------------------------- ------ -------
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 0 2.a
--------------- ------ -------
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 96,249 2.b
-------------- ------ -------
3. Federal funds sold (4) and securities purchased under agreements to resell: 1350 7,000 3
4. Loans and lease financing receivables: RCON
----
a. Loans and leases, net of unearned income (from Schedule RC-C) 2122 43,923 4.a
------------
b. LESS: Allowance for loan and lease losses 3123 4.b
------------------------------- 531
c. LESS: Allocated transfer risk reserve 3128 0 4.c
-----------------------------------
d. Loans and leases, net of unearned income, allowance, and reserve RCON
----
(item 4.a minus 4.b and 4.c) 2125 43,392 4.d
--------------------------------------------- ------ -------
5. Trading assets 3545 0 5.
----------------------------------------------------------- ------ -------
6. Premises and fixed assets (including capitalized leases) 2145 725 6.
---------------------- ------ -------
7. Other real estate owned (from Schedule RC-M) 2150 0 7.
------------------------------ ------ -------
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 2130 0 8.
---------------------------------------------------- ------ -------
9. Customers' liability to this bank on acceptances outstanding 2155 0 9.
------------------ ------ -------
10. Intangible assets (from Schedule RC-M) 2143 0 10.
------------------------------------ ------ -------
11. Other assets (from Schedule RC-F) 2160 1,539 11.
--------------------------------------- ------ -------
12. a. Total assets (sum of items 1 through 11) 2170 150,580 12.a
--------------------------------- ------ -------
b. Losses deferred pursuant to U.S.C. 1823(j) 0306 0 12.b
------------------------------- ------ -------
c. Total assets and losses deferred pursuant to 12 U.S.C. 1823(j)
(sum of items 12.a and 12.b) 0307 150,580 12.c
------------------------------------------- ------ -------
</TABLE>
(1) Includes cash items in process of collection and unposed debits.
(2) The amount reported in this item must be greater than or equal to the sum
of Schedule RC-M, items 3.a and 3.b.
(3) Includes time certificates of deposit not held for trading.
(4) Report 'term federal funds sold' in Schedule RC, item 4.a, 'Loans and
leases, net of unearned income,' and in Schedule RC-C, part 1.
(5) Report securities purchased under agreements to resell that involve the
receipt of immediately available funds and mature in one business day or
roll over under a continuing contract in Schedule RC, item 3.a, 'Federal
funds sold.'
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C>
Call Date: 06/30/97 State #: 6797 FFIEC 034
U.S. TRUST COMPANY OF TEXAS, N.A. Vendor ID: D Cert #: 33217 Page RC-2
2100 ROSS AVENUE, SUITE 2700 Transit #: 11101765
DALLAS, TX 75201 ---------
10
---------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
SCHEDULE RC - CONTINUED
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits: RCON
a. In domestic offices (sum of totals of ----
columns A and C from Schedule RC-E) RCON 2200 116,826 13.a
----------------------------------- ----
(1) Noninterest-bearing (1) 6631 7,804 13.a.1
---------------------------------------------
(2) Interest-bearing 6636 109,022
---------------------------------------------------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(1) Noninterest-bearing
-----------------------------------------------
(2) Interest-bearing
--------------------------------------------------
14. Federal funds purchased(2) and securities sold under agreements to repurchase: RCON 0 14
----
2800
15. a. Demand notes issued to the U.S. Treasury 2840 0 15.a
----------------------------------- ------ -------
b. Trading liabilities 3548 0 15.b
-------------------------------------------------------- ------ -------
16. Other borrowed money:
A. WITH A REMAINING MATURITY OF ONE YEAR OR LESS 2332 5,000 16.a
------------------------------ ------ -------
B. WITH A REMAINING MATURITY OF MORE THAN ONE YEAR THROUGH THREE A547 3,000 16.b
YEARS ------ -------
--------------------
C. WITH A REMAINING MATURITY OF MORE THAN THREE YEARS A548 3,000 16.c
-------------------------- ------ -------
17. Not applicable
18. Bank's liability on acceptances executed and outstanding 2920 0 18.
----------------------- ------ -------
19. Subordinated notes and debentures 3200 0 19.
---------------------------------------------- ------ -------
20. Other liabilities (from Schedule RC-G) 2930 1,393 20.
----------------------------------------- ------ -------
21. Total liabilities (sum of items 13 through 20) 2948 129,219 21.
--------------------------------- ------ -------
22. Not applicable
EQUITY CAPITAL
RCON 7,000 23.
----
23. Perpetual preferred stock and related surplus 3838
---------------------------------- ------ ------
24. Common stock 3230 500 24.
------------------------------------------------------------------- ------ ------
25. Surplus (exclude all surplus related to preferred stock) 3839 8,384 25.
----------------------- ------ ------
26. a. Undivided profits and capital reserves 3632 5,404 26.a
------------------------------------- ------ ------
b. Net unrealized holding gains (losses) on available-for-sale securities 8434 73 26.b
----- ------ ------
27. Cumulative foreign currency translation adjustments
----------------------------
28. a. Total equity capital (sum of items 23 through 27) 3210 21,361 28.a
------------------------- ------ ------
b. Losses deferred pursuant to 12 U.S.C. 1823(j) 0306 0 28.b
------------------------------ ------ ------
c. Total equity capital and losses deferred pursuant to 12 U.S.C. 1823(j)
(sum of items 28.a and 28.b) 3559 21,361 28.c
--------------------------------------------- ------ ------
29. Total liabilities, limited-life preferred stock, equity capital, and losses
deferred pursuant to 12 U.S.C. 1823(j) (sum of items 21, 22, and 28.c) 2257 150,580 29.
--------- ------ ------
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that best describes the most RCON
comprehensive level of auditing work performed for the bank by independent external auditors as ----
of any date during 1995 6724 N/A M.1
------------------------------------------------------------------------
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company (but external auditors
not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accordance 8 = No external audit work
with generally accepted auditing standards by a certified
public accounting firm (may be required by state chartering
authority)
</TABLE>
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Report "term federal funds purchased" in Schedule RC, item 16, 'Other
borrowed money.'
(3) Report securities sold under agreements to repurchase that involve the
receipt of immediately available funds and mature in one business day
or roll over under a continuing contract in Schedule RC, item 14.a,
'Federal funds purchased.'
<PAGE> 1
EXHIBIT 25.2
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION 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)_________
---------------
U.S. TRUST COMPANY OF TEXAS, N.A.
(Exact name of trustee as specified in its charter)
75-2353745
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
2001 Ross Avenue, Suite 2700 75201-2936
Dallas, Texas (Zip Code)
(Address of trustee's
principal executive offices)
Compliance Officer
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
(214) 754-1200
(Name, address and telephone number of agent for service)
---------------
Chancellor Media Corporation of Los Angeles
(Exact name of obligor as specified in its charter)
Delaware 75-2451687
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
433 East Las Colinas Boulevard
Irving, Texas 75039
(Address of principal executive offices) (Zip Code)
---------------
12% Subordinated Exchange Debentures due 2009
(Title of the indenture securities)
===============================================================================
<PAGE> 2
GENERAL
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.
Federal Reserve Bank of Dallas (11th District), Dallas, Texas
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Dallas, Texas
The Office of the Comptroller of the Currency, Dallas, Texas
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
2. Affiliations with Obligor and Underwriters.
If the obligor or any underwriter for the obligor is an affiliate of the
Trustee, describe each such affiliation.
None.
3. Voting Securities of the Trustee.
Furnish the following information as to each class of voting securities of
the Trustee:
As of July 24, 1997
- -------------------------------------------------------------------------------
Col A. Col B.
- -------------------------------------------------------------------------------
Title of Class Amount Outstanding
- -------------------------------------------------------------------------------
Capital Stock - par value $100 per share 5,000 shares
4. Trusteeships under Other Indentures.
9 3/8% Senior Subordinated Notes due 2004
12 1/4% Subordinated Exchange Debentures due 2008
8 3/4% Senior Subordinated Notes due 2007
5. Interlocking Directorates and Similar Relationships with the Obligor or
Underwriters.
Not Applicable
<PAGE> 3
6. Voting Securities of the Trustee Owned by the Obligor or its Officials.
Not Applicable
7. Voting Securities of the Trustee Owned by Underwriters or their Officials.
Not Applicable
8. Securities of the Obligor Owned or Held by the Trustee.
Not Applicable
9. Securities of Underwriters Owned or Held by the Trustee.
Not Applicable
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Security Holders of the Obligor.
Not Applicable
11. Ownership or Holdings by the Trustee of any Securities of a Person Owning
50 Percent or More of the Voting Securities of the Obligor.
Not Applicable
12. Indebtedness of the Obligor to the Trustee.
Not Applicable
13. Defaults by the Obligor.
Not Applicable
14. Affiliations with the Underwriters.
Not Applicable
15. Foreign Trustee.
Not Applicable
16. List of Exhibits.
T-1.1 - A copy of the Articles of Association of U.S. Trust Company of
Texas, N.A.; incorporated herein by reference to Exhibit T-1.1
filed with Form T-1 Statement, Registration No. 22-21897.
<PAGE> 4
16. (con't.)
T-1.2 - A copy of the certificate of authority of the Trustee to
commence business; incorporated herein by reference to Exhibit
T-1.2 filed with Form T-1 Statement, Registration No. 22-21897.
T-1.3 - A copy of the authorization of the Trustee to exercise corporate
trust powers; incorporated herein by reference to Exhibit T-1.3
filed with Form T-1 Statement, Registration No. 22-21897.
T-1.4 - A copy of the By-laws of the U.S. Trust Company of Texas,
N.A., as amended to date; incorporated herein by reference to
Exhibit T-1.4 filed with Form T-1 Statement, Registration No.
22-21897.
T-1.6 - The consent of the Trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
T-1.7 - A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its supervising
or examining authority.
NOTE
As of July 24, 1997, the Trustee had 5,000 shares of Capital Stock outstanding,
all of which are owned by U.S. T.L.P.O. Corp. As of April 18, 1997, U.S.
T.L.P.O. Corp. had 35 shares of Capital Stock outstanding, all of which are
owned by U.S. Trust Corporation. U.S. Trust Corporation had outstanding
19,296,927 shares of $1 par value Common Stock as of July 24, 1997.
The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S
Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of
all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10
and 11, the answers to said Items are based upon incomplete information. Items
2, 5, 6, 7, 9, 10 and 11 may, however, be considered correct unless amended by
an amendment to this Form T-1.
In answering any items in this Statement of Eligibility and Qualification which
relates to matters peculiarly within the knowledge of the obligors or their
directors or officers, or an underwriter for the obligors, the Trustee has
relied upon information furnished to it by the obligors and will rely on
information to be furnished by the obligors or such underwriter, and the
Trustee disclaims responsibility for the accuracy or completeness of such
information.
- ---------------
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee,
U.S Trust Company of Texas, N.A., a national banking association organized
under the laws of the United States of America, has duly caused this statement
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Dallas, and State of Texas on the
4th day of August 1997.
U.S. Trust Company of Texas, N.A.,
Trustee
By: /s/ JOHN C. STOHLMANN
---------------------------------
John C. Stohlmann
Vice President
<PAGE> 6
Exhibit T-1.6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 as amended in connection with the proposed issue of Chancellor Media
Corporation of Los Angeles 12% Subordinated Exchange Debentures due 2009, we
hereby consent that reports of examination by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefore.
U.S. Trust Company of Texas, N.A.
By: /s/ JOHN C. STOHLMANN
-----------------------------
John C. Stohlmann
Vice President
<PAGE> 7
EXHIBIT T-1.7
<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
Federal Financial Institutions Examination Council OMB Number: 1557-0081
Expires March 31, 2000
- ---------------------------------------------------------------------------------------------------------------------------
Please Refer to Page i, (1)
(LOGO) Table of Contents, for
the required disclosure
of estimated burden
- ---------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH
DOMESTIC OFFICES ONLY AND TOTAL ASSETS OF LESS THAN $100
MILLION - - FFIEC 034
(970331)
----------
REPORT AT THE CLOSE OF BUSINESS June 30,1997 (RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 This report form is to be filed by banks with domestic
(State member banks); 12 U.S. c. Section 1817 (State offices only. Banks with branches and consolidated
nonmember banks); and 12 U.S. C. Section 161 (National subsidiaries in U.S. territories and possessions, Edge or
banks). Agreement subsidiaries, foreign branches, consolidated
foreign subsidiaries, or International Banking Facilities
must file FFIEC 031.
- ---------------------------------------------------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by The Reports of Condition and Income are to be prepared in
an authorized officer and the Report of Condition must be accordance with Federal regulatory authority
attested to by not less than two directors (trustees) for instructions. NOTE: these instructions may in some
State nonmember banks and three directors for State member cases differ from generally accepted accounting
and National Banks. principles.
I, Alfred B. Childs, SVP & Cashier We, the undersigned directors (trustees), attest to the
----------------------------------- correctness of this Report of Condition (including the
Name and Title of Officer Authorized to Sign Report supporting schedules) and declare that it has been
examined by us and to the best of our knowledge and
of the named bank do hereby declare that these Reports of belief has been prepared in conformance with the
Condition and Income (including the supporting schedules) instructions issued by the appropriate Federal regulatory
have been prepared in conformance with the instructions authority and is true and correct.
issued by the appropriate Federal regulatory authority and
are true to the best of my knowledge and belief. /s/ William Goodwin
-----------------------
Director (Trustee)
/s/ Alfred B. Childs
- ---------------------------- /s/ Arthur C. White
Signature of Officer Authorized to Sign Report ------------------------
Director (Trustee)
June 16,1997 /s/ J.T. Moore
- -------------- --------------------
Date of Signature Director (Trustee)
- ---------------------------------------------------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to NATIONAL BANKS: Return the original only in the special
the appropriate Federal Reserve District Bank. return address envelope provided. If express mail is used
in lieu of the special return address envelope, return the
STATE NONMEMBER BANKS: Return the original only in the original only to the FDIC, c/o Quality Data Systems, 2127
special return address envelope provided. If express mail Espey Court, Suite 204, Crofton, MD 21114.
is used in lieu of the special return address envelope,
return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
- ---------------------------------------------------------------------------------------------------------------------------
FDIC Certificate Number ____________ 06-30-97
(RCRI 9050) Banks should affix the address label in this space.
U. S. Trust Company of Texas, National Association
--------------------------------------------------
Legal Title of Bank (TEXT 9010)
2001 Ross Avenue, Suite 2700
----------------------------
City (TEXT 9130)
Dallas, TX 75201
--------------------------------------------------
State Abbrev. (TEXT 9200) ZIP Code (TEXT 9220)
</TABLE>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE> 8
<TABLE>
<S> <C> <C> <C> <C>
Call Date: 06/30/97 State #: 6797 FFIEC 034
U.S. TRUST COMPANY OF TEXAS, N.A. Vendor ID: D Cert #: 33217 Page RC-2
2100 ROSS AVENUE, SUITE 2700 Transit #: 11101765
DALLAS, TX 75201 ---------
9
---------
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30,1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
<TABLE>
<S> <C> <C> <C> <C> <C>
SCHEDULE RC - BALANCE SHEET
C100
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------------
ASSETS
1. Cash and balances due from depository institutions: RCON
a. Noninterest-bearing balances and currency and coin (1,2) 0081 996 1.a
------------------ ------ -------
b. Interest bearing balances (3) 0071 679 1.b
-------------------------------------------- ------ -------
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 0 2.a
--------------- ------ -------
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 96,249 2.b
-------------- ------ -------
3. Federal funds sold (4) and securities purchased under agreements to resell: 1350 7,000 3
4. Loans and lease financing receivables: RCON
----
a. Loans and leases, net of unearned income (from Schedule RC-C) 2122 43,923 4.a
------------
b. LESS: Allowance for loan and lease losses 3123 4.b
------------------------------- 531
c. LESS: Allocated transfer risk reserve 3128 0 4.c
-----------------------------------
d. Loans and leases, net of unearned income, allowance, and reserve RCON
----
(item 4.a minus 4.b and 4.c) 2125 43,392 4.d
--------------------------------------------- ------ -------
5. Trading assets 3545 0 5.
----------------------------------------------------------- ------ -------
6. Premises and fixed assets (including capitalized leases) 2145 725 6.
---------------------- ------ -------
7. Other real estate owned (from Schedule RC-M) 2150 0 7.
------------------------------ ------ -------
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 2130 0 8.
---------------------------------------------------- ------ -------
9. Customers' liability to this bank on acceptances outstanding 2155 0 9.
------------------ ------ -------
10. Intangible assets (from Schedule RC-M) 2143 0 10.
------------------------------------ ------ -------
11. Other assets (from Schedule RC-F) 2160 1,539 11.
--------------------------------------- ------ -------
12. a. Total assets (sum of items 1 through 11) 2170 150,580 12.a
--------------------------------- ------ -------
b. Losses deferred pursuant to U.S.C. 1823(j) 0306 0 12.b
------------------------------- ------ -------
c. Total assets and losses deferred pursuant to 12 U.S.C. 1823(j)
(sum of items 12.a and 12.b) 0307 150,580 12.c
------------------------------------------- ------ -------
</TABLE>
(1) Includes cash items in process of collection and unposed debits.
(2) The amount reported in this item must be greater than or equal to the sum
of Schedule RC-M, items 3.a and 3.b.
(3) Includes time certificates of deposit not held for trading.
(4) Report 'term federal funds sold' in Schedule RC, item 4.a, 'Loans and
leases, net of unearned income,' and in Schedule RC-C, part 1.
(5) Report securities purchased under agreements to resell that involve the
receipt of immediately available funds and mature in one business day or
roll over under a continuing contract in Schedule RC, item 3.a, 'Federal
funds sold.'
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C>
Call Date: 06/30/97 State #: 6797 FFIEC 034
U.S. TRUST COMPANY OF TEXAS, N.A. Vendor ID: D Cert #: 33217 Page RC-2
2100 ROSS AVENUE, SUITE 2700 Transit #: 11101765
DALLAS, TX 75201 ---------
10
---------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
SCHEDULE RC - CONTINUED
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits: RCON
a. In domestic offices (sum of totals of ----
columns A and C from Schedule RC-E) RCON 2200 116,826 13.a
----------------------------------- ----
(1) Noninterest-bearing (1) 6631 7,804 13.a.1
---------------------------------------------
(2) Interest-bearing 6636 109,022
---------------------------------------------------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(1) Noninterest-bearing
-----------------------------------------------
(2) Interest-bearing
--------------------------------------------------
14. Federal funds purchased(2) and securities sold under agreements to repurchase: RCON 0 14
----
2800
15. a. Demand notes issued to the U.S. Treasury 2840 0 15.a
----------------------------------- ------ -------
b. Trading liabilities 3548 0 15.b
-------------------------------------------------------- ------ -------
16. Other borrowed money:
A. WITH A REMAINING MATURITY OF ONE YEAR OR LESS 2332 5,000 16.a
------------------------------ ------ -------
B. WITH A REMAINING MATURITY OF MORE THAN ONE YEAR THROUGH THREE A547 3,000 16.b
YEARS ------ -------
--------------------
C. WITH A REMAINING MATURITY OF MORE THAN THREE YEARS A548 3,000 16.c
-------------------------- ------ -------
17. Not applicable
18. Bank's liability on acceptances executed and outstanding 2920 0 18.
----------------------- ------ -------
19. Subordinated notes and debentures 3200 0 19.
---------------------------------------------- ------ -------
20. Other liabilities (from Schedule RC-G) 2930 1,393 20.
----------------------------------------- ------ -------
21. Total liabilities (sum of items 13 through 20) 2948 129,219 21.
--------------------------------- ------ -------
22. Not applicable
EQUITY CAPITAL
RCON 7,000 23.
----
23. Perpetual preferred stock and related surplus 3838
---------------------------------- ------ ------
24. Common stock 3230 500 24.
------------------------------------------------------------------- ------ ------
25. Surplus (exclude all surplus related to preferred stock) 3839 8,384 25.
----------------------- ------ ------
26. a. Undivided profits and capital reserves 3632 5,404 26.a
------------------------------------- ------ ------
b. Net unrealized holding gains (losses) on available-for-sale securities 8434 73 26.b
----- ------ ------
27. Cumulative foreign currency translation adjustments
----------------------------
28. a. Total equity capital (sum of items 23 through 27) 3210 21,361 28.a
------------------------- ------ ------
b. Losses deferred pursuant to 12 U.S.C. 1823(j) 0306 0 28.b
------------------------------ ------ ------
c. Total equity capital and losses deferred pursuant to 12 U.S.C. 1823(j)
(sum of items 28.a and 28.b) 3559 21,361 28.c
--------------------------------------------- ------ ------
29. Total liabilities, limited-life preferred stock, equity capital, and losses
deferred pursuant to 12 U.S.C. 1823(j) (sum of items 21, 22, and 28.c) 2257 150,580 29.
--------- ------ ------
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that best describes the most RCON
comprehensive level of auditing work performed for the bank by independent external auditors as ----
of any date during 1995 6724 N/A M.1
------------------------------------------------------------------------
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company (but external auditors
not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accordance 8 = No external audit work
with generally accepted auditing standards by a certified
public accounting firm (may be required by state chartering
authority)
</TABLE>
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Report "term federal funds purchased" in Schedule RC, item 16, 'Other
borrowed money.'
(3) Report securities sold under agreements to repurchase that involve the
receipt of immediately available funds and mature in one business day
or roll over under a continuing contract in Schedule RC, item 14.a,
'Federal funds purchased.'
